Edgar Filing: BRAVO FOODS INTERNATIONAL CORP

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

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Report for Period January 1, 2005 to December 31, 2005

BRAVO! FOODS INTERNATIONAL CORP.
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(Name of Small Business Issuer in its Amended Charter)

Commission File Number 0-25039

Delaware 62-1681831
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

11300 US Highway 1, Suite 202, North Palm Beach, Florida 33408 USA
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(Address of principal executive offices) (Zip Code)

Telephone number: (561) 625-1411
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Securities registered under Section 12(b) of the Exchange Act:
None

Securities registered under Section 12(g) of the Exchange Act
Common Stock, $.001 par value
(Title of class)

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

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

The issuer's revenues for its most recent fiscal year were $11,948,921.

The aggregate market value of the voting stock held by non-affiliates of
the issuer on March 24, 2006, based upon the $0.54 per share average bid
and asked prices of such stock on that date, was $90,213,998, based upon
167,062,960 shares held by non-affiliates of the issuer. The total number
of issuer's shares of common stock outstanding held by affiliates and non-
affiliates as of March 24, 2006 was 184,253,753.

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

DOCUMENTS INCORPORATED BY REFERENCE: See Exhibits

FORWARD-LOOKING STATEMENTS

Statements that are not historical facts, including statements about
our prospects and strategies and our expectations about growth contained in
this report are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements represent our present expectations or beliefs concerning future
events. We caution that such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
uncertainty as to our future profitability; the uncertainty as to whether
our new business model can be implemented successfully; the accuracy of our
performance projections; and our ability to obtain financing on acceptable
terms to finance our operations until profitability.

PART I

ITEM 1 - DESCRIPTION OF BUSINESS

The Company

Bravo! Foods International Corp. is a Delaware corporation, which was
formed on April 26, 1996. We formerly owned the majority interest in two
Sino-American joint ventures in China, known as Green Food Peregrine
Children's Food Co. Ltd. and Hangzhou Meilijian Dairy Products Co., Ltd.
These two joint ventures processed milk products for local consumption in
the areas of Shanghai and Hangzhou, China, respectively. We closed Green
Food Peregrine in December 1999 and sold our interest in Hangzhou Meilijian
Dairy in December 2000.

In December 1999, we obtained Chinese government approval for the
registration of a new wholly owned subsidiary in the Wai Gao Qiao "free
trade zone" in Shanghai, China. We formed this import-export company to
import, export and distribute food products on a wholesale level in China.
In addition, China Premium (Shanghai) was our legal presence in China with
respect to contractual arrangements for the development, marketing and
distribution of branded food products. We ceased all activities of this

Chinese subsidiary in April 2004, owing to low sales volume and
insufficient financial or logistic resources to market our products
profitably in mainland China.

In December 1999, we formed Bravo! Foods, Inc., a wholly owned
Delaware subsidiary, which we utilized to advance the promotion and
distribution of branded Looney Tunes(TM) products in the United States,
through production agreements with local dairy processors. At the end of
2001, we assumed this business, and our U.S. subsidiary ceased functioning
as an operating company at that time.

On February 1, 2000, we changed our name from China Peregrine Food
Corporation to China Premium Food Corporation, and on March 16, 2001 we
changed our name to Bravo! Foods International Corp.

In January 2005, we formed Bravo! Brands (UK) Ltd., a United Kingdom
registered company that is wholly owned by Bravo! Brands International Ltd.
We will utilize Bravo! Brands (UK) Ltd. to advance the production,
promotion and distribution of licensed branded products in the United
Kingdom through production and sales agent agreements with local entities.

In March 2005, we formed Bravo! Brands International Ltd., a Delaware
subsidiary that will hold license rights for our branded products on an
international basis. We will utilize Bravo! Brands International Ltd. to
hold and exploit certain license rights for branded products developed by
us in international markets through local second-tier subsidiaries such as
Bravo! Brands (UK) Ltd.

The Business

Our business involves the development and marketing of our own
Slammers(R) trademarked brand, the obtaining of license rights from third
party holders of intellectual property rights to other trademarked brands,
logos and characters and the granting of production and marketing rights to
processor dairies to produce branded flavored milk utilizing our
intellectual property.

In the United States, we generate revenue from the unit sales of
finished branded flavored milks to retail consumer outlets. Currently, we
use a single third-party processor in the United Sates to produce all of
our single serve milk based beverages. We recognize revenue in the United
States at the gross amount of our invoices for the sale of finished product
to wholesale buyers ("unit sales"). We take title to our branded flavored
milks when they are shipped by our third party processors and recognize as
revenue the gross wholesale price charged to our wholesale customers. Our
gross margin is determined by the reported wholesale price less the cost
charged by Jasper Products, our third party processor, to produce our
branded milk products.

Internationally, we generate revenue primarily through the sale of
"kits" to these processors. "Kits" sold to processors consist of flavor
ingredients that are developed and refined by us and the grant of
production rights to processors to produce the flavored milks. The
consideration paid to us under these production contracts consists of fees
charged for our grant of production rights for the branded flavored milks
plus a charge for flavor ingredients. The fees charged by us for the
production rights are set to match royalty fees for our intellectual
property licenses.

All of our third party licensing agreements recognize that we will
use third party production agreements for the processing of flavored milk
products and that the milk products will be produced and may be sold
directly by those processors. Our responsibilities under our third party
production agreements are to design and provide approved packaging artwork,
to help determine the best tasting flavors for the particular market and to
assist in the administration, promotion and expansion of the respective
branded milk programs. Ingredients for the flavored milks are formulated
to our specifications

and supplied on an exclusive basis by either Givaudan Roure or Mastertaste,
both of which are flavor development and production companies. In the
United States, we assume the responsibility for sales and marketing of our
flavored milks produced by Jasper Products LLC.

Master Distribution Agreement - Coca-Cola Enterprises
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On August 31, 2005, we entered into a ten-year Master Distribution
Agreement with Coca-Cola Enterprises Inc that we believe will significantly
expand the distribution and sales of our products. The agreement provides
for the distribution of our products by Coca-Cola Enterprises in the United
States, all U.S. possessions, Canada, Belgium, continental France, Great
Britain, Luxembourg, Monaco and the Netherlands, as well as any other
geographic territory to which, during the term of the agreement, Coca-Cola
Enterprises obtains the license to distribute beverages of The Coca-Cola
Company. The appointment of Coca-Cola Enterprises as the exclusive
distributor for our products was effective August 30, 2005, has an
effective distribution date of October 31, 2005 and an expiration date of
August 15, 2015. Coca-Cola Enterprises has the option to renew the Master
Agreement for two subsequent periods of ten additional years. Attendant to
the execution of the agreement we issued three-year warrants to Coca-Cola
Enterprises for the right to purchase 30 million shares of our common stock
at an exercise price of $0.36 per share.

Under the terms of the agreement, Coca-Cola Enterprises is obligated
to use all commercially reasonable efforts to solicit, procure and obtain
orders for our products and merchandise and actively promote the sale of
such products in the Territory, as defined in the agreement. The agreement
establishes a comprehensive process for the phased transition from our
existing system of distributors to Coca-Cola Enterprises, dependent upon
distribution territory, product and sales channels. The parties have agreed
that Coca-Cola Enterprises will implement its distribution on a ramp-up
basis, with the initial distribution commencing in the United States on or
about the October 31, 2005 effective distribution date. Coca-Cola
Enterprises' distribution in other Territory areas will be dependent upon,
among other things, third-party licensing considerations and compliance
with the regulatory requirements for the products in foreign countries.

We have agreed to provide the following:

* strategic direction of our products;
* maintain sales force education and support;
* actively market and advertise our products and design and develop
point of sale materials and advertising.

We are also responsible for handling:

* consumer inquiries;
* product development; and
* the manufacture and adequate supply of our products for
distribution by Coca-Cola Enterprises.

The terms of the agreement require our company to maintain the
intellectual property rights necessary for our company to produce, market
and/or distribute and for Coca-Cola Enterprises to sell our products in the
Territory. We are obligated to spend a fixed dollar amount in the remainder
of 2005 and 2006 on national and local advertising, including actively
marketing the Slammers trademark, based on a plan as mutually agreed each
year. Beginning in 2007, the Company shall allocate an amount per year for
such activities in each country in the defined Territory equal or greater
than an agreed upon percentage of our total revenue in such country.

Under the agreement, Coca-Cola Enterprises has the right of first
refusal to distribute any new products developed by our company, and the
agreement establishes a process for the potential expansion of Coca-Cola
Enterprises' distribution of the Company's products to new territories.
Either party may terminate the agreement for a material breach, insolvency
or bankruptcy and Coca-Cola Enterprises may terminate for change of control
by our company, material governmental regulatory enforcement action or
threatened governmental action having a material adverse consumer or sales
impact on our products, and upon twelve months notice after August 15,
2006.

Third Party Intellectual Property Licenses
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Marvel Enterprises, Inc. (Super Heroes(R) and Marvel Heroes(R))

On February 4, 2005, we entered into a two-year license agreement for
the utilization of Marvel Heroes characters on our flavored milks in the
United Kingdom and Ireland. We agreed to a royalty rate of 4% of net
wholesale sales in the territory against the prepayment of a guaranteed
minimum royalty amount. We have adopted the unit sales model currently
used in the United States. We have outsourced the infrastructure required
for the production, promotion, marketing, distribution and sale of our
products through a production agreement with Waterfront Corporation in the
UK and through an exclusive sales agency agreement with Drinks Brokers,
Ltd. a UK registered company responsible for the launch and growth of
several major beverage brands in the licensed territory.

In March 2005, we entered into a new one-year license agreement with
Marvel Enterprises, Inc. to use its Super Heroes(R) properties to promote
our branded milk products in the United States, Canada and Mexico. Under
the terms of the license agreement, we agreed to a royalty rate of 5% of
net wholesale sales in the United States, 4% for school lunch channels and
2.5% for school hot lunch programs. We also agreed to a 11% royalty on the
amount invoiced to dairy processors for "kits" in Canada and Mexico.

On February 4, 2005, we entered into an eighteen month license
agreement for the utilization of Marvel Heroes characters on our flavored
milks in nine Middle East Countries. We agreed to a 11% royalty on the
amount invoiced to third party dairy processors for "kits" in the territory
against the prepayment of a guaranteed minimum royalty amount.

Chattanooga Bakery, Inc. (Moon Pie(R))

In October 2003, we signed a two-year license agreement with MD
Enterprises, Inc., under which we have the exclusive right to manufacture,
distribute, market and sell Moon Pie(R) flavored milk products in the
United States. We agreed to a variable royalty rate of 2% to 3% of net
wholesale sales, depending upon volume.

Masterfoods USA (Starburst(R), Milky Way(R), 3 Musketeers(R))

On September 21, 2004, we entered into a licensing agreement with
Masterfoods USA, a division of Mars, Incorporated, for the use of
Masterfood's Milky Way(R), Starburst(R) and 3 Musketeers(R) trademarks in
connection with the manufacture, marketing and sale of single serve
flavored milk drinks in the United States, its Possessions and Territories
and US Military installations worldwide. The license limits the
relationship of the parties to separate independent entities. The initial
term of the license agreement expires December 31, 2007. We have agreed to
pay a royalty based upon the total net sales value of the licensed products
sold and advance payments of certain agreed upon guaranteed royalties.
Ownership of the licensed marks and the specific milk flavors to be
utilized with the marks remains with Masterfoods. We have a right of first
refusal for other milk beverage products utilizing the Masterfoods marks
within the licensed territory.

Diabetes Research Institute

In June 2005, we extended our licensing agreement with Diabetes
Research Institute to June 30, 2006. We agreed to a variable royalty rate
of 0.25% of net sales. We use this intellectual property, which consists
of a logo plus design on the labels of our Slim Slammers(TM) product line.

In House Intellectual Property
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In addition to our third-party licenses, we have developed and sell
flavored milks bearing trademarks developed by us, including "Slammers(R)"
"Pro Slammers(TM)", "Slim Slammers(R)" and "Breakfast Blenders(TM)".

Production Contracts/Administration
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Prior to 2000, our business primarily involved the production and
distribution of milk in China. In the third quarter of 2000, we began to
refocus our business away from the production - distribution aspect of the
value chain by implementing a business model that involved the branding,
marketing, packaging design and promotion of branded flavored fresh milk in
the United States. During the middle of 2001, this refocused business was
implemented in China, in December 2001 in Mexico and in the third quarter
of 2002 in Canada. Currently, operations in the United States, the Middle
East, Mexico and Canada are run directly by Bravo! Foods International
Corp. Our United Kingdom business is managed through our wholly owned
subsidiary Bravo! Brands International Ltd., which is a UK registered
company.

United States

The initial dairy processors with which we had production contracts
were members of Quality Chekd Dairies, Inc., a national cooperative with
over 40 member dairies that process fresh milk on a regional basis. This
business, while viable, proved to have limited sales expansion capabilities
in the US owing to the inherent regional distribution limitations of a
"fresh" milk product with a short shelf life.

The advent of extended shelf life (ESL) and aseptic long life milk
presented us with the opportunity to increase sales dramatically on a
national basis. In the third quarter of 2001 and the first quarter of
2002, we entered into production contracts with Shamrock Farms, located in
Phoenix, Arizona and Jasper Products, of Joplin, Missouri, and began to
market branded ESL and aseptic flavored milks to large national chain
accounts. Since 2003, our milk products are being produced by Jasper
Products.

United Kingdom

In February 2005, we executed an exclusive sales agency agreement
with Drinks Brokers, Ltd., a division of Tactical Sales Resources Limited
for sales of our product lines in the United Kingdom. Pursuant to terms of
the agreement, Bravo! appointed Drinks Brokers as its Sales Agent in the
United Kingdom for the marketing, promotion, distribution and sale of
Bravo!'s Slammers(R) Marvel Heroes line of flavored milk, as well as other
product lines that Bravo! may introduce to the UK in the near future.

Drinks Brokers utilizes its established networks to manage all
matters relating to the sale and effective distribution of Bravo!'s
products within the United Kingdom, including the solicitation of sales
from customers in applicable market segments, marketing, advertising and
promotion of Bravo!'s products, distribution, and merchandising.

Our products are processed in the United Kingdom by Waterfront
Corporation Limited, on a third party co-pack basis. We generate revenue
in the United Kingdom from the unit sales of finished branded flavored
milks to retail consumer outlets. Currently, we use a single third-party
processor in the United States to produce all of our single serve milk
based beverages. We recognize revenue in the United States at the gross
amount of our invoices for the sale of finished product to wholesale buyers
("unit sales"). We take title to our branded flavored milks when they are
shipped by our third party processor and recognize as revenue the gross
wholesale price charged to our wholesale customers. Our gross margin is
determined by the reported wholesale price less the cost charged by
Waterfront Corporation Limited.

Middle East

In December 2003, we entered into a third party production agreement
with Saudia Dairy & Foodstuff Company, (SADAFCO) a Middle East dairy
processors, headquartered in Jeddah, Saudi Arabia. SADAFCO processes our
Slammers (R) branded flavored milks, including the Marvel line, for
distribution in nine Middle East countries. AsheTrade, our international
agent, with offices in Miami, Florida and Jeddah, Saudi Arabia, facilitates
our Middle East business.

In September 2005, we entered into a third party production agreement
with Oman National Dairy Products Co. Ltd., a Middle East dairy processors,
headquartered in Ruwi, Oman. Oman Dairy will process our Slammers (R)
branded flavored milks, including the Marvel line, for distribution in nine
Middle East countries. We generate revenue for sales in the Middle East
utilizing the "kit" model. We are not responsible for production,
marketing, promotion or distribution of the product in the Middle East

Products
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Commencing in September of 2000, we implemented the "kit" sales
program with third party dairy processors in the United States, for the
production and sale of fresh branded flavored milk in single serve plastic
bottles. This product, as with all of our U.S. products up to September
2000, had a limited shelf life of, generally, 21 days.

In early 2002, we developed branded extended shelf life and aseptic,
bacteria free, long life flavored milk products. The extended shelf life
product was sold in 11.5oz single serve plastic bottles and had to be
refrigerated. The shelf life of this product is 90 days. Our aseptic
product does not require refrigeration and has a shelf life of 8 months.
This product was packaged in an 11.2oz Tetra Pak Prisma(TM) sterile paper
container. Both of these products were introduced to the public in the
second and third quarters of 2002.

Commencing in May 2002, we developed a new branded fortified
flavored milk product under the "Slammers(R) Fortified Reduced Fat Milk"
brand name. We use our Slammers(R) brand in conjunction with our licensed
third party trademarks. Slammers(R) is made from 2 percent fat milk and is
fortified with 11 essential vitamins. The introduction of this new product
and the phase out of our "regular" branded milks occurred in the fourth
quarter of 2002. Our Slammers(R) flavored milks are sold in the United
States in single serve extended shelf life plastic bottles, as well as the
long life aseptic Tetra Pak Prisma(TM) package. Our Slammers(R) flavored
milks are sold in Mexico and have been sold in Canada in single serve
extended shelf life plastic bottles.

In November 2002, we introduced Slim Slammers(R) Fortified Milk, a
low calorie version of our Slammers(R) Fortified Reduced Fat Milk. Slim
Slammers(R) Fortified Milk has no added sugar and is sweetened with
sucralose, a natural sweetener made from sugar. Slim Slammers(R) Fortified
Milk is made from 1 percent fat milk, is fortified with 11 essential
vitamins and is available in the same flavors as our

Slammers(R) brand. We reintroduced this product in the United States with
a new package and formulation during 2004.

In 2004, we announced our product development and brand strategy for
seven new, separate and distinct single serve product lines: Ultimate
Slammers(TM), Slim Slammers(R), Moon Pie Slammers(R), Pro-Slammers(TM),
Starburst(R) Slammers(R), 3 Musketeers(R) Slammers(R) and Milky Way(R)
Slammers(R). These product lines are all fortified and positioned to
appeal directly to profiled demographic segments, including teens and pre
teens for Ultimate Slammers(TM), Starburst(R) Slammers(R) and Milky Way(R)
Slammers(R), teens and sports enthusiasts for Pro-Slammers(TM), young to
old for Moon Pie(R) Slammers(R) and health conscious adults for Slim
Slammers(R) and 3 Musketeers(R) Slammers(R).

We launched four brands in 2004, beginning with Ultimate Slammers(R)
in April and achieved national distribution of Ultimate Slammers(R) through
both retail grocers and convenience stores by mid- summer. Roughly 10,000
retail supermarket stores carried this brand nationwide in 2004. This was
followed by our June launch of Slim Slammers(R) and Moon Pie(R) Slammers(R)
and the July release of our Pro-Slammers(TM) line.

In January 2005, we launched our Slammers(R) Starburst line of Fruit
& Cream Smoothies utilizing a "shelf stable" re-sealable plastic bottle for
milk products that does not require refrigeration. Until that launch, all
single serve flavored milk in plastic bottles required refrigeration for
storage, distribution and shelf placement. The tactical advantage of
distributing milk products ambient enables us to side-step a major entry
barrier in our immediate consumption strategy. Refrigerated milk is
relegated to dairy direct-store-delivery systems that are controlled by
either regional dairy processors or larger national dairy holding
companies. Shelf stable re-sealable plastic bottles allow us to use a more
traditional distribution network that accommodates the non-refrigerated
beverages. Also, milk products packaged in shelf stable re-sealable
plastic bottles have significantly longer shelf life for storage, allowing
us to ship in full truckloads resulting in decreased freight costs. We
currently are converting all of our products to "shelf stable" re-sealable
plastic bottles.

In the first quarter 2005, we launched our Slammers(R) MilkyWay and 3
Musketeers lines utilizing a "shelf stable" re-sealable plastic bottle for
milk products that does not require refrigeration, under the Masterfoods
License. During this period, we also introduced Breakfasts Blenders(TM),
which is a meal replacement milk beverage developed for the "on the go"
consumer,

Industry Trends
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The flavored milk industry has grown from approximately $750 million
in 1995 to $2.5 billion in 2004. The single serve portion of this category
is difficult to measure, since approximately 2/3 of the sales in the single
serve milk industry are sold in immediate consumption channels or other
channels that do not report scan-data. For example, Wal-Mart has become
the largest retailer in the USA for milk, selling an estimated 15% of total
milk sales. Wal-Mart does not report sales for the industry data resources
embodied in A.C. Neilson or IRI analyses. Similarly, most convenience
stores and "up-and-down-the-street" retailers in the immediate consumption
sales channels do not report either, and neither do vending and schools.

We have analyzed the industry using reports available from milk and
beverage industry sources. These include the total, segmented and rate of
growth sales that are reported, the immediate consumption sales rates for
all consumables compared to retail grocery buying patterns and opinions of
experts in the milk industry as to the relative size of reported versus
non-reported sales. Based upon these reports and analysis, we believe the
current size of the single serve flavored milk industry (packaging 16 oz.
or smaller) is approximately $1.5 billion domestically. The industry grew
at annual rates of between 5 and

15 percent during the last five years but was virtually flat in the last
two years while it digested the remarkable 10-year growth rates. We
believe that this space is positioned for growth now and will continue to
be in the immediate consumption channels such as vending, convenience
stores and food service market segments.

Market Analysis
---------------

The flavored milk business is a relatively new category in the dairy
field. The flavored "refreshment" segment is both the fastest growing and
most profitable category in the industry and is receiving the most
attention in the industry today. Pioneered by Nestle with the NesQuik line
and Dean Foods with its Chug brand, this "good for you" segment is in
demand both in the U.S. and internationally.

The International Dairy Foods Association reports that, although
flavored milk currently amounts to only 5 to 6 percent of milk sales, it
represents over 59% of the growth in milk sales. With the total milk
category exceeding $9.3 billion in 2004, the flavored milk segment was
approximately $2.5 billion in 2004, with single serve flavored milk growing
to approximately $1.5 billion for the same period. Statistically, as the
flavored segment grows, the entire category grows as well. In the past ten
years, selling more flavored milks has resulted in more sales of white milk
as well.

In addition, the International Dairy Foods Association and Dairy
Management Inc. have reported on studies suggesting that dairy products may
help in weight loss efforts when coupled with a reduced calorie diet, based
on data associating adequate calcium intake with lower body weight and
reduced body fat. We continue to develop a niche in the single serve
flavored milk business by utilizing strong, national branding as part of
the promotion of our Slammers(R), Pro Slammers(TM) and Slim Slammers(R)
products. This niche has as its focus the increased demand for single
serve, healthy and refreshing drinks.

Market Segment Strategy
-----------------------

The Bravo! product model addresses a very clear and concise target
market. We know from experience that the largest retailers of milk
products are demanding new and more diverse refreshment drinks,
specifically in the dairy area, in response to consumer interest and
demand. To that end, we have and will continue to differentiate our
products from those of our competitors through innovative product
formulations and packaging designs, such as those implemented in our
Slammers(R) and Pro Slammers(TM) fortified milk product lines and our Slim
Slammers(R) low calorie, no sugar added products. Our Slammers(R) milk
products have had promising results penetrating this arena as consumers
continue to look for healthy alternatives to carbonated beverages. The
positioning of our products as a healthy, fun and great tasting alternative
refreshment drink at competitive prices to more traditional beverages
creates value for the producer and the retailer alike. This "profit
orientation" for the trade puts old-fashioned milk products in a whole new
light. The consumer is happy, the retailer is happy and the producer is
able to take advantage of the value added by the brand and the resulting
overall increase in milk sales.

We currently are implementing a very important "first-to-market"
strategy that we feel will dramatically reposition our brands and company.
Until now, all single served flavored milk in plastic bottles required
refrigeration for storage, distribution, and shelf placement. Our
strategic partner, Jasper Products, became America's first processor with
FDA approval to offer a "shelf stable" re-sealable plastic bottle for
ambient milk products that do not require refrigeration.

The tactical advantage of distributing our milk products at ambient
temperatures enables us to side-step a major entry barrier in our immediate
consumption strategy. Most beverages are distributed ambient either
through beverage distribution channels or warehouse "candy and tobacco"
distributors. Refrigerated milk was relegated to dairy direct-store-
delivery systems that are controlled by either

regional dairy processors or larger national dairy holding companies such
as Dean Foods or H.B. Hood. We avoid the roadblock of being reliant upon
our competition for chilled distribution since we are now in the unique
position to use the more traditional distribution network that accommodates
non-refrigerated beverages. We currently are converting all of our products
into ambient "shelf stable" re-sealable plastic bottles.

We have been and continue to pursue a strategic goal of placing
Slammers(R) milks in elementary, middle and high schools through ala carte
lunch programs and vending facilities in school cafeterias, and we are
promoting our Slim Slammers(R) milks as low calorie, non-sugar added
alternatives to traditional soft drinks. Penetration of this market
segment has been limited by logistic and economic concerns of school
administrators in the push to remove traditional carbonated soft drinks
from schools in favor of milk and milk based products.

Competition
-----------

Nestle pioneered the single serve plastic re-sealable bottle which
has become the standard for this industry, and they currently enjoy a
dominant market share. Dean Foods owns a number of regional single serve
brands that are sold in this format, and they also have an exclusive
license to produce Hershey brand flavored milk nationwide. Our analysis
indicates that the Nestle's Nesquik brand accounts for approximately 30-35
percent of the U.S. single serve milk category, while Hershey's market
share is approximately half that, at around 15%. The other competition
comes from private label and regional dairy brands. Our Slammers(R) milks
are the only other single serve brand distributed nationally in America in
plastic re-sealable containers.

Our resources for promotions have been limited, and we run significantly
less promotional activities in comparison to our competitors. Where we are
in direct competition with Nestle and Hershey, however, we have been able
to maintain competitive sales levels.

Employees

We have twenty-six full time employees located at our North Palm
Beach corporate offices.

