Filed by Automated Filing Services Inc. (604) 609-0244 - Melt, Inc.

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

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

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

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was sold, or the average bid and asked prices of such common
equity, as of a specified date within 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.)

13,500,000 common shares at $0.20⁽¹⁾ per common share = $2,700,000.00

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS)

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

State the number of shares outstanding of each of the issuer's classes of equity stock, as of the latest practicable date.

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form
10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities
Act of 1933 ("Securities Act"). The listed documents should be clearly described for identification purposes (e.g.,
annual report to security holders for fiscal year ended December 24, 1990).

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

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

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

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

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

We were incorporated in the State of Nevada on July 18, 2003 with the intention to commence operations as a gelato bar and coffee shop through our wholly-owned subsidiary, Melt CA. Our wholly-owned subsidiary, Melt CA, was incorporated in the State of California on August 6, 2003 and our wholly-owned subsidiary Melt Franchising LLC was incorporated in the state of Nevada on February 26, 2005. Melt Franchising is responsible for the sale of franchises and support of our franchisees. We opened our first corporate owned retail outlet on November 28, 2003.

On July 27, 2004, we incorporated Villa Melt LLC in the State of California for the purpose of operating retail gelato bars. Upon incorporation and until August 22, 2006, we owned 50% of the equity, while a previous supplier of our company (Dolci Dolci LLC) owned the other 50%. On August 22, 2006, we entered into an agreement with Dolci Dolci LLC wherein we agreed to sell our interest in Villa Melt.

Through our wholly-owned subsidiary, Melt Franchising LLC, we franchise retail gelato bars and quick casual restaurants under the name of "Melt-gelato italiano®",“Melt – café & gelato bar®”, and “Melt gelato and crepe cafe®.” Our subsidiary, Melt CA, was responsible for owning and operating corporate owned gelato bars, and constructing gelato bars, for and on behalf of, franchisees. Currently our company does not own or operate any gelato bars. Our main business strategy is in licensing our brand and business methodology to franchise owned and operated stores. To date, we have sold 47 franchises, of which 23 are currently open and operating stores, 14 in California, 4 in Arizona, 2 in Massachusetts, 1 in Ohio, 1 in Illinois and 1 in Connecticut. 4 stores have closed, 4 have been transferred and 14 agreements have been terminated due to franchisees not finding suitable locations within the time period allowed. As of March 15, 2008, we have entered into franchise agreements for an additional 4 stores, which we expect to open in 2008.

As of September 2007, we discontinued our operations in Melt CA, and will no longer offer the services of constructing stores for our franchisees, due to continuing losses and infrastructure requirements.

On March 21, 2005, we filed a Uniform Franchise Offering Circular (UFOC) which allowed our company to offer franchises in those states that do not require registration and in California, Washington, Illinois, and New York, which require registration. As of April 2005, we embarked on an aggressive strategy to grow our business through the sale of franchises. We commenced marketing in July 2005 and have entered into 49 franchise agreements as of March 15, 2008.

On May 28, 2006, we entered into an Asset Purchase Agreement and Bill of Sale for our corporate owned store located in the Galleria at Tyler, Riverside, CA. As a result of this transaction, a gain on sale of equipment of $94,592 was recorded in the second quarter of 2006.

On August 22, 2006, we entered into an agreement to sell our equity interest in our 50% subsidiary, Villa Melt, LLC, to the remaining interest holders for $145,000. Upon close of the sale, we recognized a loss on sale of assets of $22,149. With the sale of this subsidiary, our company no longer has any company operated locations.

Our revenue is derived from several sources. Revenue is recognized by initial franchise fees charged to new franchisees and recurring royalties based on sales made at franchisee owned and operated stores. We also sell food and beverages to franchise owned and operated stores. A portion of our revenue during 2007 was generated through the management of the construction of retail locations and the sale of equipment to franchisees, however as of September 30, 2007 we have closed this department and no longer offer this as a service.

Our main products sold in the retail stores are gelato, sorbetto, crepes, paninis, salads, smoothies, coffee, sodas, and other food related items.

In 2007, we opened 12 new franchise owned and operated stores in Arizona, California, Connecticut, Illinois, Massachusetts, and Ohio, and closed 4 stores in Florida, Missouri and California. In 2008, we plan to reduce the pace of our growth with the intention of solidifying our operations and procedures, improving our in store and retail marketing program, and fine tuning the look and feel of the stores. To date, most of our stores are located in major regional shopping malls, however, in 2008 we will be testing the concept outside of malls with the intention of creating a destination point as opposed to an impulse buy. The appeal of our product and concept allows us to target customers which includes a broad demographic comprised of males and females of all ages and all incomes, however we will primilarly concentrate in areas that have a joint family income of $75,000 and greater.

We currently obtain our main products from two suppliers. We believe our suppliers have the capability to increase production to meet our needs now and in the future.

The quick service and quick casual service food sector is characterized by intense and substantial competition. We believe that our business competes with large and established ice cream retailers such as Ben & Jerry's, Haagen-Dazs, Dreyer’s, Baskin-Robbins, Dairy Queen and Cold Stone Creamery Company, as well as other small to medium sized ice cream, and yogurt business entities that provide similar products, as well as other quick service and quick casual food retailers. Direct competition with retail food stores that market and sell Italian ice cream (gelato) is, however, limited to a few small companies with less than 20 stores and individual business people that

have one to a few gelato bars. The market is growing at a rapid rate and new gelato bars are opening up in various markets across the country.

As of December 1, 2007, we entered into an unwritten agreement with Chill Inc. whereby all employees of our company and our subsidiaries were transferred to Chill Inc. This was done to simplify the operations at Melt and to reduce audit and other costs. Chill Inc. is a non arms length company in that Clive Barwin and Brandon Barwin are shareholders of Chill Inc. As a result of this verbal agreement, we are not subject to collective bargaining agreements. We intend to enter into a formal agreement with Chill Inc. in the near future.

President, Chief Executive Officer and Chief Financial Officer – Clive Barwin, has direct responsibility for overall management, marketing, finance, product and business development.

Vice-President (Operations) – Brandon Barwin, has direct responsibility for operations of franchise owned stores.

Vice President and General Counsel – Josiah Puder, Esq., manages our company’s legal affairs and assists in the strategic development of our company.

Our plan for the year ending 2008 includes opening 6 franchise owned and operated stores in 3 states. We have dramatically slowed down our growth to allow us time to get the financial affairs of our business under control and spend time improving the operations, procedures and marketing departments before expanding at a more rapid rate in 2009. Our plan in 2009 includes opening 24 franchise owned stores. During the years ahead, we plan on being more selective in allowing people to become franchisees with the intention of reducing the number of failing or under performing stores.

We are in the perishable food industry. The development, manufacture and marketing of products sold by our company is subject to extensive regulation by various government agencies, including the U.S. Federal Trade Commission, Franchise Trade Commission as well as various state and local agencies including state health department and building departments. To date we have been able to satisfy all the requirements of these departments.

Our company has registered the following service marks ‘Melt – gelato italiano”®. “Melt – café & gelato bar®” and “Melt – gelato and crepe café®”. These measures may not be adequate to prevent the unauthorized use of our trade names. We may be unable to prevent third parties from acquiring and using names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. We are not aware that our products or proprietary rights infringe the proprietary rights of any third parties.

We do not rely on trade secrets to protect our intellectual property. We do not execute confidentially and non-disclosure agreements with our own staff, however, as part of our franchise agreement our franchisees are required to execute confidentiality, non-disclosure, and non-competition agreements. We believe our success depends on the knowledge, experience, and commitment of our management team and on the success of our franchisees.

We are not required to deliver an annual report to our stockholders but will voluntarily send an annual report, together with our annual audited financial statements upon request. We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Our

Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at http://www.sec.gov.

The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site is http://www.sec.gov.

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

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

Our common shares are considered speculative as our business is still in an early growth stage of its development. Prospective investors should consider carefully the risk factors set out below.

