SB-2/A

As filed with the Securities and Exchange Commission on October 6, 2006


                                                  Registration No. 333-


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

                                    FORM SB-2

                          PRE-EFFECTIVE AMENDMENT NO. 2



             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                       EDGEWATER FOODS INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

         NEVADA                                                20-3113571
- ----------------------------    ------------------------    -------------------
(State or other jurisdiction    (Commission File Number)    (IRS Employer
of incorporation)                                           Identification No.)

                    5552 WEST ISLAND HIGHWAY, QUALICUM BEACH
                        BRITISH COLUMBIA, CANADA V9K 2C8
               (Address of principal executive offices (zip code))

                                 (250) 757-9811
              (Registrant's telephone number, including area code)

                                 ROBERT SAUNDERS
                      PRESIDENT AND CHIEF EXECUTIVE OFFICER

                    5552 West Island Highway, Qualicum Beach
                        British Columbia, Canada V9K 2C8
            (Name, address and telephone number of agent for service)

Approximate  date of proposed sale to the public:  AS SOON AS PRACTICABLE  AFTER
THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If this form is filed to  register  securities  for an  offering to be made on a
continuous or delayed basis, check the following box: [X]

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the  Securities  Act  registration  statement  number of the  earlier  effective
registration statement for the same offering. [ __ ]

If this form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ __ ]

If this form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ __ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ __ ]


- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
TITLE OF EACH CLASS OF    AMOUNT TO BE           PROPOSED MAXIMUM        PROPOSED MAXIMUM       AMOUNT OF
SECURITIES TO BE          REGISTERED             OFFERING PRICE PER      AGGREGATE OFFERING     REGISTRATION FEE
REGISTERED                                       UNIT (1)                PRICE (1)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
                                                                                    

Common Stock underlying   9,465,599 (2) (3)      $1.40                   $13,251,838.60         $1,417.95
the Preferred Stock
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Common Stock Underlying   21,440,020             $1.40                   $30,016,028.00         $3,211.71
the Warrants
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------





- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Common Stock Underlying   2,868,803              $1.40                   $4,016,324.20          $429.75
the Placement
Consultant Warrants
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Common Stock              647,860  (3)           $1.40                   $907,004.00            $97.05
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Total                     34,422,282                                                            $5,156.46
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------






(1)      Estimated  solely for the purpose of computing the  registration fee in
         accordance  with Rule 457(c) of the  Securities  Act of 1933 based upon
         the average of the bid and asked price of the Registrant's common stock
         as quoted on the Over-the-Counter  Bulletin Board  of $1.40 on July 11,
         2006.

(2)      This number represents 120% of the aggregate number of shares of common
         stock  necessary  to  effect  the  conversion  of all of our  Series  A
         Preferred Stock currently outstanding.

(3)      An indeterminate  number of additional  shares of common stock shall be
         issuable pursuant to Rule 416 to prevent dilution  resulting from stock
         splits,  stock dividends or similar  transactions  and in such an event
         the number of shares  registered  shall  automatically  be increased to
         cover  the  additional  shares  in  accordance  with Rule 416 under the
         Securities Act.

(4)      Includes  22,860  shares  issued as  dividends  to some of our Series A
         Convertible Preferred  shareholders;  400,000 shares issued to a lender
         as  consideration  for  extending  the  repayment  date of a loan;  and
         225,000 shares issued to consultants.


Pursuant to Rule 416 of the Act, this  registration  statement  also covers such
indeterminate  additional  shares of common  stock as may become  issuable  as a
result of stock splits, stock dividends or other similar events.


THE REGISTRANT HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT  SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY  STATES THAT THIS REGISTRATION  STATEMENT
SHALL  THEREAFTER  BECOME  EFFECTIVE  IN  ACCORDANCE  WITH  SECTION  8(a) OF THE
SECURITIES  ACT OF  1933  OR  UNTIL  THE  REGISTRATION  STATEMENT  SHALL  BECOME
EFFECTIVE ON SUCH DATE AS THE  COMMISSION,  ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.


                          COPIES OF COMMUNICATIONS TO:

                             LOUIS E. TAUBMAN, ESQ.
                      LAW OFFICES OF LOUIS E. TAUBMAN, P.C.
                           17 State Street, 16th Floor
                               NEW YORK, NY 10004
                                 (212) 732-7184
                               FAX: (212) 202-6380


                                       ii



The information contained in this preliminary prospectus is not complete and may
be changed.  These  securities may not be sold until the Securities and Exchange
Commission  declares the  registration  statement filed with it effective.  This
preliminary  prospectus is not an offer to sell these securities,  and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not  permitted.  You should rely only on the  information  contained  in this
preliminary  prospectus.  We have not  authorized  anyone  to  provide  you with
information that is different.

                             PRELIMINARY PROSPECTUS


                   SUBJECT TO COMPLETION, DATED

                       EDGEWATER FOODS INTERNATIONAL, INC.

                        34,422,282 SHARES OF COMMON STOCK

         The 34,422,282 shares of common stock,  $.001 par value,  being offered
by the selling  shareholders  listed on page 11. The shares of our common  stock
covered by this  prospectus  include:

          o    400,000  shares of common  stock to The  Bridge  Financing  Group
               (doing business as "World Wide Mortgage  Corporation") on January
               31, 2006 as  consideration  of their  agreement to extend the due
               date for repayment of our $1,500,00 bridge loan with them;

          o    225,000  shares of common stock issued to the  following  parties
               pursuant to consulting  agreements with us, in consideration  for
               services  provided  to us:  100,000  shares  issued  to  Aurelius
               Consulting Group, Inc. in October 2005;  100,000 shares issued to
               Gallatin Consulting,  Inc. on June 27, 2005; 12,500 shares issued
               to  Christian  Galatti on October 21, 2005 and November 11, 2005;
               and 12,500  shares issued to Gary Shemano on October 21, 1005 and
               November 11, 2005;

          o    21,440,020  shares of common  stock  issuable  upon  exercise  of
               21,440,020  warrants  to purchase  shares of our common  stock to
               investors in our 2006 private financings;

          o    9,465,599  shares of common stock issuable upon conversion of the
               Series A Convertible  Preferred Stock granted to investors in our
               2006  private  financings;  this  number  represents  120% of the
               aggregate  number of shares of common stock  necessary to convert
               the  currently  outstanding  7,887,999  shares  of our  Series  A
               Preferred Stock,  which is required by the transaction  documents
               of our April 12, 2006,  May 30, 2006,  June 30, 2006 and July 11,
               2006 private financings;

          o    2,868,803  shares of common stock issuable upon exercise of three
               (3)  placement  consultant  warrants  to  purchase  shares of our
               common stock granted to the placement consultant in our April 12,
               2006,  May 30,  2006,  June 30,  2006 and July 11,  2006  private
               financings;

          o    22,860 shares of common stock issuable pursuant to dividends that
               were issued in July 2006 and  pursuant to  dividends  that may be
               paid in the future to our Series A Preferred Shareholders.

         This offering is not being underwritten.

         The prices at which the selling shareholders may sell their shares will
be  determined  by the  prevailing  market  price for the shares or in privately
negotiated transactions.  Information regarding the selling shareholders and the
times  and  manner  in which  they may  offer  and sell the  shares  under  this
prospectus  is  provided   under  the  "Selling   Shareholders"   and  "Plan  of
Distribution" sections in this prospectus. Edgewater will not receive any of the
proceeds from the sale of the shares under this prospectus.



                                      iii



         Our common stock is listed on the Over the Counter Bulletin Board, also
called the  OTCBB,  under the  trading  symbol  "EDWT." On October 5, 2006,  the
closing  bid for our common  stock as reported on the OTCBB was $1.35 per share.
As of October 5, 2006,  Edgewater had the following  amount of shares issued and
outstanding:


          o    20,983,260 shares of Common Stock; and,
          o    7,887,999 shares of Series A Preferred Stock

                         THIS INVESTMENT INVOLVES RISK.
                     SEE "RISK FACTORS"BEGINNING ON PAGE 3.

         Neither the Securities and Exchange Commission nor any state securities
commission  has approved or disapproved  the securities or determined  that this
prospectus  is complete or  accurate.  Any  representation  to the contrary is a
criminal offense.
                   ------------------------------------------

                         The date of this Prospectus is
                   ------------------------------------------
































                                       iv




                                TABLE OF CONTENTS


                                                                            Page


Corporate Information......................................................  vi

Prospectus Summary.........................................................  1

Risk Factors...............................................................  4

Cautionary Statement Regarding Forward Looking Statements..................  10

Use Of Proceeds............................................................  10

Selling Shareholders.......................................................  10

Plan of Distribution.......................................................  14

Business...................................................................  16

Description of Property....................................................  23

Management.................................................................  27

Executive Compensation.....................................................  31

Security Ownership of Certain Beneficial Owners and Management.............  37

Certain Relationships And Related Transactions.............................  39

Description Of Securities..................................................  40

Market for Common Equity and Related Shareholder Matters...................  45

Management's Discussion and Analysis or Plan of Operations.................  46

Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.......................................................  56

Legal Proceedings..........................................................  56

Experts....................................................................  56

Legal Matters..............................................................  56

Financial Statements....................................................... F-1










                                       v


                              CORPORATE INFORMATION

Our corporate  offices are located at 5552 West Island  Highway,  Qualicum Beach
British Columbia, Canada, V9K 2C8. Our telephone number is (250) 757-9811.





















                                       vi




                               PROSPECTUS SUMMARY

The  following  is a summary  that  highlights  what we  believe  to be the most
important  information  regarding  Edgewater  and the  securities  being offered
herein.  Because  it is a  summary,  however,  it  may  not  contain  all of the
information  that is  important  to you. To  understand  our  business  and this
offering  fully,  you  should  read this  entire  prospectus  and our  financial
statements and related notes carefully.  Unless the context requires  otherwise,
"we," "us," "our" and similar terms refer to Edgewater.

                                   THE COMPANY

We  are  the  parent  company  of  Island  Scallops  Ltd.,  a  Vancouver  Island
aquaculture  company.  Island  Scallops was  established in 1989 and for over 15
years has successfully  operated a scallop farming and marine hatchery business.
Island  Scallops is dedicated to the farming,  processing  and marketing of high
quality, high value marine species:  scallops and sablefish.  Scallop farming is
relatively new to North America and Island Scallops is the only producer of both
live-farmed  Pacific  scallops and live  sablefish (or  blackcod).  Given Island
Scallops' unique hatchery technology and extensive research and development,  we
believe that there is no significant competition for the farming of these marine
species  in our  geographic  area.  Island  Scallops  is  committed  to  rapidly
expanding  production  and profits while  continuing  to finance the  aggressive
growth  of the  company  and  maintaining  a  healthy  respect  for  the  marine
environment.

                               RECENT DEVELOPMENTS

Business

         We commenced  harvesting our  year-class  2004 sea scallops in February
2006.  We refer to the  year-class  of scallops  based on when the scallops were
spawned.  Generally,  the harvest  occurs  approximately  22 to 24 months  after
spawning  of  the  scallops.   The  2004  year-class   scallop  harvest  started
approximately one month sooner than we originally  anticipated.  The early start
to the harvest was  attributed to improved  scallop  growth rates as a result of
selective breeding and use of proprietary  farming  techniques.  The benefits of
five years of selective  breeding are  starting to show  benefits  with the 2004
year-class, displaying a higher weight to shell ratio. We anticipated harvesting
approximately 2 million scallops between February and October 2006, however, the
results of our  experimentation  with ear hanging scallops as opposed to keeping
them in nets during the final  portion of their growth cycle were  disappointing
and resulted in greater mortality than expected,  as well as sporadic growth. In
the future,  we anticipate  using a combination of  ear-hanging  and lantern net
methods.

         The 2005  year-class  scallops  are  currently  maturing in our tenured
growing sites and joint venture locations.  We are currently  preparing our farm
sites for the  transfer of these  scallops  to their final stage large  grow-out
nets.  This  transfer  will be  completed  during  the  summer  of  2006  and we
anticipate  commencing  harvesting up to approximately 4 million 2005 year-class
scallops  during April of 2007.  The 2006  year-class  scallop  spawning  season
commenced  in  March of 2006  and was  completed  in  April  2006.  The  scallop
brood-stock conditioning for this spawning began in mid-December 2005. We expect
to begin  harvesting  these 2006 year-class  scallops during the Spring of 2008,
however, we could begin harvesting portions of the class sooner if mortality (at
various points of the growth cycle) are significantly better than our current



                                        1


projections or if growth rates are  substantially  higher. We anticipate that of
the over 350 million  larvae  that were  spawned,  at least 10 million  scallops
could reach full  maturity  and thus be  harvested.  The use of DNA based family
analysis  started in 2005 will continue  through 2006, with the goal of breeding
high meat yield scallops.

         In October 2005, we installed  twenty new longlines at our Hindoo Creek
scallop farm in Baynes Sound (1).  Each  longline is 108 yds (324 feet) long and
submerged at approximately  25 ft depth. In July 2006, we received  approval for
an additional 23 longlines.  The October and July additions  bring the tenure up
to its management plan of 67. At harvest,  each new longline has the capacity to
hold 90,000  scallops in final  stage  grow-out  nets,  thereby  increasing  the
production of the farm to 6 million scallops.  Additionally, the Deep Bay tenure
has been expanded to 32 longlines, which has the capacity to hold 2.8 million at
harvest.

         After an  analysis  of our  production  results to date,  we decided to
transition  production to a combination of our ear-hanging method and the use of
"lantern style" nets (for our grow-out nets),  the later of which will allow for
approximately  90,000 scallops per line (vs.  100,000  "ear-hung).  The costs of
"lantern  style" are similar to that of  "ear-hanging"  ($.08 per scallop in net
vs.  $.075 per ear hung  scallop):  labor costs for the lantern  method are less
because there is less handling of the scallops,  however, capital costs are more
since we will need to purchase boats capable of handling  additional  weight per
line caused by use of nets vs. ear hanging.  In conjunction with the transfer of
our 2005 scallop  class from small mesh nets to the final stage lantern nets, we
also will begin  moving the 2006 crop from the pond sites (at our  hatchery)  to
small mesh nets on our farms;  it is estimated  that these animals will be ready
for harvest in the Spring of 2008.


SERIES A PREFERRED STOCK AND WARRANT FINANCINGS

         On April 12, 2006 we completed a private equity financing of $1,062,000
with 2 accredited investors.  Net proceeds from the offering, were approximately
$952,040.  We issued 1,888,000 shares of our Series A Preferred Stock, par value
$0.001 per share and stated  value of $0.75 per  share,  at a purchase  price of
$0.5625 per share and each  investor  also received one of each of the following
warrants:  (i) Series A Warrant, (ii) Series B Warrant,  (iii) Series C Warrant,
(iv) Series D Warrant, (v) Series J Warrant, (vi) Series E Warrant, (vii) Series
F Warrant,  (viii) Series G Warrant, and (ix) Series H Warrant, each to purchase
a number  of  shares of  Common  Stock  equal to 50% of the  number of shares of
Series A Preferred  Stock  purchased,  except for the Series J  Warrants,  which
entitled  the  investor to purchase a number of shares of our common stock equal
to 100% of the number of shares of Series A Preferred Stock purchased. We issued
a total  of  9,440,000  Warrants.  Each of the  Warrants  has a term of five (5)
years, except for the Series J Warrants, which have a term of one (1) year. Each
share of the Series A  Preferred  Stock is  convertible  into one fully paid and
nonassessable share of our common stock.

         In connection with the April 12, 2006 financing,  our management agreed
not to sell any of our securities owned by them, their affiliates or anyone they
have influence over until this registration statement has been effective for six
months.  World Wide Mortgage,  to whom we borrowed the amount of CDN $1,500,000,
also entered into a lock up agreement to sell no more than 100,000 shares of our
common stock per quarter until the registration statement has been effective for
six months.


                                       2



         In  connection  with  the  April  12,  2006  financing,  we  paid  cash
compensation  to a placement  consultant in the amount of $84,960 and issued him
188,800  warrants.  Each of the placement  consultant's  warrants  allows him to
purchase one share of our Series A Preferred  Stock, and one half of each of the
Series A-H Warrants and one Series J warrant. Each of the placement consultant's
warrants to purchase the securities described above is exercisable at a price of
$0.5625 per warrant, for a period of three years.

         On May 30, 2006 we completed  another round of private equity financing
of  $1,500,000  pursuant  to a Series A  Convertible  Preferred  Stock  Purchase
Agreement  dated  May 30,  2006.  The net  proceeds  from  this  financing  were
approximately  $1,380,000.  We issued 2,000,000 shares of our Series A Preferred
Stock,  stated value of $0.75 per share,  at a purchase price of $0.75 per share
and the investor also received one of each of the following warrants: (i) Series
A Warrant,  (ii)  Series B Warrant,  (iii)  Series C Warrant,  and (iv) Series D
Warrant, each to purchase a number of shares of Common Stock equal to 50% of the
number of shares of Series A  Preferred  Stock  purchased;  we issued a total of
4,000,000  Warrants.  Each of the  Warrants  has a term of five (5) years and is
identical  to the Series A-D  Warrants  we issued to  investors  pursuant to the
financing we closed on April 12, 2006.

