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

FORM 10-KSB

(Mark One) x  Annual Report Pursuant To
  Section 13 Or 15(D) Of The Securities Exchange Act Of 1934

For the fiscal year ended December 31, 2004

 ̈  Transition
  Report Under Section 13 Or 15(D) Of The Securities Exchange Act Of 1934

For the transition period from ________________ to ________________

COMMISSION FILE NUMBER000-32011

BALSAM VENTURES, INC.
  (Name of small business issuer in its charter)

|NEVADA                                                               | 52-2219056      
|-------------------------------------------------------------------- | ----------------
|(State or other jurisdiction of incorporation
      or organization) | (I.R.S. Employer
|                                                                     |                 
|SUITE 200, 20 EAST FOOTHILL BOULEVARD                                |                 
|ARCADIA, CALIFORNIA                                                  | 91006           
|(Address of principal executive offices)                             | (Zip Code)      
|                                                                     |                 
|(626)574-2911                                                        |                 
|Issuer's telephone number                                            |                 

Securities registered under Section 12(b) of the Exchange Act:
  NONE.

Securities registered under Section 12(g) of the Exchange Act:

COMMON STOCK, $0.001 PAR VALUE PER SHARE.

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
  o   No ý

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained in this form, and no disclosure
  will be contained, to the best of registrant's knowledge, in definitive proxy
  or information statements incorporated by reference in Part III of this Form
  10-KSB or any amendment to this Form 10-KSB. ̈

State issuer's revenues for its most recent fiscal year NIL.

As of May 13, 2005, the aggregate market value of the voting
  and non-voting common equity held by non- affiliates is $344,375, based
  on an average of the bid price of $0.045 and ask price of $0.08 of the
  common stock on May 13, 2005.

As of May 13, 2005, the Registrant had 25,500,000
  common stock with a par value of $0.001 outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

Transitional Small Business Disclosure Format (check one):
  Yes ̈    No
  x

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BALSAM VENTURES, INC. ANNUAL REPORT ON FORM 10-KSBFOR THE YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS

|           |                                                                                                                        | PAGE
|---------- | ---------------------------------------------------------------------------------------------------------------------- | ----
|           |                                                                                                                        |     
|PART I     |                                                                                                                       
|           |                                                                                                                        |     
|Item 1.    | Description of Business.                                                                                               | 3   
|Item 2.    | Description of Property.                                                                                               | 4   
|Item 3.    | Legal Proceedings.                                                                                                     | 5   
|Item 4.    | Submission of Matters to a Vote of Security
      Holders.                                                             | 5   
|           |                                                                                                                        |     
|PART II    |                                                                                                                       
|           |                                                                                                                        |     
|Item 5.    | Market for Common Equity and Related Stockholder
      Matters.                                                        | 6   
|Item 6.    | Management’s Discussion and Analysis
      or Plan of Operation.                                                       | 8   
|Item 7.    | Financial Statements.                                                                                                  | 12  
|Item 8.    | Changes in and Disagreements with Accountants
      on Accounting and Financial Disclosure.                            | 13  
|Item 8A.   | Controls and Procedures.                                                                                               | 13  
|Item 8B.   | Other Information.                                                                                                     | 13  
|           |                                                                                                                        |     
|PART III   |                                                                                                                       
|           |                                                                                                                        |     
|Item 9.    | Directors, Executive Officers, Promoters
      And Control Persons; Compliance with Section 16(a) of the Exchange Act. | 14  
|Item 10.   | Executive Compensation.                                                                                                | 16  
|Item 11.   | Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters.                  | 17  
|Item 12.   | Certain Relationships and Related Transactions.                                                                        | 18  
|Item 13.   | Exhibits.                                                                                                              | 19  
|Item 14.   | Principal Accountant Fees and Services.                                                                                | 20  
|           |                                                                                                                        |     
|SIGNATURES | 21                                                                                                                    

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PART I

ITEM 1.             DESCRIPTION
  OF BUSINESS.

FORWARD LOOKING STATEMENTS

The information in this discussion contains forward-looking
  statements. These forward-looking statements involve risks and uncertainties,
  including statements regarding the Company's capital needs, business strategy
  and expectations. Any statements contained herein that are not statements of
  historical facts may be deemed to be forward-looking statements. In some cases,
  you can identify forward-looking statements by terminology such as "may", "will",
  "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict",
  "potential" or "continue", the negative of such terms or other comparable terminology.
  Actual events or results may differ materially. In evaluating these statements,
  you should consider various factors, including the risks described below, and,
  from time to time, in other reports the Company files with the Securities and
  Exchange Commission (the “SEC”). These factors may cause the Company's
  actual results to differ materially from any forward-looking statement. The
  Company disclaims any obligation to publicly update these statements, or disclose
  any difference between its actual results and those reflected in these statements.

OVERVIEW

We were incorporated on August 17, 1999 under the laws of
  the State of Nevada.

In accordance with our original business plan, we developed
  a free Internet web site at "www.usacitizenship.net" to provide a reliable source
  of information on immigration into the United States. Our original business
  plan was to draw users to our web site so that we could sell and generate revenues
  from the sale of web site advertisements. We completed the development of our
  web site and it became operational. However, we did not achieve sales of advertising
  on our web site and we have not earned any revenue to date.

As discussed below, on June 6, 2002, we entered into an exclusive
  licensing agreement (the “Original License Agreement”) with NorPac
  Technologies, Inc. (formerly Cool Can Technologies, Inc.) ("NorPac"). We ceased
  development of our web site business in order to concentrate on development
  of the technology licensed from NorPac. The web site is not currently operational.
  As discussed below, on November 30, 2003, we entered into a new exclusive licensing
  agreement with NorPac which cancelled and replaced the Original License Agreement.

License of Cool Can Technology

On June 6, 2002, we entered into an exclusive licensing agreement
  which was amended on September 2, 2002 (the "Original License Agreement") with
  NorPac, pursuant to which we were granted the exclusive worldwide right and
  license, for a period of 40 years, to enjoy, commercialize and exploit NorPac's
  proprietary Instacool self-chilling beverage container technology (the "Cool
  Can Technology"). As part of the consideration that we agreed to pay pursuant
  to the Original License Agreement, we issued 300,000 shares of our common stock
  to NorPac. However, we were in default of the Original License Agreement because
  we had failed to pay a $200,000 license fee. On June 5, 2003, we reached
  an agreement with NorPac that provided us until November 30, 2003 to remedy
  the default or lose our rights under the License Agreement.

On November 30, 2003, we entered into a new license agreement
  with NorPac (the “License Agreement”) which grants us the exclusive
  right and license, for a period of 40 years, to enjoy, commercialize and exploit
  the Cool Can Technology in countries comprising the European Union and the Peoples
  Republic of China (the “Exclusive Regions”). The License Agreement
  cancels and replaces the Original License Agreement and terminates all of our
  obligations under the Original License Agreement. Under the License Agreement,
  we have the right, within the Exclusive Region, to manufacture, use and sell
  apparatus and products embodying the Cool Can Technology and grant sub-licenses
  of our right to manufacture, use and sell

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products embodying the Cool Can Technology. The License Agreement
  further provides us with a right of first refusal with respect to any transfers,
  sales or assignments of the Cool Can Technology by NorPac, including patents,
  trademarks or other intellectual property rights. We also have a right of first
  refusal with respect to any licensing rights for countries which are not a party
  to the North American Free Trade Agreement and are outside of the Exclusive
  Region. The consideration we agreed to pay to NorPac pursuant to the License
  Agreement is as follows:

| | 1. | We agreed to issue 5,000,000 shares of our common
        stock to NorPac, which shares were issued in May, 2004; and                                                                                                                                                                                                                        
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                              
| | 2. | We agreed to pay ongoing royalties to NorPac equal
        to 2% of gross profits from sales of products or 5% of gross licensing
        revenues. Notwithstanding that there may be no gross profits or gross
        licensing revenues, we agreed to pay minimum royalty payments of $5,000
        per month beginning January 15, 2006.

NorPac's proposed product is referred to as the "InstaCool"
  product and consists of a module for insertion in an aluminum beverage container
  that incorporates a cartridge of liquid carbon dioxide ("CO2") that is held
  in place by a cartridge holder. The module consists of proprietary technology
  for which NorPac has been granted patent protection. The module would be inserted
  in an aluminum beverage container during an automated canning process. Containers
  incorporating the InstaCool product would be identified and sold as self-chilling
  beverage containers. To start the chilling process, a consumer would pull the
  tab off the container as with a regular non-chilling beverage container. When
  the tab on the lid of the beverage container is pulled by the consumer, a valve
  mechanism within the container releases the compressed liquid CO2. The escaping
  CO2 forms into small particles of frozen snow at extremely cold temperatures
  and rapidly imparts a chilling action to the beverage. The targeted result is
  that the consumer may purchase a beverage at room temperature and enjoy it cold
  without having to purchase it from a cooler or purchase ice to cool the beverage.

SIGNIFICANT EMPLOYEES

We have no significant employees other than the officers and
  directors of the Company.

RESEARCH AND DEVELOPMENT

We have incurred no research and development expenditures
  during the fiscal year ended December 31, 2004.