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

We have a limited operating history. Our future is subject to the risks and expenses encountered by early stage companies, such as uncertainty regarding level of future revenue and inability to budget expenses and manage growth accordingly, uncertainty regarding acceptance of our products and retail operations and inability to access sources of financing when required and at rates favourable to us. Our limited operating history and the highly competitive nature of the retail food industry make it difficult to predict future results of our operations. We may not establish a customer following that will make us profitable, which might result in the loss of some or all of your investment in our common stock.

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

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

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

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

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

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

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

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

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

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

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

We are in the perishable food industry. The development, manufacture and marketing of products sold by us will be subject to extensive regulation by various government agencies, including the U.S. Food and Drug Administration and the U.S. Federal Trade Commission, as well as various state and local agencies. These agencies regulate production processes, product attributes, packaging, labelling, advertising, storage and distribution. These agencies establish and enforce standards for safety, purity and labelling. In addition, other governmental agencies (including the U.S. Occupational Safety and Health Administration), establish and enforce health and safety standards and

regulations in the workplace, including those in our retail locations. Our retail locations will be subject to inspection by federal, state, and local authorities. We will seek to comply at all times with all such laws and regulations. We will obtain and maintain all necessary permits and licenses relating to our operations, and will ensure that our facilities and practices comply with applicable governmental laws and regulations. Nevertheless, there is no guarantee that we will be able to comply with any future laws and regulations. Our failure to comply with applicable laws and regulations could subject us to civil remedies including fines, injunctions, recalls or seizures as well as potential criminal sanctions.

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

Because we depend on two of our current senior employees, if we are required to replace them and we cannot hire and retain other qualified personnel, we might be forced to discontinue our operations.

Since our inception on July 18, 2003, our President, Chief Executive Officer, Chief Financial Officer, Secretary and director, Clive Barwin, and our Vice-President and director, Brandon Barwin, our key employees, have handled all of the responsibilities in the area of corporate administration, business development, research and operations. In addition, Clive Barwin has also provided us with capital raising services. The loss of the services of either of Clive Barwin or Brandon Barwin, or the inability to identify, hire, train and retain other qualified directors, executive officers or personnel in the future would have a material adverse affect on our business, financial condition and operating results. We do not maintain any life insurance policies on any of these directors, executives, or key personnel for our benefit.

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

Our officers and directors and their affiliate, in the aggregate, beneficially own 27.64% of issued and outstanding shares of our common stock. As a result, they have the ability to exert significant influence over matters affecting minority shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our officers, directors and one of our principal shareholders (specifically Glynis Sive, the wife of Clive Barwin) can exercise such influence over our company, investors may not be able to replace our management if they disagree with the way our business is being run. Because control by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.

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

We may incur uninsured liabilities and losses as a result of the conduct of our business. At the moment we do not carry comprehensive liability insurance, however we are currently obtaining pricing from various insurance companies and expect to have comprehensive insurance coverage in the very near future. However, when we do have insurance, there can be no assurance that we have coverage sufficient to satisfy potential claims. We do not carry any business interruption insurance. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.

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

We are authorized to issue up to 100,000,000 common shares, of which 21,290,000 are issued and outstanding. Our board of directors has the authority to cause our company to issue additional shares of common stock or issue warrants or options to purchase shares of common stock without the consent of any of our shareholders. Consequently, our shareholders may experience more dilution in their ownership of our company in the future.

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

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

Our stock is as penny stock. Trading of our stock may be restricted by the SEC's "Penny Stock" regulations which may limit a stockholder's ability to buy and sell our stock.

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

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Our main office is located at the principle residence of our Vice–President, Brandon Barwin, at 31556 Loma Linda, Temecula, CA 92592. We do not expect to lease any future facilities in the near future.

We have three non cancellable operating leases for stores which we sublease to franchisees in California and one store lease in California that it is the guarantor. The leases have terms of up to 10 years, call for monthly rental payments of between $4,000 and $6,500, and are subject to annual consumer price index inflation increases. The leases contain no renewal options.

On March 15, 2007, a previously held non cancellable store lease was assigned to a franchisee. With the assignment, our company is no longer liable for any future minimum lease payments. In addition, one other non cancellable lease was subleased to a franchisee.

On July 2, 2007, we entered into a settlement agreement with our St Louis, Missouri franchisee. The settlement covers one store and a franchise agreement for a second store as well as two sublease agreements. As part of this settlement our company is now liable for the rent payment on these two stores and has notified the landlord that it intends to terminate the leases. Our company has accrued a total of $150,000 in expected settlement costs relating to these leases in the accrued expenses of discontinued operations as of December 31, 2007.

During the year ended December 31, 2007, we notified lessors of one store in Florida, one store in Massachusetts, one store in Philadelphia and one store in Louisiana that we intend to cancel our non cancellable lease and have accrued a total of $236,000 in expected settlement costs related to these leases in accrued expenses of discontinued operations as of December 31, 2007.

Melt Franchising, LLC and Melt (California), Inc. v. Steven A. Field, M.D., MMS Coconut Point, LLC, and MMS King of Prussia Court, LLC. American Arbitration Association Case No. 73 114 00147 07 JEEN. On March 18, 2007, we, and MCI, filed a demand for arbitration against respondents seeking a finding and/or declaration that we are entitled to terminate respondents’ franchises. Claimants also seek unpaid royalties and advertising contributions; rent and other charges due under subleases between respondents and MCI; an amount equal to all unpaid construction invoices; an amount equal to all unpaid invoices for products purchased by respondents; and costs and expenses of arbitration and attorneys’ fees. An arbitrator was appointed and a preliminary hearing was held wherein Respondents, who have not responded to the demand for arbitration, alleged that the arbitration clause contained in Respondents’ franchise agreements violates California law and is therefore unenforceable. Further, Respondents sought to disqualify the Arbitrator because the Arbitrator is local counsel for our co-counsel Faegre & Benson (who has subsequently been removed as co-counsel). The parties are in the process of selecting an arbitrator or consolidating the claims with the action discussed below.

David Gold, Elena Gold, EAOA, Inc., Steven Field, MMS Management, LLC, MMS Coconut Point, LLC, Jong Han, Yon Ho Kim, Young Suk Kim, Kang Won Lee, Yoo & Lee Enterprises, Inc., Charindra Liyanage, Liyange Investments, LLC v. Melt, Inc., Melt (California), Inc., Melt Franchising, LLC, Clive V. Barwin, Brandon Barwin, Michael Zorehkey, Rick Zorehkey, Eddie Ollman, Scott Miller, and Alin Cruz. Superior Court of the State of California, County of Los Angeles, Case No. BC377783. On September 19, 2007, plaintiffs filed a putative class action against us, our affiliates, and our officers and employees alleging damages and injunctive relief under state Franchise Acts, restitution and injunctive relief under unfair business practices act, damages and injunctive relief under the “Cartwright” act, fraud, interference with prospective economic advantage, and declaratory relief. Plaintiffs purport to represent a class of our franchisees, however, we will oppose any class certification and no certification has, as of February 2008, been granted. As of February 29, 2008, the plaintiffs have filed a First Amended Complaint and are seeking to file a Second Amended Complaint. We expect to assert a variety of counterclaims against the plaintiffs in our responsive pleading.

There were no matters submitted to a vote of our security holders either through solicitation of proxies or otherwise in the fourth quarter of the fiscal year ended December 31, 2007.

In the United States, our common shares are traded on the Over-the-Counter Bulletin Board under the symbol “MLTC.” The following quotations obtained from Stockwatch reflect the high and low bids for our common shares

based on inter-dealer prices, without retail mark-up, mark-down or commission an may not represent actual transactions.

The high and low bid prices of our common shares for the periods indicated below are as follows:

Quarter Ended⁽¹⁾	High	Low
December 31, 2007	$0.40	$0.11
September 30, 2007	$0.53	$0.43
June 30, 2007	$0.54	$0.40
March 31, 2007	$0.51	$0.40
December 31, 2006	$0.85	$0.75
September 30, 2006	$0.90	$0.65

(1) Our common shares were initially approved for quotation on the OTC Bulletin Board on June 27, 2005 under the symbol “MLTC”.