         In  connection  with  the  May  30,  2006   financing,   we  paid  cash
compensation to a placement  consultant in the amount of $120,000 and issued him
200,000  warrants.  Each of the placement  consultant's  warrants  allows him to
purchase one share of our Series A Preferred  Stock, and one-half of each of the
Series A-D Warrants. Each of the placement consultant's warrants to purchase the
securities described above is exercisable at a price of $1.50 per warrant, for a
period of three years.

         On June 30, 2006 and July 11,  2006 we  completed  two final  rounds of
private equity  financing  accepting  subscriptions  in the aggregate  amount of
$2,840,000 from 9 institutional and accredited investors pursuant to the May 30,
2006 Series A Convertible  Preferred Stock  Purchase.  On June 30, 2006 and July
11, 2006,  we entered into separate  Joinder  Agreements to each of the Series A
Convertible  Preferred  Stock  Purchase  Agreement and the  Registration  Rights
Agreement,  each dated as of May 30, 2006,  with each of the new investors which
added  such  investors  as  additional  parties  to the May 30,  2006  financing
documents.   Net  cash  proceeds  from  these  two  rounds  were   approximately
$2,659,000.  Pursuant  to  these  two  final  financings,  we  issued a total of
3,786,666  shares of our Series A  Preferred  Stock,  stated  value of $0.75 per
share at a purchase price of $0.75 per share and each investor also received one
of each of the following warrants:  (i) Series A Warrant, (ii) Series B Warrant,
(iii) Series C Warrant, and (iv) Series D Warrant,  each to purchase a number of
shares  of  Common  Stock  equal to 50% of the  number  of  shares  of  Series A
Preferred Shares  purchased  (subject to the rounding of factional  shares);  we
issued a total of 7,573,344  Warrants in these two rounds of financing.  Each of
the  Warrants  has a term of five (5) years and is  identical  to the Series A-D
Warrants we issued to investors  pursuant to the  financings  we closed on April
12,  2006 and May 30,  2006.  Each  share of our  Series  A  Preferred  Stock is
convertible into one fully paid and nonassessable share of our common stock.

         In connection with the June 30, 2006 and July 11, 2006  financings,  we
paid a total  placement  consultant  fee of $217,000.  The placement  consultant
received  $160,000 of his fee in securities (as described  below) and $57,000 in
cash. As a result,  we issued the  placement  consultant  213,333  shares of our
Series A Preferred Stock, and one of each of the A-D Warrants,  each to purchase


                                       3


106,667  shares of our Common  Stock.  The A-D Warrants  issued to the placement
consultant  are  identical to the Series A-D Warrants we issued to the investors
as described above.

Pursuant to the April, May, June and July 2006 financings, we received aggregate
net proceeds of approximately $4,991,040 and we issued an aggregate of 7,887,999
shares of our Series A Preferred  Stock and Warrants to purchase an aggregate of
21,440,020 shares of our common stock.

For  further  information   regarding  the  preferred  stock  and  warrants  see
"Description  of  Securities  - Series A Preferred  Stock" and  "Description  of
Securities -Warrants."


         Also in  connection  with the  issuance  of the  shares of our Series A
Preferred  Stock and  Warrants  issued  in the  April,  May,  June and July 2006
financings  described above, we agreed to file this registration  statement with
the Securities and Exchange  Commission to register for resale the shares of our
common  stock  into  which the  shares of our  Series A  Preferred  Stock may be
converted  and the shares of common  stock  issuable  upon the  exercise  of the
warrants. We are required to file this registration  statement on or before July
14, 2006. If the registration statement is not declared effective by December 6,
2006, we will be required to pay liquidated  damages equal to 1.0% of the amount
invested for each calendar month or portion  thereof  thereafter such date until
this  registration  statement is declared  effective.  Pursuant to the April 12,
2006  financing,  in no event shall the amount of liquidated  damages payable at
any time and from time to time exceed an  aggregate  of 24% of the amount of the
initial  investment in the Series A Preferred  Stock pursuant to such financing.
Pursuant to the May 30, 2006, June 30, 2006 and July 11, 2006 financings,  in no
event shall the amount of liquidated  damages  payable at any time and from time
to time exceed an  aggregate of 10% of the amount of initial  investment  in the
Series A Preferred  Stock pursuant to such rounds of financing.  We are required
to keep this registration  statement continuously effective under the Securities
Act until  such date as is the  earlier  of the date when all of the  securities
covered by this registration  statement have been sold or the date on which such
securities may be sold without any restriction pursuant to Rule 144.



                                  RISK FACTORS

You  should  carefully  consider  the risks  described  below  before  making an
investment in EDGEWATER.  All of these risks may impair our business operations.
If any of the following risks actually occurs our business,  financial condition
or results of operations could be materially  adversely affected.  In such case,
the trading  price of our common  stock could  decline,  and you may lose all or
part of your investment.

RISKS RELATING TO AQUACULTURE

We are subject to a number of biological and environmental risks.

Our  business  would be  adversely  affected if our scallop  crop is infected by
Perkinsus Quagwadi.  Perkinsus affects a variety of scallops. In 1992, mortality
due to Perkinsus infection was large and mortality was high, but Island Scallops
was able to overcome this disease by breeding the remaining  stock.  Eight years
of successfully breeding hardy individuals resulted in the remaining populations
of scallops being Perkinsus-free. Although there is a chance that other diseases



                                       4


may occur,  the Island Scallops hybrid scallop has proven resistant to Perkinsus
disease for the last ten years.

Paralytic  Shellfish Poisoning (PSP or red tide) is another concern when farming
scallops.  The  adductor  muscle can be  processed  for sale to the  traditional
scallop  meat market even when there is a PSP  closure.  On the other hand,  the
live animal  market is stopped by PSP  toxicity.  Sewage  Contamination  (faecal
coliform) is also  monitored by the Canadian  Food  Inspection  Agency (CFIA) to
avoid this  problem.  These types of  contaminants  do not threaten the crop, it
only causes a temporary  displacement  to the  marketing of the product.  Island
Scallops'  aquaculture  is not without  total  risk;  however,  the  development
program over the last decade has reduced the risk of disease and  increased  the
historical grow-out survival rate to 95% over the past six years.  Despite these
advances,  however,  an  outbreak  of  PSP,  even if it did  not  affect  Island
Scallops'  stock,  could have a  depressive  effect on the  shellfish  market in
general, which could then adversely affect our business.

Aquaculture  and  scallop  farming is  subject  to a variety of general  disease
risks.

Bacteria are almost always  associated with  mortalities in the larval stages of
growth.  Control  of  disease  outbreaks  in the  hatchery  consists  of regular
inspection,  growth rates, color and larvae is checked for proper shape.  Proper
hygiene  practices  within the hatchery  minimize  problems  with  Bacteria.  In
general,  scallops are harder to handle and transport and care needs to be taken
when moving  them.  Scallops  can develop a stress  related  disease that can be
avoided by proper handling  conditions  such as temperature,  moisture rates and
time before getting back in the water (maximum time being 24 hours).

Boring sponges and worms can adversely impact our scallop yield.

Boring sponges and worms are organisms  that make holes in the scallop's  shell,
weakening it and  requiring the scallop to make  repairs.  Secreting  additional
layers of shell material to mend these holes directs energy away from growth and
maintenance of the scallop. In cases of severe infestation,  the adductor muscle
may be reduced in weight by up to 50%, and the meat may be discolored.

Our  business  would be  adversely  affected if our scallop  crop is infected by
flatworm.

Flatworms  can be  devastating,  destroying  all seed  within  2  weeks.  Island
Scallops  has managed to minimize  this  problem  and keep  mortalities  down by
keeping the seeds in the pond a little longer so it becomes  larger,  making the
time  spent in the first net  culture  less.  We then move the seeds to a larger
mesh net culture,  which  causes the  flatworms to fall off and no longer pose a
problem. This husbandry technique alleviates the problem to a large degree.

Scallops  raised in the open ocean are  subject to a variety of  predators  that
could adversely impact crop yield.

Starfish are a major predator of scallops,  particularly in bottom  culture.  If
the hanging  techniques are far enough from the bottom,  even during extreme low
tides,  then this  does is not  problematic.  Since  starfish  and crabs  have a
free-swimming  larval  stage as part of their life cycle,  it is  possible  that


                                       5


these larvae can settle within the "grow-out"  nets and settle there and prey on
these scallops.  However,  with proper husbandry techniques these effects can be
minimized.

Our  business  would be  adversely  affected if a majority  of our scallop  crop
experiences fouling.

Fouling  is  caused  by  settlement  and  growth of  several  organisms  such as
macroalgae,  bryozoans,  barnacles  and  mussels on the nets.  Heavy  fouling of
culture nets and scallops  impedes  growth of the  scallops.  Since most fouling
occurs in  shallower  waters,  hanging  scallops  at deeper  depths  can  reduce
fouling. If culture systems are managed properly, fouling is not a problem.

Aquaculture can be subject to a variety of growing conditions that can adversely
affect product growth and development.

Certain  growing  conditions  and sea  conditions  can  affect the  quality  and
quantity  of  scallops  produced,  decreasing  the  supply of our  products  and
negatively impacting  profitability.  Extreme wave actions tend to make scallops
seasick.  In cases of extreme  seasickness,  scallops stop feeding and growth is
reduced.  This may create  mortality by  weakening  the scallops and making them
susceptible to other problems and diseases. Currently, the water leases owned by
Island  Scallops  are  located  in  areas  where  this  will  prove  to be  less
problematic.  Additionally,  if other environmental  conditions are unfavorable,
growing  conditions in the ocean can greatly inhibit  scallop growth.  Generally
this  risk is  mitigated  by  year-to-year  variations  in  growing  conditions.
However, we cannot guarantee that we will not be negatively  affected,  at least
in the short term, if we experience poor growing conditions.

Increased mortality rates would adversely impact our business.

In general,  increased  mortality rates in juveniles are due to improper feeding
and hatchery  husbandry.  Once scallops are  introduced to the ocean,  increased
mortality  rates are  caused by the above  factors  as well as  fluctuations  in
salinity and currents.  Given the location of Island  Scallops'  current farming
areas, the salinity and currents should not be problematic.  Mortality rates can
also increase due to  overcrowding  problems.  In cases of extreme  overcrowding
scallops actually bite each other and their shells become damaged.

If we are unable to expand our tenures, our projected production may be delayed.

To  increase  our  production  capacity,  we must expand our  tenures.  However,
expanding tenures requires government approval, which can be a timely and costly
process.  Two of our tenures,  Hindoo Creek and Deep Bay, have been approved for
expansion.  Our Denman tenure must be re-zoned before expansion  thereof will be
approved and our Bowser bottom lease Management Plan must be reconfigured before
expansion of that area is approved. Although we are confident that such approval
will be granted after issues raised by local  residents and  fisherman,  such as
the use of surface  floats for our longlines  have been  addressed,  there is no
guarantee that it will be granted.  In the future, we will seek expansion of our
other  tenures,  which also may not be granted.  If we do not receive  expansion
approval  for our  Denman  tenure  and Bowser  bottom  lease,  it will delay our
proposed expansion.



                                       6


BUSINESS RISKS

We will require additional capital to fund our current business plan.

Our success is dependent on future financings. The aquaculture or marine farming
industry is a  capital-intensive  business,  which requires  substantial capital
expenditures  to develop  and  acquire  farms and to  improve or expand  current
production.  Further,  the farming of marine life and  acquisition of additional
farms may require  substantial  amounts of working capital.  We project the need
for significant capital spending and increased working capital requirements over
the next several years. There can be no assurance that we will be able to secure
such financing on terms, which are acceptable,  if at all. The failure to secure
future  financing with favorable  terms could have a material  adverse effect on
our business and operations.

We are dependent on certain key existing and future personnel.


Our success will depend,  to a large  degree,  upon the efforts and abilities of
our officers and key management employees such as Mr. Saunders, Mr. Bruce Evans,
Ms. Patti  Greenham and Ms. Leslie  Chapman.  The loss of the services of one or
more of these or other key employees could have a material adverse effect on our
operations.  We currently  maintain key man life insurance on Mr. Saunders for a
value of $1,000,000.  We also have an employment agreement with Mr. Saunders. We
do not maintain key man  insurance  for,  nor do we  currently  have  employment
agreements  with, any of our other key employees.  In addition,  as our business
plan is implemented,  we will need to recruit and retain  additional  management
and key employees in virtually all phases of our operations.  Key employees will
require a strong background in the marine aquaculture industry. We cannot assure
that we will be able to successfully attract and retain key personnel.

The fact that our  directors and officers own  approximately  49% of our capital
stock  and 68% of our  voting  capital  stock may  decrease  your  influence  on
shareholder decisions.


Our  executive  officers  and  directors,  in the  aggregate,  beneficially  own
approximately 49% of our capital stock and 68% of our voting capital stock. As a
result,  our officers  and  directors,  will have the ability to  influence  our
management and affairs and the outcome of matters  submitted to shareholders for
approval,  including  the election and removal of  directors,  amendments to our
bylaws and any merger,  consolidation or sale of all or substantially all of our
assets.

Our acquisitions and potential future acquisitions involve a number of risks.

Our potential future  acquisitions  involve risks  associated with  assimilating
these  operations  into our company;  integrating,  retaining and motivating key
personnel;   integrating   and  managing   geographically-dispersed   operations
integrating the technology and infrastructures of disparate entities;  and risks
inherent in the husbandry and farming of marine species.

We may have difficulty  competing with larger and  better-financed  companies in
our sector.

In  general,  the  aquaculture  industry  is  intensely  competitive  and highly
fragmented. Many of our competitors have greater financial, technical, marketing
and public  relations  resources than we presently have. Our sales may be harmed


                                       7


to the  extent we are not able to  compete  successfully  against  such  seafood
producers.

Contamination of our seafood would harm our business.

Because our products are designed for human consumption, our business is subject
to  certain  hazards  and  liabilities   related  to  food  products,   such  as
contamination.  A discovery of  contamination  in any of our  products,  through
tampering  or  otherwise,  could  result in a recall of our  products.  Any such
recall would significantly  damage our reputation for product quality,  which we
believe is one of our principal competitive assets, and could seriously harm our
business  and sales.  Although we maintain  insurance  to protect  against  such
risks,  we may not be able to maintain such  insurance on  acceptable  terms and
such insurance may not be adequate to cover any resulting liability.

We may experience  barriers to conducting  business due to potential  government
regulations.

There are no  hatchery/producer  competitors in the scallop farming  business in
British  Columbia.  The United  States will not allow the farming of the species
farmed by Island  Scallops in their  waters,  as this species is  considered  an
"exotic".  It is unlikely that the Canadian  government would decide to regulate
this species like the United States does (as the Canadian  government  developed
the technology) however if it does, this would have a material adverse affect on
our business.

Our business may be adversely affected price by volatility.

If market prices for Island Scallops' products decrease, we will incur a loss of
profits.  However,  our operational  costs will increase because we will have to
produce the same quantity to meet the current demand, which will decrease profit
margin. This form of price volatility would be detrimental for our business.

Foreign exchange rates risks, political stability risk, and/or the imposition of
adverse trade regulations could harm our business.

We conduct some of our business in foreign currencies. Our profitability depends
in part on revenues  received in United States dollars as a result of sales into
the United  States.  A decline in the value of the United States dollar  against
the Canadian  dollar would  adversely  affect  earnings from sales in the United
States.  As part of our plans to  acquire  other  businesses  we may  expand our



                                       8


operations to other countries,  operate those businesses in foreign  currencies,
and export  goods from those  countries.  Thus far,  we have not  engaged in any
financial hedging  activities to offset the risk of exchange rate  fluctuations.
We may in the future, on an as-needed basis, engage in limited financial hedging
activities  to offset the risk of exchange  rate  fluctuations.  There is a risk
that a shift in certain  foreign  exchange rates or the imposition of unforeseen
and adverse  political  instability  and/or trade  regulations  could  adversely
impact the costs of these items and the  liquidity  of our  assets,  and have an
adverse  impact  on our  operating  results.  In  addition,  the  imposition  of
unforeseen  and adverse trade  regulations  could have an adverse  effect on our
exported seafood operations. We expect the volume of international  transactions
to  increase,   which  may  increase  our  exposure  to  future   exchange  rate
fluctuations.

RISKS RELATING TO THE OFFERING

There may not be sufficient  liquidity in the market for our securities in order
for investors to sell their securities.