INTELLECTUAL PROPERTY

We do not own, either legally or beneficially, any patents
  or trademarks. Subject to the License Agreement, the patents, trademarks and
  other intellectual property rights which make up the Cool Can Technology remain
  the property of NorPac. However, under the terms of the License Agreement we
  have a right of first refusal to acquire those patents, trademarks or other
  intellectual property rights should NorPac seek to dispose of the Cool Can Technology
  during the term of the License Agreement. Under the License Agreement, we are
  required to prosecute, within the Exclusive Region, any possible infringements
  upon NorPac’s patents or trademarks relating to the Cool Can Technology.

ITEM 2.             DESCRIPTION
  OF PROPERTY.

We have no real property holdings and, at this time, we have
  no agreements to acquire any properties. We do not lease any real property.
  Because of our limited operations, our management has determined that it is
  unnecessary for us to lease full-time office space at this time. David Lam,
  our President and Chief Executive

Page 4 of 21

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Officer and a member of our board of directors, has agreed
  to allow us to use office space leased by his company, Mediverse International,
  Inc., on an as needed basis free of charge.

ITEM 3. 
  LEGAL PROCEEDINGS.

We are not a party to any legal proceedings and, to our knowledge,
  no such proceedings are pending, threatened or contemplated.

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

No matters were submitted to our security holders during the
  fourth quarter of our fiscal year ending December 31, 2004.

Page 5 of 21

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PART II

ITEM 5.             MARKET
  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common shares are quoted on the OTC Bulletin Board under
  the symbol BLSV.

The following table indicates the high and low bid prices
  of the common shares during the periods indicated:

|                                 | 2004   |        |  | 2003  |      
|-------------------------------- | ------ | ------ |  | ----- | -----
|                                 |        |        |  |       |      
|                                 | High   | Low    |  | High  | Low  
|                                 |        |        |  |       |      
|First Quarter ended March 31     | $0.07  | $0.03  |  | $0.05 | $0.02
|Second Quarter ended June 30     | $0.125 | $0.031 |  | $0.08 | $0.01
|Third Quarter ended September 30 | $0.06  | $0.03  |  | $0.08 | $0.03
|Fourth Quarter ended December 31 | $0.035 | $0.03  |  | $0.05 | $0.03

The range of high and low price quotes of our common stock
  as set out in the table above are as quoted on the OTC Bulletin Board. The market
  quotations provided reflect inter-dealer prices, without retail mark-up, mark-down
  or commission and may not represent actual transactions.

PENNY STOCK RULES

The SEC has adopted rules that regulate broker-dealer practices
  in connection with transactions in penny stocks. Penny stocks are generally
  equity securities with a price of less than $5.00, other than securities
  registered on certain national securities exchanges or quoted on the Nasdaq
  system, provided that current price and volume information with respect to transactions
  in such securities is provided by the exchange or system. The penny stock rules
  require a broker-dealer, prior to a transaction in a penny stock not otherwise
  exempt from those rules, to deliver a standardized risk disclosure document
  prepared by the SEC, which: (a) contains a description of the nature and level
  of risk in the market for penny stocks in both public offerings and secondary
  trading; (b) contains a description of the broker's or dealer's duties to the
  customer and of the rights and remedies available to the customer with respect
  to a violation of such duties or other requirements of securities laws; (c)
  contains a brief, clear, narrative description of a dealer market, including
  bid and ask prices for penny stocks and significance of the spread between the
  bid and ask price; (d) contains a toll-free telephone number for inquiries on
  disciplinary actions; (e) defines significant terms in the disclosure document
  or in the conduct of trading in penny stocks; and (f) contains such other information
  and in such form as the SEC shall require by rule or regulation. The broker-dealer
  also must, prior to effecting any transaction in a penny stock, provide the
  customer with: (a) bid and offer quotations for the penny stock; (b) the compensation
  of the broker-dealer and its salesperson in the transaction; (c) the number
  of shares to which such bid and ask prices apply, or other comparable information
  relating to the depth and liquidity of the market for such stock; and (d) monthly
  account statements showing the market value of each penny stock held in the
  customer's account. In addition, the penny stock rules require that, prior to
  a transaction in a penny stock that is not otherwise exempt from those rules,
  the broker-dealer must: (a) make a special written determination that the penny
  stock is a suitable investment for the purchaser and (b) receive from the purchaser
  his or her written acknowledgement of receipt of the determination and a written
  agreement to the transaction.

These disclosure requirements may have the effect of reducing
  the trading activity in the secondary market for our stock and therefore stockholders
  may have difficulty selling those securities.

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REGISTERED HOLDERS OF OUR COMMON STOCK

As of May 13, 2005, there were approximately 9 registered
  holders of record of our common stock. We believe that a large number of stockholders
  hold stock on deposit with their brokers or investment bankers registered in
  the name of stock depositories.

DIVIDENDS

We have neither declared nor paid any cash dividends on our
  capital stock since our inception and do not contemplated paying cash dividends
  in the foreseeable future. It is anticipated that earnings, if any, will be
  retained for the operation of our business. Our board of directors will determine
  future dividend declarations and payments, if any, in light of the then-current
  conditions they deem relevant and in accordance with the Nevada Revised Statutes.

There are no restrictions in our articles of incorporation
  or in our bylaws which prevent us from declaring dividends. The Nevada Revised
  Statutes, however, do prohibit us from declaring dividends where, after giving
  effect to the distribution of a dividend:

| | (a) | We would not be able to pay our debts as they become
        due in the usual course of business; or                                                                                                                                           
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                
| | (b) | Our total assets would be less than the sum of our
        total liabilities plus the amount that would be needed to satisfy the
        rights of shareholders who have preferential rights superior to those
        receiving distributions.

RECENT SALES OF UNREGISTERED SECURITIES

On October 1, 2003, we issued to 12 of our creditors a total
  of $260,000 of 10% convertible notes due October 1, 2006 (the “Convertible
  Notes”). The Convertible Notes are convertible into shares of our common
  stock at the option of the holder at the lesser of $0.03 per share or 50%
  of our average trading price for the 10 trading days prior to conversion. We
  issued 11 of the Convertible Notes pursuant to Regulation S promulgated under
  the Securities Act of 1933 on the basis that each of these 11 holders of the
  Convertible Notes are not “U.S. persons” as defined under Regulation
  S. One (1) additional Convertible Note was issued pursuant to the exemption
  to registration contained in section 4(2) of the Securities Act of 1933 on the
  basis that the issuance of this Convertible Note did not involve a public offering.

On November 18, 2003, we issued 300,000 shares of our common
  stock to NorPac as part of the consideration that we owed to NorPac pursuant
  to the Original License Agreement as discussed above. These shares were issued
  at a price of $0.21 per share, the closing price of our common stock on
  September 2, 2002, the amendment date of the Original License Agreement. The
  issuance of these shares of our common stock was made pursuant to the exemption
  to registration contained in Section 4(2) of the Securities Act of 1933.

As discussed above, on November 30, 2003, we entered into
  a new exclusive licensing agreement with NorPac. As part of the consideration
  for those licensing rights, we agreed to issue to NorPac 5,000,000 shares in
  our common stock. These shares were issued to NorPac in May, 2004 at a price
  of $0.05 per share, the closing price of our common stock on that date.
  The issuance of these shares of our common stock will be made pursuant to the
  exemption to registration contained in section 4(2) of the Securities Act of
  1933.

We have reached a verbal agreement with BIG K.G. (“BIG”),
  a German company, pursuant to which BIG will act as our agent for the purpose
  of locating European placees for a proposed private placement of 40,000,000
  units at a price of $0.025 per unit for total proceeds of $1,000,000
  (the “Private Placement”). Under the terms of our verbal agreement,
  each unit to be issued under the proposed Private Placement will consist of
  one share in our common stock and one share purchase warrant entitling the warrant
  holder to

Page 7 of 21

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purchase one additional share of our common stock at a price
  of $0.05 per share. BIG is to receive a commission of $100,000 for services
  provided in connection with the proposed Private Placement. Although we have
  reached a verbal agreement with BIG in respect of the proposed Private Placement,
  we have not yet formalized our agreement with BIG. As a considerable period
  of time has passed without our being able to reach a formalized agreement with
  BIG, there is a substantial doubt that the proposed Private Placement will actually
  be completed.

ITEM 6.             MANAGEMENT'S
  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

PLAN OF OPERATIONS

Our plan of operations for the next twelve months will include
  the following components:

| | (1) | We plan to seek sub-licensing agreements
        to finance approximately $300,000 for the development of the InstaCool
        technology. We plan to proceed with product development and production
        of samples of self-chilling beverage container modules. This phase of
        development will include the following elements and will take approximately
        nine months once financing is in place:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     | (a)                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |     | (b)                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |     | (c)                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (2) | We anticipate spending approximately $20,000
        on professional fees over the next twelve months in complying with our
        reporting obligations under the Securities Exchange Act of 1934.                                                                                                                                                                                                                    
|
| | (3) | We anticipate spending approximately $140,000
        on general overhead expenses, including office expenses and consulting
        fees.                                                                                                                                                                                                                                                                              

Subject to obtaining financing, we anticipate that we will
  be spending approximately $460,000 over the next twelve-month period pursuing
  our stated plan of operations. Of these anticipated expenditures, we anticipate
  that $230,000 will be spent on our plan of operations over the next six
  months. Our present cash reserves are not sufficient for us to carry out our
  plan of operations without substantial additional financing. We are currently
  attempting to arrange for financing through sub-licensing arrangements that
  would enable us to proceed with our plan of operations. Although we have reached
  a verbal agreement with BIG K.G. for the proposed Private Placement, there exists
  a substantial doubt that we will be able to complete the proposed Private Placement.
  We do not have any other financing arrangements in place and there is no assurance
  that we will be able to achieve sufficient financing required to commercialize
  the InstaCool technology and to earn revenues. In the event that we are not
  successful in developing and commercializing the InstaCool technology, we intend
  to focus on the advertising and marketing campaign for our U.S. immigration
  web site business.

