---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(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, 2008

[   ] TRANSITION REPORT PURSUANT TO 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.(Exact name of registrant as specified in its charter)

|NEVADA                                                             | 52-2219056                                     
|------------------------------------------------------------------ | -----------------------------------------------
|State or other jurisdiction of incorporation or
      organization | (I.R.S. Employer Identification No.)           
|                                                                   |                                                
|Suite 410-103 East Holly Street, National Bank
      Building      |                                                
|Bellingham, WA 98225                                               | 98225                                          
|(Address of principal executive offices)                           | (Zip Code)                                     
|                                                                   |                                                
|(360) 306-1133                                                     |                                                
|Registrant's telephone number, including area code                 |                                                
|                                                                   |                                                
|Securities registered pursuant to Section 12(b) of the
      Act:  | NONE.                                          
|                                                                   |                                                
|Securities registered pursuant to Section 12(g) of the
      Act:  | Common Stock, $0.001 Par Value Per
      Share.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined by Rule 405 of the Securities Act.[  
]Yes    [X]No

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.[ 
 ]Yes    [X]No

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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. [X]Yes[   ]No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (s229.405 of this chapter) is not
contained herein, and will not 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-K or any amendment to this Form 10-K.
[   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer [   ] |                                               | Accelerated
      filer                     
      [   ]
|----------------------------- | --------------------------------------------- | --------------------------------------------------------
|Non-accelerated filer   [   ] | (Do not check if a smaller reporting company) | Smaller reporting company[X]                            

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

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of
such common equity, as of the last business day of the registrants most
recently completed second fiscal quarter: $389,870 as of June 30, 2008,
basedon the average of the closing bid of $0.015 and the closing ask of
  $0.02 as quoted on the OTC Bulletin Board.

Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest practicable date.
As of March 31, 2009, the Registrant had 30,681,663 shares of common stock
outstanding.

---

BALSAM VENTURES, INC.

ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDED
DECEMBER 31, 2008

TABLE OF CONTENTS

PAGEPART I
        3ITEM
      1.
      BUSINESS
      3ITEM
      1A.
      RISK FACTORS
      4ITEM
      2.
      PROPERTIES
      5ITEM
      3.
      LEGAL PROCEEDINGS
      5ITEM
      4.
      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
      5PART II
        6ITEM
      5.
      MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
        MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
      6ITEM
      7.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS
      7ITEM
      8.
      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
      11ITEM
      9.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE
      12ITEM
      9A(T).
      CONTROLS AND PROCEDURES
      12ITEM
      9B.
      OTHER INFORMATION
      14PART III
        15ITEM
      10.
      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
      15ITEM
      11.
      EXECUTIVE COMPENSATION.
      16ITEM
      12.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
        AND RELATED STOCKHOLDER MATTERS.
      17ITEM
      13.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
        INDEPENDENCE.
      18ITEM
      14.
      PRINCIPAL ACCOUNTING FEES AND SERVICES.
      18ITEM
      15.
      EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
      19SIGNATURES
        20


2

---

PART I

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 United States 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.

As used in this Annual Report, the terms we, us, our,
Balsam, and the Company mean Balsam Ventures, Inc., unless otherwise
indicated. All dollar amounts in this Annual Report are expressed in U.S.
dollars, unless otherwise indicated.

ITEM
1.             
BUSINESS.

General

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

We currently have no business or assets. We are in the process
of reorganizing our business and are seeking and evaluating alternative business
opportunities. Our ability to seek out and acquire an alternative business
opportunity is subject to our obtaining additional financing, of which there is
no assurance.

We were previously in the business of developing a technology
for self-chilling beverage containers (the Cool Can Technology) that was
licensed by Norpac Technologies, Inc. (Norpac). However, Norpacs patents over
the Cool Can Technology expired. As a result, on June 30, 2008, we entered into
a Release Agreement with NorPac Technologies, Inc. (NorPac), pursuant to which
we released NorPac from any legal claims and liabilities in connection with a
license agreement dated November 30, 2003, and as amended on January 12, 2006,
(collectively, the Release) between us and NorPac. In exchange for our
releasing NorPac from its obligations under the License Agreement, NorPac:

|(a) | surrendered for cancellation the remaining 5,545,000
      shares of our common stock which had been issued to NorPac under terms of
      the License Agreement and still owned by NorPac; and                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                 
|(b) | assigned to us an indebtedness owed to NorPac of
      approximately $612,000 plus accrued interest. Readers are cautioned that
      there is substantial doubt that we will be able to collect any or all of
      this assigned indebtedness.

Research and Development Expenditures

We have not incurred any research expenditures since our
incorporation.

Patents and Trademarks

We do not own, either legally or beneficially, any patents or
trademarks.

Employees

We have no employees other than our sole executive officer and
director. We intend to conduct our business largely through consultants.

3

---

ITEM
1A.           RISK FACTORS.

The following are some of the important factors that could
affect our financial performance or could cause actual results to differ
materially from estimates contained in our forward-looking statements. We may
encounter risks in addition to those described below. Additional risks and
uncertainties not currently known to us, or that we currently deem to be
immaterial, may also impair or adversely affect our business, financial
condition or results of operation.

We Do Not Have Any Business Operations Or Any Significant
Assets. We Have Not Identified Any Alternative Business Opportunities. Our Plan
Of Operation For The Next Twelve Months Will Consist Solely Of Seeking Suitable
Business Opportunities.

We are currently in the process of reorganizing our business
and are seeking alternative business opportunities. We have not yet identified
any suitable business opportunities and there is no assurance that we will be
able to do so in the future. Even if we are able to identify suitable business
opportunities, there are no assurances that we will be able to acquire an
interest in those opportunities or that we will have the resources to pursue
such opportunities. As such, an investment in our shares at this time would be
highly speculative.

We may not be able to continue our business as a going
concern.

We have suffered recurring losses and net cash outflows since
our inception and we expect to continue to incur substantial losses as we
continue our business operations.

Our ability to continue as a going concern is dependent upon
our ability to obtain alternative business opportunities and financing,
restructure our debt, and reduce our costs. We are currently in the process of
identifying business opportunities, sources of additional financing, negotiating
changes to our debt structure and evaluating our strategic options. However,
there are no assurances that these plans can be accomplished on satisfactory
terms, or at all, or that they will provide sufficient cash to fund our
operations, pay the principal of, and interest on, our indebtedness, fund our
other liquidity needs or permit us to refinance our indebtedness. Our inability
to obtain business opportunities, additional financing, restructure our
indebtedness, or reduce our costs would have a material adverse effect on our
financial condition, results of operations and ability to satisfy our
obligations, and may result in our pursuing a restructuring of our indebtedness
either on a consensual basis or under the provisions of bankruptcy legislation,
or liquidating our business and operations. Further, our inability to obtain
additional financing or restructure our indebtedness, or our pursuing a
restructuring of our indebtedness either on a consensual basis or under the
provisions of bankruptcy legislation, may result in our stockholders losing all
or a material portion of their investment in our securities.

We have yet to earn revenues, and, because our ability to
sustain new operations is dependent on our ability to raise financing, our
accountants have expressed a substantial doubt about our ability to continue as
a going concern.

Since our inception, we have suffered recurring losses and net
cash out flows from our activities. To date, we have funded our activities
through issuances of our common stock, related party loans and the support of
creditors. There are no assurances that we will be able to obtain financing
sufficient to support our ongoing activities. As a result, Davidson &
Company LLP, Chartered Accountants, our independent auditors, expressed a
substantial doubt about our ability to continue as a going concern in their
audit report on our financial statements contained in this Annual Report.

Because our stock is a penny stock, stockholders will be
more limited in their ability to sell their stock.

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 quotation
system.