Our common shares are issued in registered form. Nevada Agency & Trust Co., 50 West Liberty, Suite 800, Reno, NV 89501 (Telephone 775-322-0626, Facsimile 775-322-5623) is the registrar and transfer agent for our common shares. On March 15, 2008, the shareholders' list of our common shares showed 73 registered shareholders and 21,290,000 shares outstanding.

We have not declared any dividends on our common stock since the inception of our company on July 18, 2003. There is no restriction in our Articles of Incorporation and Bylaws that will limit our ability to pay dividends on our common stock. However, we do not anticipate declaring and paying dividends to our shareholders in the near future.

The following table provides a summary of the securities authorized for issuance under Equity Compensation Plans, the weighted average price and number of securities remaining available for issuance, all as at December 31, 2007.

We did not purchase any of our shares of common stock or other securities during the year ended December 31, 2007.

The following discussion should be read in conjunction with our consolidated audited financial statements and the related notes for the years ended December 31, 2007 and December 31, 2006 that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this registration statement, particularly in the section entitled "Risk Factors" beginning on page 6 of this annual report.

Our consolidated audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Since inception on July 18, 2003, we have been engaged in the development, ownership, operation and franchising of gourmet Italian style ice cream and coffee shops (gelaterias), offering for sale Italian gelato (ice cream), crepes, super smoothies, coffee, Italian sodas and related products, pastries and confections.

Our revenue from continuing operations consist of royalties earned from franchise owned retail stores, fees from franchised owned retail stores, and sale of products to franchise owned and operated stores. Our first store opened on November 28, 2003 in Palm Desert, California, since then we opened three other corporate owned stores, of which we sold our interest in two of them and closed one. Our first franchised store was opened in Glendale, California in November 2004, and since then we have opened a total of 26, of which four have closed. During fiscal 2007, 12 new franchise owned stores open and four closed.

For the year ended December 31, 2007 as compared to the year ended December 31, 2006:

Total revenue from continuing operations for the year ended December 31, 2007 was $3,001,700 compared to $1,712,754 for the year ended December 31, 2006, an increase of 75%. The increase in revenue is driven by the increase in the number of franchises open and increase in the store count, resulting in increased revenues from the sale of food and beverage, royalty and marketing fees and franchise fees. During the period ending December 31, 2007 no new corporate owned stores were opened and twelve new franchise owned stores were open, for a total of twenty three franchise stores open at the end of the year. During the year ended December 31, 2006 we opened no corporate owned stores and ten new franchise stores and had fifteen franchise stores open at the end of the year.

We posted a net loss from continuing operations of $329,834 for the year ended December 31, 2007 and a total net loss of $1,641,970 compared to a net loss from continuing operations of $716,771 and a total net loss of $1,101,289 for the year ended December 31, 2006. The principal increase in the net loss was due to the store in the box program which resulted in a loss of $1,312,136 compared to $251,213 in the prior year, an increase in salaries and wages from $400,558 in the prior year to $766,698 in 2007 and an increase in marketing expense from $160,239 in the prior year to $272,871 in 2007.

Cost of sales for continuing operations for the year ended December 31, 2007 amounted to $1,630,371 or 54% of sales compared to $1,259,315 or 74% for the year ended December 31, 2006. The increase in the cost of sales is directly related to our increase in franchise stores opened during the year. The decrease in percentage cost of sales to sales is due primarily to a change in the mix of the revenue from the different primary sources.

Total expenses from continuing operations for the year ended December 31, 2007 were $1,626,212 compared to $1,295,072 for the year ended December 31, 2006, the increase is mainly due to the increase in salaries and wages and marketing expense as a result of company growth and management of the construction department.

Salaries and wages from continuing operations amounted to $766,698 for the year ended December 31, 2007 as compared to $400,558. The increase is primarily due to the hiring of head office executives to support the growth of the concept; these executives are no longer with our company.

Marketing expenses from continuing operations amounted to $272,871 for the year ended December 31, 2007 as compared to $160,239 for the year ended December 31, 2006. The increase in expense was primarily driven by management’s hiring an investor relations firm and a public relations firm during 2007 and realizing expenses from these arrangements for the entire year. Of the total expenses, $72,500 was expended on behalf of our franchisees for brand marketing.

General and administrative expenses from continuing operations amounted to $241,089 for the year ended December 31, 2007 as compared to $290,864 for the year ended December 31, 2006. The decrease is due to a focused effort to reduce general operating costs to achieve profitability. Our general and administrative expenses consisted of travel expenses, office supplies, data processing, and miscellaneous expenses.

Depreciation and amortization from continuing operations amounted to $12,143 for the year ended December 31, 2007 compared to $22,321 for the year ended December 31, 2006, the decrease is due to sales of equipment during the year.

During the year ended December 31, 2007, we paid $100,000 in management fees to Brandon Barwin from January 1, 2007 to November 30, 2007 and accrued an additional $24,000 in management fees to Clive Barwin, compared to $72,450 paid to Brandon Barwin and $24,000 accrued to Clive Barwin for the year ended December 31, 2006. In addition, we paid $26,500 in management fees to Chill, Inc., a related party company owned and operated by the management of Melt. As of December 1, 2007, all employees of Melt were transferred to the employment of Chill, Inc. and their wages are being paid by Chill, Inc. and charged to our company in the form of a management fee.

We have incurred $60,479 in audit and accounting fees for the year ended December 31, 2007 and $134,774 in legal fees for the period ended December 31, 2007, primarily in connection with the preparation and filing of our reports required for SEC purposes. Legal fees were also expended to expand our UFOC to three additional registration states and in order to defend against litigation brought against our company and some of our officers.

At December 31, 2007, we had continuing operations working capital deficit of $979,954 compared to a deficit of $117,045 for the year ended December 31, 2006. The increase was mainly due to a reduction in cash on hand of $487,377, a reduction of accounts receivable of $585,827 and a reduction in deferred revenue of $410,000.

At December 31, 2007, our total assets from continuing operations were $278,589, of which $67,853 consisted of cash, $109,078 consisted of receivables, $46,807 consisted of fixed assets net of depreciation and $54,851 consisted of other assets. There was $55,347 of assets from discontinued operations at December 31, 2007.

At December 31, 2007, our total liabilities from continued operations were $1,565,637, of which $1,156,885 is current liabilities and $408,752 is long-term debt.

As at December 31, 2007, we owe $149,465 related to short-term operating loans and $88,000 in management fees to an officer and director.

2007 was a difficult year for the group. The majority of our losses and expenses were created as a result of the program that was put in place to construct new stores for franchisees and supply equipment to new franchisees. As of September 30, 2007 we discontinued the operations of these two departments. 2008 will be a year of reorganization, re-positioning, re-structuring, re-energizing and re-building each and every function within our company and the stores. We plan on transforming our business and using the experience and knowledge gained from some missteps to our advantage. We will simplify the operation with the intent of making it profitable. These plans our aimed toward creating a strong platform to allow us to once again be able to aggressively grow the franchise network in 2009.

Presently, we have insufficient revenue and cash flow to support our operation. Management is in the process of creating a plan for the raising of additional capital to help us get through 2008.

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

We also plan on expanding our marketing program with the intention of creating some brand awareness and thus increasing sales at our franchise owned stores. Our expansion and marketing efforts to attract new franchisees will be greatly curtailed until we reach some of the goals mentions in the Future Operations.

Our business plan for 2008 envisions opening six new franchise owned stores and no corporate owned stores.

Our marketing efforts in 2008 will be focused towards improving our in-store marketing campaign with the intent of improving sales at the store level. During the latter part of 2007, we hired a new advertising and marketing agency with experience in the quick casual food sector and with their help anticipate creating new and innovative marketing programs that will help create brand awareness.

