---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended March 31, 2008

[   ] 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.)

31556 Loma Linda, Temecula, CA 92592(Address of principal executive offices)

310-601-7907(Issuer's telephone
number)

_____________________________________________________________(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 May 7, 2008

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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- 2 

Item 1. Financial Statements.

It is the opinion of management that the interim consolidated
financial statements for the quarter ended March 31, 2008 include all
adjustments necessary in order to ensure that the interim consolidated financial
statements are not misleading.

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- 3 





MELT INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008 and December 31, 2007





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- 4 

MELT INC. AND SUBSIDIARIES Consolidated Balance
Sheets

|ASSETS                                              |  
|--------------------------------------------------- | -
|                                                    |  
|                                                    |  
|                                                    |  
|CURRENT ASSETS                                      |  
|                                                    |  
|Cash                                                | $
|Receivables, net of allowance of $10,000 and $4,005 |  
|                                                    |  
|Total Current Assets                                |  
|                                                    |  
|FIXED ASSETS, NET                                   |  
|                                                    |  
|OTHER ASSETS                                        |  
|                                                    |  
|Trademark, net                                      |  
|Debt issuance costs                                 |  
|Deposits                                            |  
|                                                    |  
|Total Other Assets                                  |  
|                                                    |  
|ASSETS FROM DISCONTINUED OPERATIONS (NOTE 3)        |  
|                                                    |  
|TOTAL ASSETS                                        | $

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

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- 5 

MELT INC. AND SUBSIDIARIES 
  Consolidated Balance Sheets (Continued)

LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)

|                                                          |   | March 31,   |   |   | December 31, |  
|--------------------------------------------------------- | - | ----------- | - | - | ------------ | -
|                                                          |   | 2008        |   |   | 2007         |  
|                                                          |   | (Unaudited) |   |   |              |  
|CURRENT LIABILITIES                                       |   |             |   |   |              |  
|                                                          |   |             |   |   |              |  
|Accounts payable                                          | $ | 443,544     |   | $ | 472,855      |  
|Accounts payable  related party (Note 5)                 |   | -           |   |   | 17,532       |  
|Accrued expenses                                          |   | 278         |   |   | 444          |  
|Accrued management fees  related party (Note
      5)    |   | 88,000      |   |   | 88,000       |  
|Notes payable - related party
      (Note 5)              |   | 100,000     |   |   | 149,465      |  
|Accrued interest - related party (Note 5)                 |   | 78,426      |   |   | 74,689       |  
|Notes payable                                             |   | 185,765     |   |   | 185,431      |  
|Accrued interest                                          |   | 16,159      |   |   | 28,469       |  
|Deferred revenue                                          |   | 125,000     |   |   | 140,000      |  
|                                                          |   |             |   |   |              |  
|Total Current
      Liabilities                           |   | 1,037,172   |   |   | 1,156,885    |  
|                                                          |   |             |   |   |              |  
|LONG-TERM LIABILITIES                                     |   |             |   |   |              |  
|                                                          |   |             |   |   |              |  
|Notes payable                                             |   | 407,842     |   |   | 408,752      |  
|                                                          |   |             |   |   |              |  
|Total Long-Term
      Liabilities                         |   | 407,842     |   |   | 408,752      |  
|                                                          |   |             |   |   |              |  
|LIABILITIES FROM DISCONTINUED OPERATIONS (NOTE
      3)   |   | 401,000     |   |   | 407,250      |  
|                                                          |   |             |   |   |              |  
|TOTAL LIABILITIES                                         |   | 1,846,014   |   |   | 1,972,887    |  
|                                                          |   |             |   |   |              |  
|STOCKHOLDERS EQUITY (DEFICIT)                            |   |             |   |   |              |  
|                                                          |   |             |   |   |              |  
|Common stock; $0.001 par value,
      100,000,000         |   |             |   |   |              |  
|shares authorized, 21,290,000 and 21,290,000
      shares |   |             |   |   |              |  
|issued and
      outstanding, respectively                |   | 21,290      |   |   | 21,290       |  
|Additional paid-in capital                                |   | 1,877,426   |   |   | 1,877,426    |  
|Deferred equity compensation                              |   | (48,113     | ) |   | (52,487      | )
|Accumulated deficit                                       |   | (3,474,635  | ) |   | (3,485,180   | )
|                                                          |   |             |   |   |              |  
|Total Stockholders
      Equity (Deficit)                |   | (1,624,032  | ) |   | (1,638,951   | )
|                                                          |   |             |   |   |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS
      EQUITY          | $ | 221,982     |   | $ | 333,936      |  