4

---

Because our securities constitute "penny stocks" within the
meaning of the rules, the rules apply to us and to our securities. The rules may
further affect the ability of owners of shares to sell our securities in any
market that might develop for them. As long as the quotation price of our common
stock is less than $5.00 per share, the common stock will be subject to Rule
15g-9 under the Exchange Act. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock, to deliver a standardized risk
disclosure document prepared by the SEC, that:

|1. | contains a description of the nature and level of risk in
      the market for penny stocks in both public offerings and secondary
      trading;                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                          
|2. | 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 to such duties or other requirements of
      securities laws;
|   |                                                                                                                                                                                                                                          
|3. | contains a brief, clear, narrative description of a
      dealer market, including bid and ask prices for penny stocks and the
      significance of the spread between the bid and ask price;                                           
|   |                                                                                                                                                                                                                                          
|4. | contains a toll-free telephone number for inquiries on
      disciplinary actions;                                                                                                                                                       
|   |                                                                                                                                                                                                                                          
|5. | defines significant terms in the disclosure document or
      in the conduct of trading in penny stocks; and                                                                                                                             
|   |                                                                                                                                                                                                                                          
|6. | contains such other information and is in such form,
      including language, type, size and format, as the SEC shall require by
      rule or regulation.                                                                              

The broker-dealer also must provide, prior to effecting any
transaction in a penny stock, 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) a 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 not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading
activity in the secondary market for our stock.

ITEM
2.             
PROPERTIES.

We have no real property holdings and, at this time, we have no
agreements to acquire any properties. We do not least 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. The office space that we
use is currently provided to us on an as-needed basis, at a cost of $104.50 per
month.

ITEM
3.             
LEGAL PROCEEDINGS.

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

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

None.

5

---

PART II

|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
      STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES.
|------- | -------------------------------------------------------------------------------------------------------------------------

Market Information

Our common shares are quoted on the Over-The-Counter Bulletin
Board (the OTC Bulletin Board) under the symbol BLSV." The following table
indicates the high and low bid prices of the common shares obtained during the
periods indicated:

2008
      2007High
      Low
      High
      LowFirst Quarter ended March 31
      $ 0.06
      $ 0.02
      $ 0.09
      $ 0.07Second Quarter ended June 30
      $ 0.02
      $ 0.015
      $ 0.06
      $ 0.06Third Quarter ended September 30
      $ 0.015
      $ 0.006
      $ 0.06
      $ 0.05Fourth Quarter ended December 31
      $ 0.008
      $ 0.005
      $ 0.06
      $ 0.05


The 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.

Registered Holders Of Our Common Stock

As of March 31, 2009, there were 18 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.

6

---

Dividends

We have neither declared nor paid any cash dividends on our
capital stock since our inception and do not contemplate 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

None.

ITEM
7.             
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

PLAN OF OPERATION

We are currently in the process of reorganizing our business
and are seeking and evaluating alternative business opportunities. As a result,
we are unable to provide an accurate estimate of our financial requirements for
the next twelve months. However, as at December 31, 2008, we currently have a
working capital deficit of $581,349 and will need substantial financing in the
near term in order to meet our current obligations as they become due and to
meet our ongoing reporting obligations under the Securities and Exchange Act
(the Exchange Act). In addition, if our management is successful in
identifying a suitable business opportunity for us to pursue, we will likely
need significantly more financing in order to pursue the new business
opportunity. Currently, we do not have any financial arrangements in place and
there is no assurance that we will be able to obtain sufficient financing on
terms acceptable to us, if at all.

RESULTS OF OPERATIONS

|Summary of Year End Results |   |                   |   |   |                   |   |  |                       | 
|--------------------------- | - | ----------------- | - | - | ----------------- | - |  | --------------------- | 
|                            |   | Year Ended        |   |   | Year Ended        |   |  | Percentage            | 
|                            |   | December 31, 2008 |   |   | December 31, 2007 |   |  | Increase / (Decrease) | 
|Revenue                     | $ | -                 |   | $ | -                 |   |  | n/a                   | 
|Expenses                    |   | (105,826          | ) |   | (112,069          | ) |  | (5.6)%                | 
|Net Loss                    | $ | (105,826          | ) | $ | (112,069          | ) |  | (5.6)%                | 

Revenue

We have not earned any revenues to date and we do not
anticipate earning revenues in the near future. We are a development stage
company and presently have only nominal operations.

7

---

Expenses

The major components of our expenses for the years ended
December 31, 2008 and 2007 are outlined in the table below:

|                             |   | Year Ended        |   |   | Year Ended        |  |  | Percentage            | 
|---------------------------- | - | ----------------- | - | - | ----------------- |  |  | --------------------- | 
|                             |   | December 31, 2008 |   |   | December 31, 2007 |  |  | Increase / (Decrease) | 
|Bank Charges and Interest    | $ | 6,622             |   | $ | 3,633             |  |  | 82.3%                 | 
|Consulting Services          |   | 51,000            |   |   | 60,000            |  |  | (15.0)%               | 
|Foreign Exchange Loss (Gain) |   | (4,024            | ) |   | 1,823             |  |  | (320.7)%              | 
|License and Royalty Payments |   | -                 |   |   | 15,000            |  |  | (100)%                | 
|Office and Sundry            |   | 1,523             |   |   | 1,083             |  |  | 40.6%                 | 
|Professional Fees            |   | 46,909            |   |   | 27,747            |  |  | 69.1%                 | 
|Regulatory                   |   | 2,427             |   |   | 2,598             |  |  | (6.6)%                | 
|Stock Transfer Services      |   | 735               |   |   | 185               |  |  | 297.3%                | 
|Travel                       |   | 634               |   |   | -                 |  |  | n/a                   | 
|Total Operating Expenses     | $ | 105,826           |   | $ | 112,069           |  |  | (5.6)%                | 

Consulting fees accrued during the period were incurred with
respect to general administrative and accounting work performed in connection
with our business activities and in connection with meeting our regulatory
filings.

Professional fees for the year ended December 31, 2008
represent fees incurred in respect of legal and audit services provided in
connection with meeting our ongoing reporting obligations under the Exchange
Act.

Effective April 1, 2007, we suspended our royalty payments to
  NorPac as NorPacs patents for the Cool Can Technology expired. As a result,
  we had no expenses relating to the license and royalty payments during the year
  ended December 31, 2008.

LIQUIDITY AND CAPITAL RESOURCES

|Working Capital                         |   |                   |   |   |                   |   |  |                       | 
|--------------------------------------- | - | ----------------- | - | - | ----------------- | - |  | --------------------- | 
|                                        |   | At                |   |   | At                |   |  | Percentage            | 
|                                        |   | December 31, 2008 |   |   | December 31, 2007 |   |  | Increase / (Decrease) | 
|Current Assets                          | $ | 2                 |   | $ | 165               |   |  | (98.8)%               | 
|Current Liabilities                     |   | (581,351          | ) |   | (475,688          | ) |  | 22.2%                 | 
|Working Capital Surplus
      (Deficit) | $ | (581,349          | ) | $ | (475,523          | ) |  | 22.3%                 | 

|Cash Flows                                    |   |                   |   |   |                   |  
|--------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                              |   | Year Ended        |   |   | Year Ended        |  
|                                              |   | December 31, 2008 |   |   | December 31, 2007 |  
|Cash Flows used in Operating
      Activities | $ | (13,388           | ) | $ | (28,361           | )
|Cash Flows used in Investing Activities       |   | -                 |   |   | -                 |  
|Cash Flows from Financing
      Activities    |   | 13,225            |   |   | 26,100            |  
|Net Increase in Cash During Period            | $ | (163              | ) | $ | (2,261            | )

Our working capital deficit increased during the year ended
December 31, 2008 primarily as a result of an increase in accounts payable due
to a lack of capital to meet our ongoing expenditures and the fact that our only
source of financing during the period was in the form of short-term loans.
During the year ended December 31, 2008, we received loans totaling $13,225 as
follows:

| | (a) | loans from a third party company totaling $6,925. The
      loans bear interest at a rate of 10%, compounded annually and are due on
      demand.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                   
| | (b) | loans from a shareholder totaling $6,300. The loans bear
      interest at a rate of 10%, compounded annually and are due on
    demand.          

8

---

On June 30, 2008, NorPac assigned to us an indebtedness owed to
them of approximately $612,000 plus accrued interest as partial consideration
for releasing NorPac from its obligations under our License Agreement with them.
Our management determined that the collectibility of this amount was in doubt,
and as a result, we did not record the assignment of the indebtedness on our
books.

Subsequent to the year ended December 31, 2008, we received
loans totaling $7,075. The loans bear interest at a rate of 10% compounded
annually and are due on demand.