As part of our cost cutting efforts we have transferred all of our employees to Chill Inc. and have entered into an agreement whereby Chill Inc. will perform all management related functions for the group. Chill Inc. has currently five employees working full time for Melt. The functions that these employees perform are: Clive Barwin, President & CEO, Chief Financial Officer and Secretary; Brandon Barwin, Vice President Operations; Josiah Puder, Vice President & General Counsel; Tommy Trung, General Accountant; and Daniel Yerena, Data Processing. These employees handle all of the responsibilities of our company. In addition, Clive Barwin, our President and Chief Executive Officer, provides us with capital raising services. We may choose to compensate our employees with consideration other than cash, such as shares of our common stock or options to purchase shares of our common stock.

a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a return. Guidance is also provided on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Our company adopted the provisions of FIN 48 on January 1, 2008. The effect of adoption of SFAS 158 did not have an impact on our company's consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Where applicable, SFAS 157 clarifies and codifies related guidance within other generally accepted accounting principles. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The effect of adoption of SFAS 157 did not have a material impact on our company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, "Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158). SFAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS 158 also eliminates the option in SFAS 87 to measure plan assets and obligations up to three months prior to the financial statement date. SFAS 158 is effective for fiscal years ending after December 15, 2006. The effect of adoption of SFAS 158 did not have an impact on our company's consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment to SFAS No. 115” (SFAS 159). SFAS 159 permits entities to elect to measure many financial instruments and certain other items at fair value. Upon adoption of SFAS 159, an entity may elect the fair value option for eligible items that exist at the adoption date. Subsequent to the initial adoption, the election of the fair value option should only be made at initial recognition of the asset or liability or upon a remeasurement event that gives rise to new-basis accounting. The decision about whether to elect the fair value option is applied on an instrument-by-instrument basis is irrevocable and is applied only to an entire instrument and not only to specified risks, cash flows or portions of that instrument. SFAS 159 does not affect any existing accounting standards that require certain assets and liabilities to be carried at fair value nor does it eliminate disclosure requirements included in other accounting standards. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The effect of adoption of SFAS 159 did not have a material impact on our company's consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (SFAS No. 141(R)). SFAS No. 141(R) applies to all transactions or other events in which an entity obtains control of one or more businesses. SFAS No. 141(R) establishes how the acquirer of a business should recognize, measure and disclose in its financial statements the identifiable assets and goodwill acquired, the liabilities assumed and any noncontrolling interest in the acquired business. SFAS No. 141(R) is applied prospectively for all business combinations with an acquisition date on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, with early application prohibited. SFAS No. 141(R) will not have an impact on our company’s historical financial statements and will be applied to business combinations completed, if any, on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 requires entities to report noncontrolling interests as a separate component of shareholders’ equity in the consolidated financial statements. The amount of earnings attributable to the parent and to the noncontrolling interests should be clearly identified and presented on the face of the consolidated statements of operations. Additionally, SFAS No. 160 requires any changes in a parent’s ownership interest of its subsidiary, while retaining its control, to be accounted for as equity transactions. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years. The adoption of SFAS No. 160 is not expected to have a material impact on our company’s consolidated financial statements.

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

The consolidated audited financial statements included with this annual report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

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

The following consolidated audited financial statements are filed as part of this annual report:

We have audited the accompanying consolidated balance sheet of Melt Inc. and Subsidiaries at December 31, 2007, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2007 and 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Melt Inc. and Subsidiaries at December 31, 2007, and the results of their operations and their cash flows for the years ended December 31, 2007 and 2006 in conformity with United States generally accepted accounting principles.

We were not engaged to examine management's assertion about the effectiveness of Melt Inc. and Subsidiaries internal control over financial reporting as of December 31, 2007 and, accordingly, we do not express an opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred significant losses which have resulted in an accumulated deficit and has a deficit in working capital, raising substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ HJ Associates & Consultants, LLP
HJ Associates & Consultants, LLP
Salt Lake City, Utah
March 28, 2008

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

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

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

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

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

MELT INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity (Deficit)

					Additional
	Common Stock				Paid-in			Deferred			Accumulated
	Shares		Amount		Capital			Compensation			Deficit

Balance, December 31, 2005	20,280,000	$	20,280	$	1,077,937		$	-		$	(741,921	)

Common stock and warrants issued
for cash at $0.75 per share	920,000		920		559,677			-			-

Value of warrants sold as part of
common stock units	-		-		129,403			-			-

Net loss for the year ended
December 31, 2006	-		-		-			-			(1,101,289	)

Balance, December 31, 2006	21,200,000		21,200		1,767,017			-			(1,843,210	)

Common stock issued for
services and accrued services	90,000		90		45,810			-			-

Stock options issued for
deferred equity compensation	-		-		172,264			(172,264	)		-

Amortization of deferred equity
compensation	-		-		-			12,112			-

Cumulative effect of stock option
forfeiture	-		-		(107,665	)		107,665			-

Net loss for the year ended
December 31, 2007	-		-		-			-			(1,641,970	)

Balance, December 31, 2007	21,290,000	$	21,290	$	1,877,426		$	(52,487	)	$	(3,485,180	)

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

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

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

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

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

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

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

Melt (California), Inc. is a wholly owned subsidiary (hereinafter referred to as Melt (CA)) of Melt Inc. and was organized on August 6, 2003, under the laws of the State of California. Melt (CA) was in the business of owning and operating corporate owned stores of which none were in existence during the year ended December 31, 2007, managing the construction process for both corporate and franchisee owned stores, securing retail space for either corporate or franchise stores to operate from, as well as the sale and distribution of product to franchise owned stores until October 2007. Melt (CA) ceased managing the construction of stores during September 2007. All assets, liabilities and operating results related to store construction and retail leases are therefore included in discontinued operations as of December 31, 2007 (see note 8). Additionally, all operations of Melt (CA) relating to sales of food and beverages to franchise owned stores, marketing and the collection of royalties have been transferred to Melt Franchising, LLC.

Melt Franchising LLC (hereinafter referred to as Melt (FA)) a wholly owned subsidiary of Melt Inc was organized on February 2, 2005 under the laws of the State of Nevada. Melt (FA) is responsible for selling franchises to allow franchisee’s to own and operate stores trading under the name of Melt – gelato italiano, Melt – café & gelato bar and Melt – gelato & crepe café as well as the sale and distribution of product to franchisees, marketing and the collection of royalties. To-date Melt Franchising LLC has sold forty-seven franchises of which twenty-three are operating, fourteen agreements have been terminated by the Company as a result of the franchisee’s not securing retail space or other reasons, three are in the process of finding suitable locations to operate their stores, three are in the process of building their stores and four have closed their operations.

Villa Melt LLC, formerly a partly owned subsidiary, was organized on July 27, 2004 in the State of California. Villa Melt LLC operates two gourmet gelaterias in the State of California under the trade name Melt – Gelato Italiano. On August 22, 2006, the Company entered into an agreement to sell its equity interest in its 50% owned subsidiary Villa Melt, LLC to the remaining interest holders for $145,000 (see note 8).

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

The cost of the equipment and property is depreciated over the estimated useful life of 5 and 7 years, respectively. Depreciation is computed using the straight-line method beginning when the assets are placed in service.

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

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

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

The computation of basic loss per share of common stock is based on the weighted average number of shares of common stock outstanding during the periods presented.

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

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components as of December 31, 2007 and 2006:

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2007 and 2006 due to the following:

At December 31, 2007, the Company had net operating loss carryforwards of approximately $2,806,000 that may be offset against future taxable income from the year 2007 through 2027. No tax benefit has been reported in the December 31, 2007 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

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

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income.

The Company files income tax returns in the U.S. federal jurisdiction and the states of California, Massachusetts, Connecticut, Arizona, Illinois and Ohio. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004.

The Company adopted the provisions FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, Accounting for Income Taxes (SFAS No. 109)” (FIN 48) on January 1, 2007. As a result of the implementation of FIN 48 the Company did not recognize any increases in the liability recognize for unrecognized tax benefits.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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

The Company’s revenues are derived primarily from franchisee fees, royalties and marketing fees from franchise owned stores, from the sale of food and beverages to franchise owned stores, and previously from the sale of the operation of corporate owned retail stores, including revenue from store development, acquisition and construction services on behalf of its franchisees.