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

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- 6 

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

|                                                     |   | For the Three Months Ended |  
|---------------------------------------------------- | - | -------------------------- | -
|                                                     |   | March
      31,            |  
|                                                     |   | 2008                       |  
|                                                     |   |                            |  
|REVENUES                                             |   |                            |  
|                                                     |   |                            |  
|Food and beverage sales                              | $ | 425,783                    |  
|Royalty and marketing fees                           |   | 148,157                    |  
|Franchise fees                                       |   | 40,000                     |  
|Equipment sales                                      |   | 38,778                     |  
|Miscellaneous finders and professional
      fees    |   | 20,090                     |  
|                                                     |   |                            |  
|Total Revenues                                       |   | 672,808                    |  
|                                                     |   |                            |  
|COST OF SALES                                        |   |                            |  
|                                                     |   |                            |  
|Cost of food and beverage                            |   | 372,772                    |  
|Materials and supplies                               |   | 14,216                     |  
|                                                     |   |                            |  
|Total Cost of Sales                                  |   | 386,988                    |  
|                                                     |   |                            |  
|GROSS PROFIT                                         |   | 285,820                    |  
|                                                     |   |                            |  
|EXPENSES                                             |   |                            |  
|                                                     |   |                            |  
|Depreciation and amortization                        |   | 3,357                      |  
|Marketing                                            |   | 34,444                     |  
|Professional fees                                    |   | 66,850                     |  
|Rent                                                 |   | 11,729                     |  
|Salaries and wages                                   |   | -                          |  
|Management fees                                      |   | 98,500                     |  
|Bad debt expense                                     |   | 11,102                     |  
|General and administrative                           |   | 62,078                     |  
|                                                     |   |                            |  
|Total Expenses                                       |   | 288,060                    |  
|                                                     |   |                            |  
|LOSS FROM OPERATIONS                                 |   | (2,240                     | )
|                                                     |   |                            |  
|OTHER INCOME (EXPENSES)                              |   |                            |  
|                                                     |   |                            |  
|Interest expense                                     |   | (21,990                    | )
|Interest income                                      |   | -                          |  
|                                                     |   |                            |  
|Total Other Income (Expense)                         |   | (21,990                    | )
|                                                     |   |                            |  
|LOSS BEFORE DISCONTINUED OPERATIONS AND INCOME TAXES |   | (24,230                    | )
|                                                     |   |                            |  
|INCOME (LOSS) FROM DISCONTINUED OPERATIONS           |   |                            |  
|                                                     |   |                            |  
|Income (Loss) from store construction                |   | 34,775                     |  
|                                                     |   |                            |  
|TOTAL INCOME (LOSS) FROM DISCONTINUED OPERATIONS     | $ | 34,775                     |  