Our actual expenditures and business plan may differ from
  the one stated above. Our board of directors may decide not to pursue this plan.
  In addition, we may modify the plan based on available financing.

Page 8 of 21

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RESULTS OF OPERATIONS

|Summary of Year End Results |                        |            |                    
|--------------------------- | ---------------------- | ---------- | -------------------
|                            | Year Ended December 31
|                            | 2004                   | 2003       | Percentage Increase
|                            |                        |            | / (Decrease)       
|Revenue                     | $ nil                  | $ nil      | n/a                
|Expenses                    | (306,987)              | (232,416)  | 32.1%              
|Net Income (Loss)           | $(306,987)             | $(232,416) | 32.1%              

Revenues

We did not earn any revenues during the fiscal year ended
  December 31, 2004. We do not anticipate earning revenues until we commence sales
  of advertising on our immigration web site or we are successful completing the
  development of the InstaCool technology and are successful in commercializing
  this technology. We are presently in the development stage and we can provide
  no assurance that we will be successful in earning revenues from our immigration
  web site or from the InstaCool technology even if we achieve the financing to
  develop this technology.

Expenses

The major components of our expenses for the year are outlined
  in the table below:

|                                        | Year Ended December 31
|--------------------------------------- | ----------------------
|                                        |                       
|                                        | 2004                  
|                                        |                       
|Consulting Services                     | $60,000               
|Domain Registration                     | -                     
|Professional Fees                       | 18,198                
|Interest and Bank Charges               | 26,377                
|Office and Sundry                       | 181                   
|Regulatory                              | 2,166                 
|Stock Transfer Services                 | 65                    
|Write Off of Software Development Costs | -                     
|Travel                                  | -                     
|License Agreement Extension             | -                     
|License Cost                            | 200,000               
|Total Expenses                          | $306,987              

We incurred operating expenses in the amount of $306,987
  for the fiscal year ended December 31, 2004 as compared to $232,416 for
  the fiscal year ended December 31, 2003. The largest component of our operating
  expenses was licensing costs of $200,000, being the value of the 5,000,000
  shares of our common stock issued to NorPac as consideration for the License
  Agreement for the Cool Can Technology. We also incurred $60,000 in expenses
  on account of consulting services for general administrative and accounting
  work and for services provided in connection with our regulatory filings. Our
  operating expenses also included professional

Page 9 of 21

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fees in the amount of $18,198 incurred in meeting our
  ongoing reporting obligations under the Securities Exchange Act of 1934.

LIQUIDITY AND FINANCIAL CONDITION

|Cash Flows                                    |                              |      
|--------------------------------------------- | ---------------------------- | -----
|                                              | Year
      Ended December 31
|                                              | 2004                         | 2003 
|Net Cash used in Operating Activities         | $(1,010)                     | $(22)
|Net Cash used in Investing Activities         | Nil                          | Nil  
|Net Cash from Financing Activities            | Nil                          | Nil  
|Net Increase (Decrease) in Cash During Period | $1,010                       | $(22)

Working Capital

|                                  |                 |                 | Percentage
|--------------------------------- | --------------- | --------------- | ----------
|                                  | At December 31, | At December 31, | Increase /
|                                  | 2004            | 2003            | (Decrease)
|Current Assets                    | $1,033          | $23             | 4,391.3%  
|Current Liabilities               | 159,117         | 51,120          | 211.3%    
|Working Capital Surplus (Deficit) | $(158,084)      | $(51,097)       | 209.4%    

We had cash of $1,033 as at December 31, 2004 as compared
  to cash of $23 as at December 31, 2003. At December 31, 2004 we had a working
  capital deficit of $158,084 as compared to a working capital deficit of
  $51,097 at December 31, 2003. The increase in working capital deficit during
  the year ended December 31, 2004 is attributable to increased accounts payable
  and accrued liabilities.

We will require additional financing if we are not successful
  in earning revenues from either our web site or the InstaCool technology. There
  is no assurance that we will be able to obtain additional financing if and when
  required. Although we have reached a verbal agreement with BIG K.G. for a proposed
  private placement, there exists a substantial doubt as to whether we will be
  able to complete this private placement. We anticipate that any additional financing
  may be in the form of sales of additional shares of our common stock which may
  result in dilution to our current shareholders.

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that
  have or are reasonably likely to have a current or future effect on our financial
  condition, changes in financial condition, revenues or expenses, results of
  operations, liquidity, capital expenditures or capital resources that is material
  to stockholders.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with
  United States generally accepted accounting principles requires our management
  to make estimates and assumptions that affect the reported amount 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.
  Our management routinely makes judgments and estimates about the effects of
  matters that are inherently uncertain.

Page 10 of 21

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Our significant accounting policies are disclosed in Note
  2 to the audited financial statements included in this Annual Report.

Convertible Notes Payable

Our financial statements for the year ended December 31, 2003
  and for the quarterly periods ended March 31, 2004, June 30, 2004 and September
  30, 2004 have been restated to correct an error in the accounting for the beneficial
  conversion features of $260,000 of three year convertible notes bearing
  interest at 10% per annum, issued by us on October 1, 2003. The notes are convertible
  at any time, at the holder’s option, into common shares at the lesser
  of $0.03 or 50% of the average trading price of our common shares for the
  ten trading days prior to conversion. We may, at our option, elect to pay all
  or a portion of the interest by issuing common shares.

The accompanying financial statements for the year ended December
  31, 2003 have been restated to correct an error in the accounting for the beneficial
  conversion feature on the convertible notes.

Emerging Issues Task Force Release Nos. 98-5 and 00-27 state
  that any embedded beneficial conversion features present in convertible securities
  should be valued separately at issuance. The embedded beneficial conversion
  feature should be recognized and measured by allocating a portion of the proceeds
  equal to the intrinsic value of that feature to additional paid-in capital.
  That amount should be calculated at the commitment date as the difference between
  the effective conversion price and the fair value of the common stock or other
  securities into which the security is convertible, multiplied by the number
  of shares into which the security is convertible. The Emerging Issues Task Force
  observed that in certain circumstances, the intrinsic value of the beneficial
  conversion feature may be greater than the proceeds allocated to the convertible
  instrument. In those situations, the amount of the discount assigned to the
  beneficial conversion feature is limited to the amount of the proceeds allocated
  to the convertible instrument. For convertible instruments that have a stated
  redemption date (such as term debt) the discount resulting from recording a
  beneficial conversion option should be accreted from the date of issuance to
  the stated redemption date of the convertible instrument. In the event of early
  conversion or default, the remaining discount would be recognized as interest
  expense during the period in which such early conversion or default occurs.

In correcting the accounting for the convertible notes to
  apply the provisions of the above pronouncements, we recorded a discount on
  the convertible debentures in the amount of $260,000. This discount is being
  accreted to interest expense using the interest method over the life of the
  notes (three years). As the effective interest rate, which is determined by
  dividing the actual interest rate on the convertible debentures by the discounted
  debt amount, approaches infinity, the interest expense to be recorded approximates
  the future cash payments. Total interest expense on the debentures for the three
  months ended December 31, 2003 was $6,500. Interest expense recorded related
  to the accretion of the discount for the year ended December 31, 2003 was $Nil.
  The remaining discount on the convertible debentures as of December 31, 2003
  was $260,000.

Interest expense related to the accretion of the discount
  for the calendar years ending after December 31, 2003 is expected to be as follows
  and would be accelerated upon early conversion or default of the notes:

|Year ended December  31, 2004 | $ | -      
|----------------------------- | - | -------
|Year ended December  31, 2005 | $ | 3,030  
|Year ended December  31, 2006 | $ | 256,970

The restatement had the effect of reducing the previously
  reported carrying amounts of the notes by the $260,000 amount of the discount,
  and increasing additional paid in capital by the same amount. The restatement
  had no effect on previously reported loss, loss per share, loss from inception
  to December 31, 2003 or on previously reported cash flows.