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

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

Revenue from initial franchise fees are recognized when the Company has completed its obligations to the franchisee, the franchise store has opened and there is (a) no remaining obligation or intent to refund an amounts paid, (b) substantially all of the initial services required by the Uniform Franchise Offering Circular have been performed, and (c) there are no other material conditions or obligations related to substantial performance. Franchise fees collected for franchise agreements that are ultimately terminated are recognized as revenue only when the Company has met its obligations under the Uniform Franchise Offering Circular and there are no material conditions or obligations remaining. The Company opened 10 new franchise stores during the year ended December 31, 2007 and recognized $575,000 in franchise fee revenue. Revenue from continuing royalties and marketing fees, which are based on a percentage of net sales of franchised restaurants, are recognized as income is earned and when it becomes receivable from the franchisee.

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

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

Due to the short-term nature of the Company’s store construction contracts, the Company accounts for the build and sale of franchise stores in accordance with ARB 45 “Long-Term Construction-Type Contracts” using the completed-contract method, whereby, income is only recognized when the contract is completed, or substantially completed. Accordingly, costs of contracts in process and current billings are accumulated but there are no interim charges or credits to income other than provisions for losses. A contract is regarded as substantially completed if remaining costs are not significant in amount. During the period ended September 2007, Melt (CA) elected to discontinue the operations relating to store construction, store procurement and it’s “store in a box” program, due to continuing losses, see Note 8 for further information.

On May 28, 2006 the Company executed an Asset Purchase Agreement and Bill of Sale with Veronica and Tito Pulido, wherein, the Company agreed to sell the Melt Gelato store located at the 1208 Galleria at Tyler, Riverside California in exchange for $300,000 in cash. Veronica and Tito Pulido assumed the lease for the location and agreed to operate the location as a franchised store. Of the $300,000 received as compensation, $25,000 was recorded as franchise fees, while the remaining $275,000 was recorded as the sales value of the fixed assets associated with the store. As a result of the transaction the Company recorded a gain on sale of equipment of $94,592.

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

Accounts receivable consists primarily of amounts due from the sale of products and services to franchisees for store construction. Accounts receivable also includes amounts related to franchise royalties, rents and other miscellaneous items.

The Company recognizes allowances for doubtful accounts to ensure receivables are not overstated due to uncollectibility. Bad debt reserves are maintained for customers in the aggregate based on a variety of factors, including the length of time receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Company becomes aware of potential uncollectibility. The allowance for doubtful accounts on continuing operations was $4,005 at December 31, 2007, while bad debt expense on continuing operations totaled $4,005 and $3,254 for the years ended December 31, 2007 and 2006, respectively.

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

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, Accounting for Income Taxes (SFAS No. 109)” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with SFAS No. 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a return. Guidance is also provided on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted the provisions of FIN 48 on January 1, 2007. The effect of adoption of FIN 48 did not have a material impact on the Company.

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

(SFAS No. 141(R)). SFAS No. 141(R) applies to all transactions or other events in which an entity obtains control of one or more businesses. SFAS No. 141(R) establishes how the acquirer of a business should recognize, measure and disclose in its financial statements the identifiable assets and goodwill acquired, the liabilities assumed and any noncontrolling interest in the acquired business. SFAS No. 141(R) is applied prospectively for all business combinations with an acquisition date on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, with early application prohibited. SFAS No. 141(R) will not have an impact on the Company’s historical financial statements and will be applied to business combinations completed, if any, on or after January 1, 2009.

The Company follows the policy of charging the costs of marketing and advertising to expense as incurred. Marketing and Advertising expense for the years ended December 31, 2007 and 2006 was $272,871 and $160,239, respectively.

The Company accounts for the issuance of stock, stock options, stock warrants and other share based payment arrangements in accordance with the provisions of SFAS No.123 (revised 2004), "Share-Based Payment". Statement 123(R) requires that the compensation cost relating to share-based payment transactions be recognized in financial statements based on the fair value of the equity or liability instruments issued. The Company has authorized up to 3,000,000 securities under its Equity Compensation Plans, of which 390,000 stock options are issued and outstanding at December 31, 2007.

The consolidated financial statements include the amounts of Melt Inc. and its wholly owned subsidiaries, Melt (California) Inc., Melt Franchising LLC and formerly owned subsidiary Villa Melt LLC, a company in which Melt Inc. controlled and owned 50% of the equity until it was sold in August 2006 (see Note 8). All material inter-company accounts and transactions have been eliminated.

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

Inventory is stated at the lower of cost or market value using the first-in, first-out method of valuation. The Company held no inventory at December 31, 2007.

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

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

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

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

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

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

Depreciation expense was $12,143 and $22,321 for the years ended December 31, 2007 and 2006, respectively. Depreciation expense for the year ended December 31, 2006 includes depreciation associated with the Tyler location, sold on May 28, 2006.

As of December 31, 2007 the Company has accrued management fees to the Company’s President in the amount of $88,000 and expensed management fees totaling $24,000 and $24,000 for the years ended 2007 and 2006, respectively. In addition, the Company recognized an additional $0 and $72,450 in management fees to other members of the board of directors in their management capacity during the years ending December 31, 2007 and 2006.

As of December 31, 2007 the Company has accrued $17,532 for management fees to a related party company, Chill, Inc. As of December 1, 2007, all employees of the Company were transferred to the employment of Chill Inc. and their wages are being paid by Chill Inc. and charged to the Company in the form of a management fee. The Company expensed $26,500 under this arrangement for the year ended December 31, 2007.

As of December 31, 2007, the Company has a note payable to its President totaling $149,465. The note is unsecured, due on demand and accrues interest at 10% per annum. During the year ended December 31, 2007 the Company borrowed $175,483 and repaid $226,017 on this note.

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

Interest expense accrued on related party notes payable is $74,689 at December 31, 2007. Related party interest expense was $30,228 and $24,200 for the years ended December 31, 2007 and 2006, respectively.

The Company entered into an operating lease for corporate office space during August, 2006 in Laguna Hills, California. The lease has a term of three years, called for initial monthly payments of $3,085, is subject to annual consumer price index inflation increases and required a refundable deposit of $6,170. The lease contains no renewal option. On February 29, 2008, the Company received full early release from this office space lease, as such, as of that date there are no future rental payment obligations.

The Company has three noncancelable operating leases for stores which it subleases to franchisees in California and one store lease in California that it is the guarantor. The leases have terms of up to 10 years, call for monthly rental payments of between $4,000 and $6,500 and are subject to annual consumer price index inflation increases. The leases contain no renewal options.

The following is a schedule by years of minimum future rentals on the above mentioned four operating leases:

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

On July 2, 2007 the Company entered into a settlement agreement with its St Louis, Missouri franchisee. The settlement covers one store and a franchise agreement for a second store as well as two sublease agreements. As part of this settlement the Company is now liable for the rent payment on these two stores and has notified the landlord that it intends to terminate the leases. Accordingly, the Company has accrued an estimated lease settlement amount of $150,000 for these leases in accrued expenses of discontinued operations at December 31, 2007.

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

During the year ended December 31, 2007, the Company notified lessors of one store in Florida, one store in Massachusetts, one store in Philadelphia and one store in Louisiana that it intends to cancel its noncancellable lease and has accrued a total of $236,000 in expected settlement costs related to these leases in accrued expenses of discontinued operations at December 31, 2007.

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

On March 18, 2007, Melt (FA) and Melt (CA) filed a demand for arbitration against Respondents seeking a finding and/or declaration of entitlement to terminate respondents’ franchises. Claimants also seek unpaid royalties and advertising contributions; rent and other charges due under subleases between respondents and Melt (CA); an amount equal to all unpaid construction invoices; an amount equal to all unpaid invoices for products purchased by respondents; and costs and expenses of arbitration and attorneys’ fees. As of December 31, 2007 the demand is still pending, however both parties have now agreed to hear the matter in a court of law in California.