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

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- 7 

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

|                                                              |   | For the Three Months Ended |  
|------------------------------------------------------------- | - | -------------------------- | -
|                                                              |   | March
      31,            |  
|                                                              |   | 2008                       |  
|                                                              |   |                            |  
|INCOME (LOSS) BEFORE INCOME TAXES                             |   | 10,545                     |  
|                                                              |   |                            |  
|INCOME TAX EXPENSE                                            |   | -                          |  
|                                                              |   |                            |  
|NET INCOME (LOSS)                                             | $ | 10,545                     |  
|                                                              |   |                            |  
|BASIC NET INCOME (LOSS) PER SHARE:                            |   |                            |  
|                                                              |   |                            |  
|(Loss) per
      share on continuing operations               | $ | (0.00                      |  
|Income (loss) per share
      on discontinued operations      |   | 0.00                       |  
|                                                              |   |                            |  
|Net income (loss) per share                                   | $ | 0.00                       |  
|                                                              |   |                            |  
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC         |   | 21,290,000                 |  
|                                                              |   |                            |  
|DILUTED NET INCOME (LOSS) PER SHARE:                          |   |                            |  
|                                                              |   |                            |  
|(Loss) per share on continuing
      operations               | $ | (0.00                      | )
|Income per
      share on discontinued operations             |   | 0.00                       |  
|                                                              |   |                            |  
|Net income
      (loss) per share                             | $ | 0.00                       |  
|                                                              |   |                            |  
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
      - DILUTED |   | 21,750,000                 |  

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

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- 8 

MELT INC. AND SUBSIDIARIESConsolidated Statement of
Stockholders Equity (Deficit)

AdditionalCommon
        Stock
      
      
      Paid-in
      
      
      Deferred
      
      
      AccumulatedShares
      
      
      Amount
      
      
      Capital
      
      
      Compensation
      
      
      DeficitBalance, December 31, 2007
      
      21,290,000
      
      $
      21,290
      
      $
      1,877,426
      
      $
      (52,487
      )
      $
      (3,485,180
      )Amortization of deferred equityCompensation (unaudited)
      
      -
      
      
      -
      
      
      -
      
      
      4,374
      
      
      -Net income for the three monthsended March 31, 2008 (unaudited)
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      10,545Balance, March 31, 2008 (unaudited)
      
      21,290,000
      
      $
      21,290
      
      $
      1,877,426
      
      $
      (48,113
      )
      $
      (3,474,635
      )


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

---

- 9 

MELT INC. AND SUBSIDIARIES Consolidated Statements of
Cash Flows (Unaudited)

|                                                                 |   | For the Three Months Ended |  
|---------------------------------------------------------------- | - | -------------------------- | -
|                                                                 |   | March
      31,            |  
|                                                                 |   | 2008                       |  
|CASH FLOWS FROM OPERATING ACTIVITIES                             |   |                            |  
|                                                                 |   |                            |  
|Net income (loss) after discontinued operations                  | $ | 10,545                     |  
|Less: income (loss) from discontinued operations                 |   | 34,775                     |  
|                                                                 |   |                            |  
|Net loss before discontinued operations                          | $ | (24,230                    | )
|Items to reconcile net loss to net cash provided
      (used) by |   |                            |  
|operating activities:                                            |   |                            |  
|Depreciation
      and amortization                              |   | 3,357                      |  
|Bad debt expense                                                 |   | 11,102                     |  
|Amortization
      of deferred equity compensation               |   | 4,374                      |  
|Amortization of deferred debt issuance
      costs               |   | 1,400                      |  
|Changes in operating assets
      and liabilities:               |   |                            |  
|Decrease in receivables                                          |   | 5,901                      |  
|(Increase)
      in prepaid expenses                             |   | -                          |  
|Decrease in other assets                                         |   | 9,560                      |  
|(Decrease)
      in accounts payable and accrued expenses        |   | (47,010                    | )
|Increase in interest payable
       related party               |   | 3,737                      |  
|Increase
      (Decrease) in interest payable                    |   | (12,310                    | )
|Increase in management fees
      payable                        |   | -                          |  
|(Decrease)
      in deferred revenue                             |   | (15,000                    | )
|                                                                 |   |                            |  
|Net
      Cash Used by Operating Activities                      |   | (59,119                    | )
|                                                                 |   |                            |  
|Net
      Cash Provided by Discontinued Activities               |   | 59,699                     |  
|                                                                 |   |                            |  
|Total
      Net Cash Provided (Used) by Operating and            |   |                            |  
|Discontinued
      Activities                                    |   | 580                        |  
|                                                                 |   |                            |  
|CASH FLOWS FROM INVESTING ACTIVITIES                             |   |                            |  
|                                                                 |   |                            |  
|Purchases of fixed assets                                        |   | -                          |  
|                                                                 |   |                            |  
|Net Cash Used
      by Investing Activities                      |   |                            |  
|
      Continuing Operations                                    |   | -                          |  
|                                                                 |   |                            |  
|CASH FLOWS FROM FINANCING ACTIVITIES                             |   |                            |  
|                                                                 |   |                            |  
|Payments on notes payable                                        |   | (576                       | )
|Payments on notes payable  related party                        |   | (49,465                    | )
|                                                                 |   |                            |  
|Net Cash Used
      by Financing Activities                     |   |                            |  
|Continuing
      Operations                                      |   | (50,041                    | )
|                                                                 |   |                            |  
|DECREASE IN CASH                                                 |   | (49,461                    | )
|                                                                 |   |                            |  
|CASH AT BEGINNING OF PERIOD                                      | $ | 67,853                     |  