Financing Requirements

From inception to December 31, 2008, we have suffered
cumulative losses in the amount of $1,547,349. We expect to continue to incur
substantial losses as we continue the development of our business. Since our
inception, we have funded operations through common stock issuances, related
party loans, and the support of creditors in order to meet our strategic
objectives. Our management believes that sufficient funding will be available to
meet our business objectives, including anticipated cash needs for working
capital, and are currently evaluating several financing options, including a
public offering of securities. However, there can be no assurance that we will
be able to obtain sufficient funds to continue the development of and, if
successful, to commence the sale of, our products. As a result of the foregoing,
our independent auditors believe there exists substantial doubt about our
ability to continue as a going concern.

At the end of our fiscal year ended December 31, 2003, we
reached a verbal agreement with BIG K.G. (BIG), a German company, pursuant to
which BIG agreed to 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 potential proceeds of $1,000,000 (the Private
Placement). Under the terms of the verbal agreement, each unit to be issued
under the proposed Private Placement was to consist of one share of our common
stock and one share purchase warrant entitling the warrant holder to purchase
one additional share of our common stock at a price of $0.05 per share. BIG was
to receive a commission of $100,000 for services provided in connection with the
proposed Private Placement. In 2007, we formally approved an offering of
4,000,000 units under the terms of the verbal agreement with BIG. However, on
November 12, 2008, we decided to terminate this offering and our agreement with
BIG due to BIGs inability to find placees for the Private Placement.

We do not have any financing agreement in place, and there is
no assurance that we will be able to obtain additional financing if and when
required. We anticipate that additional financing may come 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
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.

We have identified certain accounting policies, described
below, that are most important to the portrayal of our current financial
condition and results of operations. Our significant accounting policies are
disclosed in the notes to our audited financial statements included in this
Annual Report on Form 10-K.

9

---

Foreign Currency Translation

Our functional currency is the U.S. dollar. Accordingly,
monetary assets and liabilities denominated in a foreign currency are translated
at the exchange rate in effect at the balance sheet date while non-monetary
assets and liabilities are translated at historical rates. Revenue and expense
items denominated in a foreign currency are translated at exchange rates
prevailing when such items are recognized in the statement of operations.
Exchange gains and losses arising on translation of foreign currency items are
included in the statement of operations.

10

---

ITEM
8.             
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

| | 1. | Report of Independent Registered Public Accounting Firm
      (Davidson & Company LLP, Chartered Accountants);                                                           
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                          
| | 2. | Balance Sheets as at December 31, 2008 and 2007;                                                                                                                         
| |    |                                                                                                                                                                          
| | 3. | Statements of Operations for the years ended December 31,
      2008, December 31, 2007, and for the period from inception on August 17,
      1999 to December 31, 2008;
| |    |                                                                                                                                                                          
| | 4. | Statements of Cash Flows for the years ended December 31,
      2008, December 31, 2007, and for the period from inception on August 17,
      1999 to December 31, 2008;
| |    |                                                                                                                                                                          
| | 5. | Statement of Stockholders Equity (Deficiency) for the
      period from inception on August 17, 1999 to December 31, 2008; and                                          
| |    |                                                                                                                                                                          
| | 6. | Notes to Financial Statements.                                                                                                                                           

11

---



BALSAM VENTURES, INC.(A Development Stage Company)

FINANCIAL STATEMENTS

DECEMBER 31, 2008 and 2007

(Stated in U.S. Dollars)



---

|DAVIDSON &
      COMPANY LLP |                       |  | A Partnership of Incorporated Professionals
|---------------------------- | --------------------- |  | -------------------------------------------
|                             | Chartered Accountants | 

REPORT OF INDEPENDENT REGISTERED
  PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying balance sheets of Balsam Ventures
  Inc. (A Development Stage Company) as at December 31, 2008 and 2007 and the
  related statements of operations, stockholders' equity (deficiency) and cash
  flows for the years then ended and for the period from inception on August 17,
  1999 to December 31, 2008. 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 the 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 audits provide
  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 the Company as at
  December 31, 2008 and 2007 and the results of its operations and its cash flows
  for the years then ended and for the period from inception on August 17, 1999
  to December 31, 2008 in conformity with generally accepted accounting principles
  in the United States of America.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in Note 2 to
  the financial statements, the Company has minimal assets, is dependent upon
  financing to continue operations, has suffered recurring losses from operations
  and has a working capital deficit as of December 31, 2008. These matters raise
  substantial doubt about the Company's ability to continue as a going concern.
  Management's plans in regards to these matters are discussed in Note 2. The
  financial statements do not include any adjustments that might result from the
  outcome of this uncertainty.

|                  | **"DAVIDSON**  **&
      COMPANY LLP"**
|----------------- | ---------------------------------------
|                  |                                        
|Vancouver, Canada | Chartered Accountants                  
|April 8, 2009     |                                        



|1200 - 609 Granville Street, P.O. Box 10372,
      Pacific Centre, Vancouver, BC, Canada, V7Y 1G6
|-------------------------------------------------------------------------------------------------
|Telephone (604) 687-0947 Fax (604) 687-6172                                                      

F-2

---

BALSAM VENTURES, INC.(A Development Stage Company)

BALANCE SHEETS(Stated in U.S. Dollars)

|                                                                                          |   | DECEMBER 31, |   |   | DECEMBER 31, |  
|----------------------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                                                          |   | 2008         |   |   | 2007         |  
|                                                                                          |   |              |   |   |              |  
|ASSETS                                                                                    |   |              |   |   |              |  
|                                                                                          |   |              |   |   |              |  
|Current Assets                                                                            |   |              |   |   |              |  
|Cash                                                                                      | $ | 2            |   | $ | 165          |  
|Deferred tax asset, less valuation allowance
      of $526,098 (2007 -$490,117 ) (Note 4) |   | -            |   |   | -            |  
|                                                                                          |   |              |   |   |              |  
|Total Assets                                                                              | $ | 2            |   | $ | 165          |  
|                                                                                          |   |              |   |   |              |  
|LIABILITIES AND STOCKHOLDERS DEFICIENCY                                                  |   |              |   |   |              |  
|                                                                                          |   |              |   |   |              |  
|Current Liabilities                                                                       |   |              |   |   |              |  
|Accounts payable and accrued liabilities                                                  | $ | 118,867      |   | $ | 83,699       |  
|Accounts payable and accrued
      liabilities related parties (Note 7)                  |   | 323,785      |   |   | 272,870      |  
|Loans
      payable (Note 6 and 7)                                                        |   | 138,699      |   |   | 119,119      |  
|                                                                                          |   |              |   |   |              |  
|Total Current Liabilities                                                                 |   | 581,351      |   |   | 475,688      |  
|                                                                                          |   |              |   |   |              |  
|Commitments and Contractual Obligations(Note 9)                                           |   |              |   |   |              |  
|                                                                                          |   |              |   |   |              |  
|Stockholders Deficiency                                                                  |   |              |   |   |              |  
|Common Stock (Note 8)                                                                     |   |              |   |   |              |  
|Authorized:                                                                               |   |              |   |   |              |  
|100,000,000 common shares with a par value of $0.001 per share                            |   |              |   |   |              |  
|Issued
      and outstanding:                                                             |   |              |   |   |              |  
|December
      31, 2008 -30,681,663 common shares                                         |   |              |   |   |              |  
|December
      31, 2007 -36,226,663 common shares                                         |   | 30,682       |   |   | 36,227       |  
|Additional paid-in
      capital                                                          |   | 935,318      |   |   | 929,773      |  
|Deficit
      accumulated during the development stage                                    |   | (1,547,349   | ) |   | (1,441,523   | )
|                                                                                          |   |              |   |   |              |  
|Total Stockholders
      Deficiency                                                      |   | (581,349     | ) |   | (475,523     | )
|                                                                                          |   |              |   |   |              |  
|Total Liabilities
      and Stockholders Deficiency                                      | $ | 2            |   | $ | 165          |  

**Subsequent Events (Note 12)**

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

F-3

---

BALSAM VENTURES, INC.(A Development Stage Company)