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

On September 19, 2007, Plaintiffs filed a punitive class action against us, our affiliates, and our officers and employees alleging damages and injunctive relief under state Franchise Acts, restitution and injunctive relief under unfair business practices act, damages and injunctive relief under the “Cartwright” act, fraud, interference with prospective economic advantage, and declaratory relief. Plaintiffs purport to represent a class of our franchisees. We and our affiliates and employees deny the allegations and are in the process of responding to this litigation.

On October 20, 2006, the Company sold 920,000 units in a private placement for $690,000, or $0.75 per unit. Each unit entitled the purchaser to one share of restricted common stock of the Company and a share purchase warrant to purchase one half of an additional common share. The proceeds from the sale were allocated between the common stock issued and the purchase warrants based on their relative fair values at $560,597 and $129,403, respectively. The fair value of the common stock was determined using the quoted market price on the date of issuance and the fair value of the purchase warrants were determined using the Black-Scholes option pricing model.

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

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

On April 2, 2007, the Company issued 1,720,000 stock options to employees with an exercise price of $0.40, which was the previous five day weighted average price of the Company’s common stock when issued. The options have a five year term and vest over a 4 year period at a rate of 25% per year. The options terminate upon leaving the Company prior to vesting, as such, six employees have either resigned or been terminated and forfeited a total of 1,330,000 options as of December 31, 2007. The Company initially deferred $172,264 in calculated fair value of the options expected to vest and amortized $12,112 of the value to expense during the year ended December 31, 2007. As a result of forfeitures being in excess of original expected amounts, the Company recorded a cumulative effect adjustment related to the excess forfeitures as a reduction of deferred equity compensation in the amount of $107,665 and reduced additional paid-in capital.

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

Outstanding

Exercisable

Weighted

Number

Average

Weighted

Number

Weighted

Range of

Outstanding

Remaining

Average

Exercisable

Average

Exercise

Contractual

Exercise

Prices

12/31/07

Life

Price

12/31/07

Price

$ 0.40

390,000

4.25

0.40

- $

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

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

During May 2007, 930,000 warrants issued during May 2004 in conjunction with a private placement of the Company’s common stock expired unexercised.

On October 20, 2006, the Company issued 920,000 shares of common stock and 460,000 warrants to purchase common stock. The Company recognized proceeds from the sale of $690,000, or $0.75 per share. The warrants are fully vested, have a term of 2 years and are exercisable at $0.90 per share for the first year and $1.00 thereafter.

A summary of the status of the Company’s stock purchase warrants as of December 31, 2007 and changes during the year ended December 31, 2007 is presented below:

Outstanding

Exercisable

Weighted

Number

Average

Weighted

Number

Weighted

Range of

Outstanding

Remaining

Average

Exercisable

Average

Exercise

Contractual

Exercise

Prices

12/31/07

Life

Price

12/31/07

Price

$0.90 – 1.00

460,000

0.80

0.90

460,000

0.95

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

During July 2007, the Company entered into a Commission Agreement with Concentric Concepts Corporation to locate individuals or entities willing to make loans to the Company and negotiate terms on those loans. The Commission Agreement calls for the payment of commissions in the following amounts:

Funds $0.00 - $1,500,000 earn 4.5% cash and 2.5% equity Funds $1,500,000 - $2,300,000 earn 5.0% cash and 3.0% equity Funds in excess of $2,300,000 earn 5.5% cash and 3.5% equity

In addition to the commissions noted above, the Commission Agreement also provides for bonuses of $7,500 cash and $7,500 equity for reaching $2,300,000 in funds and $11,500 cash and $11,500 equity for reaching $2,500,000 in funds.

As a result of the Commission Agreement, on July 30, 2007, the company received 400,000 in convertible debt funds from Money for Gelato, Inc. The debt is convertible into restricted common stock at the option of the lender if not repaid within 12 months at $0.55 per share for months 13 - 24, $0.80 for months 25 – 36, $1.15 for months 37 – 48 and $1.50 thereafter. The debt is payable five years from issuance, carries a monthly interest only payment of prime plus 3% and a prepayment penalty of 15% on any funds repaid within the first 48 months. Due to the conversion price being greater than the market price of the Company’s common stock at issuance, no beneficial conversion feature was recognized as a result of entering into the loan.

As a result of the receipt of funds under the Commission Agreement, the Company incurred $28,000 in debt issuance costs. The debt issuance costs were unpaid and accrued at December 31, 2007 and are being amortized over the stated redemption date of the related debt issuance of five years. Amortization of debt issuance costs totaled $2,333 for the year ended December 31, 2007.

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

All operating results of Villa Melt, LLC are included in discontinued operations as of December 31, 2006. No tax benefit has been attributed to discontinued operations.

The following is a summary of the loss from discontinued operations resulting from the sale of Villa Melt, LLC:

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

During the period ended September 2007, Melt (CA) elected to discontinue the operations relating to store construction, store procurement and it’s “store in a box” program, due to continuing losses.

All assets, liabilities and operating results relating to these segments are therefore included in discontinued operations as of December 31, 2007. No tax benefit has been attributed to discontinued operations. The following is an unaudited summary of the assets and liabilities related to discontinued operations of construction activities:

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

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

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

The majority of the Companies food and beverage product is supplied by one vendor under a long-term supply agreement. Although the supply agreement is long-term and provides for the Company to receive preferential pricing, certainty that this relationship will continue on the same terms in the future cannot be guaranteed. Shipment delays, product quality, liability issues and price increases that cannot be passed on to customers could result in materially higher costs.

On February 29, 2008, the Company received full early release from its office space lease in Laguna Hills, California and as of that date has no future rental payment obligations. The Company is still in the process of settling final lease closing terms and expects to receive a portion of its $6,170 deposit back.

Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

We have not changed our auditors since our last year end and we have not had any disagreements with our auditors.

At the end of the period covered by this Annual Report Form 10-KSB, our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to our company required to be included in our periodic SEC filings. There has been no change in our internal control over financial reporting during the quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management of our company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our principal executive officer and principal financial officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2007 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, our management used the criteria set forth in the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation conducted under the framework in “Internal Control – Integrated Framework,” our management concluded that our company’s internal control over financial reporting was effective, as of December 31, 2007, in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our company’s registered public accounting firm pursuant to temporary rules of the SEC that permit our company to provide only management's report in this Annual Report on Form 10-KSB.

Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act.

All of the directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and qualified. Our officers are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

Name	Position Held with the Company	Age	Date First Elected or Appointed
Clive Barwin	President, CEO, CFO, Secretary and Director	53	July 18, 2003
Brandon Barwin	Vice-President and Director	43	August 1, 2003

The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed.

For the past five years Clive Barwin has acted as a consultant to various computer hardware and software development and marketing companies. In 2002 he also syndicated a real estate venture for the construction of a retail and residential development, in Sydney, Australia.

In 1992 Clive Barwin founded DataWave Systems Inc., a start up high tech company to develop and commercialize wireless technology for the electronic kiosk industry. He was President and CEO from 1992 to 1998, during which time he took the company public on the Vancouver Stock Exchange, and on the Over-the-Counter Bulletin Board. Under his stewardship the company grew from one employee to over 90, with offices in Vancouver, New Jersey, Los Angeles, Orlando, and Texas.

From 1983 to 1992 Clive Barwin was the founder, President and CEO of Modatech Systems Inc., a high-tech company started to develop and commercialize software to automate the sales forces of large multi-national companies. The company went public on the Vancouver Stock Exchange, Toronto Stock Exchange and the Over-the-Counter Bulletin Board. He grew the company from one employee to over 150, with offices in Vancouver, Toronto, Los Angeles, New York, Dallas, and Chicago.

Brandon Barwin was previously Director of Operations of DataWave Systems Inc. from March 1998 to September 2003, where he was responsible for all areas of operations which included rollout and installation of over 1,000 computerized retail kiosks and 2,000 retail point of sale systems.

Brandon Barwin was the founder, President and CEO of a furniture retail store in Victoria, British Columbia, called Clicks Furniture from November 1989 to January 1998. In addition to Clicks, Brandon assisted in his other family business called Standard Furniture.