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

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- 10 

MELT INC. AND SUBSIDIARIES Consolidated Statements of
Cash Flows (Continued)(Unaudited)

|                      |   | For the Three Months Ended | 
|--------------------- | - | -------------------------- | 
|                      |   | March
      31,            | 
|                      |   | 2008                       | 
|                      |   |                            | 
|                      |   |                            | 
|CASH AT END OF PERIOD | $ | 18,392                     | 
|                      |   |                            | 
|CASH PAID FOR:        |   |                            | 
|                      |   |                            | 
|Interest              | $ | 29,163                     | 
|Income taxes          | $ | -                          | 

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

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- 11 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

|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 (CA) was in the business
of owning and operating corporate owned stores, of which none were in existence
during the year ended December 31, 2007 and the period ended March 31, 2008,
managing the construction process for both corporate and franchisee owned
stores, securing retail space for either corporate or franchise stores to
operate from, as well as the sale and distribution of product to franchise owned
stores until October 2007. Melt (CA) ceased managing the construction of stores
during September 2007. All assets, liabilities and operating results related to
store construction and retail leases are therefore included in discontinued
operations as of March 31, 2008 (see note 3). Additionally, all operations of
Melt (CA) relating to sales of food and beverages to franchise owned stores has
been transferred to Melt Franchising, LLC.

Melt Franchising LLC (hereinafter
referred to as Melt (FA)) a wholly owned subsidiary was organized on February 2,
2005 under the laws of the State of Nevada. Melt (FA) 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 as well as the sale and distribution of product to franchisees,
marketing and the collection of royalties. To-date, Melt (FA) has sold
forty-seven franchises of which twenty-three are operating, fourteen agreements
have been terminated by the Company as a result of the franchisees not securing
retail space or other reasons, three are in the process of finding suitable
locations to operate their stores, two are in the process of building their
stores and five have closed their operations.

b. Depreciation

The cost of the equipment and property
is depreciated over the estimated useful life of 5 years. 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
three months ended March 2008 and 2007 was $3,209 and $2,888, respectively.

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- 12 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

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

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.

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 franchising activities, including sales of franchise licenses,
food and beverage products, equipment, marketing services and royalties from
franchisee sales.

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 a ten year term with two
five 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. During the three

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- 13 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

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

f. Revenue Recognition (Continued)

Franchise Fee Revenue (Continued)

months ended March 31, 2008 and 2007,
  the Company recognized $40,000 and $75,000 in franchise fee revenue, respectively.

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 March 31, 2008 and December 31,
2007 the company maintained deferred revenue of $125,000 and $140,000,
respectively. This represents franchise fees received, which have not been
recognized as revenue.

Build and Sale of Franchise
Stores

Due to the short-term nature of the
Companys store construction contracts, the Company accounted 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 were 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. The Company ceased its activities related to the
build and sale of franchise stores in 2007 (see Note 3).