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

|                                                           |   |              |   |   |              |   |   | CUMULATIVE   |  
|---------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
|                                                           |   |              |   |   |              |   |   | FROM         |  
|                                                           |   |              |   |   |              |   |   | INCEPTION    |  
|                                                           |   | YEAR         |   |   | YEAR         |   |   | (AUGUST 17,  |  
|                                                           |   | ENDED        |   |   | ENDED        |   |   | 1999) TO     |  
|                                                           |   | DECEMBER 31, |   |   | DECEMBER 31, |   |   | DECEMBER 31, |  
|                                                           |   | 2008         |   |   | 2007         |   |   | 2008         |  
|                                                           |   |              |   |   |              |   |   |              |  
|EXPENSES                                                   |   |              |   |   |              |   |   |              |  
|                                                           |   |              |   |   |              |   |   |              |  
|Accretion of discount on convertible notes                 | $ | -            |   | $ | -            |   | $ | 260,000      |  
|Bank charges and interest                                  |   | 6,622        |   |   | 3,633        |   |   | 89,728       |  
|Consulting services                                        |   | 51,000       |   |   | 60,000       |   |   | 516,947      |  
|Domain registration                                        |   | -            |   |   | -            |   |   | 436          |  
|Foreign exchange loss (gain)                               |   | (4,024       | ) |   | 1,823        |   |   | (1,073       | )
|License and royalty payments                               |   | -            |   |   | 15,000       |   |   | 328,000      |  
|Office and sundry                                          |   | 1,523        |   |   | 1,083        |   |   | 16,689       |  
|Professional fees                                          |   | 46,909       |   |   | 27,747       |   |   | 293,100      |  
|Regulatory                                                 |   | 2,427        |   |   | 2,598        |   |   | 18,259       |  
|Stock transfer services                                    |   | 735          |   |   | 185          |   |   | 6,855        |  
|Travel                                                     |   | 634          |   |   | -            |   |   | 9,733        |  
|Write-off of software
      development costs              |   | -            |   |   | -            |   |   | 8,675        |  
|                                                           |   | 105,826      |   |   | 112,069      |   |   | 1,547,349    |  
|                                                           |   |              |   |   |              |   |   |              |  
|Provision for income taxes                                 |   | -            |   |   | -            |   |   | -            |  
|                                                           |   |              |   |   |              |   |   |              |  
|NET LOSS                                                   | $ | 105,826      |   | $ | 112,069      |   | $ | 1,547,349    |  
|                                                           |   |              |   |   |              |   |   |              |  
|                                                           |   |              |   |   |              |   |   |              |  
|BASIC AND DILUTED
      NET LOSS PER SHARE                 | $ | (0.00        | ) | $ | (0.00        | ) |   |              |  
|                                                           |   |              |   |   |              |   |   |              |  
|                                                           |   |              |   |   |              |   |   |              |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES
      OUTSTANDING |   |              |   |   |              |   |   |              |  
|-BASIC AND DILUTED                                         |   | 33,416,184   |   |   | 36,226,663   |   |   |              |  

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

F-4

---

BALSAM VENTURES, INC.(A Development Stage Company)

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

|                                                                              |   |              |   |   |              |   |   | CUMULATIVE   |  
|----------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
|                                                                              |   |              |   |   |              |   |   | FROM         |  
|                                                                              |   |              |   |   |              |   |   | INCEPTION    |  
|                                                                              |   | YEAR         |   |   | YEAR         |   |   | (AUGUST 17,  |  
|                                                                              |   | ENDED        |   |   | ENDED        |   |   | **1999**) TO |  
|                                                                              |   | DECEMBER 31, |   |   | DECEMBER 31, |   |   | DECEMBER 31, |  
|                                                                              |   | 2008         |   |   | 2007         |   |   | 2008         |  
|                                                                              |   |              |   |   |              |   |   |              |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                          |   |              |   |   |              |   |   |              |  
|                                                                              |   |              |   |   |              |   |   |              |  
|Net loss for the period                                                       | $ | (105,826     | ) | $ | (112,069     | ) | $ | (1,547,349   | )
|Adjustments to reconcile net loss to cash used in operating
      activities: |   |              |   |   |              |   |   |              |  
|Write off of software development
      costs                                 |   | -            |   |   | -            |   |   | 8,675        |  
|Interest accrued on convertible notes payable                                 |   | -            |   |   | -            |   |   | 78,000       |  
|Shares issued to extend
      license agreement                               |   | -            |   |   | -            |   |   | 293,000      |  
|Accretion of discount on convertible debentures                               |   | -            |   |   | -            |   |   | 260,000      |  
|Changes in non-cash working capital items:                                    |   |              |   |   |              |   |   |              |  
|Decrease in prepaid expenses                                                  |   | -            |   |   | 50           |   |   | -            |  
|Increase in accounts payable
      and accrued liabilities                    |   | 35,168       |   |   | 19,392       |   |   | 608,468      |  
|Increase in accounts payable and accrued
      liabilitiesrelated parties    |   | 50,915       |   |   | 60,848       |   |   | 128,785      |  
|Increase in accrued interest payable                                          |   | 6,355        |   |   | 3,418        |   |   | 9,773        |  
|                                                                              |   |              |   |   |              |   |   |              |  
|Net cash used in operating activities                                         |   | (13,388      | ) |   | (28,361      | ) |   | (160,648     | )
|                                                                              |   |              |   |   |              |   |   |              |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                          |   |              |   |   |              |   |   |              |  
|                                                                              |   |              |   |   |              |   |   |              |  
|Software development costs                                                    |   | -            |   |   | -            |   |   | (8,675       | )
|                                                                              |   |              |   |   |              |   |   |              |  
|Net cash used in investing activities                                         |   | -            |   |   | -            |   |   | (8,675       | )
|                                                                              |   |              |   |   |              |   |   |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                          |   |              |   |   |              |   |   |              |  
|                                                                              |   |              |   |   |              |   |   |              |  
|Issuance of common stock
      for cash                                       |   | -            |   |   | -            |   |   | 75,000       |  
|Proceeds
      from loans payable, net of repayments                          |   | 13,225       |   |   | 26,100       |   |   | 94,325       |  
|                                                                              |   |              |   |   |              |   |   |              |  
|Net
      cash provided by financing activities                               |   | 13,225       |   |   | 26,100       |   |   | 169,325      |  
|                                                                              |   |              |   |   |              |   |   |              |  
|NET INCREASE (DECREASE) IN CASH                                               |   | (163         | ) |   | (2,261       | ) |   | 2            |  
|                                                                              |   |              |   |   |              |   |   |              |  
|CASH, BEGINNING OF PERIOD                                                     |   | 165          |   |   | 2,426        |   |   | -            |  
|                                                                              |   |              |   |   |              |   |   |              |  
|CASH, END OF PERIOD                                                           | $ | 2            |   | $ | 165          |   | $ | 2            |  

Supplemental Disclosure with respect to Cash Flows (Note 10)

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

F-5

---

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, 2008

DEFICITCOMMON STOCK
      
      
      ACCUMULATEDADDITIONAL
      
      
      SHARE
      
      
      DURING THEPAR
      
      
      PAID-IN
      
      
      SUBSCRIPTION
      
      
      DEVELOPMENTSHARES
      
      
      VALUE
      
      
      CAPITAL
      
      
      RECEIVABLE
      
      
      STAGE
      
      
      TOTALStock issued for cash at$0.0005
      
      10,000,000
      
      $
      10,000
      
      $
      (5,000
      )
      $
      -
      
      $
      -
      
      $
      5,000Stock issued for cash at$0.005
      
      10,000,000
      
      
      10,000
      
      
      40,000
      
      
      -
      
      
      -
      
      
      50,000Stock issued for cash at $0.10
      
      200,000
      
      
      200
      
      
      19,800
      
      
      -
      
      
      -
      
      
      20,000Subscriptions 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
      )
      
      69,574Subscriptions received
      
      -
      
      
      -
      
      
      -
      
      
      2,500
      
      
      -
      
      
      2,500Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (31,342
      )
      
      (31,342
      )Balance, December 31, 2000
      
      20,200,000
      
      
      20,200
      
      
      54,800
      
      
      -
      
      
      (34,268
      )
      
      40,732Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (18,989
      )
      
      (18,989
      )Balance, December 31, 2001
      
      20,200,000
      
      
      20,200
      
      
      54,800
      
      
      -
      
      
      (53,257
      )
      
      21,743Net 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 featureof convertible notes
      