Page 11 of 21

---

ITEM 7.             FINANCIAL
  STATEMENTS.

|   |                                                                                       |                                                                                                                                                                                                         | Page
|-- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|   |                                                                                       |                                                                                                                                                                                                         |     
|1. | Reports
        of Independent Registered Public Accounting Firm;                     |                                                                                                                                                                                                        
|   |                                                                                       |                                                                                                                                                                                                         |     
|   | a.                                                                                    | Report of Telford Sadovnick, PLLC                                                                                                                                                                       | F-2 
|   |                                                                                       |                                                                                                                                                                                                         |     
|   | b.                                                                                    | Report of Morgan & Company, Chartered
      Accountants                                                                                                                                                 | F-3 
|   |                                                                                       |                                                                                                                                                                                                         |     
|2. | Audited
        Financial Statements for the year ended December 31, 2004, including: |                                                                                                                                                                                                        
|   |                                                                                       |                                                                                                                                                                                                         |     
|   | a.                                                                                    | Balance Sheets as
        at December 31, 2004 and December 31, 2003;                                                                                                                                   | F-4 
|   |                                                                                       |                                                                                                                                                                                                         |     
|   | b.                                                                                    | Statements of Operations
        for the years ended December 31, 2004, December 31, 2003, December 31,
        2002 and for the period from inception on August 17, 1999 to December
        31, 2004; | F-5 
|   |                                                                                       |                                                                                                                                                                                                         |     
|   | c.                                                                                    | Statements of Cash
        Flows for the years ended December 31, 2004, December 31, 2003, December
        31, 2002 and for the period from inception on August 17, 1999 to December
        31, 2004; | F-6 
|   |                                                                                       |                                                                                                                                                                                                         |     
|   | d.                                                                                    | Statements of Stockholders’
        Equity (Deficiency); and                                                                                                                                            | F-8 
|   |                                                                                       |                                                                                                                                                                                                         |     
|   | e.                                                                                    | Notes to Financial
        Statements.                                                                                                                                                                  | F-9 

Page 12 of 21

---

BALSAM VENTURES, INC.
  (A Development Stage Company)

FINANCIAL STATEMENTS
  (Stated in U.S. Dollars)

DECEMBER 31, 2004



F-1

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of 
  Balsam Ventures, Inc.(A Development Stage Company)

We have audited the accompanying balance sheet of Balsam
  Ventures, Inc. (the “Company”) (a Development Stage Company)
  as at December 31, 2004, the related statements of operations, stockholders’
  equity (deficiency) and cash flows for the year ended December 31, 2004. These
  financial statements are the responsibility of the Company’s management.
  Our responsibility is to express an opinion on these financial statements based
  on our audit.

We conducted our audit in accordance with standards of the
  Public Company Accounting Oversight Board (United States). Those standards require
  that we plan and perform an audit to obtain reasonable assurance about whether
  the financial statements are free of material misstatement. An audit includes
  examining, on a test basis, evidence supporting the amounts and disclosures
  in the financial statements. An audit also includes assessing the accounting
  principles used and significant estimates made by management, as well as evaluating
  the overall financial statement presentation. We believe that our audit provides
  a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
  present fairly, in all material respects, the financial position of Balsam
  Ventures, Inc. (a Development Stage Company) as at December 31, 2004 and
  the results of its operations and its cash flows for the year then ended, in
  conformity with accounting principles generally accepted in the United States
  of America.

As described in Note 4 to the financial statements, the accompanying
  financial statements of Balsam Ventures Inc. (a Development Stage Company)
  as at December 31, 2003, for the year then ended, and for the period from inception,
  August 17, 1999, to December 31, 2003, have been restated. The restated financial
  statements as of and for the year ended December 31, 2003, and the cumulative
  data from August 17, 1999 (inception) to December 31, 2003, were audited by
  Morgan & Company, Chartered Accountants, and they expressed an unqualified
  opinion in their report dated March 29, 2004, except for Note 4 which is dated
  as of April 21, 2005. With the exception of certain matters relating to Note
  4, they have not performed any auditing procedures since March 29, 2004.

The accompanying financial statements have been prepared assuming
  the Company will continue as a going concern. As discussed in Note 1 to the
  financial statements, the Company has suffered recurring losses and net cash
  outflows from operations since inception. These factors raise substantial doubt
  about the Company’s ability to continue as a going concern. Management’s
  plans in regard to these matters are also described in Note 1. The financial
  statements do not include any adjustments that might result from the outcome
  of this uncertainty.

|                       | /s/ TELFORD SADOVNICK, P.L.L.C.
|---------------------- | -------------------------------
|                       |                                
|                       | CERTIFIED PUBLIC ACCOUNTANTS   
|Bellingham, Washington |                                
|April 21, 2005         |                                

F-2

---




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of 
  Balsam Ventures Inc. 
  (A Development Stage Company)

We have audited the accompanying balance sheet of Balsam Ventures
  Inc. (a development stage company) as at December 31, 2003 and the statements
  of operations, stockholders’ deficiency, and cash flows for the year then
  ended, and for the period from inception, August 17, 1999, to December 31, 2003.
  These financial statements are the responsibility of the Company's management.
  Our responsibility is to express an opinion on these financial statements based
  on our audits.

We conducted our audits in accordance with the standards of
  the Public Company Accounting Oversight Board (United States). Those standards
  require that we plan and perform an audit to obtain reasonable assurance whether
  the financial statements are free of material misstatement. An audit includes
  examining, on a test basis, evidence supporting the amounts and disclosures
  in the financial statements. An audit also includes assessing the accounting
  principles used and significant estimates made by management, as well as evaluating
  the overall financial statement presentation. We believe that our audit provides
  a reasonable basis for our opinion.

In our opinion, these financial statements present fairly,
  in all material respects, the financial position of the Company as at December
  31, 2003 and the results of its operations and its cash flows for the year ended
  December 31, 2003 and for the period from inception, August 17, 1999, to December
  31, 2003, in conformity with United States generally accepted accounting principles.

As discussed in Note 5 of the financial statements, the Company
  issued $260,000 in aggregate principal amount of convertible notes due in
  2006, and recorded a discount on the notes of $260,000 related to the beneficial
  conversion features. Accordingly no monetary amount is reflected as a liability
  on the accompanying balance sheet, although $260,000 in aggregate principal
  amount of the notes was outstanding at December 31, 2004.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in Note 1 to
  the financial statements, the Company has suffered recurring losses and net
  cash outflows from operations since inception. These factors raise substantial
  doubt about the Company’s ability to continue as a going concern. Management’s
  plans in regard to these matters are also discussed in Note 1. These financial
  statements do not include any adjustments that might result from the outcome
  of this uncertainty.

As described in Note 5 to the financial statements, the accompanying
  financial statements of Balsam Ventures Inc. (a development stage company) as
  at December 31, 2003, for the year then ended, and for the period from inception,
  August 17, 1999, to December 31, 2003, have been restated.

|Vancouver, B.C. | “Morgan & Company”
|--------------- | ------------------

|March 29, 2004, except as to Note 5 |                      
|----------------------------------- | ---------------------
|which is dated as at April 21, 2005 | Chartered Accountants

|Tel: (604) 687-5841 |                                     | P.O. Box 10007 Pacific Centre
|------------------- | ----------------------------------- | -----------------------------
|Fax: (604) 687-0075 | Sute 1488 - 700 West Georgia Street
|www.morgan-cas.com  | Vancouver, B.C. V7Y 1A1            

F-3

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

BALANCE SHEETS
  (Stated in U.S. Dollars)

|                                                                    |   |             |  
|------------------------------------------------------------------- | - | ----------- | -
|                                                                    |   | December 31 |  
|                                                                    |   | 2004        |  
|                                                                    |   |             |  
|ASSETS                                                              |   |             |  
|                                                                    |   |             |  
|Current                                                             |   |             |  
|Cash                                                                | $ | 1,033       |  
|                                                                    |   |             |  
|LIABILITIES                                                         |   |             |  
|                                                                    |   |             |  
|Current                                                             |   |             |  
|Accounts payable and accrued liabilities                            | $ | 159,117     |  
|                                                                    |   |             |  
|Convertible Notes Payable                                           |   |             |  
|$260,000, net of $260,000
      (2003 - $260,000) discount on notes |   |             |  
|attributable
      to beneficial conversion feature (Note 4)        |   | -           |  
|                                                                    |   |             |  
|STOCKHOLDERS’ DEFICIENCY                                            |   |             |  
|                                                                    |   |             |  
|Share Capital                                                       |   |             |  
|Authorized:                                                         |   |             |  
|100,000,000
      common voting stock, par value with $0.001 per    |   |             |  
|share                                                               |   |             |  
|                                                                    |   |             |  
|Issued and outstanding:                                             |   |             |  
|25,500,000
      common stock at December 31, 2004                  |   |             |  
|20,500,000
      common stock at December 31, 2003                  |   | 25,500      |  
|                                                                    |   |             |  
|Additional paid-in capital                                          |   | 572,500     |  
|                                                                    |   |             |  
|Deficit Accumulated During The Development Stage                    |   | (756,084    | )
|                                                                    |   |             |  
|                                                                    |   | (158,084    | )
|                                                                    |   |             |  
|                                                                    | $ | 1,033       |  