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 due from the sale of products and services to franchisees for store
construction. Accounts receivable also includes 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,

---

- 14 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

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

g. Accounts Receivable and Allowance
for Doubtful Accounts (Continued)

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 on continuing operations was $ 10,000 and $4,005 at March 31,
2008 and December 31, 2007, respectively, while bad debt expense on continuing
operations totalled $11,102 and $Nil for the three months ended March 31, 2008
and 2007, respectively.

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 three months ended March 31, 2008 and
2007 was $34,444 and $161,053, respectively.

i. Principles of Consolidation

The consolidated financial statements
include the amounts of Melt Inc. and its wholly owned subsidiaries, Melt (CA)
and Melt (FA). All material inter-company accounts and transactions have been
eliminated.

j. 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.

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- 15 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

|NOTE 2 - | 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. As of March 31, 2008 the demand is still pending.

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 punitive class action against us, our affiliates, and our officers and
employees alleging damages and injunctive relief under state Franchise Acts,
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 are in the process of responding to this litigation.

|NOTE 3 - | DISCONTINUED OPERATIONS
|-------- | -----------------------

During the period ended September
2007, Melt (CA) elected to discontinue the operations related to construction
and sale of store locations for franchisees, its store in a box program due to
continuing losses. All assets, liabilities and operating results related to
store construction are therefore included in discontinued operations as of March
31, 2008 and 2007. No tax benefit has been attributed to discontinued
operations. The following is an unaudited summary of the assets and liabilities
related to discontinued operations of construction activities:

| |                           |   | March 31, |  |   | December 31, | 
| | ------------------------- | - | --------- |  | - | ------------ | 
| |                           |   | 2008      |  |   | 2007         | 
| |                           |   |           |  |   |              | 
| | CURRENT ASSETS            |   |           |  |   |              | 
| |                           |   |           |  |   |              | 
| | Accounts
      receivable | $ | 24,173    |  | $ | 55,347       | 
| |                           |   |           |  |   |              | 
| | CURRENT LIABILITIES       |   |           |  |   |              | 
| |                           |   |           |  |   |              | 
| | Accrued
      expenses    | $ | 401,000   |  | $ | 407,250      | 

---

- 16 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

|NOTE 3 - | DISCONTINUED OPERATIONS (CONTINUED)                                                                                                                      
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                          
|         | The following is an unaudited summary of the loss from
      discontinued operations resulting from the discontinuation of construction
      activities:

| |                                                     |   | For the Three Months Ended |  
| | --------------------------------------------------- | - | -------------------------- | -
| |                                                     |   | March
      31,            |  
| |                                                     |   | 2008                       |  
| |                                                     |   |                            |  
| | REVENUES                                            |   |                            |  
| |                                                     |   |                            |  
| | Franchise
      stores construction/equipment       | $ | -                          |  
| | Professional and finders
      fees                 |   | -                          |  
| |                                                     |   |                            |  
| | Total
      Revenues                                |   | -                          |  
| |                                                     |   |                            |  
| | COST OF SALES                                       |   |                            |  
| |                                                     |   |                            |  
| | Franchise stores construction/equipment
      costs |   | -                          |  
| | Professional
      and finders fees                 |   | -                          |  
| |                                                     |   |                            |  
| | Total Cost of Sales                                 |   | -                          |  
| |                                                     |   |                            |  
| | GROSS PROFIT (DEFICIT)                              | $ | -                          |  
| |                                                     |   |                            |  
| | EXPENSES                                            |   |                            |  
| |                                                     |   |                            |  
| | Bad debt                                            |   | 850                        |  
| | Rent                                                |   | -                          |  
| |                                                     |   |                            |  
| | Total Expenses                                      | $ | 850                        |  
| |                                                     |   |                            |  
| | INCOME (LOSS) FROM OPERATIONS                       |   | (850                       | )
| |                                                     |   |                            |  
| | OTHER INCOME                                        |   |                            |  
| |                                                     |   |                            |  
| | Miscellaneous income                                |   | 35,625                     |  
| |                                                     |   |                            |  
| | INCOME (LOSS) FROM DISCONTINUED                     |   |                            |  
| | OPERATIONS                                          | $ | 34,775                     |  

|NOTE 4 - | OUTSTANDING STOCK PURCHASE WARRANTS AND OPTIONS                                                                                                                                                                                                                                                     
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                     
|         | Employee Stock Options                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                     
|         | On April 2, 2007, the Company issued 1,720,000 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