      -
      
      
      -
      
      
      260,000
      
      
      -
      
      
      -
      
      
      260,000Stock issued for licenseextension payment at $0.21
      
      300,000
      
      
      300
      
      
      62,700
      
      
      -
      
      
      -
      
      
      63,000Net 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
      
      
      -
      
      
      -
      
      
      200,000Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (306,987
      )
      
      (306,987
      )Balance, December 31, 2004
      
      25,500,000
      
      
      25,500
      
      
      572,500
      
      
      -
      
      
      (756,084
      )
      
      (158,084
      )Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (154,205
      )
      
      (154,205
      )Balance, December 31, 2005
      
      25,500,000
      
      
      25,500
      
      
      572,500
      
      
      -
      
      
      (910,289
      )
      
      (312,289
      )Stock issued for licenseextension payment at $0.06
      
      500,000
      
      
      500
      
      
      29,500
      
      
      -
      
      
      -
      
      
      30,000Stock issued on conversion ofconvertible notes payable
      
      8,666,663
      
      
      8,667
      
      
      251,333
      
      
      -
      
      
      -
      
      
      260,000


F-6

---

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, 2008

DEFICITCOMMON STOCK
      
      
      ACCUMULATEDADDITIONAL
      
      
      SHARE
      
      
      DURING THEPAR
      
      
      PAID-IN
      
      
      SUBSCRIPTION
      
      
      DEVELOPMENTSHARES
      
      
      VALUE
      
      
      CAPITAL
      
      
      RECEIVABLE
      
      
      STAGE
      
      
      TOTALStock issued on settlement ofaccrued interest payable onconvertible notes payable
      
      1,560,000
      
      
      1,560
      
      
      76,440
      
      
      -
      
      
      -
      
      
      78,000Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (419,165
      )
      
      (419,165
      )Balance, December 31, 2006
      
      36,226,663
      
      
      36,227
      
      
      929,773
      
      
      -
      
      
      (1,329,454
      )
      
      (363,454
      )Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (112,069
      )
      
      (112,069
      )Balance, December 31, 2007
      
      36,226,663
      
      
      36,227
      
      
      929,773
      
      
      -
      
      
      (1,441,523
      )
      
      (475,523
      )Cancellation of stock
      
      (5,545,000
      )
      
      (5,545
      )
      
      5,545
      
      
      -
      
      
      -
      
      
      -Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (105,826
      )
      
      (105,826
      )Balance, December 31, 2008
      
      30,681,663
      
      $
      30,682
      
      $
      935,318
      
      $
      -
      
      $
      (1,547,349
      )
      $
      (581,349
      )


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

F-7

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|1. | HISTORY AND ORGANIZATION OF THE COMPANY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Balsam Ventures, Inc. (the Company) was
        incorporated on August 17, 1999 in the State of Nevada. The Company was
        in the business of developing and marketing a patented, proprietary technology
        for self-chilling beverage containers (the Cool Can Technology)
        that it had licensed in 2004 until it was advised that the patents for
        the Cool Can Technology had expired. The Company settled its rights under
        the Agreement (see Note 9) in exchange for (1) the surrender for cancellation
        of the remaining 5,545,000 shares of common stock of the Company which
        were issued to the Licensor under the Agreement and still held by the
        Licensor and (2) the assignment of indebtedness owed to the Licensor of
        approximately $612,000 plus accrued interest to the Company (see Note
        5). The Company is in the process of reorganizing the Companys business
        and is seeking and evaluating alternative business opportunities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company is considered to be in the development stage.
        The accompanying financial statements represent those of a development
        stage enterprise and therefore, are subject to the usual business risks
        of development stage companies. The Company has not yet generated any
        revenue from operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These financial statements have been prepared with the
        on-going assumption that the Company will be able to realize its assets
        and discharge its liabilities in the normal course of business. However,
        certain conditions noted below raise substantial doubt about the Companys
        ability to continue as a going concern. These financial statements do
        not include any adjustments to the amounts and classifications of assets
        and liabilities that might be necessary should the Company be unable to
        continue as a going concern.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | As shown in the accompanying financial statements, the
        Company has incurred a net loss of $1,547,349 for the period from inception
        (August 17, 1999) to December 31, 2008, and has no revenue. The operations
        of the Company have primarily been funded by the sale of common stock
        and loans payable. Continued operations of the Company are dependent on
        the Companys ability to complete equity financings, obtain additional
        loans or generate profitable operations in the future. Managements
        plan in this regard is to secure additional funds through future equity
        financings and loans payable. Such financings or loans payable may not
        be available or may not be available on reasonable terms to the Company.                                                                                                                                                                                                                                 

F-8

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|3. | 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 of America and are stated in U.S. dollars. The significant accounting
        policies adopted by the Company are as follows:                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (a) Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The preparation of financial statements in
        conformity with generally accepted accounting principles in the United
        States requires management to make estimates and assumptions that affect
        the reported amount of assets and liabilities and the disclosure of contingent
        assets and liabilities at the date of the financial statements and the
        reported amount of revenues and expenses during the reporting period.
        Actual results could differ from these estimates.                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (b) Foreign currency
        translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The functional currency of the Company is
        the U.S. dollar. Accordingly, monetary assets and liabilities denominated
        in a foreign currency are translated at the exchange rate in effect at
        the balance sheet date while non-monetary assets and liabilities are translated
        at historical rates. Revenue and expense items denominated in a foreign
        currency are translated at exchange rates prevailing when such items are
        recognized in the statement of operations. Exchange gains and losses arising
        on translation of foreign currency items are included in the statement
        of operations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (c) Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company considers cash held at banks
        and all highly liquid investments with original maturities of three months
        or less to be cash and cash equivalents. At December 31, 2008 and 2007,
        the Company had no cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (d) Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | A deferred tax asset or liability is recorded for all
        temporary differences between financial and tax reporting and net operating
        loss carryforwards. Deferred tax expenses (benefit) result from the net
        change during the period of deferred tax assets and liabilities.                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Deferred tax assets are reduced by a valuation allowance
        when, in the opinion of management, it is more likely than not that some
        portion or all of the deferred tax assets will not be realized. Deferred
        tax assets and liabilities are adjusted for the effects of changes in
        tax laws and rates on the date of enactment.                                                                                                                                                                                                                                                                                                 

F-9

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (e) Fair value of financial
        instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company's financial instruments consist
        of cash, accounts payable and accrued liabilities, accounts payable and
        accrued liabilities related parties and loans payable. Unless otherwise
        noted, it is management's opinion that the Company is not exposed to significant
        interest, currency or credit risks arising from these financial instruments.
        The fair value of these financial instruments approximates their carrying
        values, unless otherwise noted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (f) Net loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Basic net loss per share is computed by dividing
        the net loss for the period by the weighted average number of shares of
        common stock outstanding during the period. Diluted earnings per share
        takes into consideration shares of common stock outstanding (computed
        under basic earnings per share) and potentially dilutive shares of common
        stock. As of December 31, 2008 and 2007, there were no potentially dilutive
        securities outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (g) Development stage                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company is a development stage company
        as defined in Statement of Financial Accounting Standards (SFAS)
        No. 7, Accounting and Reporting by Development Stage Enterprises,as it is devoting substantially all of its efforts to establish a
        new business and planned principal operations have not commenced.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (h) Concentration of
        credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Cash is the only financial instrument that
        potentially subjects the Company to concentration of credit risk. The
        Company maintains cash in bank accounts that, at times, may exceed federally
        insured limits. The Company has not experienced any losses in such accounts
        and believes it is not exposed to any significant risks on its cash in
        bank accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (i) Recent accounting
        pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | In September 2006, the Financial Accounting Standards
        Board (FASB) issued SFAS No. 157, Fair Value Measurements.SFAS No. 157 establishes a framework for measuring the fair value
        of assets and liabilities. This framework is intended to provide increased
        consistency in how fair value determinations are made under various existing
        accounting standards which permit, or in some cases require, estimates
        of fair market value. SFAS No. 157 is effective for fiscal years beginning
        after November 15, 2007, and interim periods within those fiscal years.
        In February 2008, FASB Staff Position 157-2 (FSP SFAS 157-2)
        delayed the effective date of SFAS No.157 until fiscal years beginning
        after November 15, 2008, and interim periods within those fiscal years,
        for all nonfinancial assets and nonfinancial liabilities, except for items
        that are recognized or disclosed at fair value in the financial statements
        on a recurring basis (at least annually). The Company adopted