There is currently only a limited  public market for our common stock,  which is
listed on the  Over-the-Counter  Bulletin  Board,  and there can be no assurance
that a trading  market  will  develop  further or be  maintained  in the future.
During  the  month  of  June  2006,  our  common  stock  traded  an  average  of
approximately  318 shares per day. As of October 5, 2005,  the closing bid price
of our  common  stock  was  $1.35 per  share.  As of  October  5,  2005,  we had
approximately 114 shareholders of record of our common stock and 14 shareholders
of record of our preferred  stock,not  including  shares held in street name. In
addition,  during  the past two years our common  stock has had a trading  range
with a low price of $0.51 per share and a high price of $1.95 per share.



The market price of our common stock may be volatile.

The market  price of our common  stock has been and will  likely  continue to be
highly  volatile,  as is the stock  market in  general,  and the  market for OTC
Bulletin  Board  quoted  stocks  in  particular.  Some of the  factors  that may
materially  affect the market  price of our common stock are beyond our control,
such as changes in  financial  estimates by industry  and  securities  analysts,
conditions  or trends in the industry in which we operate or sales of our common
stock.  These factors may  materially  adversely  affect the market price of our
common  stock,  regardless  of our  performance.  In addition,  the public stock
markets have  experienced  extreme  price and trading  volume  volatility.  This
volatility  has  significantly  affected the market prices of securities of many
companies for reasons frequently  unrelated to the operating  performance of the
specific  companies.  These broad market  fluctuations  may adversely affect the
market price of our common stock.

The  outstanding  warrants  may  adversely  affect  us in the  future  and cause
dilution to existing shareholders.

There are currently 24,308,823 warrants outstanding. The terms of these warrants
expire  as  early  as 2007  and as late as  2011.  The  exercise  price of these
warrants range from $0.5625 to $2.25 per share, subject to adjustment in certain
circumstances.  Exercise of the warrants may cause  dilution in the interests of
other  shareholders  as a result of the  additional  common  stock that would be
issued  upon  exercise.  In  addition,  sales of the shares of our common  stock
issuable  upon  exercise of the warrants  could have a depressive  effect on the
price of our stock, particularly if there is not a coinciding increase in demand
by  purchasers of our common  stock.  Further,  the terms on which we may obtain
additional  financing  during the period any of the warrants remain  outstanding
may be adversely affected by the existence of these warrants as well.

Our common stock may be considered a "penny stock" and may be difficult to sell.

The SEC has adopted  regulations which generally define a "penny stock" to be an
equity  security  that has a market  price of less  than  $5.00  per share or an


                                       9


exercise price of less than $5.00 per share, subject to specific exemptions. The
market price of our common stock is less than $5.00 per share and, therefore, it
may be designated as a "penny stock"  according to SEC rules.  This  designation
requires  any broker or dealer  selling  these  securities  to disclose  certain
information  concerning  the  transaction,  obtain a written  agreement from the
purchaser  and determine  that the purchaser is reasonably  suitable to purchase
the  securities.  These rules may  restrict the ability of brokers or dealers to
sell our  common  stock and may affect the  ability of  investors  to sell their
shares.


                         CAUTIONARY STATEMENT REGARDING
                           FORWARD-LOOKING INFORMATION


         From  time  to  time,   we  may  make  written   statements   that  are
"forward-looking,"  including  statements contained in this prospectus and other
filings with the Securities and Exchange Commission, reports to our stockholders
and  news  releases.  All  statements  that  express  expectations,   estimates,
forecasts or projections  are  forward-looking  statements.  In addition,  other
written or oral statements  which constitute  forward-looking  statements may be
made by us or on our behalf. Words such as "expects,"  "anticipates," "intends,"
"plans,"  "believes,"  "seeks,"  "estimates,"  "projects,"  "forecasts,"  "may,"
"should,"  variations  of such words and  similar  expressions  are  intended to
identify such forward-looking statements. These statements are not guarantees of
future  performance and involve risks,  uncertainties  and assumptions which are
difficult  to  predict.  Therefore,  actual  outcomes  and  results  may  differ
materially  from  what  is  expressed  or  forecasted  in or  suggested  by such
forward-looking  statements.  We undertake no obligation to update  publicly any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.  Important  factors on which such  statements are based are
assumptions concerning uncertainties, including but not limited to uncertainties
associated with the following:

         (a) volatility or decline of our stock price;

         (b) potential fluctuation in quarterly results;

         (c) our failure to earn revenues or profits;

         (d) inadequate  capital and barriers to raising the additional  capital
or to obtaining the financing needed to implement its business plans;

         (e) inadequate capital to continue business;

         (f) changes in demand for our products and services;

         (g) rapid and significant changes in markets;

         (h) litigation with or legal claims and allegations by outside parties;
or


                                       10


         (i) insufficient revenues to cover operating costs.

         There is no assurance that we will be profitable, we may not be able to
successfully develop,  manage or market our products and services, we may not be
able to attract or retain  qualified  executives and technology  personnel,  our
products and services may become obsolete,  government regulation may hinder our
business, additional dilution in outstanding stock ownership may be incurred due
to the issuance of more shares,  warrants and stock options,  or the exercise of
warrants and stock options, and other risks inherent in the our businesses.

         We undertake no  obligation  to publicly  revise these  forward-looking
statements to reflect events or circumstances  that arise after the date hereof.
Readers should carefully review the factors described in other documents we file
from time to time with the  Securities  and Exchange  Commission,  including the
Quarterly  Reports  on Form  10-QSB  and  Annual  Report on Form  10-KSB and any
Current  Reports  on  Form  8-K  filed  by us.  All  forward-looking  statements
attributable  to us are expressly  qualified in their entirety by the cautionary
statement above.



USE OF PROCEEDS


We have registered  these shares because of  registration  rights granted to the
investors  in  our  recent  private  equity  financing  and  the  other  selling
shareholders.  We will not  receive  any  proceeds  upon the  conversion  of the
preferred  shares  into shares of our common  stock,  however,  we received  net
proceeds of  approximately  $4,990,000  from the initial  sale of the  preferred
shares and we could  receive  up to  approximately  $34,350,000  net of fees and
expenses,  from the  exercise of the  warrants  when and if  exercised.  The net
proceeds from the sale of the Preferred Stock and any proceeds received form the
exercise  of the  warrants  have been and will be used as set forth in the table
below.


The following table represents  estimates only. The actual amounts may vary from
these estimates.

Use of Funds              Funds Received from Sale of   Funds Received from Sale
                                Preferred Shares         of Preferred Shares and
                                                        Exercise of the Warrants
- --------------------------------------------------------------------------------

Working Capital                   $3,540,000                   $34,350,000

Repayment of Bridge Loan          $1,450,000                             -


   Total                          $4,990,000                   $34,350,000

- ---------------


                                       11



                              SELLING SHAREHOLDERS


         The  following  table sets forth  certain  information  concerning  the
resale of the shares of common stock by the selling  shareholders  (the "Selling
Shareholders").  To our  knowledge,  no  Selling  Shareholder  nor any of  their
affiliates  has held any position or office with,  been employed by or otherwise
has had any material  relationship  with us or our  affiliates  during the three
years prior to the date of this prospectus. Unless otherwise indicated below, to
our knowledge, none of the Selling Shareholders are broker-dealers or affiliates
of a  broker-dealer  within the meaning of Section 3 of the Securities  Exchange
Act.

         The Selling Shareholders may offer all or some portion of the shares of
the common stock or the shares of common stock  issuable upon  conversion of the
Series A Preferred  Stock  and/or  exercise  of the  warrants.  Accordingly,  no
estimate  can be given as to the amount or  percentage  of our common stock that
will be held by the Selling  Shareholders  upon termination of sales pursuant to
this prospectus.  In addition, the Selling Shareholder identified below may have
sold, transferred or disposed of all or a portion of their shares since the date
on which they provided the information  regarding their holdings in transactions
exempt from the  registration  requirements of the Securities Act. The amount of
shares  owned and offered  hereby by the  Selling  Shareholders  are  calculated
assuming  a  conversion  ratio of one  share of common  stock for each  share of
Preferred  Stock,  which conversion price is subject to adjustment under certain
circumstances.  See "Description of Securities." Individual beneficial ownership
of the Selling  Shareholders  also includes shares of common stock that a person
has the right to acquire within 60 days from October 5, 2006.  See  "Description
of Securities -Warrants."

         As of October 5, 2006, there were 20,983,260 shares of our common stock
outstanding and 7,887,999 shares of our preferred stock  outstanding,  which are
treated on as converted  basis for the purposes of computing  the  percentage of
outstanding  securities  owned by the  Selling  Shareholders.  Unless  otherwise
indicated, the Selling Shareholders have the sole power to direct the voting and
investment  over the shares owned by them. We will not receive any proceeds from
the resale of the common stock by the Selling Shareholders. We estimate that our
costs and expenses of  registering  the shares  listed herein for resale will be
approximately $10,000.

            Unless otherwise indicated, all of the Selling Shareholders received
their shares pursuant to the April, May, June or July 2006 financings, which are
described  above in Recent  Developments,  Series A Preferred  Stock and Warrant
Financings.


                                       12







                             OWNERSHIP OF COMMON STOCK BY SELLING SHAREHOLDERS
                             -------------------------------------------------

    NAME OF SELLING          NUMBER OF SHARES      NUMBER OF SHARES      NUMBER OF SHARES           PERCENTAGE OF
    STOCKHOLDER              PRIOR TO THE          OFFERED HEREBY        TO BE OWNED AFTER THE      OWNERSHIP AFTER THE
                             OFFERING                                    OFFERING                   OFFERING (1)(2)(3)
    -------------------------------------------------------------------------------------------------------------------
                                                                                        


    Vision Opportunity       22,107                20,822,108(4)         20,822,108                        *
    Master Fund, Ltd.
    Michael Ross             753                   728,750(5)            728,750                           *
    IRA FBO, Michael P.      0                     200,003 (17)          200,003
    Ross, Pershing LLC as
    Custodian
    Nite Capital, LP         0                     1,000,001 (6)         1,000,001                         *
    IRA FBO, Richard M.      0                     400,001 (7)           400,001                           *
    Ross, Pershing LLC as
    Custodian
    Irene S. Ross 2005 GS    0                     400,001 (8)           400,001                           *
    Trust
    Lenore Rabin-Koster      0                     200,003 (9)           200,003                           *
    Jack Halpern             0                     800,003 (10)          800,003                           *
    Judith S. Brauner        0                     200,003 (11)          200,003                           *
    Union Bancaire Privee    0                     4,000,001 (12)        4,000,001                         *
    Pai's International      0                     1,344,000 (13)        1,344,000
    Trade, Inc.

    Bridge Financing Group   800,000               400,000 (14)          400,000                           *
    (doing business as
    "World Wide Mortgage
    Corporation")

    Aurelius Consulting      100,000               100,000 (15)          100,000                           *
    Group, Inc.
    Gallatin Consulting, Inc.100,000               100,000 (16)          100,000                           *
    Gary Shemano             12,500                12,500 (18)           12,500                            *
    Christian Galatti        12,500                12,500 (18)           12,500                            *
    Lauren Stock             0                     3,997 (19)            3,997                             *
    Ijaz Malik               0                     199,998 (20)          199,998                           *
    Providence Consulting,   0                     1,149,013(21)         1,149,013                         *
    LLC
    Niel Kleinman            0                     771,799(22)           771,799                           *





     * Less than 1% ownership of our common stock following the offering.


                                       13



(1)      All  Percentages  have been rounded up to the nearest one  hundredth of
         one percent.

(2)      Since we do not have the ability to control how many,  if any, of their
         shares each of the selling shareholders listed above will sell, we have
         assumed  that  all of the  selling  shareholders  will  sell all of the
         shares offered herein for purposes of determining  their  percentage of
         ownership following the offering.

(3)      The number of shares offered by this  prospectus will vary from time to
         time based upon several factors including the amount of Preferred Stock
         the holder  intends to convert and the amount of  warrants  that may be
         exercised.  See "Prospectus Summary - Recent Developments - Financing."
         Based upon the terms of the both the Preferred  Stock and the warrants,
         holders  may not  convert  the  Preferred  Stock  and/or  exercise  the
         warrants,  if on any date,  such holder would be deemed the  beneficial
         owner of more than 9.99% of the then  outstanding  shares of our common
         stock.  Additionally,  the  shares of  Preferred  Stock are  subject to
         certain anti-dilution  provisions,  which would be triggered if we were
         to sell  securities  at a price  below  the  price at which we sold the
         Preferred Stock.

(4)      The person having voting,  dispositive or investment powers over Vision
         Opportunity Master Fund, Ltd, is Adam Benowitz,  Authorized Agent. This
         amount  includes   5,133,333  shares  of  common  stock  issuable  upon
         conversion of Vision's Series A Convertible Preferred Stock, 15,666,668
         shares of common  stock  issuable  upon  exercise of Vision's  Warrants
         Vision  received in the April,  May, June and July 2006  financings and
         22,107 shares of common stock Vision  received as dividends on June 30,
         2006.


5)       This amount  includes  141,333  shares of common  stock  issuable  upon
         conversion of his Series A Convertible  Preferred Stock, 546,668 shares
         of common stock issuable upon exercise of his Warrants  received in the
         April,  May,  June and July 2006  financings  and 753  shares of common
         stock he  received  as  dividends  on June 30,  2006.  This amount also
         includes an  additional  13,333  shares of common stock  issuable  upon
         conversion of 13,333 shares of Series A Convertible Preferred Stock and
         26,664 shares of common stock issuable upon exercise of 26,664 Warrants
         Mr. Ross received from Chi Pai.

(6)      The person having voting,  dispositive  or investment  powers over Nite
         Capital  is Keith  Goodman,  Authorized  Agent.  This  amount  includes
         333,333  shares of common  stock  issuable  upon  conversion  of Nite's
         Series A Convertible Preferred Stock and 666,668 shares of common stock
         issuable upon exercise of the warrants Nite received in the April, May,
         June and July 2006 financings.



                                       14


(7)      This amount  includes  133,333  shares of common  stock  issuable  upon
         conversion  of his Series A  Convertible  Preferred  Stock and  266,668
         shares of common  stock  issuable  upon  exercise  of the  warrants  he
         received in the April, May, June and July 2006 financings.

(8)      This amount  includes  133,333  shares of common  stock  issuable  upon
         conversion  of her Series A  Convertible  Preferred  Stock and  266,668
         shares of common  stock  issuable  upon  exercise of the  Warrants  she
         received in the April, May, June and July 2006 financings.

(9)      This  amount  includes  66,667  shares of common  stock  issuable  upon
         conversion  of her Series A  Convertible  Preferred  Stock and  133,336
         shares of common  stock  issuable  upon  exercise of the  warrants  she
         received in the April, May, June and July 2006 financings.

(10)     This amount  includes  266,667  shares of common  stock  issuable  upon
         conversion  of his Series A  Convertible  Preferred  Stock and  533,336
         shares of common  stock  issuable  upon  exercise  of the  warrants  he
         received in the April, May, June and July 2006 financings.

(11)     This  amount  includes  66,667  shares of common  stock  issuable  upon
         conversion  of her Series A  Convertible  Preferred  Stock and  133,336
         shares of common  stock  issuable  upon  exercise  of the  warrants  he
         received in the April, May, June and July 2006 financings.

(12)     The persons having voting,  dispositive or investment powers over Union
         Bancaire  Privee are Olivier  Constantin  and Franco Rossi,  Authorized
         Agents.  This amount includes 1,333,333 shares of common stock issuable
         upon conversion of Duration's Series A Convertible  Preferred Stock and
         2,666,668 shares of common stock issuable upon exercise of the warrants
         it received in the April, May, June and July 2006 financings.

(13)     The person having voting,  dispositive or investment  powers over Pai's
         International  Trade,  Inc. is Chi Pai. This amount includes  1,344,000
         shares of common stock underlying the placement consultant warrants Pai
         International received in the April, May, June and July 2006 financings
         for the placement  consultant services they provided in connection with
         the April, May, June and July 2006 financings.



14)      The person having  voting,  dispositive  or investment  powers over The
         Bridge Financing Group is Randy Howarth,  Authorized  Agent. The Bridge
         Financing  Group received  shares of our common stock as  consideration
         for  agreeing  to extend the due date to April 15, 2006 for us to repay
         our CDN  $1,500,000  loan pursuant to the bridge loan  agreement  dated
         November  9, 2004 and  amended  on April 15,  2005  between  us and the
         Bridge Financing Group.

15)      The  person  having  voting,  dispositive  or  investment  powers  over
         Aurelius  Consulting Group, Inc. is David Gentry,  Authorized Agent. In
         October 2005, we engaged Aurelius  Consulting to provide  marketing and
         investor relations  services for an initial term of one year.  Aurelius
         is entitled to receive 25,000 shares of our restricted common stock per
         quarter during the term of its agreement,  in  consideration  for their
         services.