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

F-4

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

STATEMENTS OF OPERATIONS
  (Stated in U.S. Dollars)

|                          |   |                        |   |   |                |   |   |            |   |   |                  | 
|------------------------- | - | ---------------------- | - | - | -------------- | - | - | ---------- | - | - | ---------------- | 
|                          |   |                        |   |   |                |   |   |            |   |   | Cumulative       | 
|                          |   |                        |   |   |                |   |   |            |   |   | Period from      | 
|                          |   |                        |   |   |                |   |   |            |   |   | August 17        | 
|                          |   |                        |   |   |                |   |   |            |   |   | 1999 (inception) | 
|                          |   | Year Ended December 31 |   |   | to December 31 |  
|                          |   | 2004                   |   |   | 2003           |   |   | 2002       |   |   | 2004             | 
|                          |   |                        |   |   |                |   |   |            |   |   |                  | 
|Revenue                   | $ | -                      |   | $ | -              |   | $ | -          |   | $ | -                | 
|                          |   |                        |   |   |                |   |   |            |   |   |                  | 
|Expenses                  |   |                        |   |   |                |   |   |            |   |   |                  | 
|License and extension     |   |                        |   |   |                |   |   |            |   |   |                  | 
|costs                     |   | 200,000                |   |   | 63,000         |   |   | -          |   |   | 263,000          | 
|Consulting services       |   | 60,000                 |   |   | 132,000        |   |   | 93,847     |   |   | 285,947          | 
|Interest and bank         |   |                        |   |   |                |   |   |            |   |   |                  | 
|charges                   |   | 26,377                 |   |   | 6,931          |   |   | 147        |   |   | 33,455           | 
|Professional fees         |   | 18,198                 |   |   | 20,841         |   |   | 44,628     |   |   | 131,901          | 
|Regulatory                |   | 2,166                  |   |   | 434            |   |   | 6,160      |   |   | 8,760            | 
|Office and sundry         |   | 181                    |   |   | 325            |   |   | 6,610      |   |   | 9,406            | 
|Stock transfer services   |   | 65                     |   |   | 25             |   |   | 2,887      |   |   | 5,405            | 
|Write off of software     |   |                        |   |   |                |   |   |            |   |   |                  | 
|development
      costs   |   | -                      |   |   | 8,675          |   |   | -          |   |   | 8,675            | 
|Domain registration       |   | -                      |   |   | 185            |   |   | 46         |   |   | 436              | 
|Travel                    |   | -                      |   |   | -              |   |   | 9,099      |   |   | 9,099            | 
|                          |   |                        |   |   |                |   |   |            |   |   |                  | 
|Net loss for the period   | $ | 306,987                |   | $ | 232,416        |   | $ | 163,424    |   | $ | 756,084          | 
|                          |   |                        |   |   |                |   |   |            |   |   |                  | 
|Net loss per share, basic |   |                        |   |   |                |   |   |            |   |   |                  | 
|and diluted               | $ | (0.01                  | ) | $ | (0.01          | ) | $ | (0.01      | ) |   |                  | 
|                          |   |                        |   |   |                |   |   |            |   |   |                  | 
|Weighted average          |   |                        |   |   |                |   |   |            |   |   |                  | 
|number of shares          |   |                        |   |   |                |   |   |            |   |   |                  | 
|outstanding               |   | 23,601,093             |   |   | 20,236,164     |   |   | 20,200,000 |   |   |                  | 

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

F-5

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

STATEMENTS OF CASH FLOWS 
  (Stated in U.S. Dollars)

|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|--------------------------------------------------- | - | ---------------------- | - | - | -------------- | - | - | -------- | - | - | ---------------- | -
|                                                    |   |                        |   |   |                |   |   |          |   |   | Cumulative       |  
|                                                    |   |                        |   |   |                |   |   |          |   |   | Period from      |  
|                                                    |   |                        |   |   |                |   |   |          |   |   | August 17        |  
|                                                    |   |                        |   |   |                |   |   |          |   |   | 1999 (inception) |  
|                                                    |   | Year Ended December 31 |   |   | to December 31 |  
|                                                    |   | 2004                   |   |   | 2003           |   |   | 2002     |   |   | 2004             |  
|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|Cash provided by (used in):                         |   |                        |   |   |                |   |   |          |   |   |                  |  
|Operating Activities                                |   |                        |   |   |                |   |   |          |   |   |                  |  
|Net loss for the period                             | $ | (306,987               | ) | $ | (232,416       | ) | $ | (163,424 | ) | $ | (756,084         | )
|Items not involving cash:                           |   |                        |   |   |                |   |   |          |   |   |                  |  
|License
      and extension costs                   |   | 200,000                |   |   | 63,000         |   |   | -        |   |   | 263,000          |  
|Interest
      accrued on convertible notes         |   |                        |   |   |                |   |   |          |   |   |                  |  
|payable                                             |   | 26,036                 |   |   | 6,500          |   |   | -        |   |   | 32,536           |  
|Write off of software
      development costs       |   | -                      |   |   | 8,675          |   |   | -        |   |   | 8,675            |  
|                                                    |   | (80,951                | ) |   | (154,241       | ) |   | (163,424 | ) |   | (451,873         | )
|Changes in non-cash operating working
      capital |   |                        |   |   |                |   |   |          |   |   |                  |  
|items:                                              |   |                        |   |   |                |   |   |          |   |   |                  |  
|Change
      in accounts payable and accrued        |   |                        |   |   |                |   |   |          |   |   |                  |  
|liabilities                                         |   | 81,961                 |   |   | 154,219        |   |   | 148,592  |   |   | 386,581          |  
|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|                                                    |   | 1,010                  |   |   | (22            | ) |   | (14,832  | ) |   | (65,292          | )
|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|Investing Activity                                  |   |                        |   |   |                |   |   |          |   |   |                  |  
|Software development costs                          |   | -                      |   |   | -              |   |   | -        |   |   | (8,675           | )
|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|Financing Activity                                  |   |                        |   |   |                |   |   |          |   |   |                  |  
|Issuance of common stock                            |   | -                      |   |   | -              |   |   | -        |   |   | 75,000           |  
|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|Increase (Decrease) In Cash                         |   | 1,010                  |   |   | (22            | ) |   | (14,832  | ) |   | 1,033            |  
|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|Cash, Beginning Of Period                           |   | 23                     |   |   | 45             |   |   | 14,877   |   |   | -                |  
|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|Cash, End Of Period                                 | $ | 1,033                  |   | $ | 23             |   | $ | 45       |   | $ | 1,033            |  
|                                                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|Supplemental disclosure of cash flow information:   |   |                        |   |   |                |   |   |          |   |   |                  |  
|Cash paid during the period for:                    |   |                        |   |   |                |   |   |          |   |   |                  |  
|Interest                                            | $ | 341                    |   | $ | 431            |   | $ | 147      |   | $ | 919              |  
|Income taxes                                        |   | -                      |   |   | -              |   |   | -        |   |   | -                |  

Continued

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

F-6

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

STATEMENTS OF CASH FLOWS
  (Stated in U.S. Dollars)

---

Supplemental disclosure of cash flow information (cont’d)

Non-cash financing and investing activities:

|a) | During the year ended December 31, 2004, the Company
        issued 5,000,000 common shares, with a value of $200,000, as consideration
        for a license. During the year ended December 31, 2003, the Company issued
        300,000 common shares, with a value of $63,000, to initiate and extend
        the arrangement.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                   
|b) | During
        the year ended December 31, 2003, the Company settled accounts payable,
        in the amount of $260,000, by the issue of convertible notes payable.                                                                                                                                                              

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

F-7

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
  (Stated in U.S. Dollars)

PERIOD FROM AUGUST 17, 1999 (INCEPTION) TO DECEMBER 31,
  2004
  (Restated)

|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|---------------------------------- | ------------ |  | - | ----------- |  | - | ---------- | - | - | ------------ | - | - | ----------- | - | - | -------- | -
|                                   |              |  |   |             |  |   |            |   |   |              |   |   | Deficit     |   |   |          |  
|                                   | Common Stock |  |   | Accumulated |  |   |            |  
|                                   |              |  |   |             |  |   | Additional |   |   | Share        |   |   | During the  |   |   |          |  
|                                   |              |  |   |             |  |   | Paid-in    |   |   | Subscription |   |   | Development |   |   |          |  
|                                   | Shares       |  |   | Par Value   |  |   | Capital    |   |   | Receivable   |   |   | Stage       |   |   | Total    |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Stock issued for cash at $0.0005   | 10,000,000   |  | $ | 10,000      |  | $ | (5,000     | ) | $ | -            |   | $ | -           |   | $ | 5,000    |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Stock issued for cash at $0.005    | 10,000,000   |  |   | 10,000      |  |   | 40,000     |   |   | -            |   |   | -           |   |   | 50,000   |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Stock issued for cash at $0.10     | 200,000      |  |   | 200         |  |   | 19,800     |   |   | -            |   |   | -           |   |   | 20,000   |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Subscriptions receivable           | -            |  |   | -           |  |   | -          |   |   | (2,500       | ) |   | -           |   |   | (2,500   | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the period            | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (2,926      | ) |   | (2,926   | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 1999         | 20,200,000   |  |   | 20,200      |  |   | 54,800     |   |   | (2,500       | ) |   | (2,926      | ) |   | 69,574   |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Subscriptions received             | -            |  |   | -           |  |   | -          |   |   | 2,500        |   |   | -           |   |   | 2,500    |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the year              | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (31,342     | ) |   | (31,342  | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2000         | 20,200,000   |  |   | 20,200      |  |   | 54,800     |   |   | -            |   |   | (34,268     | ) |   | 40,732   |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the year              | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (18,989     | ) |   | (18,989  | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2001         | 20,200,000   |  |   | 20,200      |  |   | 54,800     |   |   | -            |   |   | (53,257     | ) |   | 21,743   |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the year              | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (163,424    | ) |   | (163,424 | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2002         | 20,200,000   |  |   | 20,200      |  |   | 54,800     |   |   | -            |   |   | (216,681    | ) |   | (141,681 | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Beneficial conversion              |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|feature of convertible
      notes | -            |  |   | -           |  |   | 260,000    |   |   | -            |   |   | -           |   |   | 260,000  |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Stock issued for license extension |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|payment at $0.21                   | 300,000      |  |   | 300         |  |   | 62,700     |   |   | -            |   |   | -           |   |   | 63,000   |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the year              | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (232,416    | ) |   | (232,416 | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2003         | 20,500,000   |  |   | 20,500      |  |   | 377,500    |   |   | -            |   |   | (449,097    | ) |   | (51,097  | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Stock issued for license at $0.04  | 5,000,000    |  |   | 5,000       |  |   | 195,000    |   |   | -            |   |   | -           |   |   | 200,000  |  
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the year              | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (306,987    | ) |   | (306,987 | )
|                                   |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2004         | 25,500,000   |  | $ | 25,500      |  | $ | 572,500    |   | $ | -            |   | $ | (756,084    | ) | $ | (158,084 | )