F-10

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (i) Recent accounting pronouncements (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | SFAS No.157 on January 1, 2008, and utilized the one
        year deferral for nonfinancial assets and nonfinancial liabilities that
        was granted by FSP FAS 157-2. The adoption of SFAS No. 157 did not have
        a material impact on the Companys consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In February, 2007, the FASB issued SFAS No. 159, “*The
        Fair Value Option for Financial Assets and Financial Liabilities*”.
        SFAS No. 159 permits entities to choose to measure many financial assets
        and financial liabilities at fair value. Unrealized gains and losses on
        items for which the fair value option has been elected are reported in
        earnings. SFAS No. 159 is effective for fiscal years beginning after November
        15, 2007. The adoption of SFAS No. 159 did not have a material impact
        on the Company’s financial statements.                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In May 2008, the FASB issued SFAS No. 162, “*The
        Hierarchy of Generally Accepted Accounting Principles*”. SFAS
        No. 162 identifies the sources of accounting principles and the framework
        for selecting the principles used in the preparation of financial statements
        of nongovernmental entities that are presented in conformity with GAAP.
        This statement shall be effective 60 days following the Securities and
        Exchange Commission’s approval of the Public Company Accounting
        Oversight Board amendments to AU Section 411, The Meaning of Present Fairly
        in Conformity With Generally Accepted Accounting Principles. The Company
        does not believe that implementation of this standard will have a material
        impact on its financial position, results of operations or cash flows.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining
        Whether Instruments Granted in Share-Based Payment Transactions Are Participating
        Securities. FSP EITF 03-6-1 states that unvested share-based
        payment awards that contain nonforfeitable rights to dividends or dividend
        equivalents (whether paid or unpaid) are participating securities and
        shall be included in the computation of earnings per share pursuant to
        the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning
        after December 15, 2008. The Company does not believe that implementation
        of this standard will have a material impact on its consolidated financial
        position, results of operations or cash flows.                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (j) Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Certain amounts reported in the prior periods have been
        reclassified to conform to the current periods presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-11

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|4. | DEFERRED INCOME TAXES                                                                                                                                                                                                                                                                                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                
|   | Income tax benefits attributable to losses from operations
        was $Nil for the years ended December 31, 2008 and 2007. The provision
        for income taxes differs from the result which would be obtained by applying
        the statutory income tax rate of 34% to income before income taxes as
        a result of the following:

| |                                 |   | YEAR         |   |   | YEAR         |  
| | ------------------------------- | - | ------------ | - | - | ------------ | -
| |                                 |   | ENDED        |   |   | ENDED        |  
| |                                 |   | DECEMBER 31, |   |   | DECEMBER 31, |  
| |                                 |   | 2008         |   |   | 2007         |  
| |                                 |   |              |   |   |              |  
| | Loss for the period             | $ | (105,826     | ) | $ | (112,069     | )
| |                                 |   |              |   |   |              |  
| | Computed expected tax benefit |   | (35,981      | ) |   | (38,103      | )
| | Change in valuation allowance   |   | 35,981       |   |   | 38,103       |  
| |                                 |   |              |   |   |              |  
| | Income tax recovery             | $ | -            |   | $ | -            |  

The following is a summary of deferred
  taxes at December 31:

| |                                   |   | 2008     |   |   | 2007     |  
| | --------------------------------- | - | -------- | - | - | -------- | -
| |                                   |   |          |   |   |          |  
| | Deferred tax assets:              |   |          |   |   |          |  
| | Net operating loss carry forwards |   | 526,098  |   |   | 490,117  |  
| | Valuation allowance               |   | (526,098 | ) |   | (490,117 | )
| |                                   |   |          |   |   |          |  
| | Income tax recovery               | $ | -        |   | $ | -        |  

|   | The Company has incurred operating losses of $1,547,349
        which, if unutilized, will expire through 2028.                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|5. | LOANS RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On June 30, 2008, the Company settled its rights under
        the Agreement (see Note 9) whereby the licensor assigned loans receivable
        totalling $612,000 plus accrued interest to the Company. Management determined
        that the fair value of the loans was in doubt due the uncertainty of the
        collectibility of the loans and as a result, did not record the assignment
        of the loans receivable on its books.

F-12

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|6. | LOANS PAYABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | During the year ended December 31, 2008, several loans
        were granted from a third party company totalling $6,925. The loans bear
        interest at 10% per annum, compounded annually and are due on demand.
        Interest expense accrued for the year ended December 31, 2008 totalled
        $393.                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | During the year ended December 31, 2007, two loans were
        granted from a third party company for $60,000 and $4,100, respectively.
        The first loan bears interest at 8% per annum, compounded annually and
        was due April 19, 2008. On April 19, 2008, the first loan was verbally
        extended with the same terms and is due on demand. The second loan bears
        interest at 10%, compounded annually and is due on demand. Interest expense
        accrued for the year ended December 31, 2008 and 2007 totalled $5,495
        and $3,418.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|7. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | At December 31, 2008 and 2007, included in accounts
        payable and accrued liabilities related parties is $8,005 and $8,090,
        respectively, owed to a director and officer.                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | At December 31, 2008 and 2007, included in accounts
        payable and accrued liabilities –related parties is $315,780 and
        $255,780, respectively, owed to a shareholder for consulting fees and
        reimbursement of expenses. Consulting fees for the year ended December
        31, 2008 and 2007 were $51,000 and $60,000, respectively.                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Loans payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | During the year ended December 31, 2008, several loans
        were granted from a shareholder totalling $6,300. The loans bear interest
        at 10% per annum, compounded annually and are due on demand. Interest
        expense accrued for the year ended December 31, 2008 totalled $467.                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | During the period ended December 31, 2006, a series
        of loans totalling $46,601 were granted from a shareholder. During the
        year ended December 31, 2007, an additional $5,000 was granted. The loans
        are non-interest bearing, unsecured and due on demand.                                                                                                                                                                                                                                                                                          

F-13

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|8. | COMMON STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Companys articles of incorporation allow it
        to issue up to 100,000,000 shares of common stock, par value $0.001. Effective
        April 3, 2002 the Company effected a stock split of its common stock by
        issuing two new shares for every one old share. Except as otherwise stated
        to the contrary in these financial statements, all references to shares
        and prices per share have been adjusted to give retroactive effect to
        the stock split.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On August 17, 1999, the Company issued 10,000,000 shares
        of its common stock at $0.0005 per share in a private placement transaction.                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On October 29, 1999, the Company issued 10,000,000 shares
        of its common stock at $0.005 per share in a private placement transaction.                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On December 24, 1999, the Company issued 200,000 shares
        of its common stock at $0.10 per share in a private placement transaction.                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On November 18, 2003, the Company issued 300,000 shares
        of its common stock with a value of $63,000 to initiate and extend the
        arrangement for a chilling beverage container technology.                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On May 18, 2004, the Company issued 5,000,000 shares
        of its common stock with a value of $200,000, as consideration for a license.                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On January 14, 2006, the Company issued 500,000 shares
        of its common stock with a value of $30,000, as consideration for the
        extension of a license.                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On October 1, 2006, the Company issued 8,666,663 common
        shares, with a value of $260,000 on conversion of convertible notes payable.                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On October 1, 2006, the Company issued 1,560,000 common
        shares, with a value of $78,000 for settlement of accrued interest payable
        on $260,000 convertible notes payable.                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On June 30, 2008, the Company cancelled 5,545,000 common
        shares surrendered when it settled its rights under the Agreement (see
        Note 9) which were issued to the Licensor under the Agreement.                                                                                                                                                                                                                                                                                   

F-14

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|9. | 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 Cool Can 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 had the
        right to sub-license the right to manufacture, use and sell products embodying
        the Cool Can Technology.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | In consideration for the Agreement, the Company
        agreed to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

On January 14, 2006, the Company entered
  into an agreement (the Extension Agreement) with the Licensor, to
  amend the terms of their Agreement. Under the Extension Agreement, the Licensor
  agreed to extend the date on which the Company is required to commence paying
  the minimum royalty payments to January 15, 2007.

In consideration for the Extension Agreement,
  the Company agreed to:

| | a) | issue 500,000 shares of its common stock (issued in
        2006);
| | -- | ------------------------------------------------------------------
| |    |                                                                   
| | b) | pay $20,000 on or before January 31, 2006 (paid 2006).            