Brandon Barwin worked at McDonald’s Restaurants Canada from January 1981 to October 1988, as a Regional Manager for the majority of that time.

Brandon Barwin, our Vice-President and a director, is a fourth cousin of Clive Barwin, our President, CEO and director.

Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:

1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

4. being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

We do not have a separate audit committee at this time. Our board of directors acts as our audit committee.

Our board of directors has determined that it does not have a member of its audit committee that qualifies as an “audit committee financial expert” as defined in Item 401(e) of Regulation S-B, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.

We believe that the members of our board of directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date.

Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2007, all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with

Effective March 6, 2004, our board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, our President and Secretary (being our principal executive officer, principal financial officer and principal accounting officer), as well as persons performing similar functions. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

Our Code of Business Conduct and Ethics requires, among other things, that all of our Senior Officers commit to timely, accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty and integrity.

In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly Senior Officers, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal and state securities laws. Any Senior Officer who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to our company. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our policy to retaliate against any individual who reports in good faith the violation or potential violation of our Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics as filed with the Securities and Exchange Commission is incorporated by reference as Exhibit 14.1 to this annual report. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: Melt, Inc., 31556 Loma Linda, Temecula, CA, USA 92592.

SUMMARY COMPENSATION TABLE
Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensa- tion ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensa- tion ($)	Total ($)
Clive Barwin President CEO, Secretary and Director⁽¹⁾	2007 2006	24,000 24,000	0 0	0 0	0 0	0 0	0 0	0 0	24,000 24,000
Scott M. Miller Executive Vice President and Chief Financial Officer ⁽²⁾	2007 2006	115,846 15,000	0 N/A	0 N/A	0 N/A	0 N/A	0 N/A	0 N/A	115,846 15,000
Michael Zorehkey Executive Vice President of Development³⁾	2007 2006	57,923 21,937	0 N/A	0 N/A	0 N/A	0 N/A	0 N/A	35,000 N/A	92,923 21,937
Brandon Barwin Vice President⁽⁴⁾	2007 2006	81,840 65,998	0 0	0 0	0 0	0 0	0 0	0 0	81,840 65,998

⁽¹⁾Clive Barwin became our President, Chief Executive Officer and Secretary on July 18, 2003. All 2007 compensation has been deferred.
⁽²⁾Scott M. Miller became our Executive Vice President and Chief Financial Officer on November 13, 2006 and resigned August 31, 2007.
⁽³⁾Michael Zorehkey became our Executive Vice President of Development on November 6, 2006 and resigned 05/01/07.
⁽⁴⁾Brandon Barwin became our Vice President on August 1, 2003.

On April 7, 2007, we granted a total of 1,720,000 options to purchase our common stock to employees of our company, including one current and two former officers at an exercise price of $0.40 per share. The options have a five year term and vest over a 4 year period at a rate of 25% per year. The options terminate upon leaving our company prior to vesting and as such, options issued to Mr. Miller and Mr. Zorehkey were terminated upon their resignations. The following is a summary of outstanding equity awards to officers and directors at December 31, 2007:

OPTION AWARDS
NAME (A)	NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE (B)	NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE (C)	OPTION EXERCISE PRICE ($) (E)	OPTION EXPIRATION DATE (F)
Brandon Barwin Vice President	0	200,000	$0.40	4/7/2012

We reimburse our directors for expenses incurred in connection with attending board meetings. We have not paid any director's fees or other cash compensation for services rendered as a director since our inception to December 31, 2007.

We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.

Employment Contracts and Termination of Employment and Change in Control Arrangements

We have not entered into any employment agreement or consulting agreement with our directors and executive officers.

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.

We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation,

retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth, as of March 15, 2008, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percentage of Shares of Common Stock⁽¹⁾
Clive Barwin 38 Olola Avenue, Vaucluse, NSW 2030, Australia	4,860,000⁽²⁾	22.92%
Brandon Barwin 45320 Corte Palmito Temecula, CA 92592	950,000	4.48%

Glynis Sive 38 Olola Avenue, Vaucluse, NSW 2030, Australia	1,980,000⁽²⁾	9.34%
The Norwood Trust 1st Floor, 299 Oxford Street London W1C 2DZ, England	1,800,000	8.49%
Directors and Officers as a Group (3 individuals)	5,810,000⁽²⁾	27.41%

⁽¹⁾	Based on 21,290,000 shares outstanding as of March 15, 2008.

⁽²⁾	Excludes the 1,980,000 shares held by Glynis Sive disclosed herein. Clive Barwin and Glynis Sive are married. Clive Barwin disclaims any beneficial interest, ownership interest, voting control or investment authority or direction in regards to the shares beneficially owned by Glynis Sive.

We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company.

Item 12. Certain Relationships and Related Transactions, and Director Independence.

Except as disclosed herein, there have been no transactions or proposed transactions in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years in which any of our directors, executive officers or beneficial holders of more than 5% of the outstanding shares of our common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest.

Our promoter is our President, Chief Executive Officer and director, Clive Barwin.

The aggregate fees billed by HJ Associates & Consultants, LLP for professional services rendered for the audit of our annual consolidated financial statements for the periods ended December 31, 2007 and December 31, 2006 included in our annual report on Form 10-KSB were $37,500 and $44,000, respectively.

For the fiscal year ended December 31, 2007, the aggregate fees billed for assurance and related services by HJ Associates & Consultants, LLP relating to the performance of the audit of our financial statements which are not reported under the caption "Audit Fees" above, was $nil.

For the fiscal years ended December 31, 2007 and December 31, 2006, the aggregate fees billed by HJ Associates & Consultants, LLP for other non-audit professional services, other than those services listed above, was $4,720 and $4,083 respectively.

We do not use HJ Associates & Consultants, LLP for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements are provided internally or by other service providers. We do not engage HJ Associates & Consultants, LLP to provide compliance outsourcing services.

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before HJ Associates & Consultants, LLP is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

The board of directors pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules, and therefore, the board of directors does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

The board of directors has considered the nature and amount of fees billed by HJ Associates & Consultants, LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining HJ Associates & Consultants, LLP's independence.

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

/s/ Clive Barwin
By: Clive Barwin
President, CEO, CFO, Secretary and Director
(Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer)
Date: March 28, 2008

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

/s/ Clive Barwin
By: Clive Barwin
President, CEO, CFO, Secretary and Director
(Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer
Date: March 28, 2008

/s/ Brandon Barwin
By: Brandon Barwin
Vice-President and Director
Date: March 28, 2008

Nevada	47-0925451
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

Title of each class	Name of each exchange on which registered
Nil	Nil

			Number of securities
			remaining available for
	Number of securities		future issuance under
	to be issued upon	Weighted average	equity compensation
	exercise of	exercise price of	plans (excluding
	outstanding options,	outstanding options,	securities reflected in
	warrants and rights	warrants and rights	column (a))
	(a)	(b)	(c)

Equity compensation plans
approved by security holders	N/A	N/A	N/A
Equity compensation plans not
approved by security holders	3000,0000	N/A	2,261,000
Total	3,000,000	N/A	2,261,000

	Independent Auditor's Report, dated March 22, 2008.

	Consolidated Audited Balance Sheet as at December 31, 2007.

	Consolidated Audited Statements of Operations for the year ended December 31, 2007 and for the year ended December 31, 2006.

	Consolidated Audited Statements of Changes in Stockholders' Equity for the year ended December 31, 2007 and for the year ended December 31, 2006.

	Consolidated Audited Statements of Cash Flows for the year ended December 31, 2007 and for the year ended December 31, 2007.

	Notes to the Consolidated Financial Statements.