16)      The  person  having  voting,  dispositive  or  investment  powers  over
         Gallatin Consulting,  Inc. is Thomas Bostic Smith, Authorized Agent. In
         June 2005, we engaged  Gallatin  Consulting,  Inc. to provide  investor
         relations  services  for an  initial  term  of one  year.  Gallatin  is
         entitled  to  receive  100,000  of  our  restricted   common  stock  in
         consideration  for their  services,  although  the  shares  shall  vest
         quarterly on a 25,000 shares per quarter basis.


                                       15


17)      This  amount  includes  66,667  shares of common  stock  issuable  upon
         conversion  of his Series A  Convertible  Preferred  Stock and  133,335
         shares of common stock issuable upon exercise of his Warrants  received
         in the April, May, June and July 2006 financings.

18)      At October 21, 2005 and  November  11,  2005,  our board  approved  the
         issuance of a total of 25,000 shares of our common stock to The Shemano
         Group, LLC for preparing a research report for the Company. Mr. Shemano
         and Mr. Gallati are the President and CEO of The Shemano  Group,  which
         is a registered Broker-Dealer; however, as indicated herein, the shares
         were  issued  in the  ordinary  course of  business  and at the time of
         issuance,  neither  shareholder  had any agreements or  understandings,
         directly or indirectly, with any party to distribute the shares.

19)      This  amount  includes  1,333  shares of  common  stock  issuable  upon
         conversion of her Series A Convertible Preferred Stock and 2,664 shares
         of common stock  issuable upon  exercise of her Warrants  received from
         Chi Pai.

20)      This  amount  includes  66,666  shares of common  stock  issuable  upon
         conversion  of his Series A  Convertible  Preferred  Stock and  133,332
         shares of common stock issuable upon exercise of his Warrants  received
         from Chi Pai.

21)      The  person  having  voting,  dispositive  or  investment  powers  over
         Providence  Consulting,  LLC is Chi Pai,  Authorized Agent. This amount
         includes  65,335  shares of common stock  issuable  upon  conversion of
         their Series A Convertible  Preferred  Stock,  130,676 shares of common
         stock  issuable upon exercise of their  Warrants  received from Chi Pai
         and 953,002  shares of common  stock  issuable  upon  exercise of their
         placement consultant warrants received from Chi Pai.


22)      This  amount  includes  66,667  shares of common  stock  issuable  upon
         conversion of his Series A Convertible  Preferred Stock, 133,332 shares
         of common stock issuable upon exercise of his Warrant received from Chi
         Pai and 571,801  shares of common stock  issuable  upon exercise of his
         placement consultant warrants received from Chi Pai.


                              PLAN OF DISTRIBUTION


         We are  registering the shares of common stock on behalf of the Selling
Shareholders.  The selling security  holders and any of their pledgees,  donees,
assignees and successors-in-interest  may, from time to time, sell any or all of
their shares of common stock being  offered  under this  prospectus on any stock
exchange,  market or trading  facility on which  shares of our common  stock are
traded or in private  transactions.  These  sales may be at fixed or  negotiated
prices.  The selling  security  holders may use any one or more of the following
methods when disposing of shares:



                                       16



          o    ordinary  brokerage  transactions  and  transactions in which the
               broker-dealer solicits purchasers;

          o    block trades in which the broker-dealer  will attempt to sell the
               shares  as agent but may  position  and  resell a portion  of the
               block as principal to facilitate the transaction;

          o    purchases  by a  broker-dealer  as  principal  and resales by the
               broker-dealer for its account;

          o    an  exchange  distribution  in  accordance  with the rules of the
               applicable exchange;

          o    privately negotiated transactions;

          o    to cover  short  sales made after the date that the  registration
               statement  of  which  this  prospectus  is  a  part  is  declared
               effective by the Commission;

          o    broker-dealers  may agree with the  selling  security  holders to
               sell a specified  number of such shares at a stipulated price per
               share;

          o    a combination of any of these methods of sale; and

          o    any other method permitted pursuant to applicable law.

         The shares may also be sold under Rule 144 under the  Securities Act of
1933, as amended if available,  rather than under this  prospectus.  The selling
security  holders  have the sole  and  absolute  discretion  not to  accept  any
purchase  offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.

         The selling  security  holders may pledge their shares to their brokers
under the margin provisions of customer agreements. If a selling security holder
defaults on a margin loan, the broker may, from time to time, offer and sell the
pledged shares.

         Broker-dealers  engaged by the selling security holders may arrange for
other  broker-dealers  to  participate  in  sales.  Broker-dealers  may  receive
commissions  or  discounts  from  the  selling  security  holders  (or,  if  any
broker-dealer acts as agent for the purchaser of shares,  from the purchaser) in
amounts to be negotiated,  which commissions as to a particular broker or dealer
may be in excess of customary  commissions to the extent permitted by applicable
law.

         If  sales  of  shares  offered  under  this   prospectus  are  made  to
broker-dealers  as  principals,  we would be required  to file a  post-effective
amendment to the  registration  statement of which this prospectus is a part. In
the post-effective  amendment, we would be required to disclose the names of any
participating  broker-dealers and the compensation arrangements relating to such
sales.



                                       17



         The selling security holders and any  broker-dealers or agents that are
involved in selling the shares offered under this prospectus may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with these
sales.  Commissions received by these broker-dealers or agents and any profit on
the  resale of the  shares  purchased  by them may be deemed to be  underwriting
commissions or discounts under the Securities Act. Any  broker-dealers or agents
that are  deemed to be  underwriters  may not sell  shares  offered  under  this
prospectus  unless and until we set forth the names of the  underwriters and the
material  details of their  underwriting  arrangements  in a supplement  to this
prospectus  or,  if  required,  in  a  replacement   prospectus  included  in  a
post-effective  amendment to the registration statement of which this prospectus
is a part.

         The selling security holders and any other persons participating in the
sale or distribution of the shares offered under this prospectus will be subject
to  applicable  provisions  of the Exchange  Act, and the rules and  regulations
under that act, including Regulation M. These provisions may restrict activities
of,  and limit the  timing of  purchases  and sales of any of the shares by, the
selling security holders or any other person.  Furthermore,  under Regulation M,
persons   engaged  in  a  distribution   of  securities   are  prohibited   from
simultaneously  engaging in market making and other  activities  with respect to
those  securities for a specified  period of time prior to the  commencement  of
such distributions,  subject to specified exceptions or exemptions. All of these
limitations may affect the marketability of the shares.

         If any of the shares of common stock  offered for sale pursuant to this
prospectus are transferred  other than pursuant to a sale under this prospectus,
then  subsequent  holders could not use this prospectus  until a  post-effective
amendment or prospectus  supplement is filed,  naming such holders.  We offer no
assurance as to whether any of the selling security holders will sell all or any
portion of the shares offered under this prospectus.

         We have agreed to pay all fees and  expenses  we incur  incident to the
registration of the shares being offered under this  prospectus.  However,  each
selling  security  holder and purchaser is responsible for paying any discounts,
commissions and similar selling expenses they incur.

         We and the  selling  security  holders  have  agreed to  indemnify  one
another against certain  losses,  damages and liabilities  arising in connection
with this prospectus, including liabilities under the Securities Act.



                                    BUSINESS

OVERVIEW

         We were incorporated  under the laws of the State of Nevada on June 12,
2000, with the name Heritage Management Corporation.  In August 2005, we entered
into a share exchange  agreement with Edgewater Foods  International,  Inc., the
parent  company  of Island  Scallops  Ltd.  an  aquaculture  company  located in
Vancouver Island, British Columbia. As a result of the Share Exchange, Edgewater
became our wholly  owned  subsidiary  and  Edgewater's  shareholders  became the
owners of the majority of our voting  stock.  Pursuant to the terms of the Share
Exchange  Agreement,  Edgewater's  officers and directors have been appointed as
our  officers and  Directors.  Additionally,  we changed our name from  Heritage
Management, Inc. to Edgewater Foods International, Inc.



                                       18


         Our wholly owned  subsidiary,  Edgewater  Foods  International  Inc., a
Nevada  Corporation,  is the parent company of Island Scallops Ltd., a Vancouver
Island aquaculture company. Island Scallops was established in 1989 and for over
17 years  has  successfully  operated  a scallop  farming  and  marine  hatchery
business. Island Scallops is dedicated to the farming,  processing and marketing
of high quality,  high value marine  species:  scallops and  sablefish.  Scallop
farming is  relatively  new to North  America  and Island  Scallops  is the only
producer of both live-farmed  Pacific scallops and live sablefish (or blackcod).
Given Island  Scallops'  unique hatchery  technology and extensive  research and
development,  we believe that there is currently no significant  competition for
these  marine  species.  Island  Scallops  is  committed  to  rapidly  expanding
production and profits while continuing to finance the aggressive  growth of the
company and maintaining a healthy respect for the marine environment.

         Edgewater  acquired  Island  Scallops  in June 2005  through a tax free
share  exchange.  Island  Scallops  was  established  in 1989  to  commercialize
Canadian government research on scallop  aquaculture.  Island Scallops' hatchery
operations  have  diversified  to produce  other  species of  shellfish  such as
mussels,  clams, geoducks and oysters. Island Scallops has also investigated the
culture of halibut,  spot prawn, sea urchin and abalone.  Island Scallops is the
first  hatchery to  successfully  produce  sablefish  juveniles  for  commercial
grow-out.

         Currently,  Island Scallops' primary product is farmed pacific scallops
for sale in the west coast of North America. Island Scallops offers a variety of
other  products and services to the industry  including  aquaculture  equipment,
consulting,  research and  development,  and custom  processing  and  marketing.

Internationally,  Island  Scallops  has  collaborated  with  both  Japanese  and
Moroccan fisheries interests.

General Fisheries Market Overview

         The  worldwide  market for farmed  marine  species  continues  to grow.
According  to a  personal  communication  from  the  National  Marine  Fisheries
Service,  Fisheries Statistics Division,  Silver Spring, MD, in British Columbia
alone,  farming production  increased from US$44.56 million in 1988 to US$190.24
million in 1998.  Although  significant  growth  occurred in salmon  farming and
little or no growth  occurred in shellfish  (oyster)  farming,  recent  problems
within the salmon  industry  are causing some salmon  farming  interests to turn
towards  shellfish.  Island  Scallops  can only  benefit  from this recent trend
towards  shellfish,  as  training  farmers in correct  husbandry  would only add
another revenue stream.

         The majority of the world's current scallop production comes from three
species of scallops: the Japanese scallop, the sea scallop and the king scallop.
The  Chinese  scallop  is also  selling  well,  but  FDA  inspections  of  China
facilities  found that the conditions and hygiene were issues as hatcheries were
highly polluted.  There has also been a fishery boom on the east coast of Canada
and the United States with the Digby or sea scallop.

         In the United  States,  consumption  of  scallops  exceeded  64 million
pounds in 2002. Various communications between Island Scallops personnel and the
National Marine Fisheries Service, Fisheries Statistics Division, Silver Spring,
MD and analysis of data from the  Fisheries  Statistics & Economics  Division of
the National  Marine  Fisheries  Service (NMFS)  website for annual  landings of
commercial  fisheries   (http://www.st.nmfs.noaa.gov/st1/commercial/index.html),
tell us that this  represented a per capita  consumption of 0.22 pounds,  with a
dollar value of US$342 million. After shrimp, scallops represent one of the most


                                       19


popular  shellfish  products  in the  United  States.  In  general,  per  capita
consumption  of seafood in the United  States has remained  steady over the last
six  years  ranging  from 15.2 to 16.2  pounds  per  annum.  Based  upon  Robert
Saunders',  our chairman and president,  communications with the National Marine
Fisheries  Service,  Fisheries  Statistics  Division of Silver  Spring,  MD, and
personal  observations,  given consumers'  growing  preoccupation with healthier
foods and the increasing availability of seafood (due to the recent successes in
aqua  farming  and  improved  distribution   channels),  we  expect  per  capita
consumption to continue to increase.

         Shifts in North American  shellfish  market trends from shucked to live
in shell products can be seen in the oyster markets. Within the last 5 years, we
have seen a significant trend away from shucked oyster meat to live in the shell
product in the  Pacific  Northwest  due to the  demand  for fresh  high  quality
products.  We believe that once a live in the shell product is readily available
within the scallop  market,  a shift from frozen  scallop meat to fresh in shell
product will also occur.


KEY CORPORATE OBJECTIVES

Our key business  development  objectives over the next 36 months are to: expand
scallops  sales  and begin  blackcod  production  using  both  existing  and new
infrastructure at our facilities in Qualicum Beach,  Canada,  that we anticipate
will  allow us to  reach  annual  sales of  approximately  US$18.4  million  and
earnings of  approximately  US$6 million by the end of 2008 (on  scallops  sales
alone).  We plan to implement this significant  expansion  through the following
six initiatives:


     o    Increase  scallops  sales from  approximately  US$500,000  per year to
          approximately  US$1.0  million for the year ending 2006 using existing
          inventory.

     o    Produce at least 15 million scallops of our 2006 scallop class,  which
          we will start harvesting in the spring of 2008.

     o    Capitalize  on the high  demand for  sablefish  in foreign  markets by
          entering into the blackcod market in the next 2 to 3 years.

     o    Expand   current    distribution   by   establishing   new   strategic
          relationships  with 10-15  American  fisheries  importers  in Seattle,
          Portland, San Francisco, San Jose, and Los Angeles in 2007.

     o    During 2007, rapidly increase farm production with a projected minimum
          2007  scallop  class  of at least 50  million  which we will  begin to
          harvest in early 2009.

     o    Produce more than 200 million  scallop seeds in 2008, with a projected
          2008 scallop class of at least 100 million scallops.


MARKETING AND DISTRIBUTION

Our  marketing  and  distribution  strategy  for Island  Scallops  is focused on
developing and maintaining  long-term  relationships  with distribution  channel
members.  Island Scallops also strives to differentiate  its products to achieve
consistent  supply and quality.  Island  Scallops  believes  the scallop  market
effectively  functions as a commodity market and therefore,  relationships  with


                                       20


distributors are important. To develop these relationships,  Island Scallops has
identified  key purchasing  criteria for the  distributors:  price,  quality and
consistent  farmed supply. In the short term, Island Scallops intends to adopt a
pricing policy equal to the market wholesale  prices.  In other words, we do not
intend to set any  promotional or premium prices for either the whole or shucked
product,  but instead intend to sell our products at the market rate. This would
mean Island  Scallops'  products would compete on other factors,  such as supply
and consistent quality.

Over the long term,  for the  reasons  noted  below,  Island  Scallops  wants to
differentiate  its products so that it can command premium prices.  Freshness is
an important  factor for scallops since whole scallops only have a shelf life of
approximately 7 days while shucked  scallops remain fresh for up to 20 days. Due
to this short  shelf  life,  distributors  try to offer the  freshest  products.
Island Scallops believes it is in a favorable  position to supply fresh products
to United  States  brokers/distributors,  especially  those  located on the west
coast   where   demand   for   the   product   is   strong.   Currently,   these
brokers/distributors  are  supplied  for the most  part with  east  coast  North
American  scallops,  which have several  transportation-related  delivery delays
that decrease freshness.

Supply is another key factor  where Island  Scallops  has a distinct  advantage.
Based on our planned  increase  in scallop  production,  we believe  that Island
Scallops  will  have a  large  quantity  of  scallops  for  sale.  Therefore,  a
distributor  would  not  have to  deal  with  numerous  suppliers,  which  costs
additional time and money.  This makes Island Scallops an attractive  source for
scallops,  since  we  believe  that we will be able to  satisfy  the  demand  of
distributors, which will save them time and money.

Island Scallops has also developed a unique live holding system for use with our
distribution  model.  This system allows Island Scallops to deliver live product
directly to seafood suppliers and individual restaurants.

PRODUCTS

Current Products

Island Scallops currently focuses exclusively on aquaculture products and is not
involved  in wild  fisheries.  All  seafood  products  are  produced  in private
hatcheries and grown on ocean farm sites. Currently,  the Pacific Scallop is the
only product that Island Scallops produces, grows, processes and markets. Island
Scallops has,  however,  produced a variety of other shellfish species including
the Pacific  oyster,  European  flat oyster,  Manila clam,  eastern blue mussel,
Mediterranean  mussel, rock scallop,  geoduck clam and sea urchin,  which in the
past we have sold to third party shellfish farmers.  Additionally,  our hatchery
has  produced  and is capable of  producing  a variety  of  shellfish  seed (for
grow-out and sale by our  companies)  including  mussel,  oysters and geoduck as
well as scallop seed.