The Cool Can Technology and patents and
  trademarks of the Licensor included in the Cool Can 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
  Cool Can Technology during the Agreement. The Agreement supercedes all prior
  arrangements and agreements between the Company and the Licensor in respect
  of the Cool Can Technology.

F-15

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|9.  | LICENSE AGREEMENT (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | During the period ended March 31, 2007, the Company
        paid royalty fees of $15,000. In June 2007, the Licensor notified the
        Company that its intellectual property rights to the Cool Can Technology
        had possibly expired. As a result, the Company suspended the minimum royalty
        payments required under the Agreement effective April 1, 2007.                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company has been advised that the patents for the
        Cool Can Technology have, in fact expired. On June 30, 2008, the Company
        settled its rights under Agreement in exchange for (1) the surrender for
        cancellation of the remaining 5,545,000 shares of common stock of the
        Company which were issued to the Licensor under the Agreement and still
        held by the Licensor and (2) the assignment of indebtedness owed to the
        Licensor of approximately $612,000 plus accrued interest to the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                |   |              |  |   |              |  |   | CUMULATIVE   | 
| | -------------- | - | ------------ |  | - | ------------ |  | - | ------------ | 
| |                |   |              |  |   |              |  |   | FROM         | 
| |                |   |              |  |   |              |  |   | INCEPTION    | 
| |                |   | YEAR         |  |   | YEAR         |  |   | (AUGUST 17,  | 
| |                |   | ENDED        |  |   | ENDED        |  |   | 1999) TO     | 
| |                |   | DECEMBER 31, |  |   | DECEMBER 31, |  |   | DECEMBER 31, | 
| |                |   | 2008         |  |   | 2007         |  |   | 2008         | 
| |                |   |              |  |   |              |  |   |              | 
| | Cash paid for: |   |              |  |   |              |  |   |              | 
| | Interest       | $ | -            |  | $ | -            |  | $ | 1,112        | 
| | Income taxes   | $ | -            |  | $ | -            |  | $ | -            | 
| |                |   |              |  |   |              |  |   |              | 

Non-cash transaction:

During the year ended December 31, 2008,
  the Company settled its rights under an Agreement which included the surrender
  for cancellation of the remaining 5,545,000 shares of common stock of the Company
  which were issued to the Licensor under the Agreement and still held by the
  Licensor (see Note 9).

During the year ended December 31, 2007,
  the Company reclassified a total of $195,000 from accounts payable to accounts
  payable related parties to better reflect the nature of the transactions.

F-16

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008(Stated in U.S. Dollars)

|11. | SEGMENT INFORMATION                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                  
|    | The Companys business is considered as operating
        in one segment based upon the Companys organization structure, the
        way in which the operation is managed and evaluated, the availability
        of separate financial results and materiality considerations.
|    |                                                                                                                                                                                                                                                                                  
|12. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                  
|    | On January 29, 2009 and April 8, 2009, two loans were
        granted from a third party company totaling $7,075. The loans bear interest
        at 10%, compounded annually and are due on demand.                                                                             

F-17

---

ITEM
9.             
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.

On October 24, 2007, we engaged Davidson & Company LLP,
Chartered Accountants (Davidson), as our principal independent accountants. On
the same date, we received a notice dated October 24, 2007 that Telford
Sadovnick, P.L.L.C., Certified Public Accountants (Telford), our independent
public accountants, resigned as our auditors. Telford stated that they were
resigning as our independent auditor due to the fact that Telford had withdrawn
its registration with the Public Company Accountability Oversight Board and is
no longer able to audit US issuers.

Our Board of Directors approved the engagement of Davidson and
the resignation of Telford by written resolution.

Telfords reports on our financial statements for the fiscal
year ended December 31, 2006 and December 31, 2005 did not contain an adverse
opinion or disclaimer of opinion, nor were they modified or qualified as to
uncertainty, audit scope or accounting principles with the exception of a
statement regarding the uncertainty of our ability to continue as a going
concern.

There were no disagreements between us and Telford on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which, if not resolved to the satisfaction of
Telford, would have caused them to make reference to the subject matter of the
disagreement in connection with their reports for the financial statements.

ITEM 9A(T).       
CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of December 31, 2008 (the Evaluation Date). This evaluation
was carried out under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were not effective as of the Evaluation Date
as a result of the material weaknesses in internal control over financial
reporting discussed below.

Disclosure controls and procedures are those controls and
procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure.

Notwithstanding the assessment that our internal control over
financial reporting was not effective and that there were material weaknesses as
identified in this report, we believe that our financial statements contained in
our Annual Report on Form 10-K for the year ended December 31, 2008 fairly
present our financial condition, results of operations and cash flows in all
material respects.

Management's Annual Report on Internal Control Over
Financial Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.

Internal control over financial reporting includes those
policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of its
management

12

---

and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial statements.

Management recognizes that there are inherent limitations in
the effectiveness of any system of internal control, and accordingly, even
effective internal control can provide only reasonable assurance with respect to
financial statement preparation and may not prevent or detect material
misstatements. In addition, effective internal control at a point in time may
become ineffective in future periods because of changes in conditions or due to
deterioration in the degree of compliance with our established policies and
procedures.

A material weakness is a significant deficiency, or combination
of significant deficiencies, that results in there being a more than remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected.

Under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, management conducted an
evaluation of the effectiveness of our internal control over financial
reporting, as of the Evaluation Date, based on the framework set forth in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on its evaluation under
this framework, management concluded that our internal control over financial
reporting was not effective as of the Evaluation Date.

Management assessed the effectiveness of the Companys internal
control over financial reporting as of Evaluation Date and identified the
following material weaknesses:

Insufficient Resources:We have an inadequate number of
personnel with requisite expertise in the key functional areas of finance and
accounting.

Inadequate Segregation of Duties: We have an inadequate
number of personnel to properly implement control procedures.

Lack of Audit Committee & Outside Directors on the
Companys Board of Directors:We do not have a functioning audit committee
and outside directors on the Companys Board of Directors, resulting in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures.

Management is committed to improving its internal controls and
will (1) continue to use third party specialists to address shortfalls in
staffing and to assist the Company with accounting and finance responsibilities,
(2) increase the frequency of independent reconciliations of significant
accounts which will mitigate the lack of segregation of duties until there are
sufficient personnel and (3) may consider appointing outside directors and audit
committee members in the future.

Management, including our Chief Executive Officer and Chief
Financial Officer, has discussed the material weakness noted above with our
independent registered public accounting firm. Due to the nature of this
material weakness, there is a more than remote likelihood that misstatements
which could be material to the annual or interim financial statements could
occur that would not be prevented or detected.

This Annual Report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the our
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this Annual Report.

Changes in internal control over financial reporting

As of the Evaluation Date, there were no changes in our
internal control over financial reporting that occurred during the fiscal year
ended December 31, 2008 that have materially affected, or that are reasonably
likely to materially affect, our internal control over financial reporting.

Limitations on the effectiveness of controls and procedures

Our management, including our Chief Executive Officer and Chief
Financial Officer, do not expect that the our controls and procedures will
prevent all potential errors or fraud. A control system, no matter how well

13

---

conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met.

ITEM 9B.        OTHER
INFORMATION.

None.

14

---

PART III

ITEM
10.            DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the name and positions of our
sole executive officer and director as of the date hereof.

Name
    Age
    PositionsJohn Boschert
    39
    President, Chief Executive
      Officer, Secretary, Treasurer, Chief Financial Officer & Director


John Boschert is our President, Chief Executive Officer,
Secretary, Treasurer, and Chief Financial Officer and our sole director. Mr.
Boschert is a self-employed business consultant. Over the past five years, Mr.
Boschert has also served as an officer or director of the following publicly
traded
companies: ****-
Blackstone Lake Minerals Inc.
(OTCBB) ****-
Exploration Drilling International Inc.
(OTCBB) ****-
Clyvia Inc.
(OTCBB) ****-
Vitavea Inc. (OTCBB)

SIGNIFICANT EMPLOYEES

We have no significant employees other than our sole executive
officer and director.

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.