ITEM 2 - DESCRIPTION OF PROPERTY

Neither our company nor our subsidiaries currently own any real
property. As of February 1, 1999, we moved our corporate offices from West
Palm Beach to 11300 US Highway 1, Suite 202, North Palm Beach, Florida,
pursuant to a lease with HCF Realty, Inc., having an initial term of five
years. The current aggregate monthly rent amounts to approximately $7,468,
which includes an expansion of our office space from 2,485 square feet to
3,490 square feet. The term of this lease has been extended for six years
to October 30, 2010.

We have executed a lease for an expansion of our office space in
North Palm Brach, Florida to include an additional 2,190 square feet at
$18.50 per square foot.

We do not have a policy to acquire property for possible capital
gains or income generation. In addition, we do not invest in securities of
real estate entities or developed or underdeveloped properties.

ITEM 3. LEGAL PROCEEDINGS

There currently are no claims or lawsuits against us for which a
report is required.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None in the fourth quarter 2005

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Common stock market price
-------------------------

Of the 184,253,753 shares of common stock outstanding as of December
31, 2005, all but approximately 42,000,000 shares can be traded on the
over-the-counter trading on the OTC Electronic Bulletin Board, which
trading commenced October 24, 1997. Of this amount, 17,190,793 shares are
held by affiliates. The following quarterly quotations for common stock
transactions on the OTC Bulletin Board reflect inter-dealer prices, without
retail mark-up, markdown or commissions and may not represent actual
transactions.

QUARTER HIGH BID PRICE LOW BID PRICE
---------------------------------------------------

2004
---------------------------------------------------

First Quarter .17 .06
---------------------------------------------------
Second Quarter .34 .14
---------------------------------------------------
Third Quarter .27 .13
---------------------------------------------------
Fourth Quarter .22 .09
---------------------------------------------------

2005
---------------------------------------------------

First Quarter .18 .10
---------------------------------------------------
Second Quarter 1.21 .14
---------------------------------------------------
Third Quarter 1.43 .51
---------------------------------------------------
Fourth Quarter 0.80 .47
---------------------------------------------------

Equity holders at March 30, 2006
--------------------------------

Common stock 184,253,753 shares 1,900 holders (approximate)
Series B preferred stock 107,440 shares 1 holder
Series H preferred stock 64,500 shares 1 holder
Series J preferred stock 200,000 shares 1 holder
Series K preferred stock 95,000 shares 1 holder

Dividends
---------

We have not paid dividends on our common stock and do not anticipate
paying dividends. Management intends to retain future earnings, if any, to
finance working capital, to expand our operations and to pursue our
acquisition strategy.

The holders of common stock are entitled to receive, pro rata, such
dividends and other distributions as and when declared by our board of
directors out of the assets and funds legally available therefor. The
availability of funds is dependent upon dividends or distribution of
profits from our

subsidiaries and may be subject to regulatory control and approval by the
appropriate government authorities on either a regional or national level.

We have accrued dividends for our convertible preferred stock in the
amount of $336,303 and $388,632 for the years ended December 31, 2005and
2004, respectively.

Sale of unregistered securities
-------------------------------

Quarter Ended December 31, 2005

On November 28, 2005, we closed a funding transaction with 13
accredited institutional investors, for the issuance and sale of 40,500,000
shares of our common stock for a purchase price of $20,250,000. In
addition, we also issued five-year warrants for the purchase of an
additional 15,187,500 shares of common stock at an exercise price of $0.80
per share. The securities are restricted and have been issued pursuant to
an exemption to the registration requirements of Section 5 of the
Securities Act of 1933 for "transactions of the issuer not involving any
public offering" provided in Section 4(2) of the Act and pursuant to a
Regulation D offering. In connection with this financing, we issued common
stock purchase warrants to purchase 1,012,500 shares of common stock at an
exercise price of $.50 per share and 304,688 shares of common stock at an
exercise price of $.80 per share to SG Cowen & Co., LLC, who acted as
placement agent for this financing.

The shares of common stock and the shares of common stock underlying
the warrants carry registration rights that obligate us to file a
registration statement within 45 days from closing and have the
registration statement declared effective within 120 days from closing.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

Our business model includes the development and marketing of our
Company owned Slammers(R) and Bravo!(TM) trademarked brands, the obtaining
of license rights from third party holders of intellectual property rights
to other trademarked brands, logos and characters and the production of our
branded flavored milk drinks through third party processors. In the United
States and the United Kingdom, we generate revenue from the unit sales of
finished branded flavored milk drinks to retail consumer outlets. We
generate revenue in our Middle East business through the sale of "kits" to
these dairies. The price of the "kits" consists of an invoiced price for a
fixed amount of flavor ingredients per kit used to produce the flavored
milk and a fee charged to the dairy processors for the production,
promotion and sales rights for the branded flavored milk.

Our new product introduction and growth expansion continues to be
expensive, and we reported a net loss of $14,506,630 for the year ended
December 31, 2005, which included a $3,000,000 one time finder's fee paid
in connection with our execution of a Master Distribution Agreement with
Coca-Cola Enterprises, Inc. As shown in the accompanying financial
statements, we have suffered operating losses and negative cash flows from
operations since inception and, at December 31, 2005, have an accumulated
deficit. These conditions give rise to substantial doubt about our ability
to continue as a going concern. As discussed herein, we plan to work
toward profitability in our U.S. and international business and obtain
additional financing. While there is no assurance that funding will be
available or that we will be able to improve our operating results, we are
continuing to seek equity and/or debt financing. We cannot give any
assurances, however, that management will be successful in carrying out our
plans.

CORPORATE GOVERNANCE

The Board of Directors

Our board has positions for six directors that are elected as Class A
or Class B directors at alternate annual meetings of our shareholders.
Five of the six current directors of our board are independent. Our
chairman and chief executive officer are separate. The board meets
regularly either in person or by telephonic conference at least four times
a year, and all directors have access to the information necessary to
enable them to discharge their duties. The board, as a whole, and the
audit committee in particular, review our financial condition and
performance on an estimated vs. actual basis and financial projections as a
regular agenda item at scheduled periodic board meetings, based upon
separate reports submitted by our Chief Executive Officer and Chief
Accounting Officer. Our shareholders elect directors after nomination by
the board or the board appoints directors when a vacancy arises prior to an
election. This year we have adopted a nomination procedure based upon a
rotating nomination committee made up of those members of the director
Class not up for election. The board presently is examining whether this
procedure, as well as the make up of the audit and compensation committees,
should be the subject of an amendment to the by-laws.

Audit Committee

Our audit committee is composed of three independent directors and
functions to assist the board in overseeing our accounting and reporting
practices. Our financial information is booked in house by our Chief
Accounting Officer's office, from which we prepare financial reports.
Lazar Levine & Felix LLP, independent registered public accountants and
auditors, audit or review these financial reports. Our Chief Accounting
Officer reviews the preliminary financial and non-financial information
prepared in house with our securities counsel and the reports of the
auditors. The committee reviews the preparation of our audited and
unaudited periodic financial reporting and internal control reports
prepared by our Chief Accounting Officer. The committee reviews
significant changes in accounting policies and addresses issues and
recommendations presented by our internal accountants as well as our
auditors. Currently, there is one vacancy on the audit committee.

Compensation Committee

Our compensation committee is composed of three independent directors
and reviews the compensation structure and policies concerning executive
compensation. The committee develops proposals and recommendations for
executive compensation and presents those recommendations to the full board
for consideration. The committee periodically reviews the performance of
our other members of management and the recommendations of the chief
executive officer with respect to the compensation of those individuals.
Given the size of our company, the board periodically reviews all such
employment contracts. The board must approve all compensation packages
that involve the issuance of our stock or stock options. Currently, there
is one vacancy on the compensation committee.

Nominating Committee

The nominating committee was established in the second quarter 2002
and consists of those members of the director Class not up for election.
The committee is charged with determining those individuals who will be
presented to the shareholders for election at the next scheduled annual
meeting. The full board fills any mid term vacancies by appointment.

CRITICAL ACCOUNTING POLICIES

Estimates
---------

This discussion and analysis of our consolidated financial condition
and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates 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. On an on-going basis, we evaluate our
company's estimates, including those related to reserves for bad debts and
valuation allowance for deferred tax assets. We base our estimates on
historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the result of which forms the basis
for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may
differ materially from these estimates under different assumptions or
conditions. Our use of estimates, however, is quite limited as we have
adequate time to process and record actual results from operations.

Revenue Recognition
-------------------

During the fiscal year ended December 31, 2005, we had two business
models that affected revenue recognition: one for the United States and
another for some of our international business. We follow the final
consensus reached by the Emerging Issues Task Force (EITF) 99-19,
"Reporting Revenue Gross as a Principal versus Net as an Agent" in
determining our revenue recognition reporting status for both business
models.

United States
-------------

In the United States, we utilize third party processors to produce
the Company's products on our behalf, which products consisted of single
serve flavored milk based beverages. Under this model, we are responsible
for all product development, marketing, and promotion, advertising and
sales activity. We refer to this business model as "unit sales".

We have responsibility for the payment to our third-party processor
for all costs associated with the production of our flavored milk based
beverages. In that regard, we pay a negotiated "dock price" per sale unit
to our third-party processor. We also are responsible for the payment of
all freight charges for the finished product to our customers, shipping
insurance charges, broker's fees and product returns.

Our milk-based products are code dated with an "expiration" date. If
our third-party processor has stored inventory that approaches code date
and is, as a result, not capable of being sold, we are responsible for the
payment of the dock price to the third-party processor even absent a sale.
If already shipped product has not sold by a date approaching the code date
or has been damaged in shipment, we issue a credit to our customer.

We establish the wholesale price at which we sell our products. The
price charged is dependent upon practical cost variables including freight
and distribution. We recognize revenue at the full wholesale price
charged.

We have sole discretion to change the product visually and its
content to satisfy our specifications. The only limitations are (i) those
imposed on the third party processor by the Food and Drug Administration
and local health officials, and (ii) labeling and content restrictions that
the FDA may impose on us.

We have the sole discretion to select the supplier of flavor and
nutritional ingredients that are sourced by third parties to meet our
flavor and nutritional profile specifications. Similarly, we have the sole
discretion to develop and determine the visual and content specifications
for our products. The only limitations are those imposed by third party
license agreements concerning the visual utilization of trademark issues.

We take title to product upon shipment by our third-party
processor. We have insurance coverage during shipment, and we are
responsible for inventory loss during shipping. The point of transfer of
title to the inventory is manifested by the physical removal of the
inventory from our third-party processor's warehouse onto the common
carrier, where the risk of loss passes to us. Contemporaneous with that
event, the third-party processor logs the shipment on our behalf and
removes the shipped products from its recorded inventory. We bear the risk
of loss of non-payment by our customers.

Purchasers of our product pay the "wholesale level" price directly to
our third party processor, which we have appointed as our billing and
collection agent for such purposes. Our third-party processor charges us a
fee for this service. As agent, the third-party processor provides us with
an out-sourced infrastructure for billing, collection, shipment, and
recording of credits to customers allowed by us for promotions, discounts
and returns. On a monthly basis, we reconcile with our third-party
processor (i) the revenue received, (ii) the dock price, (iii)
administration charges and (iv) separate charges against our account for
allowed credits to customers for promotions, discounts and returns.

We record the full wholesale level price as our gross revenue and
record the dock price as the cost of goods sold. In certain circumstances
in our U.S. business, we are required to pay slotting fees, give
promotional discounts or make marketing allowances in order to secure
wholesale customers. These payments, discounts and allowances reduce our
reported revenue in accordance with the guidelines set forth in EITF 01-9
and SEC Staff Accounting Bulletin No. 104

International Sales
-------------------

We have two business models for our international sales. In the
United Kingdom, our business model tracks the model used by us in the
United States, and we utilize third party processors to produce the
Company's products on our behalf, which products consisted of single serve
flavored milk based beverages. The operational infrastructure for this
business is provided pursuant to an agency contract with a third party, who
is responsible as our agent for all aspects of our sales, distribution,
marketing, billing and collections once our products are shipped from the
processor. All of these activities are done on behalf of our wholly owned
UK subsidiary, Bravo! Brands (UK) Ltd., and we recognize revenue on the
same basis as our US unit sales business model.

Under our Middle East business model, however, we are not involved in
the marketing, promotion, advertising or sales of the products. These
activities are the responsibility of regional dairy processors located in
foreign countries that produce and sell the milk products for their own
behalf. In this international business, the "product" sold by the Company
is not its flavored milk based beverages but consists of (i) the flavor
ingredients used to produce the milk products and (ii) production rights
granted to the regional processors to use the milk product branding and
trade dress created by the Company for the flavored milk products. The
Company refers to this business model as "kit sales".

Under this kit model, we purchase the flavor ingredients from our
suppliers and have the ingredients shipped directly to the processor to
expedite the production of the flavored milk products. The supplier for

the flavor ingredients invoices us, and we include the amount of that
invoice in our kit price to the processor. At no time is the processor
responsible to the supplier for the cost of the ingredients shipped to it.

We recognize revenue in our international kit sales business at the
gross amount of our invoices for the sale of kits at the time of shipment
of flavor ingredients to processor dairies with whom we have production
contracts for extended shelf life and aseptic long life milk. We base this
recognition on our role as the principal in these transactions, our
discretion in establishing kit prices (including the price of flavor
ingredients and production rights fees), our development and refinement of
flavors and flavor modifications, our discretion in supplier selection and
our credit risk to pay for ingredients if processors do not pay ingredient
suppliers. The revenue generated by the production contracts under this
model consists of the cost of the processors' purchase of flavor
ingredients and fees charged by us to the processors for production rights.
We formulate the price of production rights to cover our intellectual
property licenses, which varies by licensor as a percentage of the total
cost of a kit sold to the processor dairy under the production agreement.
We recognize revenue on the gross amount of "kit" invoices to the dairy
processors and simultaneously record as cost of goods sold the cost of
flavor ingredients paid by us to the ingredients supplier. The recognition
of revenue generated from the sale of production rights associated with the
flavor ingredients is complete upon shipment of the ingredients to the
processor, given the short utilization cycle of the ingredients shipped.

Pursuant to EITF 99-19, international sales of kits made directly to
customers by us are reflected in the statements of operations on a gross
basis, whereby the total amount billed to the customer is recognized as
revenue.

Slotting Fees
-------------

From time to time, we enter into arrangements with new customers
whereby, in exchange for cash payments to our customers, we obtain rights
to place our products on customers' shelves for resale at retail. We also
engage in promotional discount programs in order to enhance sales in
specific channels. We believe our participation in these arrangements is
essential to ensuring continued volume and revenue growth in the
competitive marketplace. These payments, discounts and allowances reduce
our reported revenue in accordance with the guidelines set forth in EITF
01-9 and SEC Staff Accounting Bulletin No. 104

We record our obligation under each arrangement at inception and
amortize the total required payments using the straight-line method over a
term of one year, which is normally the minimum time that we are allowed to
sell our products in given retail outlets. The Company records the balance
of the amortized slotting fee not used in the current period as prepaid
expenses. As the Company applies the amortized slotting fee as contra
revenue for a current period, it reduces the reported gross revenue by an
amount equal to the reduction in prepaid expenses.

Classification of Financial Instruments with a Convertible Feature
------------------------------------------------------------------

based on an issuer's control over the form of ultimate settlement of an
instrument. An issuer is deemed to control the form of settlement if it
has both the contractual right to settle in equity shares and the ability
to deliver equity shares. When an issuer controls the form of settlement,
an instrument is generally classified as equity. If an issuer does not
control the form of settlement, net-cash settlement is assumed and an
instrument is classified as an asset or liability (paragraphs 12, 13 EITF
00-19).

We examine the general pronouncements contained in paragraphs 12 and
13 EITF 00-19 prohibiting equity classification where net cash settlement
or a cash payment for physical settlement could occur, in light of the
eight conditions discussed in paragraphs 14 - 32 of EITF 00-19. If these
conditions are satisfied, then equity classification is appropriate. The
eight conditions are:

* The instrument permits the issuer to settle in unregistered shares
(paragraphs 14 - 18)
* The issuer has sufficient authorized shares available to settle in
its shares (paragraph 19)
* The instrument contains an explicit limit on the number of shares
to be delivered in a share settlement (paragraphs 20 - 24)
* There are no cash payments to the counterparty in the event that
the issuer fails to make timely filings with the SEC (paragraph
25)
* There are no cash settled "top-off" or "make whole" provisions
(paragraph 26)
* The contract requires net-cash settlement only where in the
circumstances the holders of shares underlying also would receive
cash in exchange for shares (paragraph 27 - 28)
* There are no provisions giving the counterparty greater rights
than those of a shareholder of the stock underlying the instrument
(paragraph 29 - 31)
* There is no requirement to post collateral for any reason
(paragraph 32)

Our analysis of these considerations requires us to exercise our
judgment within the stated guidelines in making our determination as to
whether a particular financial instrument is appropriately classified as
equity or a liability or asset.

RESULTS OF OPERATIONS

Financial Condition at December 31, 2005

As of December 31, 2005, we had an accumulated deficit of
$48,579,962, cash on hand of $4,947,986, and reported total capital surplus
of $13,490,969.

For the year ended December 31, 2005, we had revenue of $11,948,921
and general and administrative expense of $5,030,002.

After interest expenses of $336,651 and interest income of $28,972,
cost of goods sold of $8,938,692, product development costs of $798,510,
selling expenses of $8,380,668 incurred in operations and a one time
$3,000,000 fee to a third party in connection with our execution of the
Coca-Cola Enterprises distribution agreement, we had a net loss of
$14,506,630.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Consolidated Revenue
--------------------

We had revenue for the year ended December 31, 2005 of $11,948,921,
with cost of sales of $8,938,692, resulting in a gross margin of
$3,010,229. This revenue and resultant gross margin are net of slotting
fees, promotional discounts and marketing allowances for this period in the
amount of $487,221. Of the reported $11,948,921, U.S. sales accounted for
$11,537,278 with an additional $353,425 from

international sales in the United Kingdom and $58,218 from the Middle East.
Our reported revenue for the year ended December 31, 2005 increased by
$8,604,222, a 257.25% increase compared to revenue of $3,344,699 for the
same period in 2004. This increase is the result of an increase in market
penetration and distribution, after the introduction of new product lines
in the last quarter of 2004 and the first two quarters of 2005.

Consolidated Cost of Sales
--------------------------

We incurred cost of goods sold of $8,938,692 for the year ended
December 31, 2005, $8,659,427 of which was incurred in our U.S. business,
and $279,265 in connection with out international sales. Cost of goods
sold in 2005 increased by $6,563,887, a 276.4% increase compared to
$2,374,805 for the same period in 2004. The increase in cost of goods sold
reflects the increase in our sales.

In the United States and the United Kingdom, we are responsible for
the sale of our finished flavored milk drinks (referred to as "unit sales")
to retail outlets. For these unit sales, we recognize as revenue the
invoiced wholesale prices that we charge to the retail outlets that
purchase the Slammers(R) flavored milks. We report, as cost of goods sold,
the price charged to us by third party processors who produce our finished
flavored milk drink products.

Segmented revenues and costs of sales
-------------------------------------

The following table presents revenue by source and type against costs
of goods sold, as well as combined gross revenues and gross margins. In
countries other than the United States and the UK, revenues for the period
ended December 31, 2005 were generated by kit sales to third party
processors. Revenue from wholesale sales to retail outlets is recorded as
"unit sales" in the following table.

United United Middle Total
2005 States Kingdom East Company
------ ------- ------ -------

Revenue - unit sales $11,537,278 $ 353,425 $ - $11,890,703
Revenue - gross kit sales - - 58,218 58,218
----------- --------- -------- -----------
Total revenue 11,537,278 353,425 58,218 11,948,921
Cost of goods sold (8,659,427) (272,326) (6,939) (8,938,692)
----------- --------- -------- -----------

Gross margin $ 2,877,851 $ 81,099 $ 51,279 $ 3,010,229
=========== ========= ======== ===========

United Middle Total
2004 States Mexico East Company
------ ------ ------ -------

Revenue -unit sales $ 2,726,702 $ - $ - $ 2,726,702
Revenue -gross kit sales 44,379 119,968 453,650 617,997
----------- --------- -------- -----------
Total revenue 2,771,081 119,968 453,650 3,344,699
Cost of goods sold (2,262,055) (55,609) (57,141) (2,374,805)
----------- --------- -------- -----------

Gross margin $ 509,026 $ 64,359 $396,509 $ 969,894
=========== ========= ======== ===========

United States
-------------

Revenues for the period ended December 31, 2005 in the United States
increased from $2,771,081 for the same period in 2004 to $11,537,278 in
2005, a 316.35% increase. This increase is the

result of an increase in market penetration and distribution, after the
introduction of new product lines in the last quarter of 2004 and the first
two quarters of 2005.

In the period ended December 31, 2005, our gross margin for U.S.
sales of $2,877,851 increased by $2,368,825, or by 465.36%, from $509,026
for the same period in 2004. The increase in gross margin was the result
of increased sales.

Foreign Sales
-------------

Revenues for the period ended December 31, 2005 from sales in foreign
countries decreased from $573,618 for the same period in 2004 to $411,643,
a 28.23 % decrease. The decrease is the result of a reduction of sales in
the Middle East, owing to a change of ownership of our processor and ramp
up of our business in the UK during this period.

We recorded $279,265 in costs of sales in foreign countries for the
period ended December 31, 2005, an increase of $166,515 or 147.68% from
$112,750 for the same period in 2004. The increase in cost of goods sold
was the result of the commencement of a wholesale unit sales model in the
UK sales, with higher cost of sales in 2005, as opposed to our kit model
employed in the Middle East and Mexico in 2004.

For the period ended December 31, 2005, the gross profit of $132,378
for sales in foreign countries reflected a decease of $328,490 or 71.27%,
from $460,868 for the same period in 2004. The decrease in gross profit
was consistent with the implementation of a new business in the UK and
falling sales in the Middle East, with no revenue generated in Mexico for
this period, both owing to the sale of our processors in these respective
territories.

Consolidated Operating Expenses
-------------------------------

We incurred selling expenses of $8,380,668 for the period ended
December 31, 2005, of which we incurred $8,029,601 in our United States
operations. Our selling expense for this period increased by $6,576,051, a
364.4% increase compared to selling expense of $1,804,617 for the same
period in 2004. The increase in selling expenses in the current period was
due to increased freight and promotional charges associated with our
expanded product line and distribution.

Our general and administrative expenses for the period ended December
31, 2005 were $5,030,002, of which we incurred $4,808,077 in our United
States business operations. Our general and administrative expenses for
this period increased by $2,390,917, a 90.6% increase compared to
$2,639,085 for the same period in 2004. The increase in general and
administrative expenses for the current period in 2005 is the result of the
recording of additional payroll, increased lease costs, office overhead
costs and travel necessary to support the 316.35% increase in revenues from
our US business.

As a percentage of total revenue, our general and administrative
expenses decreased from 78.9% in the period ended December 31, 2004, to
42.1% for the current period in 2005. We anticipate a continued effort to
reduce these expenses as a percentage of sales through revenue growth, cost
cutting efforts and the refinement of business operations.

We recorded a $3,000,000 one time, non-recurring finder's fee payable
to a third party in connection with the execution of the Master
Distribution Agreement with Coca-Cola Enterprises, Inc. in the year ended
December 31, 2005.

Interest Expense
----------------

We incurred interest expense for the period ended December 31, 2005
of $336,651. Our interest expense increased by $96,024, a 39.91% increase
compared to $240,627 for the same period in 2004. The increase was due to
utilizing additional debt to finance our operations during this period of
rapid growth.

Loss Per Share
--------------

We accrued dividends payable of $336,303 to various series of
preferred stock during the period ended December 31, 2005. Our accrued
dividends decreased for this period by $52,329, or 13.46%, from $388,632
for the same period in 2004. The net loss before accrued dividends
increased by $10,706,704, from $3,799,926 for the period ended December 31,
2004 to $14,506,630 for the current period. The increased net loss was
offset by the decrease in accrued dividends and by the increase in the
weighted average number of common shares outstanding, resulting in our
current period loss per share of $0.11, as compared to $0.10 loss per share
as reported for 2004.

Liquidity and Capital Resources

Operations
----------

As of December 31, 2005, we reported that net cash used in operating
activities was $9,775,141, net cash provided by financing activities was
$18,209,600 and net cash used in investing activities was $3,569,602. We
had a negative working capital of $86,884 as of December 31, 2005.

Compared to $3,873,926 of net cash used in operating activities in
the period ended December 31, 2004, our current year net cash used in
operating activities increased by $5,901,215 to $9,775,141. This increase
was the result of our utilization of cash rather than equity to pay service
providers in this current period and changes in accounts receivable,
prepaid expenses, accounts payable and accrued expenses, and how we
accounted for our previously deferred product development cost. Included
in the net loss in this current period were depreciation and amortization
and stock compensation for a finder's fee aggregating $1,601,626, compared
to $974,847 for the same period in 2004.

Changes in accounts receivable in this current period in 2005
resulted in a cash decrease of $3,356,477, compared to a cash decrease in
receivables of $26,047 for the same period in 2004, having a net result of
a decrease of $3,330,430. The changes in accounts payable and accrued
liabilities in the period ended December 31, 2004 contributed to a cash
decrease of $593,475, whereas the changes in accounts payable and accrued
liabilities for the current period in 2005 amounted to an increase of
$7,034,345. We have adopted and will keep implementing cost-cutting
measures to lower our costs and expenses and to pay our company's accounts
payable and accrued liabilities by using cash and equity instruments. Our
cash flow generated through operating activities was inadequate to cover
all of our cash disbursement needs in the period ended December 31, 2005,
and we had to rely on equity and debt financing to cover expenses.

Cash used in 2005 in investing activities was $3,569,602 for
manufacturing, licenses and trademark costs, as well as software, computer
equipment and leasehold improvements in the U.S., compared to $287,200 for
the same period in 2004. The increase during this period compared to the
same period for 2004 was due to the one time payment of $2,700,000 for a
guaranteed capacity manufacturing agreement for our products with Jasper
Products.