                                       21


Island Scallops has been a leader in marine hatchery  technology for the past 17
years.  Island  Scallops has developed  proprietary  hatchery  techniques  for a
number of marine  species,  most notably the  hybridizing of the Pacific Scallop
and becoming the first  company to produce  commercial  quantities  of sablefish
juveniles.  Both of these breakthroughs have required many years of research and
considerable  investment.  In the case of sablefish,  which is a cold-water fish
that spawns at depths of 800 - 2400 ft, a variety of techniques were required to
successfully  mature,  spawn,  incubate and rear the larvae. In addition,  there
were technical difficulties associated with egg and yolk sac incubation (as well
as larvae rearing and weaning) that were resolved using  proprietary  technology
developed at Island Scallops. Island Scallops was only able to reach its goal of
commercially  farming  sablefish  with over 8 years of  dedicated  research  and
capital  investment  of  approximately   US$2.4  million.  We  intend  to  begin
significant  further  commercialization  of  sablefish  in the next two to three
years,  provided we are able to finance the  expansion of this product  which we
estimate will require at least $5.0 million of capital.


SCALLOP OVERVIEW

Island Scallops' main product is the "Pacific Scallop", which is a hybrid of the
imported  Japanese scallop and the local weathervane  scallop.  Between 1993 and
1999,  Island Scallops  developed this new scallop using Japanese  scallops that
were  imported  under  quarantine in the early  1990's.  This unique  scallop is
marketed  as the  Pacific  scallop  and is the  largest  scallop  in the  world,
reaching  sizes of 15 cm and 500 grams.  The  scallop  species  farmed by Island
Scallops,  has a proven record of being disease  resistant,  with a 95% survival
rate during the grow-out phase. We have the necessary farming  infrastructure to
significantly  increase  our  scallop  production  to a  minimum  of 15  million
scallops  annually  beginning  with the 2006 scallop  class which will begin its
harvest in early 2008.  Given the high  worldwide  demand for  scallops,  Island
Scallops  is poised to rapidly  expand  production  and  significantly  increase
revenues and earnings.

The Pacific Scallop is sold live in four sizes, extra small,  small,  medium and
large. Pricing ranges from a low of US$1.20 per pound to $4.00 per pound for the
larger sized scallops.  Previously,  Island Scallops also produced shucked meats
with or without  roe.  However,  due to the large demand and high value for live
scallops,  meat product was  discontinued  and the focus switched to the sale of
live scallops.

The basis for our anticipated  scallop farming production  increase stems from a
combination of our tenure  expansion,  our recent  financing,  improved grow-out
techniques and our transition to a combination  of  "lantern-style"  netting and
ear-hanging  methods.  Scallops  culture  utilizes  two  styles  of small  cages
referred  to as "pearl  nets and  lantern  nets."  Pearl nets are shaped  like a
pyramid  with a 35 by 35 cm square base and grow small  scallops  from 2-3 mm to
10mm. The 10-mm  scallops are grown in cylindrical  nets called lantern nets and
are 60 cm in  diameter  and 1.2  meters  deep  containing  12  layers.  Once the
scallops  reach  5cm  they  can be  grown  to  harvest  using  a  method  called
"earhanging"  or be grown out in lantern  nets.  Our  Hindoo  Creek and Deep Bay
tenures have been approved for expansion and once expansion of our Denman tenure
is approved,  which we believe will occur by the second or third  quarter of our
next  fiscal  year,  we  will  be able to  increase  capacity  to  approximately
25,000,000 animals per annum. Thereafter, we intend to further expand our Bowser
tenure in 2007,  which would supply us with the  capacity to produce  additional
30-50 million animals at harvest.

                                       22


As the only  hatchery/producer  of cultured  scallops on the west coast of North
America,  Island  Scallops  has the  ability  to  supply  fresh  scallops  (of a
predictable  quality and quantity)  throughout the year.  Although the supply of
scallops has  fluctuated in the past,  consumer  demand has always  absorbed the
available  supply. A primary factor for increased  consumption is the increasing
health  consciousness  among  consumers.  Scallops are low in saturated fats and
cholesterol  and high in  protein.  All parts of the  scallop  body are  edible;
however,  different parts tend to be consumed in different regions of the world.
In North America, the adductor muscle is traditionally the only part eaten, with
the rest of the body discarded. In Europe,  Australia and Tasmania, the adductor
muscle is usually marketed and eaten with the gonad attached. Japan utilizes the
whole  animal,  where most of the  product is cooked in the shell prior to sale.
Marketed scallops generally take the following product forms:

     o    Whole-live (shelf life of seven days);
     o    Whole dried; o Eviscerated whole;
     o    Shucked fresh (shelf life of about 15-20 days);
     o    Shucked frozen (shelf life of about a year); and
     o    Value added forms (smoked, breaded, canned).

The  shucked  product  form is the  most  significant  form for  North  American
markets.   A   whole-live   product  form  is  the  most   desirable   from  the
aquaculturist's point of view, as processing costs are minimal.  Island Scallops
has  developed a market for whole live  scallops,  which  exceeds 5,000 lbs. per
week into Vancouver.  Our initial  expansion plan envisions four major cities on
the west coast  (Seattle,  Portland,  San  Francisco and Los Angeles) to consume
2,500 lbs. per week per city based on the successful Vancouver model.

Island  Scallops  currently   distributes  through  specialty  wholesalers  with
particular  expertise in selling to restaurants.  In Vancouver these include but
are not  limited to Albion  Fisheries,  Tri-Star  Seafood  Supply,  Pacific  Rim
Shellfish,  Sea  World  Fisheries  and  Teamway  Fisheries.  As  we  expand  our
distribution,  we will  continue to focus on specialty  wholesalers  with strong
ties to major restaurants.

The most predominant scallop production in North America comes from the offshore
fishery  located on the  Georgia  Band on the east  coast.  Large  American  and
Canadian fishing companies  dominate the fishery.  The majority of their product
is shucked aboard ship then supplied to primarily  frozen to seafood  processors
onshore.  The processors  then  distribute  the product to various  restaurants,
retail outlets and seafood brokers.

Sablefish (Blackcod) Overview

Sablefish (Anoplopoma  fimbria),  often called blackcod although not a member of
the cod family, is an elongate fish with two dorsal fins and an anal fin similar
to and  opposite  the second  dorsal  fin.  Adults are black or  greenish  gray;
usually with slightly paler blotches or chainlike  pattern on the upper back. At
30-61 cm in size they are often greenish with faint stripes on the back.

Sablefish inhabit shelf and slope waters in depths of greater than 1,500 meters,
from Baja  California  to the  Aleutian  Islands and the Bering Sea.  The larger
populations of sablefish are centered in northern  British Columbia and the Gulf
of Alaska. Adults favor mud bottoms and feed on benthic invertebrates, squid and


                                       23


numerous fish species.  In turn, they are prey for halibut,  lingcod,  hagfishes
and marine mammals such as sea lions. In addition, killer whales have been known
to take sablefish from long line gear as it is being retrieved.

Sablefish spawn from January to March along the  continental  shelf at depths of
250 to 750 meters.  Fecundity ranges from  60,000-200,000 eggs up to one million
eggs for a 102-cm fish.  Larval  sablefish are found in surface  waters over the
shelf  and  slope  in  April  and  May.  Juveniles  are  highly  migratory  with
significant  movement  from nursery areas in northern B.C. to the Gulf of Alaska
and the Bering Sea.  Sablefish  move to deeper waters as they mature.  Growth is
rapid with sizes at maturity reaching 52-61 cm for five-year-old males and 58-71
cm for five-to-seven year old females.  Sablefish growth appears to be rapid for
the first three-to-five years and slow asymptotically thereafter. Annual natural
mortality of adults has been estimated to be about 10 percent.

Island  Scallops plans to raise  sablefish  onshore using shallow ponds or above
ground  tanks.  This  system  has been  successful  in Texas for the  culture of
catfish.  Tests have shown that  sablefish  prove to be very hardy when grown in
ponds and have the added  advantage of causing  sablefish  to be parasite  free.
Wild  sablefish  carry a parasite  that does not allow the fish to be eaten raw.

With adequate funding,  Island Scallops has already demonstrated the feasibility
of onshore  sablefish  farming and plans to develop a new blackcod facility that
could  produce at least  500,000  sablefish  as early as 2007,  with  production
planned to increase by at least 500,000 annually by 2008 and beyond.

Over the past  eight  years,  Island  Scallops  has also  developed  proprietary
hatchery technology for the production of sablefish  juveniles.  We believe that
sablefish will be the next species,  after salmon,  for  successful  large-scale
commercial  farming.  Sablefish,  which is a  premium-quality  whitefish  with a
delicate  texture and moderate  flavor,  is an ideal  substitute for Chilean sea
bass  (currently  over-fished  in all  oceans).  To date,  Island  Scallops  has
marketed a limited number of live sablefish into the Vancouver  market.  Initial
response was excellent  for a small  1-kilogram  live  sablefish  (~$11/kg).  To
capitalize on Island Scallops'  breakthrough  sablefish hatchery technology,  in
the next two to three  years,  we plan to  construct  a new  sablefish  hatchery
consisting of the following:

     o    An expanded  Brood  Stock  facility  with larger  capacity to hold the
          various families of selected  strains of sablefish.  This new facility
          will incorporate a new state-of-the-art water treatment system.

     o    An  improved  incubation  and larval  rearing  facility  incorporating
          proprietary improvements in tank design and seawater systems.

     o    An upgraded  zooplankton  culture facility with improved  handling and
          enrichment techniques.

     o    An expanded  and  improved  juvenile  rearing  facility  incorporating
          proprietary recirculation system designs.

As part of this  expansion,  we also intend to construct a new onshore tank farm
consisting  of  large  and  small  ponds  and  tanks  complete  with  associated
recirculation  systems.  This  onshore  facility  will be used  to  augment  the
juvenile rearing area and will house and grow juvenile fish.

                                       24



At the present time, worldwide "non-farming" sablefish catches are struggling to
meet the  worldwide  demand  according to DFOWeb,  NPFMCWeb and Pacific  Fishery
Management Council Website.  Currently,  there are only two hatchery facilities:
Island Scallops Ltd. and Sablefish  Hatcheries Inc. that have produced sablefish
juveniles.  Current production is only approximately 100,000 juveniles per year.
Based  on our  analysis  of  present  market  conditions,  increasing  worldwide
hatchery  production  tenfold (to roughly 1 million 3 kilo sablefish) would fill
less than 10% of the current  world demand  shortfall.  If Island  Scallops' new
sablefish  facilities  are able to reach a  production  of 3  million  sablefish
annually,  this will only fill less than 30% of the current  overall  shortfall.
The economic  potential  for  sablefish is therefore  considerable.  Given these
market conditions and opportunities,  Island Scallops is determined to enter the
market for sablefish in a significant manner with the next two to three years.


Other Products

In the past Island  Scallops has sold a variety of shellfish  larvae and seed to
both  international and local customers.  Sales included two species of mussels,
manila clams, geoduck clams, oysters,  abalone and sea urchins.  Island Scallops
has  established  suppliers  of  aquaculture  equipment  in Japan  and China and
supplies nets, ropes, floats, and processing equipment into the British Columbia
industry.  Currently, Island Scallops is focused almost exclusively on expansion
of scallop  sales and  development  of its  sablefish  operation  with a goal of
further commercialization of sablefish in two to three years.

DESCRIPTION OF PROPERTY

For the fiscal year ended August 31, 2005, our U.S. corporate office was located
at 400 Professional Drive, Suite 310,  Gaithersburg,  Maryland 20878. This space
was provided on a rent free basis by one of our shareholders.


         Island  Scallops'  main office and  hatcheries  are located on the east
side of  Vancouver  Island  in the  town of  Qualicum  Bay at 5552  West  Island
Highway,  Qualicum  Beach,  British  Columbia,  Canada  V9K 2C8.  The  shellfish
hatchery and processing  facilities are housed in a 930 square meter building. A
600 square  meter  sablefish  hatchery is also  located at this site.  Corporate
scallop farms are situated  along the east and west coasts of Vancouver  Island.
These facilities  represent the largest private marine research hatchery and the
first fully integrated shellfish producer in Canada.

         Island  Scallops has a total of seven farm sites  (including  two joint
ventures) for scallops.  Five of these farm sites are located at Island Scallops
held tenures (shellfish tenures are government-granted  rights that allow use of
offshore  waters  to  cultivate  shellfish).  Three of these  scallop  farms are
located in Baynes  Sound,  25 minutes  north of the main  facility.  These farms
sites total  approximately  200 acres and can currently  accommodate more than 8
million scallops.  Approximately 30% of the farm area is currently being farmed.
As part of our expansion  plans, we are currently  adding  additional main lines
and plan to  increase  our  capacity  at these  tenures  to more than 24 million
scallops in the near future. An additional bottom tenure of 926 acres is located
10 minutes north of the main facility (at Bowser) and is capable of producing at
least 30  million  scallops  annually.  The final farm site on the west coast of
Vancouver  Island near  Tofino is capable of  producing  at least three  million


                                       25


scallops,  although that site is currently  under-developed.  Baynes Sound,  the
marine waterway  situated between eastern Vancouver Island and the western shore
of  Denman  Island,  is  considered  the most  productive  and  highly  utilized
shellfish growing area in coastal British Columbia.  The area supports extensive
beach  culture  (manila  clams and  oysters) as well as  deepwater  culture that
produces oysters, scallops and some mussels.


- --------------------- ------------------- ------------------- ------------------
   Common Site Name      Lands File No.           ACRES               Type
- --------------------- ------------------- ------------------- ------------------
        Denman               1406063              38.64             Deepwater
- --------------------- ------------------- ------------------- ------------------
     Hindoo Creek            1406664             123.32             Deepwater
- --------------------- ------------------- ------------------- ------------------
       Deep Bay              1406711               43               Deepwater
- --------------------- ------------------- ------------------- ------------------
        Tofino               1406061               9.6              Deepwater
- --------------------- ------------------- ------------------- ------------------
        Bowser               1407517               926            Bottom lease
- --------------------- ------------------- ------------------- ------------------

The three  Baynes  Sound  tenures  (Denman,  Hindoo  Creek and Deep Bay) and the
Tofino tenure offer unique  features,  which will add additional  value to these
properties.  These include the split of tenures  between east and west shores of
Baynes  Sound as well as the east and west coast of Vancouver  Island,  allowing
continual   accessibility  to  shellfish   despite  managed  closures   (harvest
restrictions) due to incidental water quality or Paralytic  Shellfish  Poisoning
(PSP or red tide).  The seasonal  closures caused by short-term  bacteriological
contamination  related to rainfall and upland bacterial sources,  are limited to
the western  shore of the Baynes Sound and thus to only two of the three tenures
retained  by Island  Scallops.  The result of having  operating  tenures on both
sides of the Baynes  Sound  ensures that  product can be  continually  harvested
despite  closures  that may occur  within this  management  area.  The  expanded
tenures should easily  accommodate  our increasing  scallop  harvest in 2009 and
beyond.  At their  current size and with the  introduction  of  sufficient  main
lines, our tenures have the capacity to accommodate  approximately 13-15 million
scallops without any increase in their footprints.

Expansion of our Deep Bay and Hindo Creek has been  approved  and such  approval
does not need to be renewed for twenty  years.  We are  seeking  approval of our
Denman tenure and our Bowser bottom lease, which once approved, will allow us to
accommodate  30-50 million scallops at harvest.  The biggest hurdle to obtaining
the Denman tenure approval is the corresponding  re-zoning application that also
must be approved before we can expand the tenure.

Island Scallops'  location is a distinct advantage for producing marine species.
The waters off British Columbia are pristine and unspoiled by large  populations
or major  industries.  The close  proximity to major western cities allows us to
effectively put our products into the hands of the consumer within 24 hours.

The source of our raw material comes from our own hatchery  brood stock.  In the
case of the Pacific Scallop, we have been selectively  breeding this species for
superior  growth and  survival for the past 15 years.  The breeding  program has
produced a vigorous,  rapid growing,  disease resistant scallop with exceptional
meat yield.  In the case of sablefish we have been  selecting  fast growing fish
for the past 5 years, these display a high degree of domestication. The spawning
season  has been  extended  for  both of these  species  allowing  for  juvenile


                                       26


production  almost  year  round.  This  ability  to hold seed  stock and  select
superior  strains gives Island  Scallops an advantage in the  industry.  It also
allows Island  Scallops to tailor its production to varying  seasonal and market
demands.


COMPETITION

Fisheries Industry in General

Island Scallops is in the farmed seafood  business.  The main  concentration  of
marine farming in British Columbia has traditionally  been in the salmon sector.
The salmon farming  business has developed into a mature  industry  dominated by
Norwegian farmers.  The rest of the British Columbia marine farming sector is in
the  shellfish  industry,  mainly in oysters and Manila clams and more  recently
mussels.  This sector is rapidly  expanding and it accounted  for  approximately
US$16  million in British  Columbia in 2002,  according to the British  Columbia
Shellfish  Growers  Association  website.  Given Island Scallops'  expertise and
significant research and development experience, we believe that there is little
or no  direct  competition  in the  production  of  farmed  scallops  or  farmed
sablefish.