---

- 17 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

|NOTE 4 - | OUTSTANDING STOCK PURCHASE WARRANTS AND OPTIONS
      (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         | Employee Stock Options(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         | at a rate of 25% per year. The options terminate upon
      leaving the Company prior to vesting, as such, seven employees have either
      resigned or been terminated and forfeited a total of 1,430,000 options as
      of March 31, 2008. The Company initially deferred $172,264 in calculated
      fair value of the options expected to vest and amortized $12,112 of the
      value to expense during the year ended December 31, 2007. As a result of
      forfeitures being in excess of original 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 $107,665
      and reduced additional paid-in capital. During the three months ended
      March 31, 2008, the Company recognized $4,374 in expense associated with
      the options.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         | A summary of the status of the Companys outstanding
      stock warrants as of December 31, 2007 and March 31, 2008 and changes
      during the periods is presented below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                                |  |          |   |   | Weighted       |  |   | Weighted         | 
| | ------------------------------ |  | -------- | - | - | -------------- |  | - | ---------------- | 
| |                                |  |          |   |   | Average        |  |   | Average          | 
| |                                |  | Options  |   |   | Exercise Price |  |   | Fair
      Value | 
| | Outstanding, December 31, 2007 |  | 390,000  |   | $ | 0.40           |  | $ | 0.20             | 
| | Issued                         |  | -        |   |   | -              |  |   | -                | 
| | Exercised                      |  | -        |   |   | -              |  |   | -                | 
| | Forfeited                      |  | (100,000 | ) |   | 0.40           |  |   | 0.20             | 
| | Expired                        |  | -        |   |   | -              |  |   | -                | 
| |                                |  |          |   |   |                |  |   |                  | 
| | Outstanding, March 31, 2008    |  | 290,000  |   | $ | 0.40           |  | $ | 0.20             | 
| |                                |  |          |   |   |                |  |   |                  | 
| | Exercisable, March 31, 2008    |  | -        |   | $ | -              |  | $ | -                | 

Outstanding
      
      
      ExercisableWeightedNumber
      
      
      Average
      
      
      Weighted
      
      
      Number
      
      
      WeightedRange of
      
      Outstanding
      
      
      Remaining
      
      
      Average
      
      
      Exercisable
      
      
      AverageExercise
      
      at
      
      
      Contractual
      
      
      Exercise
      
      
      at
      
      
      ExercisePrices
      
      3/31/08
      
      
      Life
      
      
      Price
      
      
      3/31/08
      
      
      Price$ 0.40
      
      290,000
      
      
      4.00
      
      $
      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 remaining forfeitures | 0%     

---

- 18 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

|NOTE 4 - | OUTSTANDING STOCK PURCHASE WARRANTS AND OPTIONS
      (CONTINUED)                                                                                                            
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                              
|         | Stock Warrants                                                                                                                                                               
|         |                                                                                                                                                                              
|         | A summary of the status of the Companys outstanding
      stock warrants as of March 31, 2008 and December 31, 2007 and changes
      during the periods is presented below:

| |                                |  |          |  |   | Weighted       |  |   | Weighted         | 
| | ------------------------------ |  | -------- |  | - | -------------- |  | - | ---------------- | 
| |                                |  |          |  |   | Average        |  |   | Average          | 
| |                                |  | Warrants |  |   | Exercise Price |  |   | Fair
      Value | 
| |                                |  |          |  |   |                |  |   |                  | 
| | Outstanding, December 31, 2007 |  | 460,000  |  | $ | 1.00           |  | $ | 0.25             | 
| |                                |  |          |  |   |                |  |   |                  | 
| | Issued                         |  | -        |  |   | -              |  |   | -                | 
| | Exercised                      |  | -        |  |   | -              |  |   | -                | 
| | Forfeited                      |  | -        |  |   | -              |  |   | -                | 
| | Expired                        |  | -        |  |   | -              |  |   | -                | 
| |                                |  |          |  |   |                |  |   |                  | 
| | Outstanding, March 31, 2008    |  | 460,000  |  | $ | 1.00           |  | $ | 0.25             | 
| |                                |  |          |  |   |                |  |   |                  | 
| | Exercisable, March 31, 2008    |  | 460,000  |  | $ | 1.00           |  | $ | 0.25             | 