Net cash provided by financing activities for the period ended
December 31, 2005 was $18,209,600. Net cash provided by financing
activities for the same period in 2004 was $4,216,844, for a net increase
of $13,992,756. The increase was due primarily to a private placement of
our common stock

in November 2005. The net proceeds of this transaction, after the payment
of transaction expenses, were approximately $18.6 million. Approximately
$5.9 million of the net proceeds was used by us to redeem warrants for the
purchase of approximately 30.3 million shares of our common stock, issued
by us in connection with prior financing transactions. In addition, we will
have used the net proceeds from the financing for increased production
capacity, the launch of marketing campaigns, paying the finder's fee
relating to the Coca-Cola Enterprises Master Distribution Agreement and
general working capital purposes.

Going forward, our primary requirements for cash consist of the
following:

* the continued development of our business model in the United
States and on an international basis;
* promotional and logistic production support for the capacity
demands presented by our Master Distribution Agreement with Coca-
Cola Enterprises
* general overhead expenses for personnel to support the new
business activities;
* development, launch and marketing costs for our line of new
branded flavored milk products, and
* the payment of guaranteed license royalties.

We estimate that our need for financing to meet cash requirements for
operations will continue through the second quarter of 2006, when we expect
that cash supplied by operating activities will approach the anticipated
cash requirements for operating expenses. We anticipate the need for
additional financing in 2006 to reduce our liabilities, assist in marketing
and to improve shareholders' equity status. No assurances can be given
that we will be able to obtain additional financing, or that operating cash
flows will be sufficient to fund our operations.

We currently have monthly working capital needs of approximately
$350,000. We will continue to incur significant selling and other expenses
in 2006 in order to derive more revenue in retail markets, through the
introduction and ongoing support of our new products and the implementation
of the Master Distribution Agreement with Coca-Cola Enterprises. Certain
of these expenses, such as slotting fees and freight charges, will be
reduced as a function of unit sales costs as we expand our sales markets
and increase our sales within established markets. Freight charges will be
reduced as we are able to ship more full truckloads of product given the
reduced per unit cost associated with full truckloads versus less than full
truckloads. Similarly, slotting fees, which are paid to warehouses or
chain stores as initial set up or shelf space fees, are essentially one-
time charges per new customer. We believe that along with the increase in
our unit sales volume, the average unit selling expense and associated
costs will decrease, resulting in gross margins sufficient to mitigate cash
needs. In addition, we are actively seeking additional financing to
support our operational needs and to develop an expanded promotional
program for our products.

Material Events
---------------

In January 2005, we launched our Slammers(R) Starburst line of Fruit
& Cream Smoothies utilizing a "shelf stable" re-sealable plastic bottle for
milk products that does not require refrigeration. Until that launch, all
single served flavored milk in plastic bottles required refrigeration for
storage, distribution, and shelf placement. The tactical advantage of
distributing milk products ambient enables us to side-step a major entry
barrier in our immediate consumption strategy. Refrigerated milk is
relegated to dairy direct-store-delivery systems that are controlled by
either regional dairy processors or larger national dairy holding
companies. Shelf stable re-sealable plastic bottle allows us to use a more
traditional distribution network that accommodates the non-refrigerated
beverages. Also, milk products packaged in shelf stable re-sealable
plastic bottles have significantly longer shelf life for storage, allowing

us to ship in full truckloads resulting in decreased freight costs. We
currently are converting all of our products to "shelf stable" re-sealable
plastic bottles.

On August 31, 2005, we entered into a Master Distribution Agreement
with Coca-Cola Enterprises, Inc., which included the attendant grant of
three year warrants by the CCE for the right to purchase 30 million shares
of the Company's common stock at an exercise price of $0.36 per share. The
ten year exclusive Master Distribution Agreement will expand significantly
the distribution and sales of our products. The Company will recognize an
$11,900,000 net charge in deferred distribution costs for the warrant
issuance to Coca-Cola Enterprises over the 10-year term of the Master
Distribution Agreement.

External Sources of Liquidity
-----------------------------

Individual Loans
----------------

On May 6, 2004, we issued a secured promissory note to Mid- Am
Capital LLC in the principal amount of $750,000. The note provides for 8%
interest. The note's original maturity date of September 4, 2004 has been
extended. We issued warrants to purchase 3,000,000 shares of our common
stock to Mid-Am in connection with this promissory note. The warrants have an
exercise price of $0.25 per share. We used the proceeds of this promissory
note to pay the promissory note issued to Jasper Products in January 2004.

Private Financing
-----------------

We entered into the following financing transactions in 2005:

January 2005
------------

On January 31, 2005, we closed a funding transaction with Longview
Fund, LP, Longview Equity Fund, LP, Longview International Equity Fund, LP,
Alpha Capital Aktiengesellschaft and Whalehaven Funds Limited, five
institutional accredited investors, for the issuance and sale to the
Subscribers of up to $2,300,000 of principal amount of promissory notes
convertible into shares of our common stock, and Warrants to purchase
shares of common stock at 100% coverage of the common stock issuable in
accordance with the principal amount of the notes. One Million One Hundred
Fifty Thousand Dollars ($1,150,000) of the purchase price was paid on the
initial closing date, and One Million One Hundred Fifty Thousand Dollars
($1,150,000) of the purchase price will be payable within five (5) business
days after the actual effectiveness of an SB-2 Registration Statement as
defined in the Subscription Agreement.

The initial closing notes were at prime plus 4% interest in the
aggregate amount of $1,150,000, plus five-year Warrants for the purchase
of, in the aggregate, 9,200,000 shares of common stock, at the

lesser of (i) $0.16, or (ii) 101% of the closing bid price of the Common
Stock as reported by Bloomberg L.P. for the OTC Bulletin Board for the
trading day preceding the Closing Date.

The notes are convertible into shares of our common stock at $0.125
per common share. Conversions are limited to a maximum ownership of 9.99%
of the underlying common stock at any one time. The notes have a maturity
date two years from closing and are payable in twelve equal monthly
installments, commencing June 1, 2005. The installment payments consist of
principal equal to 1/20th of the initial principal amount which, subject to
certain conditions concerning trading volume and price, can be paid in cash
at 103% of the monthly installment, or common stock or a combination of
both. The notes have an acceleration provision upon the change in a
majority of the present Board of Directors except as the result of the
death of one or more directors, or a change in the present CEO. In
connection with this transaction, we issued restricted common stock in the
aggregate amount of 460,000 shares plus the aggregate cash amount of
$57,500 for due diligence fees to the investors in this transaction

April 2005
----------

On April 21, 2005, the Company closed a funding transaction with one
institutional investor for the issuance and sale to the Subscriber of a
promissory note of the Company in the principal amount of $300,000. The
promissory note bears 10% interest and is convertible into shares of common
stock of the Company at $0.20 per common share. Conversions are limited to
a maximum ownership of 9.99% of the Company's common stock at any one time.

The note has an October 31, 2005 maturity and is payable in five
equal monthly installments, commencing June 1, 2005. The installment
payments consist of principal and equal to 1/5th of the initial principal
amount plus accrued interest. Installments can be paid in cash or common
stock valued at the average closing price of the Company's common stock
during the five trading days immediately preceding the relevant installment
due date. The Company has repriced Class B Warrants issued on June 30,
2004 form $2.00 per share to $0.125 per share and issued common stock in
the aggregate amount of 93,750 shares for finder's fees to a third-party to
facilitate this transaction.

The Company has the right to prepay the promissory note by paying to
the holder cash equal to 120% of the principal to be prepaid plus accrued
interest. The notes have an acceleration provision upon the change in a
majority of the present Board of Directors except as the result of the
death of one or more directors, or a change in the present CEO of the
Company.

May 2005
--------

On May 23, 2005, we closed a funding transaction (the "May '05
Transaction") with Longview Fund, LP, Whalehaven Funds Limited, Ellis
International Ltd., and Osher Capital Corp., four institutional accredited
investors, for the issuance and sale to the Subscribers of Five Hundred
Thousand Dollars ($500,000) of principal amount of promissory notes
convertible into shares of our common stock, and Warrants to purchase
shares of common stock at 100% coverage of the common stock issuable in
accordance with the principal amount of the notes.

This May '05 Transaction is a part of a January 23, 2005 funding
transaction for an aggregate of Two Million Three Hundred Thousand Dollars
($2,300,000), One Million One Hundred Fifty Thousand Dollars ($1,150,000)
of which was paid on the initial closing date, and One Million One Hundred
Fifty Thousand Dollars ($1,150,000) of which (the "Second Tranche") was to
be payable within five (5) business days after the actual effectiveness of
an SB-2 Registration Statement covering the aggregate transaction, as
defined in the Subscription Agreement. The May '05 Transaction for Five
Hundred Thousand Dollars ($500,000) is a partial interim closing of the
Second Tranche, which occurred prior to

the anticipated effectiveness of the SB-2 Registration Statement covering
the aggregate transaction. Contemporaneous with the May '05 Transaction,
we agreed to a modification of the January 23, 2005 aggregate transaction
for the substitution of Ellis International Ltd. and Osher Capital Corp. in
the place of Alpha Capital Aktiengesellschaft, one of the original
investors. The May '05 Transaction convertible notes are at prime plus 4%
interest in the aggregate amount of $500,000, plus five-year Warrants for
the purchase of, in the aggregate, 4,000,000 shares of common stock, at an
exercise price of $0.129. The notes are convertible into shares of our
common stock at $0.125 per common share. Conversions are limited to a
maximum ownership of 9.99% of the underlying common stock at any one time.
The notes have a maturity date two years from closing and are payable in
twelve equal monthly installments, commencing June 1, 2005. The
installment payments consist of principal equal to 1/20th of the initial
principal amount which, subject to certain conditions concerning trading
volume and price, can be paid in cash at 103% of the monthly installment,
or common stock or a combination of both. The notes have an acceleration
provision upon the change in a majority of the present Board of Directors
except as the result of the death of one or more directors, or a change in
the present CEO.

In connection with this transaction, we issued restricted common
stock in the aggregate amount of 200,000 shares plus the aggregate cash
amount of $25,000 for due diligence fees to Longview Fund, LP, Gem Funding
LLC, Ellis International Ltd., and Osher Capital Corp. in this transaction.

August 2005
-----------

On August 18, 2005, we closed a funding transaction (the "August '05
Transaction") with Longview Fund, LP, Longview Equity Fund, LP and Longview
International Equity Fund, LP, three institutional accredited investors,
for the issuance and sale to the Subscribers of Six Hundred Fifty Thousand
Dollars ($650,000) of principal amount of promissory notes convertible into
shares of our common stock and Warrants to purchase shares of common stock
at 100% coverage of the common stock issuable in accordance with the
principal amount of the notes. This August'05 Transaction was a part of a
January 23, 2005 funding transaction for an aggregate of Two Million Three
Hundred Thousand Dollars ($2,300,000). The August '05 Transaction is the
Second Tranche of the January '05 transaction, which occurred upon the
effectiveness of the SB-2 Registration Statement covering the aggregate
transaction. The August'05 Transaction convertible notes are at prime plus
4% interest in the aggregate amount of $650,000, plus five-year Warrants
for the purchase of, in the aggregate, 5,200,000 shares of common stock, at
an exercise price of $0.129. The notes are convertible into shares of our
common stock at $0.125 per common share. Conversions are limited to a
maximum ownership of 9.99% of the underlying common stock at any one time.
The notes have a maturity date two years from closing and are payable in
twelve equal monthly installments. The installment payments consist of
principal equal to 1/20th of the initial principal amount which, subject to
certain conditions concerning trading volume and price, can be paid in cash
at 103% of the monthly installment, or common stock or a combination of
both. The notes have an acceleration provision upon the change in a
majority of the present Board of Directors except as the result of the
death of one or more directors, or a change in the present CEO. In
connection with this transaction, we issued restricted common stock in the
aggregate amount of 260,000 shares plus the aggregate cash amount of
$32,500 for due diligence fees to Longview Fund companies.

On September 30, 2005, we repaid $250,000 of the aggregate $650,000
of the August '05 Transaction notes, as follows: $57,692 to Longview Fund,
LP, $144,231 to Longview Equity Fund, LP and $48,077 to Longview
International Equity Fund, LP. The holders of these notes waived the
prepayment premium in lieu of their retention of warrants attached to
August '05 Transaction.

November 2005
-------------

On November 28, 2005, the Company closed a funding transaction with
thirteen accredited institutional investors, for the issuance and sale of
40,500,000 shares of the Company's common stock to the Subscribers for
$20,250,000. The Company also issued five year warrants for the purchase of
an additional 15,187,500 shares of common stock at an exercise price of
$0.80 per share. The securities are restricted and have been issued
pursuant to an exemption to the registration requirements of Section 5 of
the Securities Act of 1933 for "transactions of the issuer not involving
any public offering" provided in Section 4(2) of the Act and pursuant to a
Regulation D offering. The securities carry registration rights that
obligate the Company to file a registration statement within 45 days and
have the registration statement declared effective within 120 days from
closing.

EFFECTS OF INFLATION

We believe that inflation has not had any material effect on our net
sales and results of operations.

ITEM 7. - FINANCIAL STATEMENTS

The financial statements for the years ended December 31, 2005 and 2004 are
contained on Pages F-1 to F-43 which follow.

BRAVO! FOODS INTERNATIONAL CORP.

CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005 and 2004

F-1

BRAVO! FOODS INTERNATIONAL CORP.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm F-3

Consolidated Financial Statements
Balance Sheets F-4 to F-5

Statements of Operations and Comprehensive Loss F-6

Statements of Capital Surplus (Deficit) F-7

Statements of Cash Flows F-8

Notes to Consolidated Financial Statements F-9 to F-43

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
Bravo! Foods International Corp.
North Palm Beach, Florida

We have audited the accompanying consolidated balance sheets of Bravo!
Foods International Corp. as of December 31, 2005 and 2004 and the related
statements of operations and comprehensive loss, shareholders' deficit and
cash flows for the years then ended. 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 audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we
express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, 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 Bravo! Foods
International Corp. as of December 31, 2005 and 2004 and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $14,506,630 for the year
ended December 31, 2005 and as of that date had a working capital
deficiency of $86,884. The Company is also delinquent in payment of certain
debts. These conditions raise substantial doubt about their ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be
necessary in the event the Company cannot continue in existence.
Management's actions in regard to these matters are more fully described in
Note 1.

/s/ Lazar Levine & Felix LLP

New York, New York
February 9, 2006

F-3

BRAVO! FOODS INTERNATIONAL CORP.

CONSOLIDATED BALANCE SHEETS

December 31,
-----------------------------
2005 2004
------------ ------------

Assets

Current assets:

Cash and cash equivalents $ 4,947,986 $ 113,888
Accounts receivable, net of allowance for doubtful accounts of
$350,000 and $90,396 for 2005 and 2004, respectively 3,148,841 51,968
Inventories 391,145 11,656
Prepaid expenses 978,299 551,510

Total current assets 9,466,271 729,022
Furniture and equipment, net 288,058 111,206
License rights, net 241,898 67,301
Trademarks, net 70,015 10,249
Deferred product development costs - 162,169
Deferred distribution costs - net 11,503,333 -
Manufacturing agreement - net 2,700,000 -
Deposits 15,231 13,900
------------ ------------

Total assets $ 24,284,806 $ 1,093,847
============ ============

Liabilities and Capital Surplus (Deficit)

Current liabilities:
Note payable to International Paper $ 187,743 $ 187,743
Notes payable to Alpha Capital - 217,954
Notes payable to Mid-Am Capital LLC 112,480 111,262
Notes payable to Libra Finance 43,750 40,106
Notes payable to Longview 212 54,086
Notes payable to Stonestreet - 47,014
Notes payable to Whalehaven - 17,082
Notes payable to Osher 6,462 13,649
Notes payable to Gem Funding - 8,231
License fee payable to Warner Brothers - 147,115
Note payable to Gamma - 59,678
Note payable to Momona - 25,885
Note payable to Ellis - 25,885
Accounts payable 5,962,623 1,763,339
Accrued liabilities 3,239,885 375,962
------------ ------------

Total current liabilities 9,553,155 3,094,991

Dividends payable 1,240,682 928,379
Other notes payable - 100,171
------------ ------------

Total liabilities 10,793,837 4,123,541
------------ ------------

Commitments and contingencies

F-4

BRAVO! FOODS INTERNATIONAL CORP.

CONSOLIDATED BALANCE SHEETS

Capital Surplus (Deficit): (See Note 6)

Series B convertible, 9% cumulative, preferred stock, stated value $1.00
per share, 107,440 shares issued and outstanding; redeemable at our
option for $107,440, plus dividends 107,440 107,440
Series F convertible preferred stock, stated value $10.00
per share, 55,515 shares issued and outstanding for 2004 - 512,740
Series H convertible, 7% cumulative preferred stock, stated value $10.00
per share, 64,500 and165,500 shares issued and outstanding;
redeemable at our option for 135% of stated value plus dividends 349,037 895,591
Series I convertible, 8% cumulative preferred stock, stated value $10.00
per share, 30,000 shares issued and outstanding for 2004 - 72,192
Series J convertible, 8% cumulative preferred stock, stated value $10.00
per share, 200,000 shares issued and outstanding; redeemable at
our option for 135% of stated value plus dividends 1,854,279 1,854,279
Series K convertible, 8% cumulative preferred stock, stated value $10.00
per share, 95,000 shares issued and outstanding redeemable at our
option for 120% of stated value plus dividends 950,000 950,000
Common stock, par value $0.001 per share, 300,000,000 shares authorized,
184,253,753 and 57,793, 501 shares issued and outstanding 184,254 57,791
Additional paid-in capital 59,142,613 26,257,302
Common stock subscription receivable (10,000) -
Deferred compensation expense (475,933) -
Accumulated deficit (48,579,962) (33,737,029)
Translation adjustment (30,759) -
------------ ------------

Total capital surplus (deficit) 13,490,969 (3,029,694)
------------ ------------

Total liabilities and capital surplus (deficit) $ 24,284,806 $ 1,093,847
============ ============

See accompanying notes

F-5

BRAVO! FOODS INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS

Years ended December 31,
----------------------------
2005 2004
------------ -----------

Revenue - unit sales $ 11,890,703 $ 2,726,702
Revenue - gross kit sales 58,218 617,997
------------ -----------
Total revenue 11,948,921 3,344,699
Cost of sales (8,938,692) (2,374,805)
------------ -----------
Gross margin 3,010,229 969,894
------------ -----------
Selling expense 8,380,668 1,804,617
Product development 798,510 85,671
General and administrative expense 5,030,002 2,639,085
------------ -----------
Non-recurring finders' fees 3,000,000 -
------------ -----------
17,209,389 4,529,373
------------ -----------
Loss from operations (14,198,951) (3,559,479)
Other income (expense):
Interest income 28,972 180
Interest expense (33,665) (240,207)
Loss before income taxes (14,506,630) (3,799,926)
------------ -----------
Provision for income taxes - -
Net loss (14,506,630) (3,799,926)
------------ -----------

Dividends accrued for Series B preferred stock (9,669) (9,696)
Dividends accrued for Series G preferred stock - (15,633)
Dividends accrued for Series H preferred stock (79,237) (116,168)
Dividends accrued for Series I preferred stock (11,397) (24,066)
Dividends accrued for Series J preferred stock (160,000) (160,438)
Dividends accrued for Series K preferred stock (76,000) (62,631)
------------ -----------
(336,303) (388,632)
------------ -----------
Net loss applicable to common shareholders $(14,842,933) $(4,188,558)
------------ -----------

Weighted average number of common shares outstanding 135,032,836 40,229,738
------------ -----------

Basic and diluted loss per share $ (0.11) $ (0.10)
------------ -----------

Comprehensive loss and its components consist of the following:
Net loss $(14,506,630) $(3,799,926)
Foreign currency translation adjustment (30,759) (689)
------------ -----------

Comprehensive loss $(14,537,389) $(3,800,615)
============ ===========

See accompanying notes

F-6

BRAVO! FOODS INTERNATIONAL CORP.
STATEMENTS OF CAPITAL (DEFICIT) SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 2004 and 2005

Preferred Stock Common Stock
----------------------- -----------------------
Shares Amount Shares Amount
-------- ----------- ---------- --------

Balance, January 1, 2004 692,265 $ 4,655,550 28,047,542 $ 28,045
Issuance of common stock
for services - - 9,332,300 9,332
Conversion preferred stock (133,810) (1,213,308) 15,897,701 15,898
Conversion notes payable - - 4,265,958 4,266
Issuance of Series K
preferred stock 95,000 950,000 - -
Private Placement financing - - 250,000 250
Issuance of warrants for
convertible notes - - - -
Beneficial conversion
feature convert notes - - - -
SEC registration costs
for financing - - - -
Conversion price changes
for warrants - - - -
Beneficial conversion
price changes warrants - - - -
Stock option expense
for consultants - - - -
Accrued Dividends - Series B - - - -
Accrued Dividends - Series G - - - -
Accrued Dividends - Series H - - - -
Accrued Dividends - Series I - - - -
Accrued Dividends - Series J - - - -
Accrued Dividends - Series K - - - -
Net loss for 2004 - - - -
Translation adjustment - - - -
Balance, December 31, 2004 653,455 4,392,242 57,793,501 57,791
-------- ----------- ----------- --------
Conversion preferred stock (186,515) (1,131,486) 9,245,352 9,247
Conversion notes payable - - 41,248,858 41,249
Conversion warrants - - 32,474,792 32,475
Private placement
financing - - 40,950,000 40,950
Common stock subscribed
but not paid
Issuance of warrants
for convertible notes - - - -
Due diligence and
finders' fees - - 753,750 754
Consultant fees - - 1,527,500 1,528
Financing costs - - 260,000 260
SEC registration costs
for financing - - - -
CCE Distribution
Agreement warrants - - - -
Stock option expense - - - -
Redeem warrants - - - -
Accrued Dividends - Series B - - - -
Accrued Dividends - Series H - - - -
Accrued Dividends - Series I - - - -
Accrued Dividends - Series J - - - -
Accrued Dividends - Series K - - - -
Net loss for 2005 - - - -
Deferred compensation
expense
Translation adjustment - - - -
-------- ----------- ----------- --------

Balance, December 31, 2005 466,940 $ 3,260,756 184,253,753 $184,254
======== =========== =========== ========

Common Accumulated
Additional Deferred Stock Other
Paid In Accumulated Comp Subscription Comprehensive
Capital Deficit Expense Receivable Loss Total
----------- ------------ --------- ------------- ------------- -----------

Balance, January 1, 2004 $21,144,896 $(29,548,471) - $ 689 $(3,719,291)
Issuance of common stock
for services 666,300 - - 675,632
Conversion preferred stock 1,240,485 - - 43,075
Conversion notes payable 132,917 - - 137,183
Issuance of Series K
preferred stock - - - 950,000
Private Placement financing 29,750 - - 30,000
Issuance of warrants for
convertible notes 2,778,557 - - 2,778,557
Beneficial conversion
feature convert notes 141,277 - - 141,277
SEC registration costs
for financing (40,656) - - (40,656)
Conversion price changes
for warrants 105,911 - - 105,911
Beneficial conversion
price changes warrants 373 - - 373
Stock option expense
for consultants 57,492 - - 57,492
Accrued Dividends - Series B - (9,696) - (9,696)
Accrued Dividends - Series G - (15,633) - (15,633)
Accrued Dividends - Series H - (116,168) - (116,168)
Accrued Dividends - Series I - (24,066) - (24,066)
Accrued Dividends - Series J - (160,438) - (160,438)
Accrued Dividends - Series K - (62,631) - (62,631)
Net loss for 2004 - (3,799,926) - (3,799,926)
Translation adjustment - - (689) (689)
Balance, December 31, 2004 26,257,302 (33,737,029) - (3,029,694)
----------- ------------ --------- ------- -------- -----------
Conversion preferred stock 1,146,238 - - 23,999
Conversion notes payable 1,382,922 - - 1,424,171
Conversion warrants 3,176,033 - - 3,208,508
Private placement
financing 20,659,050 - - 20,700,000
Common stock subscribed
but not paid (10,000)
Issuance of warrants
for convertible notes 1,602,183 - - 1,602,183
Due diligence and
finders' fees 117,746 - - 118,500
Consultant fees 28,422 - - 29,950
Financing costs (1,793,321) - - (1,793,061)
SEC registration costs
for financing (147,860) - - (147,860)
CCE Distribution
Agreement warrants 11,900,000 - - 11,900,000
Stock option expense 713,898 - - 713,898
Redeem warrants (5,900,000) - - (5,900,000)
Accrued Dividends - Series B - (9,669) - (9,669)
Accrued Dividends - Series H - (79,237) - (79,237)
Accrued Dividends - Series I - (11,397) - (11,397)
Accrued Dividends - Series J - (160,000) - (160,000)
Accrued Dividends - Series K - (76,000) - (76,000)
Net loss for 2005 - (14,506,630) - (14,506,630)
Deferred compensation
expense (475,933) (475,933)
Translation adjustment - - (30,759) (30,759)
----------- ------------ --------- ------- -------- -----------

Balance, December 31, 2005 $59,142,613 $(48,579,962) $(475,933) (10,000) $(30,759) $13,490.969
=========== ============ ========= ======= ======== ===========

See accompanying notes

F-7

BRAVO! FOODS INTERNATIONAL CORP.
STATEMENTS OF CASH FLOWS

Years ended December 31,
----------------------------
2005 2004
------------ -----------

Cash flows from operating activities:
Net loss $(14,506,630) $(3,799,926)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,255,188 374,215
Stock issuance for compensation, financing finders'
and due diligence fees 346,438 600,632
Options issued for compensation - 57,492
Allowance for doubtful accounts 259,604 -
Loss on disposal of fixed assets - 6,216
Increase (decrease) from changes in:
Accounts receivable (3,356,477) (26,047)
Allowance for doubtful accounts 259,604
Other receivable - 6,331
Inventories (379,489) 43,339
Prepaid expenses and other assets (428,120) (353,057)
Accounts payable and accrued expenses 7,034,345 (593,475)
Deferred product and development costs - (189,646)
------------ -----------
Net cash used in operating activities (9,775,141) (3,873,926)
------------ -----------

Cash flows from investing activities:
Licenses and trademark costs (3,349,458) (208,248)
Purchase of equipment (220,144) (78,952)
------------ -----------
Net cash used in investing activities (3,569,602) (287,200)

Cash flows from financing activities:
Proceeds of Series K preferred stock - 950,000
Proceeds from conversion of warrants 3,208,509 -
Convertible notes payable 2,850,000 3,427,500
Private placement financing 20,690,000 30,000
Redeem warrants (5,900,000) -
Payment of note payable, bank loan and license fee payable (500,000) (150,000)
Registration costs of financing (2,138,909) (40,656)
------------ -----------
Net cash provided by financing activities 18,209,600 4,216,844
------------ -----------

Effect of changes in exchange rate on cash (30,759) (689)
Net (decrease) / increase in cash and cash equivalents 4,834,098 55,029
Cash and cash equivalents, beginning of period 113,888 58,859
Cash and cash equivalents, end of period 4,947,986 $ 113,888
============ ===========

Cash paid during year for interest 10,741 51,301

Non-cash investing and financing activities:
Stock granted in exchange of debt, payables and services $ 346,438 $ 600,632
Preferred stock and accrued dividends converted to common stock $ 24,000 $ -
Beneficial conversion feature $ - $ 141,650

See accompanying notes

F-8

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization, Businesses and Going Concern Uncertainty

Bravo! Foods International Corp., formerly known as China Premium
Food Corporation, was incorporated under the laws of the State of Delaware
on April 26, 1996. We are engaged in the sale of branded flavored milk
products and flavor ingredients in the United States, the United Kingdom,
Mexico and the Middle East.