Scallops

There are no significant  direct  competitors in the scallop farming business in
British Columbia. The United States will not allow farming this species in their
waters,  as this species is considered  "exotic".  Although scallop farming is a
very significant  industry in Japan and China,  only frozen shucked scallops are
currently sold into North America from these  countries.  Recent  examination by
the United States and Canadian Food Inspection authorities of the growing waters
in China resulted in reduced exporting due to high levels of pollution.

Island Scallops is the only hatchery,  outside of China,  that has  successfully
produced the  Japanese  scallop,  and the only  company  that has  successfully,
hybridized the weathervane and the Japanese scallop. Island Scallops is uniquely
positioned as the sole producer of live Pacific Scallops in North America. There
currently are no other hatcheries in North America that we are aware of that are
capable of producing  this unique  breed.  Although a large  commercial  scallop
fishery exists on the east coast of North America,  the majority of the scallops
are shucked at sea with only limited  quantities  sold live.  These scallops are
sold as "Digby" or "Sea" scallops.  A number of companies have attempted to grow
the bay scallop and the sea scallop on the east coast,  but these companies have
only achieved limited success.

The primary British Columbia participants in scallop farming are Island Scallops
joint venture farmers or independent scallop farmers, which receive their supply
of seed scallops  solely from Island  Scallops.  These  farmers are  chronically
underfinanced  and are  generally  able to purchase  and grow less than  300,000
scallops per farm.  Island  Scallops is uniquely  positioned  to rapidly  expand
these farms (up to six farms) under an exclusive farming and marketing contract.
Three joint  venture  farmers are  currently  farming  scallops and receive free
scallop  seed,  technology  and  support  for a 12%  royalty on the  harvest and
exclusive marketing of their product through Island Scallops.

Due to its large size and small  count per pound,  the sea  scallop is the prime
competitor in the United States market.  The fishery for this scallop is located
primarily on the North American east coast,  in particular  Georges Bank off New
England and the Maritime provinces.  This is a limited opportunity fishery, with
actual fishing time being dictated by sea and other environmental conditions.

                                       27



Sablefish

Island Scallops is currently only one of two hatcheries to produce quantities of
juvenile  sablefish.  These  fish were sold to five  commercial  salmon  farming
facilities and the fish have been marketed successfully. Little demand for a new
species has materialized.  Although  hatcheries have been constructed in British
Columbia,  neither has successfully produced large quantities of sablefish.  The
farming of  sablefish is still in its infancy and only  limited  production  has
occurred.

This limited production is not a matter of biological barriers but rather a lack
of interest by the major producers to venture into a new marine species.  Alaska
sablefish  fishermen  have  expressed  interest  in  farming  sablefish  and the
Sablefish Association of Alaska has voted unanimously to start farming sablefish
in southern Alaska. Island Scallops has been in discussion with this association
and has been told that due to  "anti-aquaculture"  policy in Alaska,  it is very
unlikely that any farming will occur in the near future.

Washington State contains two parties  interested  parties in sablefish farming.
The first is the  Makah  Tribe and the  second  is a private  company,  which is
trying to obtain  farming  permits  in Port  Angeles.  These  parties  have made
inquiries to Island Scallops for juvenile sablefish. However, to date, no orders
have been placed.


RESEARCH AND DEVELOPMENT

Due to changes in Canadian  Federal  Government's  Research and  Development tax
credits (SRED)  program,  which prevents any part of the research to be combined
with  commercial  production,  no Research and  Development  claims were made in
fiscal 2004 and 2005. Research did continue on the genetic selection of superior
strains of scallops,  as did developments in the culture process for both marine
algae and  developments  in  re-circulation  systems.  In the near future Island
Scallops  plans to conduct  research and  development  under a separate  company
called RKS  Laboratories  Ltd.,  which has no  commercial  production  and whose
primary goal is the genetic  improvement  in breeds of the Pacific  Scallops and
other marine species. We believe that this will allow the continued support from
the SRED program.

EMPLOYEES


         At October 5, 2006, we have 25 employees.


         None of our current  employees is  represented  by a labor union and we
consider our relationships with our employees to be good.

REGULATORY ENVIRONMENT

Effect of Government Regulation

There  are  a  limited  number  of   regulations   that  restrict  the  fishing,
distributing or purchase of scallops in Canada and the United States. Therefore,
the  country of origin  makes  little  difference  for the  pricing or demand of
scallops.


                                       28


A limitation to market  supply is paralytic  shellfish  poisoning  (PSP) or "red
tide". PSP is a toxin generated by plankton (scallops' food) at particular times
of the year.  The toxin is passed to the scallop when plankton is digested,  but
the toxin does not harm the  shellfish.  However,  the shellfish  containing the
toxin can be harmful to humans who consume it. Although only a limited number of
human  deaths  caused by  red-tide  poisoning  have been  reported,  the  public
announcement of red tide has a devastating  effect on most shellfish  sales. The
exception is scallop meat,  because the adductor  muscle of the scallop does not
concentrate the toxin; shucked scallops are safe to eat at any time of the year.
Nevertheless,  public perception could still influence demand over short periods
of time. To monitor for PSP, the federal Fisheries  Inspection Branch constantly
monitors samples of shellfish production and wild shellfish populations.


Tenure Expansion and Compliance with Environmental Laws

Our planned  tenure  expansions  will require  that we undergo an  environmental
screening from Transports Canada pursuant to Canadian  Environmental  Assessment
Act, which includes a review of factors such as the environmental effects of the
planned  expansions,  including the  environmental  effects of  malfunctions  or
accidents  that may occur in  connection  with the  planned  expansions  and any
cumulative  environmental  effects  that are likely to result from such  planned
expansions; the significance of such environmental effects and any comments from
the public  that are  received  in  accordance  with the CEA Act and  applicable
regulations;  and measures that are  technically and  economically  feasible and
that would mitigate any significant adverse environmental effects of the planned
expansions.

Our Deep Bay and Hindo Creek tenures have received final CEA Act approval, which
lasts for twenty years and which  allows us to expand these 2 tenures.  We still
need CEA Act approval and re-zoning  approval for our Denman tenure and approval
of our Management Plan, along with a satisfactory environmental assesment of our
Bowser bottom lease.  Please see our risk factor, If we are unable to expand our
tenures, our projected production may be delayed.


                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS



         The  following  table  and text set  forth  the  names  and ages of all
directors and executive  officers as of October 5, 2006.  The Board of Directors
is comprised of only one class.  All of the directors  will serve until the next
annual  meeting of  shareholders,  which is anticipated to be held in January or
February of 2007, and until their successors are elected and qualified, or until
their earlier death, retirement, resignation or removal. To date we have not had
an annual meeting. Except as disclosed herein, there are no family relationships
among  directors  and  executive  officers.   Also  provided  herein  are  brief
descriptions of the business experience of each director,  executive officer and
advisor  during the past five years and an indication of  directorships  held by
each director in other companies subject to the reporting requirements under the
Federal securities laws.


                                       29



Dr.  Kristina  Miller,  our  Chief  Scientific  Advisor  is the  wife of  Robert
Saunders, our Chairman, CEO and President.

NAME                            AGE    POSITION
- ----                            ---    --------
Robert Saunders                 53     Chairman, CEO and President
Douglas C. MacLellan            50     Vice Chairman
Mark H. Elenowitz               36     Director
Robert L. Rooks                 51     Director
Ian Fraser                      45     Director
Michael Boswell                 36     Director, Acting Chief Accounting Officer
Darryl Horton                   57     Director
Victor Bolton                   52     Director


ROBERT  SAUNDERS,  CHAIRMAN,  CEO AND PRESIDENT.  Mr.  Saunders has directed all
research and  development  efforts at Island  Scallops since its  establishment.
After studying for his B.Sc. at the University of British  Columbia in the early
1970's,  Mr.  Saunders has worked  exclusively in the  aquaculture  research and
development   field.   His  efforts  have  primarily   involved   designing  and
implementing  innovative  culture  technology  and methods  for new  aquaculture
species in British  Columbia.  Mr. Saunders has direct  experience with managing
projects  similar  to  the  type  proposed,  such  as  developing  the  hatchery
technology for producing the Japanese  scallop and the  development of sablefish
aquaculture.

DOUGLAS C.  MACLELLAN,  VICE-CHAIRMAN.  Since May 1992,  Mr.  MacLellan has been
President and Chief Executive Officer of the MacLellan Group,  Inc., a privately
held business  incubator and financial advisory firm. Mr. MacLellan is currently
a member of the board of directors and chairman of the audit  committee of AMDL,
Inc. (AMEX: ADL), a publicly held biotechnology  firm. From 2002 until September
2005, Mr. MacLellan was Vice Chairman and a Director of AXM Pharma,  Inc. (AMEX;
AXJ). From March 1998 through October 2000, Mr. MacLellan was the co-founder and
a  significant  shareholder  of  Wireless  Electronique,   Ltd.,  a  China-based
telecommunications  company  having joint venture  operations  with China Unicom
(NASDAQ:  CHU) in Yunnan,  Inner  Mongolia and Ningxia  provinces.  He is also a
co-founder  and, since May 1997, has been a director of Datalex  Corporation,  a
Canadian-based  legacy software solution  provider.  From November 1996 to March
1998, Mr.  MacLellan was co-Chairman and an Investment  Committee  member of the
Strategic  East European Fund.  From November 1995 to March 1998, Mr.  MacLellan
was  President,  Chief  Executive  Officer and a Director of PortaCom  Wireless,
Inc.,  a company  engaged as a developer  and  operator of cellular and wireless
telecommunications  ventures in selected developing world markets. Mr. MacLellan
is a former  member  of the  board  of  directors  and  co-founder  of  FirstCom
Corporation  (NASDAQ:  FCLX), an international  telecommunications  company that
operates a  competitive  access fiber and  satellite  network in Latin  America,
which became AT&T Latin America (NASDAQ:  ATTL) in August 2000.  During 1996, he
was also the Vice-Chairman of Asia American  Telecommunications  (now Metromedia
China  Corporation),  a  majority-owned  subsidiary of Metromedia  International
Group,  Inc.  (AMEX:  MMG).  Mr.  MacLellan  was educated at the  University  of
Southern  California  in  economics  and  finance,  with  advanced  training  in
classical economic theory.

MARK H. ELENOWITZ, DIRECTOR. Mr. Elenowitz is a co-founder and managing director
of the TriPoint family of companies. He is responsible for the overall corporate
development  of the  firm  and  assisting  Tripoint's  clients  with  high-level
financial  services and general  business  development.  From  December  2002 to
September 2005, Mr. Elenowitz was a board member of AXM Pharma (AMEX: AXJ). From


                                       30


September  2001 to March 2002,  Mr.  Elenowitz  was a Director and  President of
Image World Media,  Inc.  (Pink sheet:  IMWI),  an  international  media company
specializing  in the  production and  distribution  of various media content for
worldwide  distribution  across  multiple media  platforms,  such as traditional
television,  film and the Internet.  From  February  1998 to October  2001,  Mr.
Elenowitz was Co-Chairman and Managing Director of GroupNow!,  Inc., a financial
consulting  firm.  In this role he was  responsible  for the  company's  overall
corporate  development and corporate finance. Mr. Elenowitz integrates a strong,
successful  entrepreneurial  background  with extensive  financial  services and
capital markets experience.  He is also the senior managing director of Investor
Communications Company, LLC (ICC), a national investor relations firm he founded
in 1996.  Through ICC, Mr. Elenowitz has developed  ongoing  relationships  with
other investment banking firms,  market makers, and analysts.  Mr. Elenowitz has
worked with over 30 publicly traded companies providing financial consulting and
strategic  planning  services.  Previously,  Mr.  Elenowitz held Series 7 and 63
licenses as a broker,  and held a Series 24 license (Branch Manager) at regional
brokerage  firm and also served as Vice  President of Sales at NYSE member firm.

Mr.  Elenowitz  is the  recipient  of several  entrepreneurial  awards.  He is a
graduate of the University of Maryland School of Business and Management, with a
Bachelor of Science in Finance.

DR.  ROBERT L. ROOKS,  DIRECTOR.  Dr. Robert L. Rooks has been Chief of Staff of
All Care Animal Referral Center (ACARC) in Fountain  Valley,  California,  since
1990. ACARC is the largest  strictly  referral  veterinary  center in the United
States.  Dr. Rooks has a staff of over 20 veterinarians in the areas of surgery,
critical care, internal medicine, oncology, dentistry,  radiology and neurology.
Their services  include  24-hour  critical  care/emergency  service,  MRI and CT
scans,  color-flow  Doppler  ultrasounds,  hyperbaric oxygen therapy, a complete
orthopedic  program  including total hip replacements and joint  reconstruction,
cobalt  radiation  therapy,  a  complete   neuro-diagnostic  service,  a  kidney
transplant program and a physical rehabilitation department and much more. He is
the published author of over 100 journals,  magazine and newspaper articles. Dr.
Rooks is also the author of the book "Canine  Orthopedics"  published in 1997 by
Howell Bookhouse.  Dr. Rooks completed his  undergraduate  studies at Iowa State
University in 1978. He graduated from the College of Veterinary Medicine at Iowa
State.  Dr. Rooks  received his Masters Degree as well as completed his surgical
residency at the  University  of Illinois in 1981.  He is a Diplomat of both the
American  College of Veterinary  Surgeons and the American College of Veterinary
Practitioner.

IAN FRASER,  DIRECTOR.  Since 1997,  Mr. Ian Fraser has been President of Fraser
Yacht Sales Ltd., a successful Yacht Brokerage located in Vancouver,  B.C. Prior
to establishing  Fraser Yacht Sales Ltd., Mr. Fraser gained  experience in sales
and marketing both nationally and  internationally as a yacht broker for two top
brokerage  houses  in  Vancouver.  Previously,  Mr.  Fraser  was  worked  as  an
advertising  sales  executive with Naylor  communications  from 1988 to 1990 and
learned  valuable  communication  skills  while  working  with  numerous  trades
including the Truck  Logger's  association,  the I.W.A of America,  and the B.C.
Construction  industry.  He also operated as a commercial  fisherman on the West
coast working on commercial salmon fishing boats for the B.C. Packer Corporation
over a 4 year period and gained valuable knowledge of the coastline of Vancouver


                                      31

Island and along the mainland from Victoria to the Queen Charlotte Islands.  Mr.
Fraser also acquired sea time and  commercial  shipping  skills while working on
the deck  department of the B.C.  Ferry  Corporation  based out of Horseshoe Bay
during  his early  professional  career  and  during  the  summer  months  while
attending school in the early 1980s. Mr. Fraser also competes internationally on
ocean racing yachts and has crossed the Pacific and sailed up and down the coast
to Mexico on numerous  occasions  while racing and  delivering  racing yachts as
captain.  Mr. Fraser studied Business  Administration at Simon Fraser University
and Capilano College graduating with a diploma in Business Administration.

MICHAEL BOSWELL,  DIRECTOR AND ACTING CHIEF ACCOUNTING OFFICER. Mr. Boswell is a
co-founder and member in TriPoint  Capital  Advisors,  LLC, a boutique  merchant
bank focused on small and  mid-sized  growth  companies  and a co founder of the
TriPoint family of companies. Mr. Boswell provides high-level financial services
to start-up businesses and small to mid-sized  companies.  Prior to the founding
of  TriPoint,  Mr.  Boswell  had a number of  executive  positions  focusing  on
business  development  and management  consulting.  Mr. Boswell also spent eight
years as a senior  analyst  and/or senior  engineer for various  branches of the
United States Government.  He earned a MBA from John Hopkins University and a BS
degree in Mechanical Engineering from University of Maryland.

DARRYL HORTON, DIRECTOR. Mr. Horton has been a businessman successfully involved
in numerous  construction and development  projects for the past 35 years. He is
the President,  Manager and a Partner of Abbotsford Development  Corporation and
is currently  managing a development  project in  Abbotsford,  British  Columbia
called Eagle Mountain. Eagle Mountain is an upscale, master planned community of
single family homes, town homes and commercial properties covering approximately
60 acres  that is  expected  to be  valued,  upon  completion,  in excess of 200
million dollars. Prior to Eagle Mountain, Mr. Horton managed, owned and marketed
numerous other residential and commercial projects including the construction of
a 30 million dollar  multi-function  residential  Intermediate  Care Facility in
LaJolla  California.  For  15  years  Mr.  Horton  was a  partner  in a  general
contracting  company that did various  contracts with an average volume of about
25  million  per year.  In the  1970's,  Mr.  Horton was the Vice  president  of
Community Builders, the largest single family developer in British Columbia. Mr.
Horton is also the director of several other building and development  companies
in British Columbia.