Outstanding
      
      
      ExercisableWeightedNumber
      
      
      Average
      
      
      Weighted
      
      
      Number
      
      
      WeightedRange of
      
      Outstanding
      
      
      Remaining
      
      
      Average
      
      
      Exercisable
      
      
      AverageExercise
      
      at
      
      
      Contractual
      
      
      Exercise
      
      
      at
      
      
      ExercisePrices
      
      3/31/08
      
      
      Life
      
      
      Price
      
      
      3/31/08
      
      
      Price$ 0.90  1.00
      
      460,000
      
      
      0.56
      
      $
      1.00
      
      
      460,000
      
      $
      1.00


|NOTE 5 - | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                               
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                          
|         | Management Fees                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                          
|         | During the quarter ended March 31, 2008, the Company paid
      Chill, Inc., a related party company, a management fee of $98,500
      representing the salaries, wages, benefits and overhead expenses related
      to the operation of the Company during the period.
|         |                                                                                                                                                                                                                                                                          
|         | During the quarter ended March 31, 2008, the Company
      ceased accruing management fees to the Companys President and began
      paying his salary as part of the management arrangement with Chill, Inc.                                                           

---

- 19 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

|NOTE 5 - | RELATED PARTY TRANSACTIONS (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Notes Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | During the quarter ended March 31, 2008, the Company
      repaid $49,465 of its note payable to its President. The note balance and
      accrued interest at March 31, 2008 was $100,000 and $78,426, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 6 - | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | The Company files income tax returns in the U.S. federal
      jurisdiction and the states of California, Massachusetts, Connecticut,
      Arizona, Illinois and Ohio. With few exceptions, the Company is no longer
      subject to U.S. federal, state and local, or non-U.S. income tax
      examinations by tax authorities for years before 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | The Company adopted the provisions FASB Interpretation
      No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of
      FASB Statement No. 109, Accounting for Income Taxes (SFAS No. 109) (FIN
      48) on January 1, 2007. As a result of the implementation of FIN 48 the
      Company did not recognize any increases in the liability recognize for
      unrecognized tax benefits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 7 - | 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.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

---

- 20 -

MELT INC. AND SUBSIDIARIESNotes to the Consolidated
Financial Statements March 31, 2008 and December 31, 2007

|NOTE 7 - | GOING CONCERN (CONTINUED)                                                                                                                                                                            
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                      
|         | 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.

---

- 21 -

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

Three Months ending March 31, 2008 compared to three months
  ending March 31, 2007

The period covered by our unaudited financial statements is for
the three months ended March 31, 2008 during which time we generated $672,808 in
revenue from continuing operations and incurred a net loss of $24,230 from
continuing operations. During the same period last year we generated $571,512 in
revenue from continuing operations and incurred a loss of $356,969 from
continuing operations. The revenue was generated from franchise fees, 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 from
an increase in royalty income up approximately 62%, sales of food and beverage
up 24% and sales of equipment to franchisees up 100%, partially offset by a
decrease in franchisee fee income of 47%. Cost of sales from continuing
operations amounted to $386,988, resulting in gross profit from continuing
operations of $285,820, or 42% compared to cost of sales of $327,760 during the
same period last year, resulting in gross profit from continuing operations of
$189,752, or 37%. The percentage gross profit is in line with the prior year
gross profit.