In December 1999, we obtained Chinese government approval for the
registration of China Premium Food Corp (Shanghai) Co. Ltd., a wholly owned
subsidiary, in the Wai Gao Qiao free trade zone in Shanghai, China. This
subsidiary was formed to import, export and distribute food products and
flavored milk ingredients on a wholesale level in China. We ceased all
business activities of this Chinese subsidiary in the second quarter 2004
and did not generate revenue in 2004 from our China operation.

In January 2005, we formed Bravo! Brands (UK) Ltd., a registered
United Kingdom subsidiary. The company formed this subsidiary to operate
our branded flavored milk business in the United Kingdom.

We develop, brand, market, distribute and sell nutritious, flavored
milk products throughout the 50 United States, Great Britain and various
Middle Eastern countries. Our products are available in the United States
and internationally through production agreements with regional aseptic
milk processors and are currently sold under the brand names Slammers(R)
and Bravo!(TM).

In addition to our own Slim Slammers(R), Pro-Slammers(TM) and
Breakfast Blenders(TM) brands, many of our Slammers(R) line of extended
shelf-life, single-serve milk drinks are co-branded through license
agreements with Masterfoods(TM), a division of Mars Incorporated, Marvel
Entertainment and MD Enterprises (Moon Pie(R)).

Going Concern Uncertainty

As shown in the accompanying consolidated financial statements, we
have suffered operating losses and negative cash flow from operations since
inception and have an accumulated deficit of $48,579,962, negative working
capital of $86,884 and are delinquent on certain of our debts at December
31, 2005. Primarily as a result of a private placement of our common stock
in November 2005, whereby we realized gross proceeds of$20,250,000, we have
a capital surplus of $13,490,969 as of December 31, 2005. Further, our
auditors stated in their report on our Consolidated Financial Statements
for the year ended December 31, 2005, that these conditions raise
substantial doubt about our ability to continue as a going concern.
Management plans to increase gross profit margins in our U.S. business and
obtain additional financing and is continuing to reposition our products
with the launch of new product lines in 2006. While there is no assurance
that funding will be available or that the Company will be able to improve
its profit margins, management is continuing to actively seek additional
capacity to facilitate increased market penetration and the expansion of
distribution. No assurances can be given that the Company will be
successful in carrying out its plans. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Among the
more significant estimates included in these financial statements are the
estimated

F-9

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

allowance for doubtful accounts receivable and the deferred income tax
asset valuation allowance. Actual results could differ materially from
those estimates.

Fair Value of Financial Instruments

The carrying amount of cash, receivables, accrued liabilities and
notes payable are reasonable estimates of their fair value because of the
short maturity of these items.

Principles of Consolidation

The consolidated financial statements include the accounts of Bravo!
Foods International Corp. (the "Company"), and its wholly-owned subsidiary
Bravo! Brands (UK) Ltd. All material intercompany balances and
transactions have been eliminated.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with a remaining
maturity of three months or less to be cash equivalents.

Accounts Receivable and Concentration of Credit Risk

Our financial instruments that are exposed to concentrations of
credit risk primarily consist of cash and accounts receivable.

During the normal course of business, we extend unsecured credit to
our customers who are located in various geographical areas. Typically
credit terms require payments to be made by the thirtieth day following the
sale. We regularly evaluate and monitor the creditworthiness of each
customer on a case-by-case basis. We provide an allowance for doubtful
accounts based on our continuing evaluation of our customers' credit risk.
As of December 31, 2005, the allowance of doubtful accounts aggregated
$350,000. We maintain cash accounts with high credit quality financial
institutions. The FDIC insures total cash balances up to $100,000 per
bank.

Inventory

Inventory, which consists primarily of finished goods, is stated at
the lower of cost on the first in, first-out method or market.

F-10

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Furniture and Equipment

Furniture and equipment are stated at cost. Depreciation is computed
primarily utilizing the straight-line method over a period of seven years
for furniture and five years for equipment.

Maintenance, repairs and minor renewals are charged directly to
expenses as incurred. Additions and betterments to property and equipment
are capitalized. When assets are disposed of, the related cost and
accumulated depreciation thereon are removed from the accounts, and any
resulting gain or loss is included in the statement of operations.

Impairment of Long-Lived Assets

Effective January 1, 2002, we began applying the provisions of
Statement of Financial Accounting Standard No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS
No. 144 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable through the estimated undiscounted cash flows
expected to result from the use and eventual disposition of the assets.
Whenever any such impairment exists, an impairment loss will be recognized
for the amount by which the carrying value exceeds the fair value.

Revenue Recognition

During the fiscal year ended December 31, 2005, we had two business
models that affected revenue recognition: one for the United States and
another for our Middle East business. We follow the final consensus
reached by the EITF 99-19, "Reporting Revenue Gross as a Principal versus
Net as an Agent". Pursuant to EITF 99-19, we record as revenue only our
sales of ingredients and production rights for our products to third party
processors, who are responsible for the sale of our finished products to
customers. Since, under this model we are not the principal in the sale of
the finished products to customers, we do not record these sales as
revenue. Sales of finished product by us to our distributors or wholesale
customers, however, are recorded as revenue, since we are the principal in
such transactions.

Slotting Fees

Shipping and Handling Costs

Shipping and handling costs incurred by us are included in selling
expenses and aggregated $2,515,062 and $656,614 for 2005 and 2004,
respectively.

F-11

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising and Promotion Costs

Advertising and promotion costs, which are included in selling
expenses, are expensed as incurred and aggregated $2,487,911 and $656,614
for 2005 and 2004, respectively.

Income Taxes

We account for income taxes using the liability method, which
requires an entity to recognize deferred tax liabilities and assets.
Deferred income taxes are recognized based on the differences between the
tax bases of assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible amounts in
future years. Further, the effects of enacted tax laws or rate changes are
included as part of deferred tax expense or benefit in the period that
covers the enactment date. A valuation allowance is recognized if it is
more likely than not that some portion, or all, of a deferred tax asset
will not be realized.

Classification of Financial Instruments with a Convertible Feature

In determining whether the conversion feature of our financial
instruments would be classified in stockholder's equity, we examine the
guidance of Paragraph 4 of EITF 00-19, which provides two avenues of
analysis. First, if the characteristics of the financial instrument
constitute a "conventional" convertible instrument, the instrument
qualifies for the scope exception of paragraphs 11(a) and 12 (c) of
Statement 133, the conversion feature is not considered a derivative for
the purposes of Statement 133. In order to determine whether the
instrument is "conventional", we analyze whether it would constitute
stockholders' equity as a freestanding derivative. Second, absent the
"conventional" instrument classification and the resultant scope exception,
we analyze whether the instrument meets the equity condition requirements
of paragraphs 12 - 32 of EITF 00-19. Issue 00-19's classification
provisions are based on an issuer's control over the form of ultimate
settlement of an instrument. An issuer is deemed to control the form of
settlement if it has both the contractual right to settle in equity shares
and the ability to deliver equity shares. When an issuer controls the form
of settlement, an instrument is generally classified as equity. If an
issuer does not control the form of settlement, net-cash settlement is
assumed and an instrument is classified as an asset or liability
(paragraphs 12, 13 EITF 00-19).

* The instrument permits the issuer to settle in unregistered shares
(paragraphs 14 - 18)
* The issuer has sufficient authorized shares available to settle in
its shares (paragraph 19)
* The instrument contains an explicit limit on the number of shares
to be delivered in a share settlement (paragraphs 20 - 24)
* There are no cash payments to the counterparty in the event that
the issuer fails to make timely filings with the SEC
(paragraph 25)
* There are no cash settled "top-off" or "make whole" provisions
(paragraph 26)
* The contract requires net-cash settlement only where in the
circumstances the holders of shares underlying also would receive
cash in exchange for shares (paragraph 27 - 28)
* There are no provisions giving the counterparty greater rights
than those of a shareholder of the stock underlying the instrument
(paragraph 29 - 31)
* There is no requirement to post collateral for any reason
(paragraph 32)

F-12

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings (Loss) Per Share

Basic earnings (loss) per common share is computed by dividing the
loss applicable to common stockholders by the weighted average number of
common shares outstanding for the period.

For the years ended December 31, 2005 and 2004, potential common
shares arising from our stock options, stock warrants, convertible debt and
convertible preferred stock of 105,070,096 and 65,089,658, respectively,
were not included in the computation of diluted earnings per share because
their effect was antidilutive.

Stock-based Compensation

We have adopted the intrinsic value method of accounting for employee
stock options as permitted by Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-based Compensation" (SFAS No. 123) and
disclose the pro forma effect on net loss and loss per share as if the fair
value based method had been applied. For equity instruments, including
stock options, issued to non-employees, the fair value of the equity
instruments or the fair value of the consideration received, whichever is
more readily determinable, is used to determine the value of services or
goods received and the corresponding charge to operations. (SFAS 123 was
amended further in December 2004; see below - Recent Accounting
Pronouncements).

The following table illustrates the effect on net loss and loss per
share as if we had applied the fair value recognition provision of SFAS No.
123 to stock-based employee compensation.

Year ending December 31,
----------------------------
2005 2004
------------ -----------

Net loss applicable to common shareholders: as reported $(14,842,933) $(4,188,558)
Less pro forma stock based employee compensation expense
determined under fair value method for all awards - -
------------ -----------
Pro forma net loss $(14,842,933) $(4,188,558)
============ ===========

Loss per share:
As reported $ (0.11) $ (0.10)
Pro forma $ (0.11) $ (0.10)

The assumptions used in the Black Scholes option pricing model in
2005 and 2004 are as follows:

December 31,
-------------------------------------
2005 2004
---------------- ----------------

Discount rate - bond yield rate 3.43 - 4.52% 2.33 - 3.25%
Volatility 122 - 133% 110 - 120%
Expected life 1.5 - 3.75 years 0.75 - 3.75 years
Expected dividend yield -

F-13

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications

Certain prior years' information has been reclassified to conform to
the current year's reporting presentation.

Recent Accounting Pronouncements Affecting the Company

In December 2004, the FASB issued a revision of SFAS No. 123 "Share-
Based Payment" (No. 123R). The statement establishes standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods and services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those equity instruments. The statement does
not change the accounting guidance for share-based payments with parties
other than employees. The statement requires a public entity to measure
the cost of employee service received in exchange for an award of equity
instruments based on the grant-date fair value of the award (with limited
exception). That cost will be recognized over the period during which an
employee is required to provide service in exchange for the award (usually
the vesting period). A public entity will initially measure the cost of
employee services received in exchange for an award of a liability
instrument based on its current fair value; the fair value of that award
will be re-measured subsequently at each reporting date through the
settlement date. Changes in fair value during the requisite service period
will be recognized as compensation over that period. The grant-date fair
value of employee share options and similar instruments will be estimated
using option-pricing models adjusted for the unique characteristics of
these instruments. The Company believes this pronouncement, which is
effective for periods beginning after December 15, 2005, will not have a
material effect on their financial position and results of operations.

In May 2005, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards SFAS No. 154, Accounting
Changes and Error Corrections which replaces APB Opinion No. 20 Accounting
Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements-An Amendment of APB Opinion No. 28. SFAS No. 154 requires
retrospective application to prior periods' financial statements of a
voluntary change in accounting principle unless it is not practicable.
SFAS No. 154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005 and is required to
be adopted by the Company in the first quarter of fiscal 2007.

In April 2005, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 47 ("FIN 47"), "Accounting for Conditional
Asset Retirement Obligations - An Interpretation of FASB Statement
No. 143." FIN 47 clarifies the terms of FASB Statement No. 143 and requires
an entity to recognize a liability for a conditional asset retirement
obligation if the entity has sufficient information to reasonably estimate
its fair value. FIN 47 is effective no later than the end of fiscal years
ending after December 15, 2005. The Company believes that the adoption of
FIN 47 will have no material impact on its financial statements.

Note 2 - Fixed Assets

Fixed assets are comprised of the following:

2005 2004
-----------------------

Furniture and fixtures $ 189,068 $ 150,871
Automobiles 29,295 -
Office equipment 209,085 151,577
Leasehold improvements 23,714 23,714

F-14

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Purchased software 3,223 3,223
-----------------------
454,385 329,385

Less: accumulated depreciation and amortization (166,327) (218,179)
-----------------------
$ 288,058 $ 111,206
=======================

Depreciation and amortization expense of fixed assets aggregated
$43,292 and $30,153 for 2005 and 2004, respectively.

Note 3 - Licensing Agreements

Marvel Enterprises, Inc. (Super Heroes(R) and Marvel Heroes(R))

On February 4, 2005, we entered into a two-year license agreement for
the utilization of Marvel Heroes characters on our flavored milks in the
United Kingdom and Ireland. We agreed to a royalty rate of 4% of net
wholesale sales in the territory as the cost of the license. We have
adopted the unit sales model currently used in the United States. We have
outsourced the infrastructure required for the production, promotion,
marketing, distribution and sale of our products through a production
agreement with Waterfront Corporation in the UK and through an exclusive
sales agency agreement with Drinks Brokers, Ltd. a UK registered company
responsible for the launch and growth of several major beverage brands in
the licensed territory.

Chattanooga Bakery, Inc.( Moon Pie(R) )

In October 2003, we executed a two-year license agreement with MD
Enterprises, Inc. on behalf of Chattanooga Bakery. Under the terms of the
license agreement, we have the exclusive right to manufacture, distribute,
market and sell Moon Pie(R) flavored milk products in the United States.
We agreed to a variable royalty rate of 2% to 3% of net wholesale sales,
depending upon volume, as the cost of the license. This license has been
extended verbally for an additional two year period.

Masterfoods USA (Starburst(R), Milky Way(R), 3 Musketeers(R))

On September 21, 2004, we entered into a licensing agreement with
Masterfoods USA, a division of Mars, Incorporated, for the use of
Masterfood's Milky Way(R), Starburst(R) and 3 Musketeers(R) trademarks in
connection with the manufacture, marketing and sale of single serve
flavored milk drinks in the United States, its Possessions and Territories
and US Military installations worldwide. The license limits the
relationship of the parties to separate independent entities. The initial
term of the license agreement expires December 31, 2007. We have agreed to
pay a 5% to 7% royalty based upon the total net sales value of the licensed
products sold as the cost of the license. Ownership of the licensed marks
and the specific milk flavors to be utilized with the marks remains

F-15

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

with Masterfoods. We have a right of first refusal for other milk beverage
products utilizing the Masterfoods marks within the licensed territory.

Diabetes Research Institute

In June 2005, we extended our licensing agreement with Diabetes
Research Institute to June 30, 2006. We agreed to a variable royalty rate
of 0.25% of net sales as the cost of the license. We use this intellectual
property, which consists of a logo plus design on the labels of our Slim
Slammers(TM) product line.

Note 4 - Default of Note Payable to International Paper

In 1999, we issued a promissory note to assume existing debt owed by
our then Chinese joint venture subsidiary to a supplier, International
Paper. The face value of that unsecured note was $282,637 at an interest
rate of 10.5% per annum. The note originally required 23 monthly payments
of $7,250 and a balloon payment of $159,862 due on July 15, 2000. During
2000, we negotiated an extension of this note to July 1, 2001.
International Paper imposed a charge of $57,000 to renegotiate the note,
which amount represents interest due through the extension date. The
current balance due on this note is $187,743 at December 31, 2005, all of
which is delinquent. Although International Paper has not pursued
collection of the note, it is possible that they could do so in the future
and, if they do, such collection effort may have a significant adverse
impact on the liquidity of the Company. We have accrued interest of
$67,649 as of December 31, 2005.

Note 5 - Notes Payable to Individual Lenders

On May 9, 2004 we received the proceeds of a $750,000 loan from Mid-Am
Capital, payable September 3, 2004, with an interest rate of 8%. This loan
is secured by a general security interest in all of our assets. Mid-Am has
agreed to extend the note on a demand basis. As of December 31, 2005 the
balance of accrued and unpaid interest aggregated $99,288.

Convertible Notes with Remaining Principal
------------------------------------------

November 2003
-------------

On November 21, 2003, we entered into a Subscription Agreement with
Mid-Am Capital, LLC for the sale of a convertible note in the amount of
$200,000. The convertible note is convertible into shares of our common
stock at the lesser of $0.05 or 75% of the average of the three lowest
closing bid prices for the thirty trading days prior to but not including
the conversion date. During the 180 days following the issuance of the
convertible note, the conversion price shall not be less that $.03 per
share if no event of default exists. We have accrued interest of $33,666
on the Mid-Am note as of December 31, 2005.

April 2004
----------

On April 20, 2004, we issued a convertible promissory note for
$25,000 to Libra Finance as a finder's fee in connection with a
Subscription Agreement for the issuance of convertible 10% notes. The note
is convertible into shares of our common stock at $0.10 per common share.
Conversions are limited to a maximum ownership of 9.99% of the underlying
common stock at any one time. The note is payable in twelve equal monthly
installments, commencing November 1, 2004. The installment payments
consist of principal and a "premium" of 20% of the principal paid per
installment.

F-16

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We have the option to defer such payment until the note's maturity date on
October 1, 2005, if our common stock trades above $0.20 for the five
trading days prior to the due date of an installment payment. We have
accrued interest of $4,370 on the Libra note as of December 31, 2005.

June 2004
---------

On June 30, 2004, we entered into a Subscription Agreement with Mid-
Am Capital L.L.C for the issuance of convertible 10% notes in the amount of
$500,000. We also issued a convertible note to Libra Finance for $12,500
as a finder's fee. The note is convertible into shares of our common stock
at $0.15 per common share. Conversions are limited to a maximum ownership
of 9.99% of the underlying common stock at any one time. The note is
payable in twelve equal monthly installments, commencing January 1, 2005.
The installment payments consist of principal and a "premium" of 20% of the
principal paid per installment. We have the option to defer such payment
until the note's maturity date on December 1, 2005, if our common stock
trades above $0.20 for the five trading days prior to the due date of an
installment payment. We have accrued interest of $75,205 on the Mid-Am
note and $1,881 on the Libra note as of December 31, 2005.

October 2004
------------

On October 29, 2004, we issued a convertible promissory note for
$6,250 to Libra Finance as a finder's fee in connection with a Subscription
Agreement for the issuance of convertible 10% notes. The note is
convertible into shares of our common stock at $0.10 per common share.
Conversions are limited to a maximum ownership of 9.99% of the underlying
common stock at any one time. The note is payable in twelve equal monthly
installments, commencing May 1, 2005. The installment payments consist of
principal and a "premium" of 20% of the principal paid per installment. We
have the option to defer such payment until the note's maturity date on
April 30, 2006, if our common stock trades above $0.15 for the five trading
days prior to the due date of an installment payment and the underlying
common stock is registered. We have accrued interest of $733 on the Libra
note as of December 31, 2005.

May 2005
--------

On May 23, 2005, we issued a convertible promissory note for $25,000
to Osher Capital Corp as a finder's fee in connection with a Subscription
Agreement for the issuance of convertible prime plus 4% notes. The note is
convertible into shares of our common stock at $0.125 per common share.
Conversions are limited to a maximum ownership of 9.99% of the underlying
common stock at any one time. The note has a maturity date two years from
closing and is payable in twelve equal monthly installments, commencing
June 1, 2005. The installment payments consist of principal equal to 1/20th
of the initial principal amount which, subject to certain conditions
concerning trading volume and price, can be paid in cash at 103% of the
monthly installment or common stock or a combination of both. We have
accrued interest of $3,704 on the Osher note as of December 31, 2005.

Note 6 - Capital Surplus (Deficit)

Convertible Preferred Stock
---------------------------

Series B Convertible Preferred Stock - 1,260,000 authorized shares (all
-----------------------------------------------------------------------
issued shares remain outstanding)
---------------------------------

Series B Convertible Preferred stock pays or accrues dividends at the
rate of 9% per annum, payable only upon liquidation or redemption, as a
percentage of the stated value, out of the assets and available funds.
Voting rights of the Series B Convertible Preferred stock are the same as
our common stock.

F-17

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Series B Convertible Preferred stock is convertible anytime after
December 31, 1997 to our common stock at the fixed ratio of one share of
common stock for one share of Series B Convertible Preferred stock
surrendered for conversion.

The conversion ratio will be adjusted upon:

* a division of the common stock of the Corporation or a combination
thereof
* a reorganization or reclassification or distribution to the
holders of common stock of stock, debt securities or other assets
* a legal merger, consolidation, corporate combination, share
exchange, or a sale or lease of substantially all of our assets
resulting in the distribution to our common stock holders, stock,
debt securities or other assets
* the issuance or sale of common stock, options, warrants or other
rights to purchase the common stock of the Corporation for less
than the stated value

Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Series B Convertible
Preferred stock shall be entitled to receive for each share of Series B
Convertible Preferred stock an amount equal to the Stated Value plus all
accrued dividends attributable to each such share.

There are no registration rights associated with our Series B
Convertible Preferred stock. The common stock underlying the Series B
Convertible Preferred stock can be publicly traded pursuant to the
provisions of Rule 144.

We have the right to redeem any or all of the outstanding shares of
Series B Convertible Preferred Stock at a redemption price equal to the
stated value of the Series B Convertible Preferred Stock redeemed plus
accumulated dividends.

Series F Convertible Preferred Stock - 200,000 authorized shares (all
---------------------------------------------------------------------
issued shares have been converted)
----------------------------------

Series F Convertible Preferred stock does not provide for dividends
payable with respect to the convertible preferred. Series F holders are
entitled to receive dividends and distributions when declared by our Board
of Directors on our common stock.

Except as otherwise required by law, the Series F Convertible
Preferred Stock shall have no voting rights.

The holders of Series F Convertible Preferred stock shall be entitled
to convert such stock into our common stock at any time allowed by law.
The number of shares of common stock issuable upon conversion of each share
of Series F Preferred Stock shall equal the sum of the stated value per
share and, at the holder's election, accrued and unpaid dividends on such
shares, divided by the conversion price. At the option of the holder, the
per share of common stock conversion price is $0.60 or 75% of the average
of the three lowest closing bid prices during the twenty-two day period
immediately preceding the notice of conversion.

The holder is prohibited from converting into, and we are prohibited
from issuing common stock pursuant to a notice of conversion that, when
added to the holder's then current ownership of our common stock, exceeds
9.99% of our issued and outstanding common stock

The conversion price will be adjusted if we

* split or subdivide our common stock into a larger number of shares

F-18

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

* combine our common stock into a smaller number of shares
* issue capital stock by reclassification of shares of common stock
* merge with or into another corporation, except as the surviving
entity without reclassification, conversion or change of our
common stock

Holders of Series F Convertible Preferred stock are not entitled to a
liquidation preference.

The holders of Series F Convertible Preferred have registration
rights for our common stock underlying the Series F Convertible Preferred
stock. The common stock underlying the Series F Convertible Preferred
stock can be publicly traded pursuant to the provisions of Rule 144k.

The holders of Series F Convertible Preferred have the option of
compelling redemption of the Series F Preferred Stock upon an Event of
Default. The redemption price shall be equal to the stated value of the
Series F Convertible Preferred held by the holder, multiplied by 135%.

In March 2002, the holders of Series F Convertible Preferred waived
their rights to compel redemption of the Series F Preferred stock with
respect to all Events of Default not in the control of the Company

Series H Convertible Preferred Stock - 350,000 authorized shares (64,500
------------------------------------------------------------------------
issued shares remain outstanding)
---------------------------------

Each share of Series H Convertible Preferred stock entitles the
holder to receive or accrue dividends at the rate of 7% simple interest per
annum, as a percentage of the stated value of the Series H Convertible
Preferred stock. Dividends are payable in cash or common stock quarterly
at our option. The payment of dividends shall be made first to the Series
H Convertible preferred stockholders before dividends or other
distributions are made on any common stock or certain preferred stock.

Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Series H Convertible
Preferred stock shall be entitled to receive, prior to payments or
distributions to junior stock, an amount equal to the Stated Value plus all
accrued dividends attributable to each share of Series H Convertible
Preferred stock.

Except as otherwise required by law, the Series H Convertible
Preferred stock shall have no voting rights.