VICTOR BOLTON,  DIRECTOR. Mr. Bolton founded a Mechanical contracting firm after
graduating  from  college  and  evolved  that  firm  into  all  aspects  of  the
construction  industry  including  building and raw land  developing  as well as
extensive property  management.  Retiring from this business in 2000, Mr. Bolton
now focuses time and energy towards the food manufacturing field.

Significant Employees

The following are employees who are not executive officers, but who are expected
to make significant contributions to our business:

BRUCE  EVANS,  FARM  MANAGER.  Mr.  Bruce Evans has been  involved in  shellfish
production since 1985. He successfully established an oyster business, employing
methods of long-line  and beach  culture  production.  That business is still in
operation today,  producing 7,000 gals of shucked oysters annually and employing


                                      32

3 full time people and 4 part time people.  He moved to Island Scallops in 1989.
Mr. Evans was responsible for securing the leases from the Provincial government
for this scallop grow-out  project.  He built the established  long-line systems
that currently  produce  scallops for Island  Scallops.  Mr. Evans worked with a
Japanese  scallop  farmer  for two years in B.C.  and spent a month  working  on
highly acclaimed scallop farms in Japan. Mr. Evans has BS in Marine Biology from
the University of Victoria.

DR. KRISTINA M. MILLER,  CHIEF SCIENTIFIC ADVISOR.  Dr. Miller is currently Head
of the Molecular  Genetics  Section in the Pacific  Region for the Department of
Fisheries  and Oceans,  Canada (DFO).  She has been a research  scientist at DFO
since obtaining her PhD in Biological Sciences from Stanford University in 1992.
The Molecular  Genetics  section she oversees  contains a staff of 26, including
scientists,  biologists,  computer analysts and research technicians. Dr. Miller
conducts  research  on  the  genetic  composition,   adaptation,   immunity  and
physiology  of wild and  domesticated  fish and  shellfish  species  using  both
molecular and genomic  approaches.  She has been a leader in the  development of
molecular  technologies  to aid in the  conservation  and  management of aquatic
resources.  In  the  past  10  years,  she  has  published  over  40  scientific
peer-reviewed journal manuscripts,  and her group has been the focus of numerous
magazine and newspaper articles. Dr. Miller brings a strong scientific component
to the  management of Edgewater  Foods,  and she will serve as Chief  Scientific
Advisor.  In  addition to her PhD,  Dr.  Miller  received a BSc in Zoology  from
University of  California,  Davis in 1983, an MSc in Biology from  University of
British Columbia in 1986. Dr. Miller is Robert Saunders,  our Chairman,  CEO and
President's wife.

AUDIT COMMITTEE AND FINANCIAL EXPERT

We have an Audit Committee as specified in Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended,  composed of Douglas MacLellan (Chair), Robert
Rooks and Ian Fraser.  The Audit Committee  focuses its efforts on assisting our
Board of Directors  to fulfill its  oversight  responsibilities  with respect to
our:

     o    Quarterly and annual consolidated  financial  statements and financial
          information filed with the Securities and Exchange Commission;

     o    System of internal controls;

     o    Financial accounting principles and policies;

     o    Internal and external audit processes; and

     o    Regulatory compliance programs.

The committee meets periodically with management to consider the adequacy of our
internal  controls and financial  reporting  process.  It also  discusses  these
matters with our independent  auditors and with appropriate  financial personnel
that we employ.  The committee  reviews our financial  statements  and discusses
them  with  management  and our  independent  auditors  before  those  financial
statements are filed with the Securities and Exchange Commission.

The  committee  has the sole  authority  to retain and dismiss  our  independent
auditors and  periodically  reviews  their  performance  and  independence  from
management.  The  independent  auditors  have  unrestricted  access  and  report
directly to the committee.


                                      33






AUDIT COMMITTEE FINANCIAL EXPERT

Douglas  MacLellan  is our Audit  Committee  Financial  Expert,  as that term is
defined  in Item 401 of  Regulation  S-B and the Board has  determined  that Mr.
MacLellan is independent,  as that term is used in Item  7(d)(3)(iv) of Schedule
14A under the Exchange Act. Mr. MacLellan's qualifications as an audit committee
financial expert are described in his biography above.

                             EXECUTIVE COMPENSATION

                           Summary Compensation Table


                                                               ------------------------------ -----------
ANNUAL COMPENSATION                                            AWARDS                         Payouts
                                                               ------------------------------ -----------
- -------------------------------------------------------------- -------------- --------------- -----------
   (a)         (b)       (c)         (d)              (e)         (f)            (g)              (h)         (i)


                                                      Other                                                  All
Name                                                  Annual                   Securities       LTIP        Other
And                                                   Compen-  Restricted      Underlying       Payouts     Compen-
Principal                                             sation   Stock Award(s)  Options/           ($)       sation
Position          Year     Salary($)  Bonus($)         ($)           ($)       SARs(#)                         ($)
- ---------------- -------- ---------- -------------- --------- --------------- --------------- ------------ -----------
                                                                                                  

Robert           2005      60,000       150,000        0            0               0              0           0
Saunders,
Chairman,
President and
CEO(1)
- ---------------- -------- ---------- -------------- --------- --------------- --------------- ------------ -----------
Robert           2004         0            0           0            0               0              0            0
Saunders,
Chairman,
President and
CEO
- ---------------- -------- ---------- -------------- --------- --------------- --------------- ------------ -----------
Robert           2003         0            0           0            0               0              0            0
Saunders,
Chairman,
President and
CEO
- ---------------- -------- ---------- -------------- --------- --------------- --------------- ------------ -----------
Michael          2005         0            0           0            0               0              0           0
Boswell,
President and
Acting Chief
Account
Officer (2)
- ---------------- -------- ---------- -------------- --------- --------------- --------------- ------------ -----------
Michael          2004         0            0           0            0               0              0           0
Boswell,
President and
Acting Chief
Account Officer
- ---------------- -------- ---------- -------------- --------- --------------- --------------- ------------ -----------
Michael Boswell  2003         0            0           0            0               0              0           0
- ---------------- -------- ---------- -------------- --------- --------------- --------------- ------------ -----------



(1)  In June 2005,  we entered  into an  employment  agreement  with Mr.  Robert
     Saunders  as our  Chairman  and  President  effective  on  June  29,  2005.
     Subsequently in August 2005, Mr. Saunders was appointed CEO by our Board of


                                       34


     Directors.  Mr.  Saunders  will  serve  at the  pleasure  of the  Board  of
     Director's. For serving as President, Mr. Saunders' compensation will be US
     $60,000 per annum. Additionally,  we agreed to grant Mr. Saunders a signing
     bonus of US  $150,000  to be paid on closing of at least US  $3,500,000  in
     third party  financing and increase his  compensation to $120,000 per annum
     if we receive at least US $5,000,000 in outside  funding.  We are currently
     discussing  possible  restructuring/payment  terms  until such time that we
     become significantly cash flow positive for its operations.



(2)  Mr.  Boswell served as our President from March to June 2005, at which time
     Mr. Saunders  replaced Mr. Boswell as President.  Mr. Boswell has served as
     our  Acting  Chief  Accounting  Officer  since  August  2005.  Mr.  Boswell
     indirectly owns a minority  interest in TriPoint Capital  Advisors,  LLC, a
     significant  shareholder  and party  with which we  maintain  a  consulting
     agreement.   The  Board  recently  approved  the  Compensation  Committee's
     recommendation  to pay TriPoint $15,000 per month,  which includes fees for
     Mr. Boswell's  services as our Acting Chief Accounting during 2005, however
     TriPoint  agreed to reduce such fee to $7,000 per month until our cash flow
     position improves, at which time the Committee will reconvene and recommend
     a return to $15,000  per month.  In  addition,  TriPoint  has agreed not to
     accept any additional fees, other than expenses,  until we are sufficiently
     funded to carry out our business and  operations.  Although Mr. Boswell did
     not work for us in any capacity  until 2005, we are required to include our
     last three fiscal years in the above table. According to the above reasons,
     Mr. Boswell did not receive any compensation in 2003, 2004 or 2005.




OPTION/SAR IN LAST FISCAL YEAR

The Board of Directors and holders of a majority of our  outstanding  securities
acting by consent have adopted the  Edgewater  Foods  International  2005 Equity
Incentive  Plan. The Equity Plan is intended to further the growth and financial
success of Edgewater by providing additional incentives to directors, executives
and selected employees of and consultants to Edgewater so that such participants
may acquire or  increase  their  proprietary  interest  in  Edgewater.  The term
"Corporation" shall include any parent corporation or subsidiary  corporation of
Edgewater  as those terms are defined in Section  424(e) and (f) of the Internal
Revenue Code of 1986, as amended.  Stock  options  granted under the Plan may be
either  "Incentive  Stock  Options",  as  defined  in Code  section  422 and any
regulations  promulgated  under that Section,  or "Nonstatutory  Options" at the
discretion of our Board of Directors and as reflected in the respective  written
stock option agreements granted pursuant to this Equity Plan. Stock Appreciation
Rights,  Restricted Stock,  Restricted Stock Unit, Performance Awards,  Dividend
Equivalents,  or Other  Stock-Based  Awards may also be granted under the Equity
Plan. The Board believes that the Equity Plan will maintain the flexibility that
Edgewater  needs to keep  pace with its  competitors  and  effectively  recruit,
motivate,  and  retain the  caliber  of  employees,  directors  and  consultants
essential for achievement of our success.

                                       35


Individuals  eligible to receive awards under the Equity Plan include  officers,
directors,  employees of and  consultants to Edgewater and its  affiliates.  The
number of shares  available  under the Equity Plan shall be 5,000,000  shares of
our  common  stock,  as well as the  following:  As of  January 1 of each  year,
commencing  with the year 2006 and  ending  with the year  2008,  the  aggregate
number of Shares  available  for  granting  Awards  under the Equity  Plan shall



automatically  increase  by a number of Shares  equal to the lesser of (x) 5% of
the total  number of Shares then  outstanding  or (y)  1,000,000.  The Board may
distribute  those  shares in  whatever  form of award they so choose  within the
Equity Plan's  guidelines.  There are no  restrictions  on the amount of any one
type of award that may be granted under the Equity Plan.


As of June  30,  2006,  our  Board  of  Directors  granted  282,000  options  to
employees,  directors and consultants under the Equity Plan. No awards have been
given to any of the named executive officers. As of October 5, 2006, there are 6
Directors,  2 executive officers,  10 consultants and approximately 25 employees
other than  executive  officers,  who are  eligible to receive  awards under the
Equity Plan.

The Board may delegate a Committee to administer  the Equity Plan. The Committee
shall not  consist  of fewer than two  members,  each of whom is a member of the
Board and all of whom are disinterested  persons,  as contemplated by Rule 16b-3
promulgated  under the  Securities  Exchange Act of 1934, as amended and each of
whom is an outside  director for purposes of Section 162(m) of the Code,  acting
in accordance with the provisions of Section 3.

Currently, we do not have any definitive plans for granting further awards under
the Equity Plan and no determination has been made as to the number of awards to
be granted, or the number or identity of recipients of awards.

AMENDING THE PLAN

The Board may amend, alter, suspend,  discontinue, or terminate the Equity Plan,
including,   without   limitation,   any  amendment,   alteration,   suspension,
discontinuation, or termination that would impair the rights of any Participant,
or any other holder or beneficiary of any Award theretofore granted, without the
consent of any share  owner,  Participant,  other  holder or  beneficiary  of an
Award, or other Person. The Board may also waive any conditions or rights under,
amend any terms of, or amend, alter,  suspend,  discontinue,  or terminate,  any
Awards theretofore granted, prospectively or retroactively,  without the consent
of any Participant,  other holder or beneficiary of an Award. Except as provided
in the following  sentence,  the Board is authorized to make  adjustments in the
terms and conditions of, and the criteria  included in, Awards in recognition of
unusual or  nonrecurring  events  affecting the Company,  any Affiliate,  or the
financial  statements  of  the  Company  or  any  Affiliate,  or of  changes  in
applicable  laws,  regulations,  or  accounting  principles,  whenever the Board
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits to be made available under the
Equity  Plan.  In the  case  of  any  Award  that  is  intended  to  qualify  as
performance-based  compensation  for purposes of Section 162(m) of the Code, the
Board will not have authority to adjust the Award in any manner that would cause
the Award to fail to meet the requirements of Section 162(m).



                                       36


OPTIONS AND RIGHTS

Options and Stock Appreciation  Rights may be granted under the Equity Plan. The
exercise  price of  options  granted  shall be  determined  by the  Board or the
Committee;  provided,  however,  that such  exercise  price per Share  under any
Incentive  Stock  Option  shall  not be less  than  100%  (110% in the case of a
"10-percent  shareholder as such term is used in Section  422(c)(5) of the Code)
of the Fair Market Value of a Share on the date of grant of such Incentive Stock
Option. The Board or Committee shall fix the term of each Option,  provided that
no  Incentive  Stock  Option shall have a term greater than 10 years (5 years in
the case of a "10-percent shareholder" as such term is used in Section 422(c)(5)
of the Code).

A Stock  Appreciation  Right  granted  under the Equity Plan shall confer on the
holder thereof a right to receive,  upon exercise thereof, the excess of (1) the
Fair  Market  Value of one  Share on the date of  exercise  or,  if the Board or
Committee  shall  so  determine  in the case of any such  right  other  than one
related to any  Incentive  Stock Option,  at any time during a specified  period
before or after the date of  exercise  over (2) the grant  price of the right as
specified by the Board or Committee. Subject to the terms of the Plan, the grant
price, term, methods of exercise, methods of settlement, and any other terms and
conditions of any Stock  Appreciation  Right shall be as determined by the Board
or the  Committee.  The Board and the  Committee  may impose such  conditions or
restrictions  on the  exercise  of any Stock  Appreciation  Right as it may deem
appropriate.

FEDERAL INCOME TAX CONSEQUENCES

The current federal income tax  consequences of grants under the Equity Plan are
generally  described  below.  This  description  of  tax  consequences  is not a
complete description,  and is based on the Internal Revenue Code as presently in
effect,  which is  subject  to  change,  and is not  intended  to be a  complete
description  of the federal income tax aspects of options and stock awards under
the Equity  Plan.  Accordingly,  the  discussion  does not deal with all federal
income tax consequences that may be relevant to a particular  recipient,  or any
foreign,  state or local tax considerations.  Accordingly,  potential recipients
are urged to consult their own tax advisors as to the specific federal, foreign,
state and local tax consequences to them as a result of receiving an Award under
the Equity Plan.

Nonqualified Stock Options

A  recipient  will not be  subject  to  federal  income  tax upon the grant of a
nonqualified stock option. Upon the exercise of a nonqualified stock option, the
recipient will recognize ordinary  compensation income in an amount equal to the
excess,  if any, of the then fair market value of the shares  acquired  over the
exercise  price.  We will  generally be able to take a deduction with respect to
this  compensation  income for federal income tax purposes.  The recipient's tax
basis in the  shares  acquired  will  equal the  exercise  price plus the amount
taxable as  compensation  to the recipient.  Upon a sale of the shares  acquired
upon  exercise,  any gain or loss is generally  long-term or short-term  capital
gain or loss,  depending on how long the shares are held.  The required  holding
period  for  long-term  capital  gain is  presently  more  than  one  year.  The
recipient's  holding period for shares  acquired upon exercise will begin on the
date of exercise.


                                       37


Incentive Stock Options

A recipient who receives  incentive  stock options  generally  incurs no federal
income  tax  liability  at the time of grant or upon  exercise  of the  options.
However,  the spread will be an item of tax  preference,  which may give rise to
alternative   minimum  tax   liability   at  the  time  of   exercise.   If  the
recipient/optionee  does not  dispose of the shares  before the date that is two
years  from the  date of grant  and one  year  from  the date of  exercise,  the
difference  between the exercise price and the amount realized upon  disposition
of the shares will  constitute  long-term  capital gain or loss, as the case may
be. Assuming both holding periods are satisfied,  no deduction will be allowable
to us for federal income tax purposes in connection with the option.  If, within
two years of the date of grant or within one year from the date of exercise, the
holder of shares acquired upon exercise of an incentive stock option disposes of
the shares, the recipient/optionee  will generally realize ordinary compensation
income  at the time of the  disposition  equal  to the  difference  between  the
exercise  price and the lesser of the fair market value of the stock on the date
of exercise or the amount realized on the disposition.  The amount realized upon
such a disposition  will  generally be  deductible by us for federal  income tax
purposes.

Stock Awards

If a recipient  receives an  unrestricted  stock  award,  he/she will  recognize
compensation income upon the grant of the stock award. If a recipient receives a
restricted stock award,  he/she normally will not recognize  taxable income upon
receipt of the stock award until the stock is  transferable  by the recipient or
no longer subject to a substantial risk of forfeiture, whichever occurs earlier.