Salaries and wages from continuing operations amounted to $Nil
compared to $225,666, or 44% of sales for the same period last year. Management
fees amounted to $98,500, or 15% of sales compared to $6,388, or 1% of sales for
the same period last year. The percentage decrease in salaries and wages and
increase in management fees are

---

- 22 -

due to the entrance into a management agreement with Chill,
Inc., a related party company, whereby Chill, Inc. charges Melt a management fee
for all payroll and benefits expense of employees and operations overhead to
operate the company. General and administrative expenses from continuing
operations amounted to $62,078, or 9% of sales and $71,660, or 14% of sales for
the same period last year. Marketing expenses were $34,444 or 5% of sales and
$161,053, or 31% 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 $66,850, or 10% of revenue and $60,774, or 12% of revenue
for the same period last year.

During the period one new franchise license was sold, one new
franchised store opened and none closed. At the end of the quarter, there were
twenty three stores open.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2008 we had $18,392 cash on hand and working
capital deficit of $926,705. As of March 31, 2008 our total current assets were
$110,467, and our total assets were $221,982.

At March 31, 2008 our total liabilities were $1,846,014, of
which $1,037,172 were considered to be current.

For the three months ended March 31, 2008, net cash used by
operating activities from continuing operations was $59,119 compared to net cash
used by operating activities from continuing operations of $661,417 for the same
period last year. Net cash used by investing activities for continuing
operations was $Nil compared to cash used by investing activities for continuing
operations of $3,819 for the same period last year. Net cash used by financing
activities was $50,041 compared to $Nil for the same period last year.

Presently, we have insufficient revenue and cash flow to
support our growth plan.

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.

FUTURE OPERATIONS

Immediate Objectives

Our primary objective for the 12 month period ending March 31,
2008 will be to create a solid base that will allow us to re-start our planned
expansion program in 2009, and to reduce costs with the intention of getting our
company closer to a breakeven point.

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. Our expansion and marketing efforts to attract new
franchisees will be greatly curtailed until we reach some of the goals mentioned
in this section entitled Future Operations.

Retail Locations

Our business plan for the 12 month period ending March 31, 2009
envisions opening eight new franchise owned stores and no corporate owned
stores.

Promotion

Our marketing efforts in 2008 will be focused towards improving
our in-store marketing campaign with the intent of improving sales at the store
level. During the latter part of 2007, we hired a new advertising and marketing
agency

---

- 23 -

with experience in the quick casual food sector and with their
help anticipate creating new and innovative marketing programs that will help
create brand awareness.

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
  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.

---

- 24 -

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.

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

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- 25 -

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 own26.9%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 21,290,000 are issued and outstanding. Our board of directors has the
authority to cause our company to issue additional shares of common stock or
issue 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.

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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 Financial Industry Regulatory Authority. 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, FINRA 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, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA 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.

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.

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- 27 -

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 president and
chief executive officer (who is acting as our principal executive officer,
principal financial officer and principle accounting 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 March 31, 2008, the end of the period covered by this
report, our president and chief executive officer (who is acting as our
principal executive officer, principal financial officer and principle
accounting officer) carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures. Based on the foregoing,
our president and chief executive officer (who is acting as our principal
executive officer, principal financial officer and principle accounting 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 significant changes in our internal controls
over financial reporting that occurred during the quarter ended March 31, 2008
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. As of March 31, 2008 the demand is still pending.

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,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 punitive class action
against us, our affiliates, and our officers and employees alleging damages and
injunctive relief under state Franchise Acts, 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 are in the process
of responding to this litigation.

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- 28 -

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

None

Item
3.           Defaults Upon
Senior Securities.

None.

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

None.

Item
5.           Other
Information.

None.

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).
|               |                                                                                                                                                                                  
|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).                                                  

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- 29 -

|Exhibit Number | Description                                         
|-------------- | ----------------------------------------------------
|               |                                                     
|(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

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- 30 -



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
BarwinClive
Barwin, President, CEO, Chief Financial Officer , Secretary and Director
(Principal Executive Officer, Principal Financial Officer and Principal
Accounting Officer)

Date: May 15, 2008

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