The holders of Series H Convertible Preferred stock are entitled to
convert such stock into our common stock at any time subsequent to the
expiation of thirty days from issue. The number of shares of common stock
issuable upon conversion of each share of Series H Preferred stock shall
equal the sum of the stated value per share and, at the holder's election,
accrued and unpaid dividends on such shares, divided by the conversion
price. The conversion price is $0.40 per share of common stock.

The conversion price will be adjusted if we

F-19

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

* issue capital stock by reclassification of shares of common stock
* merge with or into another corporation, except as the surviving
entity without reclassification, conversion or change of our
common stock

The holders of Series H Convertible Preferred have limited contingent
registration rights for our common stock underlying the Series H
Convertible Preferred stock, dependent upon the registration of senior
preferred stock. The Series H Convertible Preferred stock can be publicly
traded pursuant to the provisions of Rule 144k.

The holders of Series H Convertible Preferred do not have the option
of compelling redemption of the Series H Preferred Stock upon an Event of
Default. Upon an event of default, after the applicable period to cure the
Event of Default, the dividend rate of 7% shall become 15% from and after
the occurrence of such event.

Commencing two years after the issuance of the Series H Preferred
stock we have the option, on two days written notice, of redeeming the
Series H Preferred stock which is the subject of a notice of conversion, by
paying to the holder a sum of money equal 135% of the stated value of the
aggregate of the Series H Preferred stock being redeemed plus the dollar
amount of accrued dividends on the Series H Preferred stock being redeemed.

Commencing five years after the issuance of the Series H Preferred
stock, we have the option, on two days written notice, to compel the
conversion of Series H Preferred Stock and dividends not previously
converted into shares of common stock, at the designated Conversion Price,
provided that: (i) the common stock to be delivered upon conversion will be
immediately resalable, without restrictive legend and (ii) the closing bid
price of the common stock for the twenty-two trading days preceding the
mandatory conversion date is not less than 300% of the conversion price,
and (iii) the reported daily trading volume of the common stock during each
trading day during the conversion lookback period is not less than 100,000
common shares per day.

Series I Convertible Preferred Stock - 200,000 authorized shares (all
---------------------------------------------------------------------
issued shares have been converted)
----------------------------------

Each share of Series I Convertible Preferred stock entitles the
holder to receive or accrue dividends at the rate of 8% simple interest per
annum, as a percentage of the stated value of the Series I Convertible
Preferred stock. Dividends are payable in cash or common stock quarterly
at our option. The payment of dividends shall be made first to the Series
I Convertible preferred stockholders before dividends or other
distributions are made on any common stock or preferred stock.

Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Series I Convertible
Preferred stock shall be entitled to receive, prior to payments or
distributions to junior stock, an amount equal to the Stated Value plus all
accrued dividends attributable to each share of Series I Convertible
Preferred stock.

Except as otherwise required by law, the Series I Convertible
Preferred stock shall have no voting rights. So long as any shares of
Series I Convertible Preferred stock are outstanding, we shall not

* alter or change adversely the powers, preferences or rights given
to the Series I Convertible Preferred Stock
* alter or amend the certificate of designation
* amend its certificate of incorporation, bylaws or other charter
documents so as to affect adversely any rights of any holders
* increase the authorized number of shares of Series I Convertible
Preferred Stock

F-20

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

* enter into any agreement with respect to the foregoing, without
the affirmative vote of the holders of a majority of the shares of
the Series I Convertible Preferred Stock then outstanding

The holders of Series I Convertible Preferred stock shall be entitled
to convert such stock into our common stock at any time allowed by law.
The number of shares of common stock issuable upon conversion of each share
of Series I Preferred Stock shall equal the sum of the stated value per
share and, at the holder's election, accrued and unpaid dividends on such
shares, divided by the conversion price. At the option of the holder, the
per share of common stock conversion price is $0.40 or 75% of the average
of the three lowest closing bid prices during the thirty day period
immediately preceding the notice of conversion.

The conversion price will be adjusted if we

* issue common stock to pay a stock dividend or otherwise make a
distribution or distributions on shares of our junior securities
* subdivide our common stock into a larger number of shares
* combine our common stock into a smaller number of shares
* issue capital stock by reclassification of shares of common stock
* merge with or into another corporation, except as the surviving
entity without reclassification, conversion or change of our
common stock

The holders of Series I Convertible Preferred have registration
rights for our common stock underlying the Series I Convertible Preferred
stock. The common stock underlying the Series I Convertible Preferred
stock can be publicly traded pursuant to the provisions of Rule 144k.

The holders of Series I Convertible Preferred have the option of
compelling redemption of the Series I Preferred Stock upon an Event of
Default. The redemption price shall be a sum of money equal to the number
of shares that would be issuable upon conversion of an amount of stated
value of the Series I and accrued dividends designated by the Holder at the
conversion price in effect as of the trading day prior to the date notice
is given to us by the holder multiplied by the average of the closing ask
prices and closing bid prices of the Corporation's Common Stock for the
same days employed when determining such Conversion Price. These
redemption provisions do not apply to our failure to register the common
stock underlying the Series I Convertible Preferred or other events of
default not within our control.

Series J Convertible Preferred Stock - 500,000 authorized shares (all
---------------------------------------------------------------------
issued shares remain outstanding)
---------------------------------

Each share of Series J Convertible Preferred stock entitles the
holder to receive or accrue dividends at the rate of 8% simple interest per
annum, as a percentage of the stated value of the Series J Convertible
Preferred stock. Dividends are payable in cash or common stock quarterly
at our option. The payment of dividends shall be made first to the Series
J Convertible preferred stockholders before dividends or other
distributions are made on any common stock or certain preferred stock.

Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Series J Convertible
Preferred stock shall be entitled to receive, prior to payments or
distributions to junior stock, an amount equal to the Stated Value plus all
accrued dividends attributable to each share of Series J Convertible
Preferred stock.

F-21

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Except as otherwise required by law, the Series J Convertible
Preferred stock shall have no voting rights.

The holders of Series J Convertible Preferred stock are entitled to
convert such stock into our common stock at any time subsequent to the
expiration of thirty days from issue. The number of shares of common stock
issuable upon conversion of each share of Series J Preferred Stock shall
equal the sum of the stated value per share and, at the holder's election,
accrued and unpaid dividends on such shares, divided by the conversion
price. The conversion price is $0.20 per share of common stock.

The conversion price will be adjusted if we

The holders of Series J Convertible Preferred have limited contingent
registration rights for our common stock underlying the Series J
Convertible Preferred stock, dependent upon the registration of senior
preferred stock. The common stock underlying the Series J Convertible
Preferred stock can be publicly traded pursuant to the provisions of Rule
144k.

The holders of Series J Convertible Preferred do not have the option
of compelling redemption of the Series J Preferred Stock upon an Event of
Default. Upon an event of default, after the applicable period to cure the
Event of Default, the dividend rate of 8% shall become 15% from and after
the occurrence of such event:

Commencing two years after the issuance of the Series J Preferred
stock, we have the option, on two days written notice, of redeeming the
Series J Preferred stock which is the subject of a notice of conversion, by
paying to the holder a sum of money equal 135% of the stated value of the
aggregate of the Series J Preferred stock being redeemed plus the dollar
amount of accrued dividends on the Series J Preferred stock being redeemed.

Commencing five years after the issuance of the Series J Preferred
stock, we have the option, on two days written notice, to compel the
conversion of Series J Preferred Stock and dividends not previously
converted into shares of common stock, at the designated Conversion Price,
provided that: (i) the common stock to be delivered upon conversion will be
immediately resalable, without restrictive legend and (ii) the closing bid
price of the common stock for the twenty-two trading days preceding the
mandatory conversion date is not less than 300% of the conversion price,
and (iii) the reported daily trading volume of the common stock during each
trading day during the conversion lookback period is not less than 100,000
common shares per day.

F-22

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Series K Convertible Preferred Stock - 500,000 authorized shares (all
---------------------------------------------------------------------
issued shares remain outstanding)
---------------------------------

Each share of Series K Convertible Preferred stock entitles the
holder to receive or accrue dividends at the rate of 8% simple interest per
annum, as a percentage of the stated value of the Series K Convertible
Preferred stock. Dividends are payable in cash or common stock quarterly
at our option. The payment of dividends shall be made first to the Series
K Convertible preferred stockholders before dividends or other
distributions are made on any common stock or certain preferred stock.

Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Series K Convertible
Preferred stock shall be entitled to receive, prior to payments or
distributions to junior stock, an amount equal to the Stated Value plus all
accrued dividends attributable to each share of Series K Convertible
Preferred stock.

Except as otherwise required by law, the Series K Convertible
Preferred stock shall have no voting rights.

The holders of Series K Convertible Preferred stock are entitled to
convert such stock into our common stock at any time subsequent to the
expiration of thirty days from issue. The number of shares of common stock
issuable upon conversion of each share of Series K Preferred Stock shall
equal the sum of the stated value per share and, at the holder's election,
accrued and unpaid dividends on such shares, divided by the conversion
price. The conversion price is $0.10 per share of common stock.

The conversion price will be adjusted if we

The holders of Series K Convertible Preferred have limited contingent
registration rights for our common stock underlying the Series K
Convertible Preferred stock, dependent upon the registration of senior
preferred stock.

The holders of Series K Convertible Preferred do not have the option
of compelling redemption of the Series K Preferred stock upon an Event of
Default. Upon an event of default, after the applicable period to cure the
Event of Default, the dividend rate of 8% shall become 15% from and after
the occurrence of such event:

We have the option of redeeming all or part of the Series K Preferred
stock for an eighteen month period, commencing with the issuance of the
Series K Preferred stock, by paying to the holder a sum of money equal 120%
of the stated value of the aggregate of the Series K Preferred stock being
redeemed plus the dollar amount of accrued dividends on the Series K
Preferred stock.

Commencing five years after the issuance of the Series K Preferred
stock, we have the option, on two days written notice, to compel the
conversion of Series K Preferred Stock and dividends not previously

F-23

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

converted into shares of common stock, at the designated Conversion Price,
provided that: (i) the common stock to be delivered upon conversion will be
immediately resalable, without restrictive legend and (ii) the closing bid
price of the common stock for the twenty-two trading days preceding the
mandatory conversion date is not less than 300% of the conversion price,
and (iii) the reported daily trading volume of the common stock during each
trading day during the conversion lookback period is not less than 100,000
common shares per day.

Equity Transactions
-------------------

2004

On February 1, 2004, we agreed to issue 750,000 shares of our common
stock and warrants to purchase an additional 750,000 shares of common stock
to Marvel Enterprises, Inc. We issued this equity in connection with the
grant of an intellectual property license by Marvel on January 17, 2004,
giving us the right to use certain Marvel Comics characters on our
Slammers(R) line of flavored milks. The warrants have an exercise price of
$0.10 per share for the first year and, upon the occurrence of certain
conditions tied to the royalty performance under the license, can be
extended for an additional year with an exercise price of $0.14 per share.
We made this private offering to Marvel Enterprises, an accredited
investor, pursuant to Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933.

On February 12, 2004, we held a special meeting of shareholders at
which the shareholders approved an increase of our authorized common stock
from 50,000,000 shares to 300,000,000 shares.

On February 17, 2004, we converted 875 shares of Series G Convertible
Preferred Stock into 215,164 shares of common stock pursuant to a January
12, 2004 notice of conversion from Nesher, LP, at a conversion price of
$0.0407. The conversion included accrued and unpaid dividends on the
converted preferred. We delayed processing this notice in light of our
special meeting of shareholders held February 12, 2004. The shares of
common stock issued pursuant to this conversion were retired and cancelled
on March 5, 2004 and issued to third parties on that date in accordance
with the instructions of Nesher, LP.

On February 17, 2004, we converted 1,400 shares of Series G
Convertible Preferred Stock into 343,980 shares of common stock pursuant to
a January 12, 2004 notice of conversion from Talbiya Investments, Ltd., at
a conversion price of $0.0407. The conversion included accrued and unpaid
dividends on the converted preferred. We delayed processing this notice in
light of our special meeting of shareholders held February 12, 2004. The
shares of common stock issued pursuant to this conversion were retired and
cancelled on March 5, 2004 and issued to third parties on that date in
accordance with the instructions of Talbiya Investments, Ltd.

On February 17, 2004, we converted 700 shares of Series G Convertible
Preferred Stock into 172,162 shares of common stock pursuant to a January
12, 2004 notice of conversion from The Keshet Fund, LP, at a conversion
price of $0.0407. The conversion included accrued and unpaid dividends on
the converted preferred. We delayed processing this notice in light of our
special meeting of shareholders held February 12, 2004. The shares of
common stock issued pursuant to this conversion were retired and cancelled
on March 5, 2004 and issued to third parties on that date in accordance
with the instructions of The Keshet Fund, LP.

On February 17, 2004, we converted 2,025 shares of Series G
Convertible Preferred Stock into 497,951 shares of common stock pursuant to
a January 12, 2004 notice of conversion from Keshet LP, at a conversion
price of $0.0407. The conversion included accrued and unpaid dividends on
the converted preferred. We delayed processing this notice in light of our
special meeting of shareholders held

F-24

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 12, 2004. The shares of common stock issued pursuant to this
conversion were retired and cancelled on March 5, 2004 and issued to third
parties on that date in accordance with the instructions of Keshet, LP.

On March 1,2004, we issued 80,000 shares of non-voting Series K 8%
Convertible Preferred stock, to Mid-Am Capital, LLC, having a stated value
of $10.00 per Preferred K share, for the aggregate purchase price of
$800,000. Each preferred share is convertible to 100 shares of our common
stock at a conversion price of $0.10, representing 8,000,000 shares of
common stock underlying the preferred. In addition, we made the following
adjustments to prior issued warrants for the purpose of facilitating future
fund raising by us arising out of the exercise of the warrants by Holder.
The purchase price, as defined in the Warrant No. 2003-B-002, has been
reduced to $0.10, subject to further adjustment as described in the
warrant. The expiration date, as defined in the warrant, remains as
stated. This private offering was made to Mid-Am, an accredited investor,
pursuant to Rule 506 of Regulation D and Section 4(2) of the Securities Act
of 1933.

On March 9, 2004, we converted 5,000 shares of Series F Convertible
Preferred Stock into 1,315,789 shares of common stock pursuant to a January
8, 2004 notice of conversion from Esquire Trade & Finance Inc., at a
conversion price of $0.038. The conversion did not include accrued and
unpaid dividends on the converted preferred. We delayed processing this
notice in light of our special meeting of shareholders held February 12,
2004. The shares of common stock issued pursuant to this conversion were
issued to third parties on that date in accordance with the instructions of
Esquire Trade & Finance Inc.

On April 1 2004, we converted 5,000 shares of Series F Convertible
Preferred Stock into 1,315,789 shares of common stock pursuant to a January
27, 2004 notice of conversion from Austinvest Anstalt Balzers, at a
conversion price of $0.038. The conversion did not include accrued and
unpaid dividends on the converted preferred. We delayed processing this
notice in light of our special meeting of shareholders held February 12,
2004. The shares of common stock issued pursuant to this conversion were
issued to third parties on that date in accordance with the instructions of
Austinvest Anstalt Balzers. We issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering.

On April 2, 2004, the Company and Mid-Am Capital, LLC entered into
Supplement No.1 to the Series K Convertible Preferred Subscription
Agreement, by which we sold an additional 15,000 shares of our Series K
Convertible Preferred Stock utilizing the proceeds from a certain
promissory note issued by us to Mid-Am in the face amount of $150,000.
With the consummation of this sale, the $150,000 promissory note was deemed
paid by us in full. We issued the preferred and the underlying common
stock upon conversion to an accredited investor, pursuant to a Regulation D
offering.

On April 8, 2004, we converted 4,862 shares of Series G Convertible
Preferred Stock into 700,000 shares of common stock pursuant to a March 25,
2004 notice of conversion from Nesher, LP, at a conversion price of
$0.0853. The conversion included accrued and unpaid dividends of $11,089
on the preferred converted. We issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering.

On April 8, 2004, we converted 4,478 shares of Series G Convertible
Preferred Stock into 650,000 shares of common stock pursuant to a March 25,
2004 notice of conversion from Talbiya B. Investments, Ltd., at a
conversion price of $0.0853. The conversion included accrued and unpaid
dividends of $10,662 on the preferred converted. We issued the preferred
and the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.

F-25

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 8, 2004, we converted 1,919 shares of Series G Convertible
Preferred Stock into 275,000 shares of common stock pursuant to a March 25,
2004 notice of conversion from The Keshet Fund, LP, at a conversion price
of $0.0853. The conversion included accrued and unpaid dividends of $4,265
on the preferred converted. We issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering.

On April 8, 2004, we converted 7,677 shares of Series G Convertible
Preferred Stock into 1,100,000 shares of common stock pursuant to a March
25, 2004 notice of conversion from Keshet, LP, at a conversion price of
$0.0853. The conversion included accrued and unpaid dividends of $17,060
on the preferred converted. We issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering.

On April 20, 2004, we entered into a Subscription Agreement with
Longview Fund, LP and Alpha Capital Aktiengesellschaft for the issuance of
two convertible 10% notes in the amount of $250,000 each and five-year
warrants for the purchase of, in the aggregate, 3,000,000 shares of common
stock, at $0.15 per share. The notes are convertible into shares of our
common stock at $0.10 per common share. Conversions are limited to a
maximum ownership of 9.99% of the underlying common stock at any one time.
The notes are payable in twelve equal monthly installments, commencing
November 1, 2004. The installment payments consist of principal and a
"premium" of 20% of the principal paid per installment. We have the option
to defer such payment until the note's maturity date on October 1, 2005, if
our common stock trades above $0.20 for the five trading days prior to the
due date of an installment payment. In connection with this transaction,
we issued two additional notes in the aggregate amount of $50,000, upon
identical terms as the principal notes, as a finder's fee, and paid $20,000
in legal fees. The common stock underlying all notes and warrants carry
registration rights. We issued the convertible notes and warrants to
accredited investors, pursuant to a Regulation D offering.

On April 30, 2004, we converted 20,000 shares of Series F Convertible
Preferred Stock into 1,945,525 shares of common stock pursuant to an April
27, 2004 notice of conversion from Esquire Trade & Finance Inc., at a
conversion price of $0.1028. We issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering.

On April 30, 2004, we converted 20,000 shares of Series F Convertible
Preferred Stock into 1,945,525 shares of common stock pursuant to an April
27, 2004 notice of conversion from Austinvest Anstalt Balzers, at a
conversion price of $0.1028. We issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering.

On April 30, 2004, we converted 2,500 shares of Series F Convertible
Preferred Stock into 243,191 shares of common stock pursuant to an April
27, 2004 notice of conversion from Esquire Trade & Finance Inc., at a
conversion price of $0.1028. We issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering.

On April 30, 2004, we converted 2,500 shares of Series F Convertible
Preferred Stock into 243,191 shares of common stock pursuant to an April
27, 2004 notice of conversion from Austinvest Anstalt Balzers, at a
conversion price of $0.1028. We issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering.

On May 20, 2004, we converted 9,226 shares of Series G Convertible
Preferred Stock into 620,578 shares of common stock pursuant to a May 19,
2004 notice of conversion from Nesher, LP, at a conversion price of $0.148.
The conversion did not include accrued and unpaid dividends on the
converted preferred. We issued the preferred and the underlying common
stock upon conversion to an accredited investor, pursuant to a Regulation D
offering.

F-26

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 20, 2004, we converted 13,972 shares of Series G Convertible
Preferred Stock into 939,782 shares of common stock pursuant to a May 19,
2004 notice of conversion from Keshet, LP, at a conversion price of $0.148.
The conversion did not include accrued and unpaid dividends on the
converted preferred. We issued the preferred and the underlying common
stock upon conversion to an accredited investor, pursuant to a Regulation D
offering.

On June 17, 2004, we issued 87,195 of our common stock to Stephen
Nollau, a former consultant, for services rendered. We issued the common
stock pursuant to a Form S-8 registration statement, filed by us on June
16, 2004.

On June 29, 2004, we converted 234 shares of Series G Convertible
Preferred Stock into 13,604 shares of common stock pursuant to a June 15,
2004 notice of conversion from Nesher, LP, at a conversion price of $0.172.
The conversion did not include accrued and unpaid dividends on the
converted preferred. We issued the preferred and the underlying common
stock upon conversion to an accredited investor, pursuant to a Regulation D
offering. This conversion exhausted the outstanding Series G convertible
preferred held by this investor.

On June 29, 2004, we converted 1,850 shares of Series G Convertible
Preferred Stock into 107,558 shares of common stock pursuant to a June 15,
2004 notice of conversion from Keshet, LP, at a conversion price of $0.172.
The conversion did not include accrued and unpaid dividends on the
converted preferred. We issued the preferred and the underlying common
stock upon conversion to an accredited investor, pursuant to a Regulation D
offering. This conversion exhausted the outstanding Series G convertible
preferred held by this investor.

On June 29, 2004, we converted 3,472 shares of Series G Convertible
Preferred Stock into 201,860 shares of common stock pursuant to a June 15,
2004 notice of conversion from The Keshet Fund, LP, at a conversion price
of $0.172. The conversion did not include accrued and unpaid dividends on
the converted preferred. We issued the preferred and the underlying common
stock upon conversion to an accredited investor, pursuant to a Regulation D
offering. This conversion exhausted the outstanding Series G convertible
preferred held by this investor.

On June 29, 2004, we converted 8,091 shares of Series G Convertible
Preferred Stock into 470,406 shares of common stock pursuant to a June 15,
2004 notice of conversion from Talbiya B. Investments, Ltd, at a conversion
price of $0.172. The conversion did not include accrued and unpaid
dividends on the converted preferred. We issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering. This conversion exhausted the outstanding
Series G convertible preferred held by this investor.

On June 30, 2004, we entered into Subscription Agreements with
Longview Fund, LP, Alpha Capital Aktiengesellschaft, Whalehaven Funds
Limited, Stonestreet Limited Partnership and Mid-Am Capital L.L.C for the
issuance of convertible 10% notes in the aggregate amount of $1,300,000 and
five-year "A" warrants for the purchase of, in the aggregate, 5,200,000
shares of common stock, at $0.25 per share, and five-year "B" warrants for
the purchase of, in the aggregate, 13,000,000 shares of common stock, at
$2.00 per share. The notes are convertible into shares of our common stock
at $0.15 per common share. Conversions are limited to a maximum ownership
of 9.99% of the underlying common stock at any one time. The notes are
payable in twelve equal monthly installments, commencing January 1, 2005.
The installment payments consist of principal and a "premium" of 20% of the
principal paid per installment. We have the option to defer such payment
until the note's maturity date on December 1, 2005, if our common stock
trades above $0.20 for the five trading days prior to the due date of an
installment payment. In connection with this transaction, we issued
additional notes in the aggregate

F-27

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amount of $40,000 to Gem Funding, LLC, Bi-Coastal Consulting Corp.,
Stonestreet Limited Partnership and Libra Finance, S.A upon identical terms
as the principal notes, as a finder's fee, and paid $12,500 in legal fees.
The common stock underlying all notes and warrants carry registration
rights. We issued the convertible notes and warrants to accredited
investors, pursuant to a Regulation D offering.

On August 9, 2004, we converted $50,000 of our November 2003
Convertible Promissory Note into 1,000,000 shares of common stock pursuant
to an August 5, 2004 notice of conversion from Gamma Opportunity Capital
Partners LP, at a fixed conversion price of $0.05. The conversion did not
include accrued and unpaid interest on the converted amount. We issued the
underlying common stock upon conversion pursuant to our SB-2 registration
statement, declared effective on August 3, 2004.

On August 23, 2004, we converted $50,000 of our April 2004
Convertible Promissory Note into 500,000 shares of common stock pursuant to
an August 5, 2004 notice of conversion from Longview Fund LP, at a fixed
conversion price of $0.10. The conversion did not include accrued and
unpaid interest on the converted amount. We issued the underlying common
stock upon conversion pursuant to our SB-2 registration statement, declared
effective on August 3, 2004.

On September 27, 2004, we converted $50,000 of our April 2004
Convertible Promissory Note into 500,000 shares of common stock pursuant to
a September 21, 2004 notice of conversion from Longview Fund LP, at a fixed
conversion price of $0.10. The conversion did not include accrued and
unpaid interest on the converted amount. We issued the underlying common
stock upon conversion pursuant to our SB-2 registration statement, declared
effective on August 3, 2004.

On October 6, 2004, we converted $25,000 of our November 2003
Convertible Promissory Note into 500,000 shares of common stock pursuant to
a September 23, 2004 notice of conversion from Gamma Opportunity Capital
Partners LP, at a fixed conversion price of $0.05. The conversion did not
include accrued and unpaid interest on the converted amount. We issued the
underlying common stock upon conversion pursuant to our SB-2 registration
statement, declared effective on August 3, 2004.

On October 6, 2004, we issued 500,000 shares of our common stock to
Knightsbridge Holdings, LLC, pursuant to a consulting agreement dated
November 10, 2003. We issued the common stock pursuant to our SB-2
registration statement, declared effective on August 3, 2004. The issued
and outstanding equity reported in our Form 10QSB for the period ended
March 31, 2004 reflects these shares of common stock.

On October 13, 2004, we issued 250,000 restricted shares of our
common stock in a private placement to Arthur Blanding, at the market price
of $0.12 per share, pursuant to Section 4(2) of the Securities Act of 1934.
Mr. Blanding, who solicited the purchase, is an accredited investor and has
been a director of the Company since 1999.

On October 15, 2004, we issued 750,000 shares of our common stock to
Marvel Enterprises, Inc., as partial compensation under a license agreement
dated February 1, 2004. We issued the common stock pursuant to our SB-2
registration statement, declared effective on August 3, 2004. The issued
and outstanding equity reported in our Form 10QSB for the period ended
March 31, 2004 reflects these shares of common stock.