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

F-8

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|1. | NATURE OF OPERATIONS
|-- | --------------------
|  
|   | a)                  
|  
|   |                     
|  
|   |                     
|  
|   | b)                  
|  
|   |                     
|  
|   |                     
|  
|   |                     
|  
|   | c)                  
|  
|   |                     
|  
|   |                     

F-9

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The financial statements of the Company
        have been prepared in accordance with generally accepted accounting principles
        in the United States. Because a precise determination of many assets and
        liabilities is dependent upon future events, the preparation of financial
        statements for a period necessarily involves the use of estimates which
        have been made using careful judgement.
|  
|   | The financial statements have, in management’s
        opinion, been properly prepared within reasonable limits of materiality
        and within the framework of the significant accounting policies summarized
        below:                                                                                                                                                                                                 
|  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-10

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | -----------------------------------------------------
|  
|   | e)                                                   
|  
|   |                                                      
|  
|   |                                                      
|   |                                                      
|   |                                                      
|  
|   |                                                      
|  
|   |                                                      
|  
|   | f)                                                   
|  
|   |                                                      
|  
|   | g)                                                   
|  
|   |                                                      
|  
|   | h)                                                   
|  
|   |                                                      
|  
|   | i)                                                   
|  
|   |                                                      

F-11

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | -----------------------------------------------------
|  
|   | j)                                                   
|  
|   |                                                      
|  
|   | k)                                                   
|  
|   |                                                      
|  
|   | l)                                                   
|  
|   |                                                      
|  
|   | m)                                                   
|  
|   |                                                      
|  
|   | n)                                                   
|  
|   |                                                      

F-12

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | -----------------------------------------------------
|  
|   | o)                                                   
|  
|   |                                                      
|  
|   |                                                      
|  
|   |                                                      
|  
|   |                                                      
|  
|3. | RECENT ACCOUNTING PRONOUNCEMENTS                     
|  
|   | a)                                                   
|  
|   | b)                                                   

F-13

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|3. | RECENT ACCOUNTING PRONOUNCEMENTS(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|4. | CONVERTIBLE NOTES PAYABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | During the year ended December 2003, the
        Company issued convertible notes, maturing October 1, 2006, aggregating
        $260,000 and bearing interest of 10% per annum. The notes are convertible
        into common shares at the lesser of $0.03 per share or 50% of the
        average trading price of the Company’s common shares for the ten
        trading days prior to conversion. The Company may, at its option, elect
        to pay a portion of the interest by issuing common stock.                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | The accompanying financial statements
        for the year ended December 31, 2003 have been restated to correct an
        error in the accounting for the beneficial conversion feature on the convertible
        notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | In applying the provisions of Emerging
        Issues Task Force Release Nos. 98-5 and 00-27, the Company recorded a
        discount on the convertible debentures in the amount of $260,000.
        This discount is being accreted to interest expense using the interest
        method over the life of the notes (three years). As the effective interest
        rate, which is determined by dividing the actual interest rate on the
        convertible debentures by the discounted debt amount, approaches infinity,
        the interest expense to be recorded approximates the future cash payments.
        Interest expense recorded related to the accretion of the discount for
        the year ended December 31, 2004 was $Nil (2003 - $Nil). The remaining
        discount on the convertible debentures as of December 31, 2004 was $260,000
        (2003 - $260,000).
|  
|   | Interest expense related to the accretion
        of the discount for the calendar years ending after December 31, 2004
        is expected to be as follows and would be accelerated upon early conversion
        or default of the notes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | Year ended December 31, 2005         
                $    
        3,030 
        Year ended December 31, 2006                  $
        256,970                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   | During the year ended December 31, 2004,
        $26,036 (2003 - $6,500) of interest expense was accrued and charged
        to the statement of operations. No cash payments of interest were made
        during the respective periods. Interest on these convertible notes payable
        has accrued to December 31, 2004 of $32,536 (2003 - $6,500).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-14

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|4. | CONVERTIBLE
        NOTES PAYABLE(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The restatement
        had the effect of reducing the previously reported carrying amounts of
        the notes by the $260,000 amount of the discount, and increasing additional
        paid-in capital by the same amount. The restatement had no effect on previously
        reported loss, loss per share, loss from inception to December 31, 2003
        or on previously reported cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. | LICENSE AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Pursuant to an
        exclusive license agreement (the “Agreement”) with NorPac
        Technologies, Inc. (formerly Cool Can Technologies, Inc.) (the “Licensor”),
        dated November 30, 2003, the Company acquired the exclusive right and
        license (the “License”), for a period of 40 years, to use,
        commercialize and exploit the Licensor’s proprietary trademarks,
        patents, process information, technical information, designs and drawings
        associated with the Licensor’s self-chilling beverage containers
        technology (the “Technology”), including the right to manufacture,
        use and sell apparatus and products embodying the Technology within the
        countries comprising the European Union and the People’s Republic
        of China. The Company also has the right to sub-license the right to manufacture,
        use and sell products embodying the Technology.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In consideration
        for the Agreement, the Company agreed to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Technology
        and patents and trademarks of the Licensor included in the Technology
        remain the property of the Licensor subject to the terms of the License
        granted under the Agreement. However, the Company has a right of first
        refusal to acquire the intellectual property subject to the Agreement
        should the Licensor seek to dispose of the Technology during the Agreement.
        The Agreement supercedes all prior arrangements and agreements between
        the Company and the Licensor in respect of the Technology.                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Licensor
        suspended all research and development activities on the Technology in
        November 2002 due to a lack of funds. Due to the costs involved in applying
        for and receiving extensions from the U.S. Patent and Trademark Office
        and the uncertainty relating to successful commercialization of the technology,
        the Licensor ceased filing for trademark extensions in September 2001.
        It believes that it will be able to re-institute ownership of the trademarks,
        or the equivalent thereof, when product development is completed.                                                                                                                                                                                                                                                                                                                                           

F-15

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|5. | LICENSE AGREEMENT(Continued)                                                                                                                                                                                                                                                                                                                
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | During the year ended December 31, 2004, the Company
        issued 5,000,000 common shares at $0.04 per share for a value of $200,000
        under the Agreement. During the year ended December 31, 2003, the Company
        issued 300,000 common shares at $0.21 per share for a value of $63,000
        to initiate the arrangement.
|  
|6. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                  
|  
|   | Amounts paid to related parties were based on exchange
        amounts which represented the amounts agreed upon by the related parties.
        Amounts paid or payable to related parties not disclosed elsewhere include
        the following:                                                                                          
|  
|   | During the year ended December 31, 2004, director’s
        compensation totalled $Nil (2003 - $72,000);                                                                                                                                                                                                                                    
|  
|   | At December 31, 2004, accounts payable and accrued
        liabilities includes $20,873 (2003 - $17,483) due to directors;
        convertible notes payable includes $33,899 (2003 - $33,899) due
        to directors.                                                                                                                    
|  
|7. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                
|  
|a) | Income tax provision                                                                                                                                                                                                                                                                                                                        
|  
|   | The provision for income taxes differs from the
        result which would be obtained by applying the statutory income tax rate
        of 34% (2003 – 34%) to income before income taxes. The difference
        results from the following items:                                                                                        

| |                                             |   | 2004     |   |   | 2003    |  
| | ------------------------------------------- | - | -------- | - | - | ------- | -
| |                                             |   |          |   |   |         |  
| | Computed expected (benefit of) income taxes | $ | (104,376 | ) | $ | (79,021 | )
| |                                             |   |          |   |   |         |  
| | Increase in valuation allowance             |   | 104,376  |   |   | 79,021  |  
| |                                             |   |          |   |   |         |  
| |                                             | $ | -        |   | $ | -       |  

|b) | Significant components of the Company’s deferred income tax assets
      are as follows:
|-- | ----------------------------------------------------------------------------------------

| |                                               |   | 2004     |   |   | 2003     |  
| | --------------------------------------------- | - | -------- | - | - | -------- | -
| |                                               |   |          |   |   |          |  
| | Total income tax operating loss carry forward | $ | 756,084  |   | $ | 449,097  |  
| |                                               |   |          |   |   |          |  
| | Statutory tax rate                            |   | 34%      |   |   | 34%      |  
| |                                               |   |          |   |   |          |  
| | Deferred income tax asset                     |   | 257,069  |   |   | 152,693  |  
| |                                               |   |          |   |   |          |  
| | Valuation allowance                           |   | (257,069 | ) |   | (152,693 | )
| |                                               |   |          |   |   |          |  
| |                                               | $ | -        |   | $ | -        |  