ASSETS
		December 31,
		2007

CURRENT ASSETS

Cash	$	67,853
Receivables, net of allowance of $4,005		109,078

Total Current Assets		176,931

FIXED ASSETS, NET (Note 2)		46,807

OTHER ASSETS

Trademark, Net		661
Debt issuance costs (Note 7)		25,667
Deposit’s		28,523

Total Other Assets		54,851

ASSETS OF DISCONTINUED OPERATIONS (Note 8)		55,347

TOTAL ASSETS	$	333,936

Report of Independent Registered Public Accounting Firm	F-3

Consolidated Balance Sheet	F-4

Consolidated Statements of Operations	F-6

Consolidated Statements of Stockholders’ Equity (Deficit)	F-8

Consolidated Statements of Cash Flows	F-9

Notes to the Consolidated Financial Statements	F-11

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES

Accounts payable	$	472,855
Accounts payable – related party		17,532
Accrued expenses		444
Accrued management fees – related party (Note 3)		88,000
Notes payable- related party (Note 3)		149,465
Accrued interest - related party (Note 3)		74,689
Notes payable		185,431
Accrued interest		28,469
Deferred revenue		140,000

Total Current Liabilities		1,156,885

LONG-TERM LIABILITIES

Notes payable		408,752

Total Current Liabilities		408,752

LIABILITES OF DISCONTINUED OPERATIONS (Note 8)		407,250

TOTAL LIABILITIES		1,972,887

STOCKHOLDERS’ EQUITY (DEFICIT)

Common stock: $0.001 par value 100,000,000 shares
authorized; 21,290,000 shares issued and outstanding		21,290
Additional paid-in capital		1,877,426
Deferred equity compensation		(52,487	)
Accumulated deficit		(3,485,180	)

Total Stockholders’ Equity (Deficit)		(1,638,951	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	333,936

		For the Year Ended
		December 31,
		2007			2006
REVENUES

Food and beverage sales	$	1,814,364		$	1,116,176
Franchise fees		575,000			325,000
Royalty and marketing fees		556,638			225,850
Miscellaneous finders and professional fees		55,698			45,728

Total Revenues		3,001,700			1,712,754

COST OF SALES

Cost of food and beverage		1,596,052			937,927
Materials and supplies		34,319			321,388

Total Cost of Sales		1,630,371			1,259,315

GROSS PROFIT		1,371,329			453,439

EXPENSES

Marketing		272,871			160,239
Bad debt expense		4,005			129,674
Depreciation and amortization		12,143			22,321
Professional fees		240,225			174,354
Rent		38,681			20,612
Salaries and wages		766,698			400,558
Management fees		50,500			96,450
General and administrative expenses		241,089			290,864

Total Expenses		1,626,212			1,295,072

LOSS FROM OPERATIONS		(254,883	)		(841,633	)

OTHER INCOME (EXPENSES)

Interest income		1,432			8,150
Interest expense		(73,009	)		(33,950	)
Gain (loss) on sale of fixed assets		(3,374	)		95,084


Total Other Income (Expenses)		(74,951	)		69,284

		2007			2006
Deferred tax assets:
NOL Carryover	$	1,094,400		$	628,100
Accrued expenses		62,700			27,300

Deferred tax liabilities:
Depreciation		(4,400	)		(3,600	)

Valuation allowance		(1,152,700	)		(651,800	)

Net deferred tax asset	$	-		$	-

		2007			2006

Book Income	$	(640,368		$	(429,503	)
Related party accruals		35,424			9,360
Depreciation		(2,179	)		7,340
Lease obligation contingencies		158,827
Stock for expenses		18,237			-
Sale of assets		1,017			57,130
Management fees		-			6,985
Meals & entertainment		2,167			1,696
Valuation allowance		426,875			346,992

	$	-		$	-

Balance at January 1, 2007	$	-
Additions based on tax positions related to the current year		-
Additions for tax positions of prior years		-
Reductions for tax positions of prior years		-
Settlements		-
Balance at December 31, 2007	$	-

Vehicles		16,913
Store equipment & Furniture		21,335
Computer equipment		25,928
Less: Accumulated depreciation		(17,369	)

	$	46,807

Year ended December 31:
2008	$	265,928
2009		272,837
2010		274,804
2011		276,829
2012		207,438
Thereafter		307,683

Total	$	1,605,519

	Risk free interest rates	4.54%
	Expected lives	5 years
	Expected volatilities	50%
	Dividend yields	0.00%
	Expected forfeitures	81%

				Weighted			Weighted
	Options			Average			Average
	Warrants			Price			Fair Value

Outstanding, December 31, 2006	1,390,000		$	0.82		$	0.57

Issued	-			-			-
Exercised	-			-			-
Forfeited	-			-			-
Expired	(930,000	)		(0.75	)		(0.75	)

Outstanding, December 31, 2007	460,000		$	0.90		$	0.90

Exercisable, December 31, 2007	460,000		$	0.90		$	0.90

		For the Year Ended
		December 31,
		2007			2006

NET INCREASE (DECREASE) IN CASH	$	(487,377	)	$	310,166

CASH AT BEGINNING OF YEAR		555,230			245,064

CASH AT END OF YEAR	$	67,853		$	555,230

CASH PAID FOR INTEREST	$	23,618		$	8,846
CASH PAID FOR INCOME TAXES	$	-		$	-

SCHEDULE OF NON-CASH FINANCE ACTIVITIES

Accounts payable issued for debt issuance costs	$	28,000		$	-
Common stock issued for accrued expenses	$	11,250		$	-

		For the Years Ended
		December 31,
		2007			2006

REVENUES

Franchise stores construction/equipment	$	2,239,171		$	1,791,725
Professional and finders fees		9,500			215,000

Total Revenues		2,248,671			2,006,725

COST OF SALES

Franchise stores construction/equipment costs		2,352,632			2,186,002
Professional and finders fees		84,000			-

Total Cost of Sales		2,436,632			2,186,002

GROSS PROFIT (DEFICIT)		(187,961	)		179,297

EXPENSES

Bad Debt		207,273			-

		685,846			71,916

Total Expenses	$	893,119		$	71,916

Notes payable consisted of the following at December 31, 2007:

Note payable to an officer and director, 10% interest per annum, unsecured, due upon demand.	$	149,465

Note payable to an individual, 10% interest per annum, unsecured, due upon demand.		82,630

Note payable to an individual, 14% interest per annum, unsecured, due on demand.		100,000

Convertible note payable, interest payable monthly at the rate of prime plus 3%, secured by assets of the Company, due five years from the date of issuance.		400,000

Note payable for vehicle, 11.2% interest per annum, secured by vehicle, due in equal monthly installments of $329 for 46 months.		11,553

Total Notes Payable	$	743,648

Year ended December 31:
2008	$	334,896
2009		3,132
2010		3,501
2011		2,119
2012		400,000

Total		743,648

1.	honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

2.	full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;

3.	compliance with applicable governmental laws, rules and regulations;

4.	the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and

Exhibit Number	Description

(3)	(i) Articles of Incorporation; and (ii) Bylaws

3.1	Articles of Incorporation (incorporated by reference from our Form SB-2 Registration Statement, filed on October 2, 2003).

3.2	Bylaws (incorporated by reference from our Form SB-2 Registration Statement, filed on October 2, 2003).

(10)	Material Contracts

10.1	Operating Agreement between Melt Inc. and Dolce Dolci, LLC dated July 21, 2004 (incorporated by reference from our Form 10-KSB, filed on March 31, 2005).

10.2	Operating Agreement between Melt Inc. and Melt Franchising LLC dated February 25, 2005 (incorporated by reference from our Form 10-KSB, filed on March 31, 2005).

10.3	Form of loan agreement entered into with each of:

	Clive Barwin
	Errol Brome
	Lance Rosenberg
	Cecil Hofman

	(incorporated by reference from our Form 8-K, filed on June 12, 2005).

10.4	Franchise Offering Circular (incorporated by reference from our Form 10-QSB, filed on November 14, 2005).

(14)	Code of Ethics

14.1	Code of Business Conduct and Ethics. (incorporated by reference from our Form 10-KSB, filed on March 30, 2004).

(21)	Subsidiaries of the small business issuer

	Melt (California) Inc.
	Melt Franchising LLC

(31)	Rule 13a-14(a)/15d-14(a) Certifications

31.1	Certification under Sarbanes-Oxley Act of 2002

(32)	Section 1350 Certifications

32.1	Certification under Sarbanes-Oxley Act of 2002