On October 29, 2004, we entered into Subscription Agreements with
Longview Fund, LP, Alpha Capital Aktiengesellschaft, Whalehaven Funds
Limited and Stonestreet Limited Partnership for the issuance of convertible
10% notes in the aggregate amount of $550,000 and five-year "C" warrants
for the purchase of, in the aggregate, 2,200,000 shares of common stock, at
$0.15 per share, and the repricing of five-year "A" warrants, issued June
30, 2004 for the purchase of, in the aggregate, 3,200,000 shares of

F-28

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

common stock, from $0.25 to $0.15 per share. The notes are convertible
into shares of our common stock at $0.10 per common share. Conversions are
limited to a maximum ownership of 9.99% of the underlying common stock at
any one time. The notes are payable in twelve equal monthly installments,
commencing May 1, 2005. The installment payments consist of principal and
a "premium" of 20% of the principal paid per installment. We have the
option to defer such payment until the note's maturity date on April 30,
2006, if our common stock trades above $0.15 for the five trading days
prior to the due date of an installment payment and the underlying common
stock is registered. In connection with this transaction, we issued
additional notes, without attached warrants, in the aggregate amount of
$27,500 to Gem Funding, LLC, Bi-Coastal Consulting Corp., Stonestreet
Limited Partnership and Libra Finance, S.A upon identical terms as the
principal notes, as a finder's fee, and paid $12,500 in legal fees. The
common stock underlying all notes and warrants carry registration rights.
We issued the convertible notes and warrants to accredited investors,
pursuant to a Regulation D offering.

On December 17, 2004, we converted $50,000 of our April 2004
Convertible Promissory Note into 500,000 shares of common stock pursuant to
a December 8, 2004 notice of conversion from Longview Fund LP, at a fixed
conversion price of $0.10. The conversion did not include accrued and
unpaid interest on the converted amount. We issued the underlying common
stock upon conversion pursuant to our SB-2 registration statement, declared
effective on August 3, 2004.

On December 20, 2004, we converted $25,000 of our April 2004
Convertible Promissory Note into 265,958 shares of common stock pursuant to
a December 9, 2004 notice of conversion from Bi Coastal Consulting Corp.,
at a fixed conversion price of $0.10. The conversion included $1,595.89
accrued and unpaid interest on the converted amount. We issued the
underlying common stock upon conversion pursuant to our SB-2 registration
statement, declared effective on August 3, 2004.

On December 20, 2004, we converted $50,000 of our November 2003
Convertible Promissory Note into 1,000,000 shares of common stock pursuant
to a December 8, 2004 notice of conversion from Gamma Opportunity Capital
Partners LP, at a fixed conversion price of $0.05. The conversion did not
include accrued and unpaid interest on the converted amount. We issued the
underlying common stock upon conversion pursuant to our SB-2 registration
statement, declared effective on August 3, 2004.

On December 27, 2004, we converted 10,000 shares of Series F
Convertible Preferred Stock into 1,290,323 shares of common stock pursuant
to a December 27, 2004 notice of conversion from Austinvest Anstalt
Balzers, at a conversion price of $0.0775. The conversion did not include
accrued and unpaid dividends on the converted preferred. We issued the
preferred and the underlying common stock upon conversion to an accredited
investor, pursuant to a Regulation D offering and Rule 144.

On December 27, 2004, we converted 10,000 shares of Series F
Convertible Preferred Stock into 1,290,323 shares of common stock pursuant
to a December 27, 2004 notice of conversion from Esquire Trade & Finance
Inc., at a conversion price of $0.0775. The conversion did not include
accrued and unpaid dividends on the converted preferred. We issued the
preferred and the underlying common stock upon conversion to an accredited
investor, pursuant to a Regulation D offering and Rule 144.

On December 29, 2004, we closed a funding transaction with Momona
Capital Corp. and Ellis International Ltd. for the issuance of convertible
10% notes in the aggregate amount of $200,000 and five-year "C" warrants
for the purchase of, in the aggregate, 800,000 shares of common stock, at
$0.15 per share. The notes are convertible into shares of our common stock
at $0.10 per common share. Conversions are limited to a maximum ownership
of 9.99% of the underlying common stock at any one time. The notes are
payable in twelve equal monthly installments, commencing May 1, 2005. The
installment payments consist of principal and a "premium" of 20% of the
principal paid per installment. We have the option to defer such payment
until the note's maturity date on April 30, 2006, if our common stock
trades above $0.15 for the five trading days prior to the due date of an
installment payment, and the

F-29

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

underlying common stock is registered. In connection with this
transaction, we issued additional notes, without attached warrants, in the
aggregate amount of $10,000 to the investors upon identical terms as the
principal notes, as a finder's fee, and paid $3,500 in legal fees. The
common stock underlying all notes and warrants carry registration rights.
We issued the convertible notes and warrants to accredited investors,
pursuant to an amendment to an October 29, 2004 Regulation D offering.

On December 31, 2004, we issued 8,095,105 shares of our common stock
and options for 150,000 shares at an exercise price of $0.25 per share to
our employees and consultants for services rendered, pursuant to a Form S-8
registration statement filed December 23, 2004.

2005

Period Ended March 31, 2005
---------------------------

New Financing: January 2005 Convertible Notes. On January 31, 2005,
we closed a funding transaction with Longview Fund, LP, Longview Equity
Fund, LP, Longview International Equity Fund, LP, Alpha Capital
Aktiengesellschaft and Whalehaven Funds Limited, five institutional
accredited investors, for the issuance and sale to the Subscribers of up to
$2,300,000 of principal amount of promissory notes convertible into shares
of our common stock, and Warrants to purchase shares of common stock at
100% coverage of the common stock issuable in accordance with the principal
amount of the notes. One Million One Hundred Fifty Thousand Dollars
($1,150,000) of the purchase price was paid on the initial closing date,
and One Million One Hundred Fifty Thousand Dollars ($1,150,000) of the
purchase price will be payable within five (5) business days after the
actual effectiveness of an SB-2 Registration Statement as defined in the
Subscription Agreement. The initial closing notes were at prime plus 4%
interest in the aggregate amount of $1,150,000, plus five-year Warrants for
the purchase of, in the aggregate, 9,200,000 shares of common stock, at the
lesser of (i) $0.16, or (ii) 101% of the closing bid price of the Common
Stock as reported by Bloomberg L.P. for the OTC Bulletin Board for the
trading day preceding the Closing Date. The notes are convertible into
shares of our common stock at $0.125 per common share. Conversions are
limited to a maximum ownership of 9.99% of the underlying common stock at
any one time. The notes have a maturity date two years from closing and
are payable in twelve equal monthly installments, commencing June 1, 2005.
The installment payments consist of principal equal to 1/20th of the initial
principal amount which, subject to certain conditions concerning trading
volume and price, can be paid in cash at 103% of the monthly installment,
or common stock or a combination of both. The notes have an acceleration
provision upon the change in a majority of the present Board of Directors
except as the result of the death of one or more directors, or a change in
the present CEO. In connection with this transaction, we issued restricted
common stock in the aggregate amount of 460,000 shares plus the aggregate
cash amount of $57,500 for due diligence fees to the investors in this
transaction. We issued the Convertible Promissory Note and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering. The underlying common stock is now registered
pursuant to a Form SB-2 registration statement declared effective August 2,
2005.

November 2003 Convertible Notes. We converted $25,000 of our
November 2003 Convertible Promissory Notes into 549,340 shares of common
stock pursuant to a notice of conversion from Gamma Opportunity Capital
Partners LP, at a fixed conversion price of $0.05. The conversion included
$2,467 of accrued and unpaid interest on the converted amount. We issued
the underlying common stock upon conversion pursuant to a Form SB-2
registration statement, declared effective on August 3, 2004.

April 2004 Convertible Notes. We converted $99,999 of our April 2004
Convertible Promissory Notes into 1,141,387 shares of common stock pursuant
to notices of conversion from Longview Fund LP,

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BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

at a fixed conversion price of $0.10. The conversions included $14,138 of
accrued and unpaid interest. We issued the underlying common stock upon
conversion pursuant to our SB-2 registration statement, declared effective
on August 3, 2004.

June 2004 Convertible Notes. We converted $41,666 of our June 2004
Convertible Promissory Notes into 430,327 shares of restricted common stock
pursuant to a notice of conversion from Longview Fund LP, at a fixed
conversion price of $0.15. The conversion included $22,822 of accrued and
unpaid interest. We issued the Convertible Promissory Note and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering. The underlying common stock is now registered
pursuant to a Form SB-2 registration statement declared effective April 18,
2005.

Period Ended June 30, 2005

New Financing: April 2005 Convertible Note. On April 21, 2005, we
closed a funding transaction with Alpha Capital Aktiengesellschaft for the
issuance of a convertible 10% note in the aggregate amount of $300,000.
The promissory note is convertible into shares of common stock of the
Company at $0.20 per common share. Conversions are limited to a maximum
ownership of 9.99% of the Company's common stock at any one time. The note
has an October 31, 2005 maturity and is payable in five equal monthly
installments, commencing June 1, 2005. The installment payments consist of
principal (equal to 1/5th of the initial principal amount) plus accrued
interest. Installments can be paid in cash or common stock valued at the
average closing price of the Company's common stock during the five trading
days immediately preceding the relevant installment due date. The Company
has repriced Class B Warrants issued on June 30, 2004 from $2.00 per share
to $0.125 per share and issued restricted common stock in the aggregate
amount of 93,750 shares for finder's fees to a third-party to facilitate
this transaction. The Company has the right to prepay the promissory note
by paying to the holder cash equal to 120% of the principal to be prepaid
plus accrued interest. The notes have an acceleration provision upon the
change in a majority of the present Board of Directors except as the result
of the death of one or more directors or a change in the present CEO of the
Company. The common stock underlying the note and the finder's fee common
stock have "piggy back" registration rights. We issued the convertible
note and finder's fee common stock to accredited investors, pursuant to a
Regulation D offering.

New Financing: May 2005 Convertible Notes On May 23, 2005, we closed
a funding transaction (the "May '05 Transaction") with Longview Fund, LP,
Whalehaven Funds Limited, Ellis International Ltd., and Osher Capital
Corp., four institutional accredited investors, for the issuance and sale
to the Subscribers of Five Hundred Thousand Dollars ($500,000) of principal
amount of promissory notes convertible into shares of our common stock and
Warrants to purchase shares of common stock at 100% coverage of the common
stock issuable in accordance with the principal amount of the notes. This
May '05 Transaction was a part of a January 23, 2005 funding transaction
for an aggregate of Two Million Three Hundred Thousand Dollars
($2,300,000), One Million One Hundred Fifty Thousand Dollars ($1,150,000)
of which was paid on the initial closing date, and One Million One Hundred
Fifty Thousand Dollars ($1,150,000) of which (the "Second Tranche") was to
be payable within five (5) business days after the actual effectiveness of
an SB-2 Registration Statement covering the aggregate transaction, as
defined in the Subscription Agreement. The May '05 Transaction for Five
Hundred Thousand Dollars ($500,000) is a partial interim closing of the
Second Tranche, which occurred prior to the anticipated effectiveness of
the SB-2 Registration Statement covering the aggregate transaction.
Contemporaneous with the May '05 Transaction, we agreed to a modification
of the January 23, 2005 aggregate transaction for the substitution of Ellis
International Ltd. and Osher Capital Corp. in the place of Alpha Capital
Aktiengesellschaft, one of the original investors. The May '05 Transaction
convertible notes are at prime plus 4% interest in the aggregate amount of
$500,000, plus five-year Warrants for the purchase of, in the aggregate,
4,000,000 shares of common stock, at an exercise price of $0.129. The
notes are convertible into shares of our common stock at $0.125 per common
share. Conversions are limited to a maximum

F-31

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ownership of 9.99% of the underlying common stock at any one time. The
notes have a maturity date two years from closing and are payable in twelve
equal monthly installments, commencing June 1, 2005. The installment
payments consist of principal equal to 1/20th of the initial principal
amount which, subject to certain conditions concerning trading volume and
price, can be paid in cash at 103% of the monthly installment or common
stock or a combination of both. The notes have an acceleration provision
upon the change in a majority of the present Board of Directors except as
the result of the death of one or more directors, or a change in the
present CEO. In connection with this transaction, we issued restricted
common stock in the aggregate amount of 200,000 shares plus the aggregate
cash amount of $25,000 for due diligence fees to Longview Fund, LP, Gem
Funding LLC, Ellis International Ltd., and Osher Capital Corp. in this
transaction. The Second Tranche of the January 23, 2005 aggregate
transaction, now in the amount of $650,000, remains outstanding and will be
triggered by the effectiveness of the pending SB-2 registration statement.

Conversions: November 2003 Convertible Notes. We converted $50,000
of our November 2003 Convertible Promissory Note into 1,106,740 shares of
common stock pursuant to a notice of conversion from Gamma Opportunity
Capital Partners LP, at a fixed conversion price of $0.05. The conversion
included $5,337 of accrued and unpaid interest. We issued the underlying
common stock upon conversion pursuant to a Form SB-2 registration
statement, declared effective on August 3, 2004.

Warrant Exercise: November 2003 Warrant. We issued 1,000,000 shares
of common stock to Gamma Opportunity Capital Partners LP pursuant to the
exercise of a Warrant issued in connection with the November 2003 financing
transaction, and received $50,000 in warrant exercise payments. The shares
of common stock underlying the warrant were issued pursuant to a Form SB-2
shelf registration statement, declared effective by the SEC on August 3,
2004.

Warrant Exercise: April 2004 Warrant. We issued 1,500,000 shares of
common stock to Longview Fund LP pursuant to the exercise of a Warrant
issued in connection with the April 2004 financing transaction, and
received $225,000 in warrant exercise payments. The shares of common stock
underlying the warrant were issued pursuant to a Form SB-2 shelf
registration statement, declared effective by the SEC on August 3, 2004.

Conversions: June 2004 Convertible Notes. We converted $528,573 of
our June 2004 Convertible Promissory Notes into 5,633,039 shares of common
stock pursuant to notices of conversion from Longview Fund LP, Gem Funding
LLC, Whalehaven Capital Fund Limited, Stonestreet Limited Partnership and
Bi-Coastal Consulting Corp. at a fixed conversion price of $0.10. The
conversion included $33,689 of accrued and unpaid interest. We issued the
common stock upon conversion pursuant to a Form SB-2 registration statement
declared effective by the Securities and Exchange Commission on April 18,
2005.

Warrant Exercise: June 2004 Warrant. We issued 2,200,000 shares of
common stock to Longview Fund LP, Whalehaven Capital Fund Limited and
Stonestreet Limited Partnership pursuant to the exercise of Warrants issued
in connection with the June 2004 financing transaction, and received
$309,000 in warrant exercise payments. The shares of common stock
underlying the warrants were issued pursuant to a Form SB-2 shelf
registration statement, declared effective by the SEC on April 18, 2005.

Conversions: October 2004 Convertible Notes. We converted $446,250
of our October 2004 Convertible Promissory Notes into 4,718,514 shares of
common stock pursuant to notices of conversion from Longview Fund LP, Gem
Funding LLC, Whalehaven Capital Fund Limited, Stonestreet Limited
Partnership and Bi-Coastal Consulting Corp. at a fixed conversion price of
$0.10. The conversion included $25,602 of accrued and unpaid interest. We
issued the common stock upon conversion pursuant

F-32

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to a Form SB-2 registration statement declared effective by the Securities
and Exchange Commission on April 18, 2005.

Warrant Exercise: October 2004 Warrant. We issued 1,700,000 shares
of common stock to Longview Fund LP, Whalehaven Capital Fund Limited and
Stonestreet Limited Partnership pursuant to the exercise of Warrants issued
in connection with the October 2004 financing transaction, and received
$248,700 in warrant exercise payments. The shares of common stock
underlying the warrants were issued pursuant to a Form SB-2 shelf
registration statement, declared effective by the SEC on April 18, 2005.

Conversions: December 2004 Convertible Notes. We converted $210,000
of our December 2004 Convertible Promissory Notes into 2,176,706 shares of
common stock pursuant to notices of conversion, to Momona Capital Corp. and
Ellis International Ltd Inc., at a fixed conversion price of $0.10 per
share. The conversion included $7,450 of accrued and unpaid interest. We
issued the underlying common stock upon conversion pursuant to a Form SB-2
registration statement, declared effective on April 18, 2005.

Warrant Exercise: December 2004 Warrant. We issued 500,000 shares of
common stock to Momona Capital Corp. and Ellis International Ltd Inc.,
pursuant to the exercise of Warrants issued in connection with the December
2004 financing transaction, and received $72,500 in warrant exercise
payments. The shares of common stock underlying the warrants were issued
pursuant to a Form SB-2 shelf registration statement, declared effective by
the SEC on April 18, 2005.

Conversions: January 2005 Convertible Notes. We converted $534,304
of our January 2005 Convertible Promissory Notes into 4,461,685 shares of
restricted common stock pursuant to notices of conversion, to Longview Fund
LP, Longview Equity Fund LP and Longview International Equity Fund LP at a
fixed conversion price of $0.125 per share. We issued the Convertible
Promissory Note and the underlying common stock upon conversion to an
accredited investor, pursuant to a Regulation D offering. The underlying
common stock is now registered pursuant to a Form SB-2 registration
statement declared effective August 2, 2005.

Conversions: Series F Convertible Preferred. We converted 31,134
shares of our Series F Convertible Preferred, having a stated value of
$311,340 into 2,903,839 shares of common stock pursuant to notices of
conversion, to Austinvest Anstalt Balzers and Esquire Trade & Finance Inc.
We issued the Series F Convertible Preferred and the underlying common
stock upon conversion to accredited investors, pursuant to a Regulation D
offering and Rule 144(k).

Conversions: Series H Convertible Preferred. We converted 100,000
shares of our Series H Convertible Preferred, having a stated value of
$1,000,000 into 2,500,000 shares of common stock pursuant to notices of
conversion, to four individual and two institutional investors. We issued
the Convertible Preferred and the underlying common stock upon conversion
to accredited investors, pursuant to a Regulation D offering and Rule
144(k).

Conversions: Series I Convertible Preferred. We converted 20,000
shares of our Series I Convertible Preferred, having a stated value of
$200,000 into 2,354,808 shares of common stock pursuant to a notice of
conversion, to Alpha Capital AG. We issued the Convertible Preferred and
the underlying common stock upon conversion to accredited investors,
pursuant to a Regulation D offering and Rule 144(k).

Warrant Exercise: Series I Warrant. We issued 1,333,333 shares of
restricted common stock to Alpha Capital AG, pursuant to the exercise of
Warrants issued in connection with the Series I financing transaction, and
received $133,333 in warrant exercise payments. The shares of common stock

F-33

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

underlying the warrants are now registered pursuant to a Form SB-2 shelf
registration statement, declared effective by the SEC on August 2, 2005.

Private Placements. On May 17, 2005 we issued the aggregate of 27,500
restricted shares of the Company's common stock, with a recorded value of
$4,950, to eleven product sales brokers as a bonus for the performance of
services for the Company. We issued the restricted common stock pursuant
to Section 4(6) of the Securities Act of 1933, which provides an exemption
from the registration requirements of the Act for transactions not
involving a public offering.

S-8 Registration. On April 14, 2005 and April 18, 2005, we issued
750,000 and 250,000 shares, respectively, of our common stock to Geoffrey
Eiten, for services rendered for strategic business planning. These shares
were part of 1,500,000 shares of the Company's common stock registered
under a Form S-8 registration statement filed December 23, 2004.

Warrant Issue. On June 20, 2005, we issued one year Warrant to
Marvel Enterprises Inc. to purchase 1,000,000 shares of our common stock a
$0.05 per share. This Warrant was issued in connection with the execution
of a License Agreement with Marvel for the United States, Canada and
Mexico. We issued the Warrant pursuant to Section 4(6) of the Securities
Act of 1933, which provides an exemption from the registration requirements
of the Act for transactions not involving a public offering.

Period Ended September 30, 2005

Warrant Exercise: Series D Warrant. We issued 696,042 shares of
common stock to Longview Fund LP, Longview Equity Fund LP, Longview
International Equity Fund LP and Esquire Trade & Finance Inc., pursuant to
the cashless exercises of warrants for 763,750 shares of common stock. We
issued the Warrants and the underlying common stock upon exercise to
accredited investors, pursuant to a Regulation D offering and Rule 144(k).

Conversions: Series F Convertible Preferred. We converted 19,133
shares of our Series F Convertible Preferred, having a stated value of
$191,330 into 804,752 shares of common stock pursuant to notices of
conversion to Amro International, SA. We issued the Series F Convertible
Preferred and the underlying common stock upon conversion to accredited
investors, pursuant to a Regulation D offering and Rule 144(k).

Warrant Exercise: Series F Warrant. We issued 3,345,417 shares of
common stock to Austinvest Anstalt Balzers and Esquire Trade & Finance Inc.
and Libra Finance, SA., pursuant to the cashless exercise of warrants for
3,676,518 shares of common stock. We issued the Warrants and the underlying
common stock upon exercise to accredited investors, pursuant to a
Regulation D offering and Rule 144(k).

Conversions: Series H Convertible Preferred. We converted 1,000
shares of our Series H Convertible Preferred, having a stated value of
$10,000 into 25,000 shares of common stock pursuant to notices of
conversion, to one individual investor. We issued the Convertible
Preferred and the underlying common stock upon conversion to accredited
investors, pursuant to a Regulation D offering and Rule 144(k).

Conversions: Series I Convertible Preferred. We converted 10,000
shares of our Series I Convertible Preferred, having a stated value of
$100,000 into 656,953 shares of common stock pursuant to a notice of
conversion, to Tradersbloom Limited. The conversion included $24,000 of
accrued and unpaid interest. We issued the Convertible Preferred and the
underlying common stock upon conversion to accredited investors, pursuant
to a Regulation D offering and Rule 144(k).

F-34

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Conversions: April 2004 Convertible Notes. We converted $250,000 of
our April 2004 Convertible Promissory Notes into 2,808,219 shares of common
stock pursuant to notices of conversion from Osher Capital Inc., Ellis
International Ltd Inc. and Alpha Capital AG. The conversion included
$3,082 of accrued and unpaid interest on the converted amount. We issued
the underlying common stock upon conversion pursuant to a Form SB-2
registration statement, declared effective on August 4, 2004.

Conversions: June 2004 Convertible Notes. We converted $250,000 of
our June 2004 Convertible Promissory Notes into 2,796,575 shares of common
stock pursuant to notices of conversion from Alpha Capital AG at a fixed
conversion price of $0.10. The conversion included $29,657 of accrued and
unpaid interest on the converted amount. We issued the common stock upon
conversion pursuant to a Form SB-2 registration statement declared
effective by the Securities and Exchange Commission on April 18, 2005.

Conversions: October 2004 Convertible Notes. We converted $125,000
of our October 2004 Convertible Promissory Notes into 1,342,808 shares of
common stock pursuant to notices of conversion from Alpha Capital AG at a
fixed conversion price of $0.10. The conversion included $9,280 of accrued
and unpaid interest on the converted amount. We issued the common stock
upon conversion pursuant to a Form SB-2 registration statement declared
effective by the Securities and Exchange Commission on April 18, 2005.

Warrant Exercise: December 2004 Warrant. We issued 300,000 shares of
common stock to Momona Capital Corp. pursuant to the exercise of Warrants
issued in connection with the December 2004 financing transaction, and
received $30,000 in warrant exercise payments. The shares of common stock
underlying the warrants were issued pursuant to a Form SB-2 shelf
registration statement, declared effective by the SEC on April 18, 2005.

Conversions: January 2005 Convertible Notes. We converted $500,071
of our January 2005 Convertible Promissory Notes into 4,186,644 shares of
restricted common stock pursuant to notices of conversion, to Longview Fund
LP, Longview Equity Fund LP and Longview International Equity Fund LP at a
fixed conversion price of $0.125 per share. The conversion included
$23,260 of accrued and unpaid interest on the converted amount. We issued
the common stock upon conversion pursuant to a Form SB-2 registration
statement declared effective by the Securities and Exchange Commission on
August 2, 2005.

Warrant Exercise: January 2005 Warrant. We issued 7,200,000 shares
of common stock to Whalehaven Capital Fund Limited, Longview Fund LP,
Longview Equity Fund LP and Longview International Equity Fund LP pursuant
to the exercise of Warrants issued in connection with the January 2005
financing transaction, and received $720,000 in warrant exercise payments.
The shares of common stock underlying the warrants were issued pursuant to
a Form SB-2 shelf registration statement, declared effective by the SEC on
August 2, 2005.

Conversions: April 2005 Convertible Notes. We converted $300,000 of
our April 2005 Convertible Promissory Note into 1,556,438 shares of
restricted common stock pursuant to notices of conversion, to Alpha Capital
AG at a fixed conversion price of $0.20 per share. The conversion included
$11,288 of accrued and unpaid interest on the converted amount. We issued
the common stock upon conversion pursuant to a Form SB-2 registration
statement declared effective by the Securities and Exchange Commission on
August 2, 2005.

Conversions: May 2005 Convertible Notes. We converted $475,000 of
our May 2005 Convertible Promissory Notes into 4,141,270 shares of
restricted common stock pursuant to notices of

F-35

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

conversion, to Whalehaven Capital Fund Limited, Ellis International Ltd,
Longview Fund LP and Osher Capital Corp. The conversion included $9,317 of
accrued and unpaid interest on the converted amount. We issued the common
stock upon conversion pursuant to a Form SB-2 registration statement
declared effective by the Securities and Exchange Commission on August 2,
2005.

Warrant Exercise: May 2005 Warrant. We issued 4,000,000 shares of
common stock to Whalehaven Capital Fund Limited, Ellis International Ltd,
Longview Fund LP and Osher Capital Corp. pursuant to the exercise of
Warrants issued in connection with the January 2005 financing transaction,
and received $400,000 in warrant exercise payments. The shares of common
stock underlying the warrants were issued pursuant to a Form SB-2 shelf
registration statement, declared effective by the SEC on August 2, 2005.