F-16

---

BALSAM VENTURES, INC. 
  (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS 
  (Stated in U.S. Dollars)

DECEMBER 31, 2004

|7. | INCOME TAXES(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|c) | The Company has incurred operating losses
        of approximately $756,084 which, if unutilized, will expire through
        to 2024. Future tax benefits, which may arise as a result of these losses,
        have not been recognized in these financial statements, and have been
        offset by a valuation allowance. The following table lists the fiscal
        year in which the loss was incurred and the expiration date of the operating
        loss carry forwards:

| |                                               |   |          | Expiration date of  
| | --------------------------------------------- | - | -------- | --------------------
| |                                               |   |          | income tax operating
| |                                               |   | Net Loss | loss carry forwards 
| |                                               |   |          |                     
| | 1999                                          | $ | 2,926    | 2019                
| | 2000                                          |   | 31,342   | 2020                
| | 2001                                          |   | 18,989   | 2021                
| | 2002                                          |   | 163,424  | 2022                
| | 2003                                          |   | 232,416  | 2023                
| | 2004                                          |   | 306,987  | 2024                
| |                                               |   |          |                     
| | Total income tax operating loss carry forward | $ | 756,084  |                     

F-17

---

ITEM 8.             CHANGES
  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Changes In Registrant’s Certifying Accountant

On April 6, 2005, we engaged Telford Sadovnick, PLLC as its
  principal independent accountants. On the same date, the we advised Morgan &
  Company, Chartered Accountants, that it was dismissed as the Company’s
  independent accountant. Our Board of Directors approved the engagement of Telford
  Sadovnick and the dismissal of Morgan & Company by written resolution.

Morgan & Company’s reports on the financial statements
  of the Company for the past two fiscal years did not contain an adverse opinion
  or disclaimer of opinion, nor was it modified or qualified as to uncertainty,
  audit scope or accounting principles with the exception of a statement regarding
  the uncertainty of the Company’s ability to continue as a going concern.

There have been no disagreements during the Company’s
  two most recent fiscal years and the subsequent interim period preceding the
  dismissal of Morgan & Company between the Company and Morgan & Company
  on any matter of accounting principles or practices, financial statement disclosure
  or auditing scope or procedure, which, if not resolved to the satisfaction of
  Morgan & Company, would have caused them to make reference to the subject
  matter of the disagreement in connection with their report for the financial
  statements for those years.

We filed an amended report on Form 8-K/A regarding the change
  in principal independent accountants with the Securities and Exchange Commission
  on May 2, 2005 and provided Morgan & Company with a copy of that report.
  We requested in writing that Morgan & Company provide a letter addressed
  to the Securities and Exchange Commission stating whether or not they agree
  with the disclosures contained in that report. A copy of the requested letter
  from Morgan & Company was filed as an exhibit to our report on Form 8-K/A.

ITEM 8A.          CONTROLS
  AND PROCEDURES.

|(A) | Evaluation Of Disclosure Controls And Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | As of the end of the period covered by this report,
        we carried out an evaluation, under the supervision and with the participation
        of our principal executive officer and principal financial officer, of
        the effectiveness of the design and operation of our disclosure controls
        and procedures. Our disclosure controls and procedures are designed to
        provide a reasonable level of assurance that our disclosure control objectives
        are achieved. Our principal executive officer and principal financial
        officer have concluded that our disclosure controls and procedures are,
        in fact, effective at providing this reasonable level of assurance as
        of the period covered.
|   
|(B) | Changes In Internal Controls Over Financial Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    | In connection with the evaluation of our internal
        controls during our last fiscal quarter, our principal executive officer
        and principal financial officer has determined that there are no changes
        to our internal controls over financial reporting that has materially
        affected, or is reasonably likely to materially effect, our internal controls
        over financial reporting.                                                                                                                                                                                                                                                                                                                                  

ITEM 8B.          OTHER INFORMATION.

None.

Page 13 of 21

---

PART III

ITEM 9.              DIRECTORS,
  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
  OF THE EXCHANGE ACT.

The following table sets forth the names and positions of
  our officers and directors as of the date hereof.

|Name          | Age | Positions                                              
|------------- | --- | -------------------------------------------------------
|David Lam     | 48  | President, Chief Executive Officer, Director           
|John Boschert | 34  | Secretary, Treasurer, Chief Financial Officer, Director

Set forth below is a brief description of the background and
  business experience of our executive officers and directors:

Mr. David Lamis our president, chief executive officer
  and a director of the company. Mr. Lam was appointed as president, chief executive
  officer and director of the Company on December 10, 2002. Mr. Lam is the president
  and chief executive officer of Mediverse International, Inc. of Arcadia, California
  since 1994. Mediverse is a medical device exporting company and Mr. Lam is responsible
  for domestic strategic alliances and building the distribution network in Far
  East Asia. Mr. Lam is also the Managing Director of Topher Investment, L.L.C.
  since 1997, where he focuses on the acquisitions/sales of commercial real estate
  investments and property management.

Mr. John Boschert is our secretary, treasurer, and
  chief financial officer and a director of the company. Mr. Boschert was our
  president from July 4, 2002 to December 10, 2002 when Mr. Lam was appointed.
  Mr. Boschert has worked for Universal Domains Incorporated as a consultant since
  1998 and was involved with the daily operations of Prime Time Foods and Primo's
  Mexican Specialties. Prior to joining Universal Domains Incorporated, Mr. Boschert
  worked in the investor relations department for Harbour Pacific Capital Ltd.
  from 1997 to 1998. During the period from 1993 to 1997, Mr. Boschert was the
  managing partner of Concept Restaurants Ltd., a Vancouver based company which
  owned and operated a number of restaurants in British Columbia. Mr. Boschert
  received his diploma in business administration from Langara Community College
  in 1989.

TERMS OF OFFICE

Our directors are elected to hold office until the next annual
  meeting of the shareholders and until their respective successors have been
  elected and qualified. Our executive officers are appointed by our board of
  directors and hold office until removed by our board of directors or until their
  successors are appointed.

CODE OF ETHICS

We have adopted a Code of Ethics applicable to our officers
  and directors which is a "code of ethics" as defined by applicable rules of
  the SEC. Our Code of Ethics is attached as an exhibit to this Annual Report.
  If we make any amendments to our Code of Ethics other than technical, administrative,
  or other non-substantive amendments, or grant any waivers, including implicit
  waivers, from a provision of our Code of Ethics to our Chief Executive Officer,
  Chief Financial Officer, or certain other finance executives, we will disclose
  the nature of the amendment or waiver, its effective date and to whom it applies
  in a current report on Form 8-K filed with the SEC.

Page 14 of 21

---

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
  ACT

Section 16(a) of the Securities Exchange Act of 1934 requires
  our executive officers and directors, and persons who own more than 10% of a
  registered class of our securities (“Reporting Persons”), to file
  reports of ownership and changes in ownership with the SEC. Reporting Persons
  are required by SEC regulations to furnish us with copies of all forms they
  file pursuant to Section 16(a). Based solely on our review of such reports received
  by the Company, and written representations from certain Reporting Persons that,
  other than as described below, no other reports were required for those persons,
  we believe that, during the year ended December 31, 2004, all Reporting Persons
  complied with all Section 16(a) filing requirements applicable to them.

The following persons have failed to file, on a timely basis,
  the identified reports required by Section 16(a) of the Securities Exchange
  Act of 1934:

|                            | Number of Late | Transactions Not | Known Failures to File
|--------------------------- | -------------- | ---------------- | ----------------------
|Name and Principal Position | Reports        | Timely Reported  | a Required Form       
|                            |                |                  |                       
|                            |                |                  |                       
|David Lam, Director,        |                |                  |                       
|President and               | None           | None             | None                  
|Chief Executive Officer     |                |                  |                       
|                            |                |                  |                       
|John Boschert, Director     |                |                  |                       
|Secretary, Treasurer and    | None           | None             | None                  
|Chief Financial Officer     |                |                  |                       
|                            |                |                  |                       
|NorPac Technologies, Inc.   |                |                  |                       
|Beneficial owner of greater | None           | None             | None                  
|than 10% of our issued and  |                |                  |                       
|outstanding common stock.   |                |                  |                       

Page 15 of 21

---

ITEM 10.            EXECUTIVE
  COMPENSATION.

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth certain compensation information
  for Mr. David Lam, our President and Chief Executive Officer, Mr. John Boschert,
  our Secretary, Treasurer and Chief Financial Officer and Mr. Robert Smith, our
  former Secretary and Treasurer (together, our “named executive officers”)
  for our fiscal years ended December 31, 2004, 2003 and 2002.

|SUMMARY COMPENSATION TABLE          
|------------------------------------
|                                    
|Name                                
|Restricted
      Stock
      Awarded
|Robert Smith                        
|David Lam                           
|John Boschert                       

STOCK OPTION GRANTS

We did not grant any stock options to our executive officers
  or directors during our most recent fiscal year ended December 31, 2004. We
  also have not granted any stock options to our executive officers or directors
  since December 31, 2004. In addition, as of December 31, 2004, no retirement,
  pension or insurance programs or other similar programs have been adopted by
  us for the benefit of our employees.