AUDIT COMMITTEE

Mr. Boschert is our sole director. As a result, we do not
maintain a separately-designated standing audit committee. As a result, our sole
director acts as our audit committee. Mr. Boschert does not meet the definition
of an audit committee financial expert. We believe that the cost related to
appointing a financial expert to our board of directors at this time is
prohibitive.

CODE OF ETHICS

We adopted a Code of Ethics applicable to our executive
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 our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2004, filed on May
17, 2005. 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.

15

---

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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 the copies of such forms received
by us, we believe that, except as otherwise described below, during the last
fiscal year, 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:

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

ITEM
11.            EXECUTIVE
COMPENSATION.

SUMMARY COMPENSATION TABLE

We did not pay any compensation to our sole executive officer
and director during the fiscal years ended December 31, 2008 and 2007.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

As at December 31, 2008, we did not have any outstanding equity
awards.

EMPLOYMENT CONTRACTS

We do not have an employment contract with our sole executive
officer and director. We also do not have any termination of employment or
change-in-control arrangements with our sole executive officer and sole
director.

16

---

|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|-------- | -----------------------------------------------------------------------------------------------------

EQUITY COMPENSATION PLANS

We have no equity compensation plans (including individual
compensation arrangements) under which our equity securities are authorized for
issuance.

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 March 31,
2009by: (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 (as defined under Item
402(m)(2) of Regulation S-K), 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 OFFICERSCommon Stock
      John Boschert, 
        Director, President, Chief Executive 
        Officer, Secretary, Treasurer and Chief 
        Financial Officer
      8,403,360
      27.4%5% SHAREHOLDERSCommon Stock
      John Boschert, 
        Director, President, Chief Executive 
        Officer, Secretary, Treasurer and Chief 
        Financial Officer 
        Suite 16036, Urbanizacion Marbella, 
        Calle 47 y Ave., Aquilino de la Guardia 
        Edifico Ocean Plaza - Planta Baja, 
        Panama, Republic of Panama
      8,403,360
      27.4%


|(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 March 31, 2009. As of March 31, 2009, there
      were 30,681,663 shares of our common stock issued and
  outstanding.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CHANGES IN CONTROL

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

17

---

ITEM
13.            CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

RELATED TRANSACTIONS

Except as otherwise 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 immediate family member, including any spouse, child,
      parent, step-child, step-parent, sibling or in-law, of any of the
      foregoing.      

On June 30, 2008, we entered into a Release Agreement with
NorPac Technologies, Inc. (NorPac), a former beneficial holder of more than 5%
of our issued and outstanding shares. Under the terms of the Release Agreement,
we released NorPac from any legal claims and liabilities in connection with a
license agreement dated November 30, 2003, and as amended on January 12, 2006,
(collectively, the Release) between us and NorPac. Under the terms of the
License Agreement, NorPac had granted a license to us over its Cool Can
Technology. However, NorPacs patents over this technology expired. In exchange
for our releasing NorPac from its obligations under the License Agreement,
NorPac:

|(c) | surrendered for cancellation the remaining 5,545,000
      shares of our common stock which had been issued to NorPac under terms of
      the License Agreement and still owned by NorPac; and                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                 
|(d) | assigned to us an indebtedness owed to NorPac of
      approximately $612,000 plus accrued interest. Readers are cautioned that
      there is substantial doubt that we will be able to collect any or all of
      this assigned indebtedness.

DIRECTOR INDEPENDENCE

Our common stock is quoted on the OTC Bulletin Board
inter-dealer quotation system, which does not have director independence
requirements. Under NASDAQ Rule 4200(a)(15), a director is not considered to be
independent if he or she is also an executive officer or employee of the
corporation. Our sole director, John Boschert, is also our sole executive
officer. As a result, we do not have any independent directors.

As a result of our limited operating history and minimal
resources, our management believes that it will have difficulty in attracting
independent directors. In addition, we would likely be required to obtain
directors and officers insurance coverage in order to attract and retain
independent directors. Our management believes that the costs associated with
maintaining such insurance is prohibitive at this time.

ITEM
14.            PRINCIPAL
ACCOUNTING FEES AND SERVICES.

The aggregate fees billed for the two most recently completed
fiscal years for professional services rendered by the principal accountant for
the audit of our annual financial statements and review of the financial
statements included in our Quarterly Reports on Form 10-Q and services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for those fiscal periods were as follows:

|                   | Year Ended December 31, 2008 | Year Ended December 31, 2007
|------------------ | ---------------------------- | ----------------------------
|Audit Fees         | $10,000                      | $10,960                     
|Audit-Related Fees | $Nil                         | $Nil                        
|Tax Fees           | $Nil                         | $Nil                        
|All Other Fees     | $Nil                         | $Nil                        
|Total              | $10,000                      | $10,960                     

18

---

ITEM
15.            EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.

The following exhibits are either provided with this Annual
Report or are incorporated herein by reference:

|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                       
|3.1            |  | Articles of Incorporation.(1)                                                                                                                                                                         
|               |  |                                                                                                                                                                                                       
|3.2            |  | Bylaws.(1)                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                       
|10.1           |  | Exclusive License
        Agreement dated November 30, 2003 with NorPac Technologies, Inc. (formerly
        Cool Can Technologies, Inc.)(2)                                                          
|               |  |                                                                                                                                                                                                       
|10.2           |  | Extension Agreement
        dated January 16, 2006 with NorPac Technologies, Inc.(4)                                                                                                                  
|               |  |                                                                                                                                                                                                       
|10.3           |  | Loan Agreement
        dated April 19, 2007 between Balsam Ventures, Inc. and Black Pointe Holdings
        Inc.(5)                                                                                   
|               |  |                                                                                                                                                                                                       
|10.4           |  | Promissory Note
        executed by Balsam Ventures, Inc. dated as of April 19, 2007.(5)                                                                                                              
|               |  |                                                                                                                                                                                                       
|10.5           |  | Release Agreement
        dated June 30, 2008 between Balsam Ventures, Inc. and NorPac Technologies,
        Inc.(7)                                                                                  
|               |  |                                                                                                                                                                                                       
|14.1           |  | Code of Ethics.(3)                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                       
|16.1           |  | Letter of Telford
        Sadovnick, PLLC.(6)                                                                                                                                                         
|               |  |                                                                                                                                                                                                       
|31.1           |  | Certification
        of Chief Executive Officer and Chief Financial Officer pursuant to Section
        302 of the Sarbanes-Oxley Act of 2002.                                                       
|               |  |                                                                                                                                                                                                       
|32.1           |  | Certification
        of Chief Executive Officer and 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 January 9, 2004.                                 
|(3) | Previously filed as an Exhibit to our Annual Report on
      Form 10-KSB on May 17, 2005.                                        
|(4) | Previously filed as an Exhibit to our Current Report on
      Form 8-K filed on January 19, 2006.                                
|(5) | Previously filed as an Exhibit to our Current Report on
      Form 8-K filed on April 23, 2007.                                  
|(6) | Previously filed as an Exhibit to our Current Report on
      Form 8-K filed on November 2, 2007.                                
|(7) | Previously filed as an Exhibit to our Current Report on
      Form 8-K filed on July 7, 2008.                                    

19

---

SIGNATURES

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

|      |                |  |     | BALSAM VENTURES, INC.                                          
|----- | -------------- |  | --- | ---------------------------------------------------------------
|      |                |  |     |                                                                
|      |                |  |     |                                                                
|      |                |  |     |                                                                
|Date: | April 14, 2009 |  | By: | /s/ John Boschert                                              
|      |                |  |     | JOHN BOSCHERT                                                  
|      |                |  |     | President, Secretary, Treasurer,
      Chief Executive Officer,
|      |                |  |     | Chief Financial
      Officer and Director                     
|      |                |  |     | (Principal Executive Officer and
      Principal Accounting    
|      |                |  |     | Officer)                                                       

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|Date: | April 14, 2009 |  | By: | /s/ John Boschert                                              
|----- | -------------- |  | --- | ---------------------------------------------------------------
|      |                |  |     | JOHN BOSCHERT                                                  
|      |                |  |     | President, Secretary, Treasurer,
      Chief Executive Officer,
|      |                |  |     | Chief Financial
      Officer and Director                     
|      |                |  |     | (Principal Executive Officer and
      Principal Accounting    
|      |                |  |     | Officer)                                                       

---