New Financing: August 2005 Convertible Notes On August 18, 2005, we
closed a funding transaction (the "August '05 Transaction") with Longview
Fund, LP, Longview Equity Fund, LP and Longview International Equity Fund,
LP, three institutional accredited investors, for the issuance and sale to
the Subscribers of Six Hundred Fifty Thousand Dollars ($650,000) of
principal amount of promissory notes convertible into shares of our common
stock and Warrants to purchase shares of common stock at 100% coverage of
the common stock issuable in accordance with the principal amount of the
notes. This August'05 Transaction was a part of a January 23, 2005 funding
transaction for an aggregate of Two Million Three Hundred Thousand Dollars
($2,300,000). The August '05 Transaction is the Second Tranche of the
January '05 transaction, which occurred upon the effectiveness of the SB-2
Registration Statement covering the aggregate transaction. The August'05
Transaction convertible notes are at prime plus 4% interest in the
aggregate amount of $650,000, plus five-year Warrants for the purchase of,
in the aggregate, 5,200,000 shares of common stock, at an exercise price of
$0.129. The notes are convertible into shares of our common stock at
$0.125 per common share. Conversions are limited to a maximum ownership of
9.99% of the underlying common stock at any one time. The notes have a
maturity date two years from closing and are payable in twelve equal
monthly installments. The installment payments consist of principal equal
to 1/20th of the initial principal amount which, subject to certain
conditions concerning trading volume and price, can be paid in cash at 103%
of the monthly installment, or common stock or a combination of both. The
notes have an acceleration provision upon the change in a majority of the
present Board of Directors except as the result of the death of one or more
directors, or a change in the present CEO. In connection with this
transaction, we issued restricted common stock in the aggregate amount of
260,000 shares plus the aggregate cash amount of $32,500 for due diligence
fees to Longview Fund companies. We issued the equity equivalents, the
underlying common stock upon conversion and the finders' fee common stock
pursuant to a Form SB-2 registration statement declared effective by the
Securities and Exchange Commission on August 2, 2005.

On September 30, 2005, we prepaid $250,000 of the aggregate $650,000
of the August '05 Transaction notes, as follows: $57,692 to Longview Fund,
LP, $144,231 to Longview Equity Fund, LP and $ $48,077 to Longview
International Equity Fund, LP. The holders of these notes waived the
prepayment premium in lieu of their retention of warrants attached to
August '05 Transaction.

Conversions: August 2005 Convertible Notes. We converted $91,217 of
our August 2005 Convertible Promissory Notes into 743,750 shares of
restricted common stock pursuant to a notice of conversion, to Longview
Fund LP, at a fixed conversion price of $0.125 per share. The conversion
included $1,752 of accrued and unpaid interest on the converted amount. We
issued the common stock upon conversion pursuant to a Form SB-2
registration statement declared effective by the Securities and Exchange
Commission on August 2, 2005.

Warrant Exercise: August 2005 Warrant. We issued 5,200,000 shares of
common stock to Longview Fund LP, Longview Equity Fund LP and Longview
International Equity Fund LP pursuant to

F-36

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the exercise of Warrants issued in connection with the August 2005
financing transaction, and received $520,000 in warrant exercise payments.
The shares of common stock underlying the warrants were issued pursuant to
a Form SB-2 shelf registration statement, declared effective by the SEC on
August 2, 2005.

Private Placements. On August 3, 2005 we issued 500,000 restricted
shares of our common stock to Geoffrey Eiten, for services rendered for
strategic business planning. We issued the restricted common stock
pursuant to Section 4(6) of the Securities Act of 1933, which provides an
exemption from the registration requirements of the Act for transactions
not involving a public offering.

On August 29 and September 19, 2005 we issued the aggregate of
1,000,000 restricted shares of our common stock to National Financial
Communications Corp. pursuant to the exercise of Warrants issued in
connection with a consulting agreement for services rendered for strategic
business planning. We issued the restricted common stock pursuant to
Section 4(6) of the Securities Act of 1933, which provides an exemption
from the registration requirements of the Act for transactions not
involving a public offering.

On September 19, 2005, we issued 450,000 restricted shares of our
common stock to Alpha Capital AG, an accredited investor, in a sale not
involving a public offering at a price of $1.00 per share. We issued the
common stock pursuant to a Regulation D offering.

Warrant Issue. On August 31, 2005, we issued a three year Warrant to
Coca-Cola Enterprises Inc. to purchase 30,000,000 shares of our common
stock a $0.36 per share. During the first 18 months of the exercise
period, the Company has the option to "call" the exercise of up to
10,000,000 shares of common stock issuable upon exercise of the Warrant,
upon the Company's satisfaction of certain conditions, including a trading
price of not less than $1.08 per share for 20 consecutive trading days.
This Warrant was issued in connection with the execution of a Master
Distribution Agreement on August 31, 2005. We issued the Warrant pursuant
to Section 4(6) of the Securities Act of 1933, which provides an exemption
from the registration requirements of the Act for transactions not
involving a public offering. The Company will record an $11,900,000 net
charge in deferred distribution costs for the issuance of a three year
warrant to Coca-Cola Enterprises to purchase of 30,000,000 shares of our
common stock in connection with the Master Distribution Agreement. The
Company will recognize that cost as a selling expense over the 10-year term
of the agreement.

Period Ended December 31, 2005

F-37

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All of the above offerings and sales were deemed to be exempt under
rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as
amended. No advertising or general solicitation was employed in offering
the securities. The offerings and sales were made to a limited number of
persons, all of whom were accredited investors, or business associates of
Bravo! Foods International Corp., and transfer was restricted by Bravo!
Foods International Corp. in accordance with the requirements of the
Securities Act of 1933. In addition to representations by the above-
referenced persons, we have made independent determinations that all of the
above-referenced persons were accredited or sophisticated investors, and
that they were capable of analyzing the merits and risks of their
investment and that they understood the speculative nature of their
investment. Furthermore, all of the above-referenced persons were provided
with access to our Securities and Exchange Commission filings.

Warrant Exercise: June 2004 Warrant. In December 2005, we issued
2,500,000 shares of common stock to Alpha Capital AG pursuant to the
exercise of a "B" Warrant issued in connection with the June 2004 financing
transaction and received $250,000 in warrant exercise payments. The
shares of common stock underlying the warrants were issued pursuant to a
Form SB-2 shelf registration statement, declared effective by the SEC on
April 18, 2005.

Note 7 - Stock Warrants and Options

2004

On February 1, 2004, we agreed to issue warrants to purchase 750,000
shares of common stock to Marvel Enterprises, Inc. We issued this equity
in connection with the grant of an intellectual property license by Marvel
on January 17, 2004, giving us the right to use certain Marvel Comics
characters on our Slammers(R) line of flavored milks. The warrants have an
exercise price of $0.10 per share for the first year and, upon the
occurrence of certain conditions tied to the royalty performance under the
license, can be extended for an additional year with an exercise price of
$0.14 per share. We made this private offering to Marvel Enterprises, an
accredited investor, pursuant to Rule 506 of Regulation D and Section 4(2)
of the Securities Act of 1933.

On May 9, 2004 we received the proceeds of a $750,000 loan from Mid-Am
Capital, payable September 3, 2004, with an interest rate of 8%. This loan
is secured by a general security interest in all of our assets. We issued
one-year warrants for 3,000,000 shares of common stock at $0.25 per share to
Mid-Am Capital in connection with this loan.

On October 29, 2004, we entered into Subscription Agreements with
Longview Fund, LP, Alpha Capital Aktiengesellschaft, Whalehaven Funds
Limited and Stonestreet Limited Partnership for the

F-38

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

issuance of convertible 10% notes in the aggregate amount of $550,000 and
five-year "C" warrants for the purchase of, in the aggregate, 2,200,000
shares of common stock, at $0.15 per share, and the repricing of five-year
"A" warrants, issued June 30, 2004 for the purchase of, in the aggregate,
3,200,000 shares of common stock, from $0.25 to $0.15 per share. The
common stock underlying all notes and warrants carry registration rights.
We issued the convertible notes and warrants to accredited investors,
pursuant to a Regulation D offering.

On November 19, 2004, we agreed to grant incentive stock options to
National Financial Communications Corp. for the purchase of the aggregate
of 1,000,000 shares of our common stock at an exercise price of $.25 per
share in connection with a public relations and corporate communications
services agreement. The options are exercisable during the period
commencing on the agreement date and ending three years subsequent to the
termination date of the agreement. The grant of options shall be as
follows: (i) options for 250,000 shares upon the execution of the
agreement, and (ii) beyond the first ninety (90) days of the agreement, the
balance of 750,000 shares on a pro rata quarterly basis at the rate of
250,000 per quarter, conditioned upon the continuation of the agreement.

On December 29, 2004, we closed a funding transaction with Momona
Capital Corp. and Ellis International Ltd. for the issuance of convertible
10% notes in the amount of $200,000 and five-year "C" warrants for the
purchase of 800,000 shares of common stock, at $0.15 per share. The common
stock underlying all notes and warrants carry registration rights. We
issued the convertible notes and warrants to accredited investors, pursuant
to an amendment to an October 29, 2004 Regulation D offering.

On December 31, 2004, we issued five-year options for 150,000 shares
of common stock at an exercise price of $0.25 per share to Tim Ransom for
graphic design services, pursuant to a Form S-8 registration statement

2005

Commencing on January 31, 2005, we entered into a series of
convertible notes financing transactions with seven accredited investors
that resulted in the issuance of five-year warrants for the purchase of
19,550,000 shares of common stock at a exercise price of $0.125 per share.

On April 8, 2005, we issued a two-year warrant for the purchase of
1,000,000 shares of our common stock at an exercise price of $0.24 per
share to New Century Capital, a consultant, for services rendered.

On June 20, 2005, we issued a one year warrant for the purchase of
1,000,000 shares of common stock at an exercise price of $0.05 per share to
Marvel Enterprises, Inc., pursuant to an April 14, 2005 Services Agreement
for marketing, promotional and creative services to be performed by Marvel
Enterprises, Inc. in connection with an intellectual property license
between our company and Marvel Enterprises, Inc.

On August 30, 2005, we issued a three-year warrant for the purchase
of 30,000,000 shares of our common stock at an exercise price of $0.36 per
share to Coca-Cola Enterprises Inc. as part of our execution of a ten year
Master Distribution Agreement.

On November 14, 2005, we closed a $500,000 funding transaction with
two accredited institutional investors for common stock and issued five-
year warrants for the purchase of 150,000 shares of common stock at an
exercise price of $0.71 per share to these investors.

On November 28, 2005, we closed a $20,250,000 funding transaction
with thirteen accredited institutional investors for common stock and
issued five-year warrants for the purchase of 15,187,500 shares

F-39

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of common stock at an exercise price of $0.80 per share to these investors.
In connection with this financing, we issued a five-year common stock
purchase warrant to purchase of 1,012,500 shares of common stock at an
exercise price of $0.50 and 304,688 shares at an exercise price of $0.80 to
SG Cowen & Co., LLC, for its services as a Placement Agent in connection
with this funding transaction.

On December 31, 2005, we issued options for the purchase of 8,922,745
shares of our common stock to our directors, employees and certain
consultants, pursuant to a Directors' vote of April 6, 2005, our Directors
voted to adopt a Stock Option Incentive Plan for the grant of option to
directors, employees and consultants for the purchase of up to 10,397,745
shares of our common stock. On May 12, 2005, the Board of Directors
accepted and adopted the determination of the Compensation Committee to
grant 8,922,745 of the authorized option to our employees, directors and
certain consultants. The ten-year options vest over a period of eighteen
months and have exercise prices varying from $0.20 per share to $0.30 per
share, with a weighted average exercise price of $0.24 per share.

A summary of the status of our stock options and warrants as of
December 31, 2005 and 2004 with changes during the years then ended are
presented below:

Weighted
Average
Shares Price
------ --------

Total warrants and options outstanding at December 31, 2003 39,611,363 0.28

Warrants and options granted 33,565,000 .87
Warrants and options exercised (5,895,000) (.06)
Warrants and options expired (2,191,705) (1.03)
---------- ------

Total warrants and options outstanding at December 31, 2004 65,089,658 $ 0.56

Warrants and options authorized or granted 77,077,433 .37
Warrants and options exercised (32,873,601) (.09)
Warrants and options expired (3,443,334) (1.58)
Warrants and options redeemed (32,000,000) (.185)
---------- ------

Total warrants and options outstanding at December 31, 2005 73,850,156 .42
========== ======

The following table summarizes information about stock options and warrants
outstanding at December 31, 2005:

Warrants/Options Outstanding Options/Warrants Exercisable
----------------------------------------- ----------------------------
Weighted Weighted Weighted
Average Average Average
Number Remaining Exercise Number Exercise
Exercise Price Outstanding Life (Years) Price Exercisable Price

$0.00 to $0.75 57,807,968 .23 $.31 50,876,138 $.32
$0.75 to 2.00 16,042,188 4.4 .81 16,042,188 .81
---------- --- ---- ---------- ----
73,850,156 3.3 $.42 66,918,326 $.42
========== === ==== ========== ====

F-40

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Income Taxes

We are subject to Federal income taxes. As we have experienced
operating losses for the years of 2005 and 2004, we have not provided for
income tax.

We have gross deferred tax assets of approximately $8.5 million and
$6.8 million at December 31, 2005 and 2004, respectively, relating
principally to tax effects of net operating loss carry forwards. In
assessing the recoverability of deferred tax assets, management considers
whether it is more likely than not that the assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers projected
future taxable income and tax planning strategies in making this
assessment. Based upon the level of historical taxable loss and
projections for future taxable income over the periods in which the
deferred tax items are recognizable for tax reporting purposes, it is more
likely than not that we will not realize the benefits of these deferred tax
assets. As such, management has recorded a valuation allowance for the
full amount of deferred tax assets at December 31, 2005 and 2004.

At December 31, 2005, we had available net operating losses of
approximately $24.2 million for federal income tax purposes, to offset
future taxable income, if any, which will expire at various dates through
the year 2023 for federal income tax purposes. The utilization of net
operating losses, however, may be subject to certain limitations as
prescribed by Section 382 of the Internal Revenue Code.

Note 9 - Business Segment and Geographic Information

We operate principally in one industry segment. The following sales
information is based on customer location rather than subsidiary location.

United United Middle Total
2005 States Kingdom East Company
------ ------- ------ -------

Gross margin $ 2,877,851 $ 81,099 $ 51,279 $ 3,010,229
=========== ========= ======== ===========

United Middle Total
2004 States Mexico East Company
------ ------ ------ -------

Gross margin $ 509,026 $ 64,359 $396,509 $ 969,894
=========== ========= ======== ===========

All long lived assets are located in the United States.

F-41

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Commitments and Contingencies

Lease of Office
---------------

We lease office space at our corporate office in Florida under an
original operating lease that expired March 8, 2004. We have renewed the
operating lease for an additional six-year period that will expire October
30, 2010.

Future minimum rental payments required under the operating lease as
of December 31, 2005 are as follows:

Years ending December 31, Amount
------------------------- -------

2006 $97,368
2007 97,368
2008 97,368
2009 97,368
2010 81,140

Rental expense for the years ended December 31, 2005 and 2005 are
$90,000and $68,784, respectively.

Licenses - Advances of Royalties
--------------------------------

Royalty advances are payable against earned royalties on a negotiated
basis. The table below identifies each Licensor to which our licenses
require advance payments and, in addition, reflects the term of the
respective licenses as well as the advance royalties remaining to be paid
on such negotiated advance royalty payments, as of March 30, 2006. We are
current on all advance royalty payments.

Aggregate Advance
Licensor Term Remaining
-----------------------------------------------------------------

Marvel (UK) Two years $120,960
-----------------------------------------------------------------
Marvel (Middle East) Two years 18,900
-----------------------------------------------------------------
Masterfoods Three years 450,000
-----------------------------------------------------------------
Diabetes Research Institute One year $ 3,750
-----------------------------------------------------------------

Employment Contacts
-------------------

Mr. Warren has an employment contract effective October 1, 2005,
having an annual base salary of $300,000, plus a bonus of .25% of top line
net sales revenue and normal corporate benefits. This contract has minimum
two-year terms plus a severance package upon change of control based on
base salary.

Messrs. Toulan, Patipa, Edwards and Kee have employment contracts
effective January 1, 2006, having annual base salaries aggregating
$710,000, plus discretionary bonuses and normal corporate benefits. These
contracts have minimum two-year terms plus severance packages upon change
of control based on base salary.

Mr. Kaplan has an employment contract effective November 1, 2005,
having an annual base salary of $180,000 for year one, $200,000 for year
two and $220,000 for year three, plus discretionary bonuses and normal
corporate benefits. This contract has a minimum three-year terms plus a
severance package upon change of control based on base salary

F-42

BRAVO! FOODS INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Marketing Commitments
---------------------

Coca-Cola Enterprises. We are obligated to spend an aggregate of
$5,000,000 on marketing activities in 2005 and 2006 and thereafter,
beginning in 2007, an amount per year in each country in the defined
territory equal or greater than 3% of our total revenue in such defined
territory (on a country by country basis). Such national and local
advertising for our defined products includes actively marketing the
Slammers mark, based on a plan to be mutually agreed each year. We are
required to maintain our intellectual property rights necessary for the
production, marketing and distribution of our products by CCE.

Marvel UK. We are obligated to contribute to a discretionary
marketing fund at the rate of 3% of royalties payable to Marvel for our
sales in the UK, if requested by Marvel. To date, nor such request has
been made.

Note 11 - Material Events

On August 31, 2005, we entered into a Master Distribution Agreement
with Coca-Cola Enterprises, Inc., which included the attendant grant of
three year warrants by the CCE for the right to purchase 30 million shares
of the Company's common stock at an exercise price of $0.36 per share. The
fair value of the warrants has been recorded as deferred distribution costs
and is being amortized over the life of the distribution agreement.

Note 12 - Accrued Expenses

As of December 31, 2005 and 2004, accrued expenses consisted of:

2005 2004
---- ----

Accrued payroll 636,757 $ 15,000
Discontinued marvel product costs 876,873
Discontinued shrink-wrap costs 49,724
Discontinued costs of 4 pack 375,000
Reclamation out of code costs 409,136
Freight accruals 182,814
Professional fees 106,256 85,000
Interest 343,120 235,480
Slotting fees 160,000
Miscellaneous 100,205 40,482
---------- --------
$3,239,885 $375,962
========== ========

F-43

ITEM 8A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer,
as of the end of the period covered by this report, we conducted an
evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Act of 1934, as of the end of the period covered
by this report. Based on this evaluation, our principal executive officer
and principal financial officer concluded that, as of the period covered by
this report, our disclosure controls and procedures were effective to
provide reasonable assurance that the information required to be included
in our Securities and Exchange Commission ("SEC") reports is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms including our consolidated subsidiaries, and was made known
to them by others within those entities, particularly during the period
when this report was being prepared.

(b) Changes in Internal Controls Over Financial Reporting

In connection with the evaluation required by paragraph (d) of Rule
13a-15 under the Exchange Act, there was no change identified in our
internal control over financial reporting that occurred during the last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The directors, executive officers and significant employees/advisors as of
December 31, 2005, are as follows. Our directors serve for staggered terms
of two years or until their successors are elected.

Year
Name of Officer and Age Position with the Company Appointed
----------------------- ------------------------- ---------

Stanley A. Hirschman 59 Chairman and Director 2000
Roy G. Warren 50 Director, Chief Executive Officer 1997/1999
Jeffrey J. Kaplan 57 Chief Financial Officer 2005
Tommy E. Kee 57 Chief Accounting Officer 2003
Roy D. Toulan, Jr. 60 Vice President, Corporate Secretary, General Counsel 2003
Michael Edwards 45 Chief Revenue Officer 2000
Benjamin Patipa 49 Chief Operating Officer 2002
Arthur W. Blanding 78 Director 1999
Robert Cummings 63 Director 1997
John McCormack 47 Director 1997
Phillip Pearce 77 Director 1997

The experience and background of the Company's executive officers
follow:

Mr. Stanley A. Hirschman - Chairman and Director since September 2000

Mr. Hirschman is president of CPointe Associates, Inc., an executive
management and consulting firm specializing in solutions for emerging
companies with technology-based products. In addition, he is a director of
Redwood Grove Capital Management, LLC, Global Marketing Partners, Inc. and
AirNET Wireless, LLC. CPointe was formed in 1996. Prior to establishing
CPointe Associates, Mr. Hirschman was vice president of operations of
Software, Etc., Inc., a retail software chain, from 1989 until 1996. Mr.
Hirschman has also held senior management positions with retailers T.J.
Maxx, Gap Stores and Banana Republic. Mr. Hirschman currently serves on
the Audit Committee of the Company's board of directors.

Mr. Roy G. Warren - Chief Executive Officer since May 1999; Director since
1997

Mr. Warren serves as our Chief Executive Officer and as a director.
As Chief Executive Officer, Mr. Warren continues to develop strategy for
our growth and external financial matters.

For 15 years from 1981 through 1996, Mr. Warren was in the securities
brokerage industry. During those years, Mr. Warren acted as executive
officer, principal, securities broker and partner with brokerage firms in
Florida, most notably Kemper Financial Companies, Alex Brown & Sons and
Laffer Warren & Company. Mr. Warren currently serves on the Executive
Committee of the Company's board of directors.

Mr. Warren also serves as a director of our wholly owned U.K.
subsidiary, Bravo! Brands (UK) Ltd.

Mr. Tommy E. Kee -Chief Financial Officer 2003 - 2005; Chief Accounting
Officer since 2005

Tommy Kee joined our company in March 2003 as Chief Financial
Officer. Mr. Kee currently serves as our Chief Accounting Officer for our
company. He graduated with an MBA from the University of Memphis and a BS
degree in accounting from the University of Tennessee. Before joining us,
he

served for several years as CFO for Allied Interstate, Inc. in the West
Palm Beach area. Prior to that, Mr. Kee served as CFO and Treasurer for
Hearx Ltd. a West Palm Beach, Florida public company. He also served 18
years as International Controller and Financial Director with the Holiday
Inns Inc. organization in Memphis and Orlando. Mr. Kee handles all
financial management and reporting for our company and works closely with
our external auditors and general counsel for financial reporting and SEC
compliance.

Mr. Jeffrey Kaplan - Chief Financial Officer since 2005

Mr. Kaplan joined Bravo! in October 2005 as Chief Financial Officer.
Mr. Kaplan served as Executive Vice President and Chief Financial Officer
of BIB Holdings, Ltd. and then its private company spin-off, Elk Canyon
Ltd., designers of jeanswear and loungewear, from October 2003 to September
2005. He served as Executive Vice President of Business Affairs of
Viewpoint Corporation, a graphics software company, from November 2001 to
September 2003 and its Executive Vice President and Chief Financial Officer
from February 2001 to October 2001. Mr. Kaplan served as Executive Vice
President and Chief Financial Officer of Rare Medium Group Inc., an IT
professional services company, from October 1999 to February 2001. Mr.
Kaplan received his Bachelor of Arts degree in political science from Brown
University in 1970 and his Masters of Business Administration in finance
from New York University in 1972.

Mr. Roy D. Toulan, Jr. - Vice President, Corporate Secretary, General
Counsel since 2003

Roy Toulan began with the original founders as outside corporate
counsel in 1997 and has been responsible for all of our corporate and
business legal work, including securities matters. Mr. Toulan became
Corporate Counsel in October 2002, when he left his private legal practice
in Boston, and Vice President in January 2003. He received his law degree
from Catholic University in Washington D.C., and for the first 15 years of
his career practiced corporate and securities litigation with large law
firms in New York and Boston. Before joining our company full time, he
spent the last 18 years of his private practice in Boston, Massachusetts,
engaged in general corporate and securities law helping companies with
corporate structure and funding, both domestically and internationally.
Mr. Toulan also serves as a director of our wholly owned U.K. subsidiary,
Bravo! Brands (UK) Ltd.

Mr. Michael Edwards - Chief Revenue Officer since 2003

Mr. Edwards has been with our company in a sales and marketing
capacity since 2000. Prior to that time, he worked for 5 years in beverage
marketing research for Message Factors, Inc., a Memphis, Tennessee
marketing research firm. Mr. Edwards has a BS degree from Florida State
University in Management and Marketing and spent 13 years in the banking
industry, leaving CitiBank to join Message Factors in 1995.

Dr. Benjamin Patipa - Chief Operating Officer since 2004

Dr. Patipa is a pediatrician with over fifteen years of experience in
directing operations, marketing, sales and facilitating growth in both
public and private companies. In 1987, Dr. Patipa founded and served as
the chairman and CEO of Weight For Me, Inc., a company that developed a
proprietary program which pioneered the delivery of weight control and
nutrition services to the over 12 million obese children and adolescents in
America. Weight For Me earned national and international recognition as the
premier program for the control of obesity in children and adolescents. Dr.
Patipa also served at HEARx Ltd. as a member of the Executive Operating
Committee and Sonus USA, Inc., where he lead the company's franchise
licensing and buying group business in the Southeast United States. Most
recently, Dr. Patipa served as Senior Vice President and Operational Head
of eHDL/HealthNet Data Link, Inc., a national electronic healthcare
information company.

Mr. Arthur W. Blanding - Director Since November 1999

Mr. Blanding is president of The Omega Company, an international
dairy industry consulting company. Mr. Blanding has over 50 years
experience in management of dairy processing, sales and strategic planning
consulting. He graduated from Michigan State University in 1956, with a
degree in food science, and in 1964 from Oregon State University with a
degree in Food Microbiology and attended Harvard Business School.

As President of The Omega Company for the past 20 years, Mr. Blanding
has completed over 200 projects successfully, both in the U.S. and abroad.
Clients of The Omega Company include Abbott International, Cumberland
Farms, Dairy Gold, Farm Fresh, Inc., Haagen Dazs, Labatt, Ross Laboratories
and Stop & Shop Company, among others. Mr. Blanding was a consultant for
the design and construction of the dairy processing facility built in
Shanghai by Green Food Peregrine. The Omega Company is a party to a
consulting contract with the Company concerning technical and production
issues.