EXERCISES OF STOCK OPTIONS AND YEAR-END OPTION VALUES

No stock options were exercised by our executive officers
  or directors during the financial year ended December 31, 2004 and no stock
  options have been exercised since December 31, 2004.

LONG-TERM INCENTIVE PLANS

We do not have any long-term incentive plans, pension plans,
  or similar compensatory plans for our directors or executive officers.

COMPENSATION OF DIRECTORS

Our directors received monthly management fees of $3,000
  per month during the year ended December 31, 2003 and no management fees during
  the year ended December 31, 2004.

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EMPLOYMENT CONTRACTS

We do not have employment contracts with any of our executive
  officers or directors. We also do not have any termination of employment or
  change-in-control arrangements with any of our executive officers or directors.

ITEM 11.            SECURITY
  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information concerning
  the number of shares of our common stock owned beneficially as of May 13, 2005by: (i) each person (including any group) known to us to own more than five
  percent (5%) of any class of our voting securities, (ii) each of our directors
  and each of our named executive officers, and (iii) officers and directors as
  a group. Unless otherwise indicated, the shareholders listed possess sole voting
  and investment power with respect to the shares shown.

|Title of Class         | Name and Address of Beneficial Owner                                                     | Number of Shares of Common Stock(1) | Percentage of Common Stock(1)
|---------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------- | -----------------------------
|DIRECTORS AND OFFICERS
|Common Stock           | David Lam,  
      Director, President and  
      Chief Executive Officer               | 2,240,000(2)                        | 8.5%                         
|Common Stock           | John Boschert,  
      Director, Secretary, Treasurer and 
      Chief Financial Officer | 9,129,966(3)                        | 35.6%                        
|Common Stock           | All Officers and Directors as a Group 
      (2 persons)                                 | 11,369,966                          | 42.7%                        
|5% SHAREHOLDERS       
|Common Stock           | NorPac Technologies, Inc.                                                                | 5,045,000                           | 19.8%                        

|(1) | Under Rule 13d-3, a beneficial owner of a security
        includes any person who, directly or indirectly, through any contract,
        arrangement, understanding, relationship, or otherwise has or shares:
        (i) voting power, which includes the power to vote, or to direct the voting
        of shares; and (ii) investment power, which includes the power to dispose
        or direct the disposition of shares. Certain shares may be deemed to be
        beneficially owned by more than one person (if, for example, persons share
        the power to vote or the power to dispose of the shares). In addition,
        shares are deemed to be beneficially owned by a person if the person has
        the right to acquire the shares (for example, upon exercise of an option)
        within 60 days of the date as of which the information is provided. In
        computing the percentage ownership of any person, the amount of shares
        outstanding is deemed to include the amount of shares beneficially owned
        by such person (and only such person) by reason of these acquisition rights.
        As a result, the percentage of outstanding shares of any person as shown
        in this table does not necessarily reflect the person’s actual ownership
        or voting power with respect to the number of shares of common stock actually
        outstanding on May 13, 2005. As of May 13, 2005, there were 25,500,000
        shares of our common stock issued and outstanding.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | The number of shares listed as beneficially owned
        by Mr. Lam include 1,000,000 shares owned by Mediverse International Inc.,
        a company controlled by Mr. Lam, and 1,000,000 shares of our common stock
        issuable pursuant to a $30,000 convertible note issued to Mr. Lam.
        The convertible note may                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Page 17 of 21

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|    | be converted at the lesser of $0.03 per share
        or 50% of our average trading price for the 10 days prior to conversion.
        The calculation of Mr. Lam’s ownership percentage is based on the
        assumption that Mr. Lam has exercised his conversion rights, but that
        Mr. Boschert and all other holders of the Convertible Notes have not.                                                                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(3) | The number of shares listed as beneficially owned
        by Mr. Boschert include shares 129,966 shares of our common stock issuable
        pursuant to a $3,899 convertible note issued to Mr. Boschert. The
        convertible note may be converted at the lesser of $0.03 per share
        or 50% of our average trading price for the 10 days prior to conversion.
        The calculation of Mr. Boschert’s ownership percentage is based
        on the assumption that Mr. Boschert has exercised his conversion rights,
        but that Mr. Lam and all other holders of the Convertible Notes have not.

We are not aware of any arrangement which may result in a
  change in control in the future.

ITEM 12.            CERTAIN
  RELATIONSHIPS AND RELATED TRANSACTIONS.

Except as described below, none of the following persons has
  any direct or indirect material interest in any transaction to which we were
  or are a party during the past two years, or in any proposed transaction to
  which we propose to be a party:

|(A) | any director or officer;                                                                                                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                           
|(B) | any person who beneficially owns, directly or indirectly,
        shares carrying more than 5% of the voting rights attached to our common
        stock; or                                              
|    |                                                                                                                                                                                                           
|(C) | any relative or spouse of any of the foregoing persons,
        or any relative of such spouse, who has the same house as such person
        or who is a director or officer of any parent or subsidiary.

On October 1, 2003, we issued a total of $260,000 of 10%
  convertible notes due October 1, 2006 (the “Convertible Notes”).
  The Convertible Notes are convertible into shares of our common stock at the
  option of the holder on the basis of the lesser of $0.03 per share or 50%
  of our average trading price for the 10 trading days prior to conversion. A
  Convertible Note in the amount of $30,000 was issued to Mr. David Lam, one
  of our directors and our President and Chief Executive Officer. A Convertible
  Note in the amount of $3,899 was issued to Mr. John Boschert, one of our
  directors and our Secretary, Treasurer and Chief Financial Officer.

Page 18 of 21

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ITEM 13.           
  EXHIBITS.

|Exhibit Number |  | Description of Exhibit                                                                                                                                            
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                   
|3.1            |  | Articles of Incorporation.(1)                                                                                                                                     
|               |  |                                                                                                                                                                   
|3.2            |  | Bylaws.(1)                                                                                                                                                        
|               |  |                                                                                                                                                                   
|10.1           |  | Exclusive License Agreement
        dated June 5, 2002 with Cool Can Technologies, Inc.(2)                                                                        
|               |  |                                                                                                                                                                   
|10.2           |  | Exclusive License Agreement
        dated November 30, 2003 with Cool Can Technologies, Inc.(3)                                                                   
|               |  |                                                                                                                                                                   
|14.1           |  | Code
        of Ethics                                                                                                                                            
|               |  |                                                                                                                                                                   
|31.1           |  | Certification
        of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.                                               
|               |  |                                                                                                                                                                   
|31.2           |  | Certification
        of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.                                               
|               |  |                                                                                                                                                                   
|32.1           |  | Certification
        of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|               |  |                                                                                                                                                                   
|32.2           |  | Certification
        of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

| |     |                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------
| | (1) | Previously Filed as an Exhibit to our Form SB-2
        Registration Statement originally filed with the SEC on March 30, 2000.
| | (2) | Previously Filed as an Exhibit to our Current Report
        on Form 8-K filed on June 20, 2004                                
| | (3) | Previously Filed as an Exhibit to our Current Report
        on Form 8-K filed on January 9, 2004.                             
| |     |                                                                                                                                

Page 19 of 21

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ITEM 14.            PRINCIPAL
  ACCOUNTANT FEES AND SERVICES.

The aggregate fees billed for the fiscal years ended December
  31, 2004 and December 31, 2003 for professional services rendered by the principal
  accountant for the audit of the Corporation’s annual financial statements
  and review of the financial statements included in our Quarterly Reports on
  Form 10-QSB and services that are normally provided by the accountant in connection
  with statutory and regulatory filings or engagements for these fiscal periods
  were as follows:

|                   | Year Ended December 31, 2004 | Year Ended December 31, 2003
|------------------ | ---------------------------- | ----------------------------
|Audit Fees         | $5,325                       | $4,500                      
|Audit-Related Fees | $NIL                         | $NIL                        
|Tax Fees           | $NIL                         | $NIL                        
|All Other Fees     | $NIL                         | $NIL                        
|Total              | $5,325                       | $4,500                      

Page 20 of 21

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
  caused this report to be signed on its behalf by the undersigned, thereunto
  duly authorized.

|    | BALSAM VENTURES, INC.              | 
|--- | ---------------------------------- | 
|    |                                    | 
|    |                                    | 
|    |                                    | 
|By: | /s/ David Lam                      | 
|    | DAVID LAM                          | 
|    | President, Chief Executive Officer | 
|    | Director                           | 
|    |                                    | 
|    | Date: May 16, 2005                 | 

In accordance with the Exchange Act, this report has been
  signed below by the following persons on behalf of the registrant and in the
  capacities and on the dates indicated.

|By: | /s/ David Lam                                 | 
|--- | --------------------------------------------- | 
|    | DAVID LAM                                     | 
|    | President, Chief Executive Officer            | 
|    | (Principal Executive Officer)                 | 
|    | Director                                      | 
|    |                                               | 
|    | Date: May 16, 2005                            | 
|    |                                               | 
|    |                                               | 
|    |                                               | 
|    |                                               | 
|By: | /s/ John Boschert                             | 
|    | JOHN BOSCHERT                                 | 
|    | Secretary, Treasurer, Chief Financial Officer | 
|    | (Principal Accounting Officer)                | 
|    | Director                                      | 
|    |                                               | 
|    | Date: May 16, 2005                            | 

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