Mr. Robert J. Cummings - Director Since 1997

Mr. Cummings' work experience includes ten years in purchasing at
Ford Motor Company. In 1975, he founded and currently operates J & J
Production Service, Inc., a manufacturing representative business, which is
currently responsible for over $300 million in annual sales.

Mr. Phillip Pearce - Director Since 1997

Mr. Pearce is a "retired" member of the securities industry. Mr.
Pearce served as Chairman of the NASD during which time he was instrumental
in the founding of NASDAQ. Additionally, Mr. Pearce was a former Director
of E.F. Hutton and has served as Governor of the New York Stock Exchange.
Since his retirement in 1988, Mr. Pearce has remained active in the
securities industry as a corporate financial consultant. Mr. Pearce serves
on the compensation committee of our board of directors. Mr. Pearce also
serves on our audit committee. Mr. Pearce serves as a director of
Xybernaut Corporation, a reporting company, and Redwood Grove Capital
Management, LLC.

Mr. John McCormack - Director since 1997

From December 2000 to March 2003, Mr. McCormack served as our
President and Chief Operating Officer. Prior to his employment with the
Company, Mr. McCormack served as an executive with Dean Foods Co. for over
15 years. As a Vice President of Dean Foods, he was in charge of Dean
Food's mid-western division out of Chicago, Illinois. Mr. McCormack
currently is employed by Coca-Cola Enterprises Inc. as a Regional Sales
Manager for the supermarket channel in Wisconsin, Minnesota and Northern
Illinois.

Compliance with Section 16(a) of the Exchange Act

Based upon a review of the appropriate Forms 3, 4 and 5 and any
amendments to such forms filed pursuant to Section 16(a), we report the
following: during 2005, our directors and executive officers did not file
Form 4s for options that were authorized pursuant to an incentive stock
option compensation plan until issued.

ITEM 10. EXECUTIVE COMPENSATION

Compensation of directors

We compensated Directors for their travel expenses to and from board
of directors' meetings in 2002, 2003, 2004 and, in 2005, paid an additional
$1,000 per personal attendance and $500 for a telephonic attendance. In
2004, there were three in person meetings and four telephonic board
meetings. In 2005, there were three in person meetings and four telephonic
board meetings. Directors received options for 35,000 shares of common
stock for each year as a director through 2001. Each member of the
executive committee has received options for an additional 40,000 shares of
common stock for their services from 1998 through 2001. Directors received
additional options for 25,000 shares for 2002 and 2003. On January 13,
2004, the Directors unanimously voted to convert the options to common
stock on a one for one basis. The common shares so converted were issued
pursuant to a Form S-8 registration statement filed December 23, 2004.

On January 13, 2004, the Board of Directors adopted a plan to convert
on a one for one basis the options granted to our present employees and the
directors currently serving on the Board into a like number of our
restricted shares of common stock at the then market value of $0.08 per
share. The conversion of the options to common stock for any individual
director or employee was conditioned upon a "lockup" agreement by such
director or employee, pursuant to which the recipients of such common stock
could not sell, transfer, pledge or hypothecate such common stock for a
six-month period.

On April 6, 2005, our Directors voted to adopt a Stock Option
Incentive Plan for the grant of options to directors, employees and
consultants for the purchase of up to 10,397,745 shares of our common
stock. On May 12, 2005, the Board of Directors accepted and adopted the
determination of the Compensation Committee to grant 3,572,744 of the
authorized options to our directors.

Compensation of executive officers

The following table sets forth the compensation paid during the last
three fiscal years to our Chief Executive Officer and our other executive
officers:

Summary Compensation

Annual Compensation Long-Term Compensation
----------------------------------------------- --------------------------------------
Restricted Stock
Awards and All Other
Name & Position Year Base Salary Bonus Other Options Compensation (6)

Roy G. Warren 2003 $220,000 2005 Ten Year $300,000 salary
President & CEO Options for $16,272
Director 2004 220,000 $137,750 (1) 2,500,000 common (insurance)
$8,462 bonus (3) valued at
2005 240,000 156,538 bonus (4) $42,000 (5) $300,000; vested
over 18 months

Roy D. Toulan, Jr. 2003 $180,000 $28,000 (2) $5,841 2005 Ten Year $190,000 salary
Vice President Life & Options for $10,178
Secretary 2004 180,000 $15,000 (1) disability 600,000 common (insurance)
Corporate Counsel 6,923 bonus (3) insurance valued at $72,000;
2005 182,231 7,308 bonus (3) $38,552 (5) vested over 18
months

Michael Edwards 2005 $162,923 $6,923 bonus (3) $34,161 (5) 2005 Ten Year $180,000 salary
Chief Revenue Options for $13,407
Officer 600,000 common (insurance)
valued at $72,000;
vested over 18
months

Benjamin Patipa 2004 $142,615 $6,923 bonus (3) $32,107 (3) 2005 Ten Year $180,000 salary
Chief Operating 11,000 bonus (4) Options for $13,336
Officer 600,000 common (insurance)
valued at $72,000;
vested over 18
months

Tommy E. Kee 2003 $120,000 2005 Ten Year $160,000 salary
Chief Accounting; Options for $14,874
Officer 2004 120,000 $15,000 (1) 600,000 common (insurance)
4,615 bonus (3) valued at $72,000;
2005 140,923 6,154 bonus (3) $31,415 (3) vested over 18
10,000 bonus (4) months

The reported values of options converted in 2004 are pursuant to a
January 13, 2004 vote of Directors authorizing conversion, and are
valued $0.05 per share.
100,000 shares of common stock in 2003 as a signing bonus, valued at
$28,000.
Year end bonus
Special performance based bonus
SEP/IRA Bonus, 2005
Amount paid for termination of employment owing to change of control,
based on base salary for 2006

Option Grants 2005

Aggregated Options Exercised in Last Fiscal Year And Fiscal Year-End Option
Values

None

Compensation Plans
------------------

Senior Management

On April 6, 2005, our Directors voted to adopt a Stock Option
Incentive Plan for the grant of options to directors, employees and
consultants for the purchase of up to 10,397,745 shares of our common
stock. On May 12, 2005, the Board of Directors accepted and adopted the
determination of the Compensation Committee to grant 4,900,000 of the
authorized option to our senior management.

Employment contracts

Roy G. Warren Chief Executive Officer
-------------------------------------

On September 14, 2005, the Compensation Committee of the Board of
Directors recommended a new compensation package for Mr. Warren in
recognition of his work to expand our business and in light of the then
recent execution of a ten-year Master distribution Agreement with Coca-Cola
Enterprises Inc. The basic compensation package adopted by the Company for
Mr. Warren provides, as follows:

* Annual base salary of $300,000 paid in accordance with established
Company payment procedures.
* Quarterly bonus of one-quarter of one percent (.0025) of top-line
net sales revenue.
* Company benefits as customarily awarded to executive members of
management.
* Participation in Employee and Director Stock Option programs.
* A "Special Circumstances" bonus of $500,000 to be awarded upon the
signing of a Master Distribution Agreement with CCE. Bonus to be
paid in the following manner:
* One-half paid as a cash award or, at the awardees option, in
Company stock.
* One-half paid in Company stock, with the issuance of such
being in the form of S-8 or other method as determined by
counsel.
* Effective October 1, 2005, and for a period of not less than 24
months

Roy D. Toulan, Jr., Vice President, General Counsel and Corporate
-----------------------------------------------------------------
Secretary
---------

A new compensation package became effective for Mr. Toulan on January
1, 2006. The basic compensation package adopted by the Company for Mr.
Toulan provides, as follows:

* Annual base salary of $190,000 paid in accordance with established
Company payment procedures.
* Quarterly bonus at discretion of management based upon meeting
performance goals.
* Company benefits as customarily awarded to executive members of
management.
* Participation in Employee and Director Stock Option programs.
* Effective January 1, 2006, and for a period of not less than 24
months

Jeffrey J. Kaplan, Chief Financial Officer
------------------------------------------

Mr. Kaplan's employment contract provides, as follows:

* Annual base salary of $180,000 in year one paid in accordance with
established Company payment procedures; $200,000 in year two and
$220,000 in year three.
* Quarterly bonus at discretion of management based upon meeting
performance goals.
* Company benefits as customarily awarded to executive members of
management.
* Participation in Employee and Director Stock Option programs.
* Options for 200,000 common shares at market on November 1, 2005 as
signing bonus
* Effective November 1, 2005, and for a period of not less than 36
months

Benjamin Patipa, Chief Operating Officer
----------------------------------------

A new compensation package became effective for Dr. Patipa on January
1, 2006. The basic compensation package adopted by the Company for Dr.
Patipa provides, as follows:

* Annual base salary of $180,000 paid in accordance with established
Company payment procedures.
* Quarterly bonus at discretion of management based upon meeting
performance goals.
* Company benefits as customarily awarded to executive members of
management.
* Participation in Employee and Director Stock Option programs.
* Effective January 1, 2006, and for a period of not less than 24
months

Michael Edwards, Chief Revenue Officer
--------------------------------------

A new compensation package became effective for Mr. Edwards on
January 1, 2006. The basic compensation package adopted by the Company for
Mr. Edwards provides, as follows:

Tommy E. Kee, Chief Accounting Officer
--------------------------------------

A new compensation package became effective for Mr. Kee on January 1,
2006. The basic compensation package adopted by the Company for Mr. Kee
provides, as follows:

* Annual base salary of $160,000 paid in accordance with established
Company payment procedures.
* Quarterly bonus at discretion of management based upon meeting
performance goals.
* Company benefits as customarily awarded to executive members of
management.
* Participation in Employee and Director Stock Option programs.
* Effective January 1, 2006, and for a period of not less than 24
months

Securities authorized for issuance under equity compensation plans
------------------------------------------------------------------

The equity compensation reported in this section has been a issued
pursuant to individual compensation contracts and arrangements with
employees, directors, consultants, advisors, vendors, suppliers, lenders
and service providers. The equity is reported on an aggregate basis as of
December 31, 2005. Our security holders have not approved the compensation
contracts and arrangements underlying the equity reported.

Number of securities Weighted average
to be issued upon price of outstanding Number of securities remaining
Compensation Plan exercise of options, options, warrants for future issuance under equity
Category warrants and rights and rights compensation plans
-----------------------------------------------------------------------------------------------------------

Directors (former) 325,000 $0.71 0 individual plans
-----------------------------------------------------------------------------------------------------------
Employees (former) 550,000 $0.87 60,000 individual plans
-----------------------------------------------------------------------------------------------------------
Directors/Management 8,922,745 $0.245 1,475,000 2005 Stock Option
& Employees Incentive Plan(1)
-----------------------------------------------------------------------------------------------------------
Consultants 460,000 $0.30 0 individual plans
-----------------------------------------------------------------------------------------------------------
Lender 25,000 $0.40 0 individual plan
-----------------------------------------------------------------------------------------------------------
Total 10,282,745 $0.77 1,535,000
-----------------------------------------------------------------------------------------------------------

On April 6, 2005, our Directors voted to adopt a Stock Option
Incentive Plan for the grant of option to directors, employees and
consultants for the purchase of up to 10,397,745 shares of our common
stock. On May 12, 2005, the Board of Directors accepted and adopted the
determination of the Compensation Committee to grant 8,922,745 of the
authorized option to our employees, directors and certain consultants. The
ten-year options vest over a period of eighteen months and have exercise
prices varying from $0.20 per share to $0.30 per share, with a weighted
average exercise price of $0.24 per share.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our company's
common stock as of March 24, 2006, as to

* each person known to beneficially own more than 5% of the
Company's common stock
* each of our directors
* each executive officer
* all directors and officers as a group

The following conditions apply to all of the following tables:

* except as otherwise noted, the named beneficial owners have direct
ownership of the stock and have sole voting and investment power
with respect to the shares shown
* the class listed as "common" includes the shares of common stock
underlying the Company's issued convertible preferred stock,
options and warrants

Beneficial Owners
-----------------

Name and Address of Amount and Nature of
Title of Class Beneficial Owner (1) Beneficial Ownership Percent of Class (2)
---------------------------------------------------------------------------------------------------

Common Coca-Cola Enterprises Inc. 30,000,000 16.28%
2500 Windy Ridge Parkway
Atlanta, GA 30339
---------------------------------------------------------------------------------------------------
Common Mid-Am Capital, L.L.C. (3) 19,970,723 9.99%
Northpointe Tower
10220 North Ambassador Drive
Kansas City, MO 64190
---------------------------------------------------------------------------------------------------
Common Lombard Odier Darier 16,500,000 8.95%
Hentsch & Cie (4)
Rue de la Corraterie 11
1204 Geneva
---------------------------------------------------------------------------------------------------
Common Magnetar Capital Master 13,750,000 7.46%
Fund, Ltd (4)
1603 Orrington Avenue
13th Floor
Evanston, IL 60201
---------------------------------------------------------------------------------------------------

Beneficial Ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting
or investment power with respect to securities. Shares of common
stock subject to options or warrants currently exercisable or
convertible, or exercisable or convertible within 60 days of March
24, 2005 are deemed outstanding for computing the percentage of the
person holding such option or warrant but are not deemed outstanding
for computing the percentage of any other person.
Percentage calculated from base of 184,253,753 shares of common stock
issued and outstanding.
This owner is contractually limited to a beneficial ownership of our
equity not to exceed 9.99%. Equity listed consists of convertible
preferred, convertible debentures and/or warrants.
Equity listed consists of common stock and warrants to purchase
common stock

Management Owners
-----------------

Name and Address of Amount and Nature of
Title of Class Management Owner Ownership (1) Percent of Class (2)
--------------------------------------------------------------------------------------------------

Common Roy G. Warren 5,781,765(3) 3.13%
11300 US Highway No.1
N. Palm Beach, FL
--------------------------------------------------------------------------------------------------
Common Robert Cummings 1,130,038(4) Less than 1%
2829 N.E. 44th Street
Lighthouse Point, FL
--------------------------------------------------------------------------------------------------

Common John McCormack 1,312,538(4) Less than 1%
8750 South Grant
Burridge, IL 60521
--------------------------------------------------------------------------------------------------
Common Mr. Arthur W. Blanding 947,297(5) Less than 1%
Janesville, WI 53545
--------------------------------------------------------------------------------------------------
Common Phillip Pearce 962,297(6) Less than 1%
6624 Glenleaf Court
Charlotte, NC 28270
--------------------------------------------------------------------------------------------------
Common Stanley Hirschman 1,040,652(7) Less than 1%
2600 Rutgers Court
Plano, Texas 75093
--------------------------------------------------------------------------------------------------
Common Roy D. Toulan, Jr. 1,615,121(8) Less than 1%
VP, General Counsel
6 Wheelers Pt. Rd
Gloucester, MA 01930
--------------------------------------------------------------------------------------------------
Common Tommy Kee 1,042,385(8) Less than 1%
Chief Accounting Officer
11300 US Highway 1
N. Palm Beach, FL 33408
--------------------------------------------------------------------------------------------------
Common Benjamin Patipa 1,358,700(8) Less than 1%
Chief Operating Officer
6139 Indian Forest Circle
Lake Worth, FL 33463
--------------------------------------------------------------------------------------------------
Common Michael Edwards 2,000,000(8) 1.08%
Vice President Sales
4140 S.E. Old St. Lucie Blvd.
Stuart, FL 34996
--------------------------------------------------------------------------------------------------
Common Executive officers and 17,190,793 9.32%
directors as a group
--------------------------------------------------------------------------------------------------

Beneficial Ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting
or investment power with respect to securities. Shares of common
stock subject to options or warrants currently exercisable or
convertible, or exercisable or convertible within 60 days of March
24, 2005 are deemed outstanding for computing the percentage of the
person holding such option or warrant but are not deemed outstanding
for computing the percentage of any other person.
Percentage calculated from base of 184,253,753 shares of common stock
issued and outstanding.
Includes options to purchase 2,500,00 shares of our common stock
pursuant to a 2005 Incentive Stock Option Plan adopted by the Board
of Directors on May 12, 2005.

Includes options to purchase 565,038 shares of our common stock
pursuant to a 2005 Incentive Stock Option Plan adopted by the Board
of Directors on May 12, 2005.
Includes options to purchase 494,408 shares of our common stock
pursuant to a 2005 Incentive Stock Option Plan adopted by the Board
of Directors on May 12, 2005.
Includes options to purchase 706,297 shares of our common stock
pursuant to a 2005 Incentive Stock Option Plan adopted by the Board
of Directors on May 12, 2005.
Includes options to purchase 670,982 shares of our common stock
pursuant to a 2005 Incentive Stock Option Plan adopted by the Board
of Directors on May 12, 2005.
Includes options to purchase 600,000 shares of our common stock
pursuant to a 2005 Incentive Stock Option Plan adopted by the Board
of Directors on May 12, 2005.

There currently are no arrangements that may result in a change of
ownership or control.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

John Mc McCormack has been a director of the Company since 1997 and
was our Chief Operating Officer from December 200 to March 2003. Since
December 2005, Mr. McCormack has been employed by Coca-Cola Enterprises
Inc. as a Regional Sales Manager for the supermarket channel in Wisconsin,
Minnesota and Northern Illinois.

ITEM 13. EXHIBITS

Exhibit Incorporated Filed
No. Document Description by Reference Herewith
---------------------------------------------------------------------------------------------------

3.1 Articles of Incorporation (1)
3.2 Amended Articles (name change) (1)
3.4 Restated Bylaws (1)
4 Rights of Equity Holders
4.1 Preferred, Series B Designation (1)
4.2 Preferred, Series F Designation (2)
4.3 Preferred, Series G Designation (3)
4.4 Preferred, Series H Designation (6)
4.5 Preferred, Series I Designation (7)
4.6 Preferred, Series J Designation (8)
4.7 Preferred, Series K Designation (10)
4.8 Subscription Agreement dated November 2003 entered (11)
with Gamma Opportunity Capital Partners, LP
4.9 Class A Common Stock Purchase Warrant issued to (11)
Gamma Opportunity Capital Partners, LP
4.10 Class B Common Stock Purchase Warrant issued to (11)
Gamma Opportunity Capital Partners, LP
4.11 Convertible Note issued to Gamma Opportunity Capital (11)
Partners, LP dated November 2003
4.12 Class A Common Stock Purchase Warrant issued to (11)
Libra Finance, S.A.
4.13 Subscription Agreement dated November 2003 entered (11)
with MID-AM CAPITAL, L.L.C
4.14 Class A Common Stock Purchase Warrant issued to (11)
MID-AM CAPITAL, L.L.C.
4.15 Class B Common Stock Purchase Warrant issued to (11)
MID-AM CAPITAL, L.L.C
4.16 Convertible Note issued to MID-AM CAPITAL, L.L.C. (11)
dated November 2003
4.17 Subscription Agreement dated April 2, 2004 entered (11)
with Alpha Capital Aktiengesellschaft and
Longview Fund LP

Exhibit Incorporated Filed
No. Document Description by Reference Herewith
---------------------------------------------------------------------------------------------------

4.18 Convertible Note issued to Alpha Capital (11)
Aktiengesellschaft dated April 2004
4.19 Convertible Note issued to Longview Fund LP dated (11)
April 2004
4.20 Common Stock Purchase Warrant issued to Alpha (11)
Capital Aktiengesellschaft dated April 2004
4.21 Common Stock Purchase Warrant issued to Longview (11)
Fund LP dated April 2004
4.22 Subscription Agreement entered by and between the (12)
Company and Mid-AM Capital LLC dated June 2004
4.23 Convertible Note issued to Mid-AM Capital LLC dated (12)
June 2004
4.24 Common Stock Purchase Warrant A issued to Mid-AM (12)
Capital LLC dated June 2004
4.25 Common Stock Purchase Warrant B issued to Mid-AM (12)
Capital LLC dated June 2004
4.26 Subscription Agreement entered by and between the (12)
Company and Alpha Capital, Longview Fund LP,
Stonestreet Limited Partnership, Whalehaven Funds
Limited and Gamma Opportunity Capital Partners LP
dated June 2004
4.27 Form of Common Stock Purchase A issued to Alpha (12)
Capital, Longview Fund LP, Stonestreet Limited
Partnership, Whalehaven Funds Limited and Gamma
Opportunity Capital Partners LP dated June 2004
4.28 Form of Common Stock Purchase B issued to Alpha (12)
Capital, Longview Fund LP, Stonestreet Limited
Partnership, Whalehaven Funds Limited and Gamma
Opportunity Capital Partners LP dated June 2004
4.29 Form of Convertible Note issued to Alpha Capital, (12)
Longview Fund LP, Stonestreet Limited Partnership,
Whalehaven Funds Limited and Gamma Opportunity
Capital Partners LP dated June 2004
4.30 Subscription Agreement entered by and between the (12)
Company and Alpha Capital, Longview Fund LP,
Stonestreet Limited Partnership and Whalehaven Funds
Limited dated October 2004
4.31 Form of Common Stock Purchase C issued to Alpha (12)
Capital, Longview Fund LP, Stonestreet Limited
Partnership and Whalehaven Funds Limited dated
October 2004
4.32 Form of Convertible Note issued to Alpha Capital, (12)
Longview Fund LP, Stonestreet Limited Partnership,
Whalehaven Funds Limited and Gamma Opportunity
Capital Partners LP dated October 2004
4.33 Subscription Agreement entered by and between the (12)
Company and Momona Capital Corp. and Ellis
International Ltd. dated December 2004
4.34 Form of Common Stock Purchase C issued to Momona (12)
Capital Corp. and Ellis International Ltd. dated
December 2004
4.35 Form of Convertible Note issued to Momona Capital (12)
Corp. and Ellis International Ltd. dated December 2004
4.36 Form of Convertible Note issued to Alpha Capital, (13)
Longview Fund LP, Longview Equity Fund LP,
Longview International Equity Fund LP and
Whalehaven Funds Limited dated January 2005

Exhibit Incorporated Filed
No. Document Description by Reference Herewith
---------------------------------------------------------------------------------------------------

4.37 Subscription Agreement entered by and between the (13)
Company and Alpha Capital, Longview Fund LP,
Longview Equity Fund LP, Longview International
Equity Fund LP and Whalehaven Funds Limited dated
January 2005
4.38 Form of Common Stock Purchase Warrant issued to (13)
Alpha Capital, Longview Fund LP, Longview Equity
Fund LP, Longview International Equity Fund LP and
Whalehaven Funds Limited dated January 2005
4.39 Form of Securities Purchase Agreement with 13 (14)
institutional investors in connection with November 28,
2005 $20,250,000 financing
4.40 Form of Stock Purchase Warrant in connection with (14)
November 28, 2005 $20,250,000 financing
10 Material Contracts
10.1 Warner Bros China License Agreement (5)
10.2 Warner Bros. China License Agreement (modified) (5)
10.3 Warner Bros. U.S. License Agreement. (5)
10.4 Warner Bros. Mexico. License Agreement (6)
10.5 Warner Bros. Canada. License Agreement (6)
10.6 MoonPie License Agreement (10)
10.7 Marvel License Agreement (US) (10)
10.8 SADAFCO Production Agreement (10)
10.9 Real Estate Lease Amendment Extending Term (10)
10.10 Masterfoods License (13)
Marvel Enterprises License (UK) (13)
Coca-Cola Enterprises Master Distribution Agreement (15)
16.1 Letter on change or certifying accountant (9)
21.1 Subsidiary Articles of Association (4)
31.1 Certification of CEO, Rules 13a-14(a) & 15d-14(a) X
31.2 Certification of CFO, Rules 13a-14(a) & 15d-14(a) X
32.1 Certifications of CEO & CFO, 18 U.S.C. Sec. 1350 X

Filed with Form 10SB/A First Amendment
Filed with Form 10K-SB for 12-31-99
Filed with Form 10QSB for 6-30-00
Filed with Form SB-2/A Second Amendment
Filed with Form SB-2/A Third Amendment
Filed with Form 10K-SB 2001
Filed with Form 10QSB for 6-30-02
Filed with Form 8-K for 10-02-02
Filed with Form 8-K for 3-26-04
Filed with Form 10K-SB 2003
Filed with Form SB-2 June 4, 2004
Filed with Form SB-2 January 21, 2005
Filed with Form 10K-SB 2004
Filed with Form 8-K for 11-28-05
Filed with Form 10QSB for 9-30-05

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees
----------

The aggregated fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of
our annual financial statements and review of financial statements included
in our Forms 10-QSB were $109,279 and $86,493 respectively for 2005 and
2004.

Audit Related Fees
------------------

None

Tax Fees
--------

In 2005, we paid an aggregate of $37,000 for the preparation of 2004
and prior years tax returns.

All Other Fees
--------------

During 2005, we paid $3,522 to the principal accountant for services
performed in connection with the implementation of Sarbanes Oxley Section
404.

Audit Committee Pre-Approval Policies
-------------------------------------

The audit committee makes reasonable inquiry as to the independence
of our principal auditors based upon the considerations set forth in Rule
2-01 of Regulation S-X, including the examination of representation letters
furnished by the principal accountant. The audit committee has not
approved any services beyond those required for the audit of our annual
financial statements, review of financial statements included in our Forms
10-KSB and preparation of corporate tax returns.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, Bravo! Foods International Corp. has caused this report to be
signed on its behalf by the undersigned, thereunder duly authorized, this
March 30, 2006.

BRAVO! FOODS INTERNATIONAL CORP.
(Formerly China Premium Food Corporation)

By: /S/ Roy G. Warren, Chief
Executive Officer

In accordance with the Securities Exchange Act of 1934, Bravo Foods
International Corp. has caused this report to be signed on its behalf by
the undersigned in the capacities and on the dates stated.

Signature Title Date
--------- ----- ----

/S/ Roy G. Warren Chief Executive Officer March 30, 2006

/S/ Tommy E. Kee Chief Accounting Officer March 30, 2006