When the stock is either transferable or no longer subject to a substantial risk
of forfeiture,  the recipient will  recognize  compensation  income in an amount
equal to the fair  market  value of the shares  (less any  amount  paid for such
shares) at that time. A recipient  may,  however,  elect to  recognize  ordinary
compensation income in the year the stock award is granted in an amount equal to
the fair  market  value of the shares  (less any amount  paid for the shares) at
that time,  determined without regard to the restrictions.  We will generally be
entitled to a corresponding  deduction at the same time, and in the same amount,
as the recipient  recognizes  compensation income with respect to a stock award.
Any gain or loss recognized by the recipient upon subsequent  disposition of the
shares will be capital gain or loss.

Tax Deductibility under Section 162(m)

Section  162(m)  of the  Internal  Revenue  Code  disallows  a public  company's
deductions for employee compensation exceeding $1,000,000 per year for the chief
executive officer and the four other most highly compensated executive officers.
Section 162(m)  contains an exception for  performance-based  compensation  that
meets specific  requirements.  The Equity Plan is intended to permit all options
to  qualify  as  performance-based  compensation  at the Board of  Directors  or
Committee's  discretion.  If an Award is to  qualify as such,  it shall  clearly
state so in the award agreement.

Withholding

We have the right to deduct any taxes  required to be withheld  with  respect to
grants under the Equity Plan. We may require that the  participant pay to us the
amount of any required  withholding.  The Compensation  Committee may permit the
participant  to elect to have  withheld  from the shares  issuable to him or her
with respect to an option or restricted  stock the number of shares with a value
equal to the required tax withholding amount.


                                       38


Aggregated Option/Sar Exercised And Fiscal Year-End Option/Sar Value Table

None of our named executive  officers  exercised options or SARs during the last
fiscal year.

Long Term Incentive Plans

No Long Term Incentive awards were granted in the last fiscal year.

BOARD OF DIRECTORS


Our  directors  who are  employees do not receive any  compensation  from us for
services rendered as directors.  The Board has created three classes of fees for
outside  directors:  (1) outside directors who are  "independent," as defined in
the  Exchange  Act  will be paid a  director  fee of $500 per  meeting,  whether
telephonic or in person - no fees for written consents in lieu of board meetings
will be given; (2) outside directors who are not "independent"  will not receive
any  fees  at  this  time,  but  once  our  cash  flow  position  improves,  the
Compensation   Committee  will  reconvene  and  make  recommendations  for  such
directors;  (3) the Vice Chairman will receive $3,000 per month,  which includes
$1,500 per month for his role as Chairman of our Audit Committee.  Additionally,
although we do not  currently  provide stock based  compensation  to our outside
directors,  in the future we may grant outside directors  incentive-based  stock
compensation.


BOARD COMMITTEES

We currently have five committees appointed by our Board of Directors:

     o    Audit  Committee,  which is  comprised of Douglas  MacLellan  (Chair),
          Robert Rooks and Ian Fraser.

     o    Finance  Committee,  which is  comprised  of Mark  Elenowitz  (Chair),
          Douglas MacLellan and Robert Saunders.

     o    Compensation Committee, which is comprised of Ian Fraser (Chair), Mark
          Elenowitz and Doug MacLellan.

     o    Disclosure Committee, which is comprised of Douglas MacLellan (Chair),
          Robert Saunders and Michael Boswell.

     o    Nominating  Committee,  which is comprised of Robert Saunders (Chair),
          Douglas MacLellan and Robert Rooks.

EMPLOYMENT AGREEMENTS


In June 2005, we entered into an employment agreement with Robert Saunders,  our
Chairman,  CEO and  President.  Mr.  Saunders  will serve at the pleasure of the
Board  of  Directors.  Pursuant  to  his  employment  agreement,  Mr.  Saunders'
compensation  will be $60,000 (USD) per annum for his services as our President.
Following  the receipt of at least  $5,000,000  (USD) min outside  funding,  Mr.
Saunders  will  receive an  additional  $10,000  per month for his  services  as
Chairman  and,  thereafter,  $20,000 per month  provided  that we achieve  gross
revenues  of at least  $20,000,000  (USD) for our most  recent  fiscal  year and
continuing as long as we maintain gross revenues of at least  $20,000,000  (USD)
for  each  successive  fiscal  year.  If we fail to  achieve  gross  revenue  of


                                       39

$20,000,000  (USD) in a successive  fiscal year, Mr.  Saunders  compensation  as
Chairman shall be reduced to $10,000 (USD) per month. Additionally, we agreed to
grant Mr. Saunders a signing bonus of $150,000 (USD) to be paid upon the closing
of at least $3,500,000 in new third party  financing.  In August 2006, our Board
approved the  following  revisions  to Mr.  Saunders'  compensation:  reduce Mr.
Saunders'  compensation  from  $10,000 to $5,000  per month  until our cash flow
position improves, at which time the Compensation  Committee will recommend that
Mr. Saunders' compensation increase back to $10,000 per month. We are discussing
possible restructuring/payment terms regarding the $65,000 deferred compensation
from fiscal year 2006 that was to be paid to Mr. Saunders upon the closing of at
least  US$3,500,000  in outside  funding.  Additionally,  since Mr.  Saunders no
longer serves as our Chairman, he does not receive any fees for such position.



                          SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

As used in this  section,  the  term  beneficial  ownership  with  respect  to a
security is defined by Rule 13d-3 under the Securities  Exchange Act of 1934, as
amended,  as consisting of sole or shared voting power  (including  the power to
vote or direct the vote) and/or sole or shared  investment  power (including the
power to dispose of or direct the  disposition  of) with respect to the security
through any contract,  arrangement,  understanding,  relationship  or otherwise,
subject to community property laws where applicable.


As of October 5, 2006, we had a total of  20,983,260  shares of common stock and
7,887,999 shares of preferred stock issued and  outstanding,  which are our only
issued and outstanding voting equity securities. However, our Series A Preferred
Stock  does not  have  any  voting  rights  except  with  respect  to  specified
transactions that may affect the rights, preferences, privileges or voting power
of the Series A Preferred Stock and except as otherwise  required by Nevada law.
(For further  information  regarding the  preferred  stock see  "Description  of
Securities - Series A Preferred  Stock.") At the date of this  Prospectus,  each
share of our Series A Preferred  Stock is  convertible  into one share of common
stock.

The  following  table sets  forth,  as of  October  5,  2006:  (a) the names and
addresses of each beneficial  owner of more than five percent (5%) of our common
stock and Preferred  Stock (taken together as one class) known to us, the number
of shares of common stock and Preferred  Stock  beneficially  owned by each such
person,  and the percent of our common stock and Preferred  Stock so owned;  and
(b) the names and addresses of each director and executive  officer,  the number
of shares our common  stock and  Preferred  Stock  beneficially  owned,  and the
percentage  of our  common  stock and  Preferred  Stock so  owned,  by each such
person,  and by all of our  directors and  executive  officers as a group.  Each
person has sole voting and  investment  power with  respect to the shares of our
common stock and  Preferred  Stock,  except as otherwise  indicated.  Beneficial
ownership  consists  of a direct  interest  in the  shares of  common  stock and
Preferred Stock, except as otherwise indicated.


                                       40

                                     Amount and Nature of          Percentage
 Name and Address                    Beneficial Ownership          Of Voting of
                                                                  Securities (1)

Robert Saunders                             9,900,000                34.29%
Chairman, President and CEO
5552 West Island Highway
Qualicum Beach, British Columbia
Canada V9K 2C8

Douglas C. MacLellan                        1,040,000                 3.60%
Vice Chairman
8324 Delgany Avenue
Playa del Ray, CA 90293

Mark Elenowitz                              1,238,000 (2)             4.29%
Director
400 Professional Drive
Suite 310
Gaithersburg, MD 20879

Dr. Robert Rooks                              300,000                 1.04%
Director
912 Pine Avenue
Huntington Beach, CA 90293
                                              800,000                 2.77%
Ian Fraser
Director
3056 West 2nd Avenue
Vancouver, British Columbia
Canada V6T 1E9


Michael Boswell                               938,000 (3)             3.25%
Director and
Acting Chief Accounting Officer
400 Professional Drive
Suite 310
Gaithersburg, MD 20879

Victor Bolton                                       0                 0.0%
345-916 W. Broadway
Vancouver, BC V5Z1K7

Darryl Horton                                       0                 0.0%
33568 Eagle Mountain Drive
Abbortsford, BC V3G2X7

All directors and officers as
a group (8 persons)                       14,216,000                49.24%

- ----------------

(1)       All  Percentages  have been rounded up to the nearest one hundredth of
          one percent.
(2)       Mr.  Elenowitz is a one hundred  (100%)  percent  shareholder  of MHE,
          Inc., which owns 18,000 shares of our voting stock. Additionally, MHE,
          Inc. is a forty  percent  (40%) member of TriPoint  Capital  Advisors,
          LLC, which owns 3,000,000  shares of our voting stock.  Mr.  Elenowitz
          owns  20,000  shares of our  voting  stock  directly.  Therefore,  Mr.
          Elenowitz beneficially owns 1,240,000shares of our voting stock.
(3)       Mr. Boswell and his wife jointly own Invision,  LLC, which owns 38,000
          shares of our voting stock.  Additionally,  Invision,  LLC is a thirty
          percent (30%) member of TriPoint  Capital  Advisors,  LLC,  which owns
          3,000,000  shares  of  our  voting  stock.   Therefore,   Mr.  Boswell
          beneficially owns 938,000 shares of our voting stock

                                       41


CHANGES IN CONTROL

On  August  15,  2005,  we  completed  a Share  Exchange  with  Edgewater  Foods
International,  Inc., the parent company of Island  Scallops Ltd. an aquaculture
company located in Vancouver Island,  British Columbia. As a result of the Share
Exchange,  Edgewater  became our wholly owned  subsidiary.  The  shareholders of
Edgewater  now own the majority of our voting  stock.  To  accomplish  the Share
Exchange,  we issued an  aggregate of  19,000,000  shares of our common stock in
exchange for all of the issued and  outstanding  capital stock of Edgewater from
the shareholders of Edgewater.  The shares issued to the Edgewater  Shareholders
were issued to 17 accredited  investors  pursuant to a claim of exemption  under
Section  4(2) of the  Securities  Act of 1933,  as  amended  for  issuances  not
involving a public offering. Additionally, as a condition of the Share Exchange,
E. Lee Murdoch, our controlling shareholder prior to the Share Exchange,  agreed
to cancel 2,300,000 shares of our common stock upon close of the Share Exchange.


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Dr. Kristina  Miller,  our Chief  Scientific  Advisor  is Robert  Saunders,  our
Chairman, CEO and President's wife.


         We are party to a consulting  agreement with TriPoint Capital Advisors,
LLC, a company in which Mark  Elenowitz,  a director and one of our  significant
shareholders,  indirectly owns a 40% interest. Michael Boswell, our acting Chief
Accounting  Officer and one of our directors,  indirectly owns a 30% interest in
TriPoint.  Louis  Taubman,  our outside  corporate and  securities  counsel also
indirectly owns an interest (30%) in TriPoint.  Our Board recently  approved the
Compensation  Committee's  recommendation  of a flat rate $15,000 per month fee,
which  shall be  reduced  to  $7,500  per month  until  our cash  flow  position
improves,  for the legal  services  Louis  Taubman  provides  us. The Board also
approved the recommendation of a flat rate $15,000 per month fee, which shall be
reduced  to $7,000  per month  until our cash flow  position  improves,  for the
financial  advisory  services and Acting CFO type services  TriPoint and Michael
Boswell,  respectively,  provide  us.  Additionally,  our  corporate  offices in
Gaithersburg,  Maryland are currently  provided by Tripoint  Holdings,  LLC, the
parent company of Tripoint, at no cost to us.



                            DESCRIPTION OF SECURITIES


         Our authorized  capital consists of 100,000,000 shares of common stock,
$.001 par value per share, and 10,000,000  shares of preferred stock,  $.001 par
value per share. As of October 5, 2006, there were outstanding 20,983,260 shares
of our common stock outstanding and 7,887,999 shares of our preferred stock.


                                       42

COMMON STOCK

The  holders  of common  stock are  entitled  to one vote for each share held of
record on all  matters  to be voted on by  stockholders.  The  holders of common
stock are entitled to receive such  dividends,  if any, as may be declared  from
time to time by the Board of Directors,  in its  discretion,  from funds legally
available therefore. Upon liquidation or dissolution,  the holders of our common
stock  are  entitled  to  receive,  pro rata,  assets  remaining  available  for
distribution  to  stockholders.  The  common  stock  has no  cumulative  voting,
preemptive or subscription  rights and is not subject to any future calls. There
are no conversion rights or redemption or sinking fund provisions  applicable to
the shares of common stock. All the outstanding shares of common stock are fully
paid and nonassessable.  There are no provisions in our Articles of Organization
or Bylaws that would delay, defer or prevent a change in control.

PREFERRED STOCK

Our  Board of  Directors  will be  authorized,  without  further  action  by the
shareholders,  to issue, from time to time, up to 10,000,000 shares of preferred
stock in one or more classes or series.  Similarly,  our Board of Directors will
be authorized to fix or alter the  designations,  powers,  preferences,  and the
number of shares which  constitute each such class or series of preferred stock.
Such  designations,  powers or  preferences  may  include,  without  limitation,
dividend rights (and whether  dividends are cumulative),  conversion  rights, if
any,  voting  rights  (including  the  number  of  votes,  if any,  per  share),
redemption rights (including  sinking fund provisions,  if any), and liquidation
preferences of any unissued shares or wholly unissued series of preferred stock.
As of the  date of this  filing,  we have  designated  8,000,000  shares  of our
authorized preferred stock as Series A Convertible Preferred Stock.

Series A Preferred Stock

Our Board of  Directors of has  designated  8,000,000  shares of our  authorized
preferred stock as Series A Convertible  Preferred Stock. The principal terms of
the preferred stock are as follows:

 Voting.  Except with respect to specified  transactions that may affect
the rights,  preferences,  privileges  or voting power of the Series A Preferred
Stock and except as  otherwise  required by Nevada  law,  the Series A Preferred
Stock has no voting  rights.  We shall not affect such  specified  transactions,
which include  authorizing,  creating,  issuing or increasing  the authorized or
issued  amount of any class or series of stock,  ranking pari passu or senior to
the Series A Preferred  Stock,  with  respect to the  distribution  of assets on
liquidation,  dissolution or winding up, without the affirmative vote or consent
of the  holders of at least 75% of the shares of the  Series A  Preferred  Stock
outstanding at the time, given in person or by proxy,  either in writing or at a
meeting, in which the holders of the Series A Preferred Stock vote separately as
a class. The common stock into which the Series A Preferred Stock is convertible
shall,  upon  issuance,  have all of the same voting  rights as other issued and
outstanding common stock and none of the rights of the Series A Preferred Stock.

         Dividends.  The holders of record of shares of Series A Preferred Stock
are  entitled  to  receive,  out of any  assets  at the time  legally  available
therefor  and when and as declared by the Board of  Directors,  dividends at the
rate of 8% per annum in  shares of our  common  stock.  The  number of shares of


                                       43


common  stock to be issued to the holder  shall be an amount equal to 90% of the
quotient of (i) the  dividend  payment  divided by (ii) the average of the daily
volume  weighted  average  price (VWAP) of our common stock for such date on the
OTC Bulletin  Board for the 20 trading days  immediately  preceding the date the
dividend  payment is due,  but in no event  less than  $0.65.  Dividends  on the
Series A Preferred Stock are cumulative,  accrue and are payable  semi-annually.
Dividends  on the Series A Preferred  Stock are prior and in  preference  to any
declaration or payment of any  distribution on any outstanding  shares of junior
stock.  So long as any shares of Series A Preferred  Stock are  outstanding,  we
will  not  declare,  pay or set  apart  for  payment  any  dividend  or make any
distribution on any junior stock (other than dividends or distributions  payable
in additional  shares of junior  stock),  unless at the time of such dividend or
distribution  we shall  have  paid  all  accrued  and  unpaid  dividends  on the
outstanding shares of Series A Preferred Stock.

         Conversion.  At any time on or after the issuance  date,  the holder of
any such shares of Series A Preferred Stock may, at the holder's  option,  elect
to convert all or any portion of the shares of the Series A Preferred Stock held
by such  person into a number of fully paid and  nonassessable  shares of common
stock equal to the quotient of (i) the liquidation  preference amount ($0.75) of
the shares of Series A  Preferred  Stock  being  converted  plus any accrued but
unpaid dividends divided by (ii) the conversion price,  which initially is $0.75
per share, subject to certain adjustments.

         If within 3  business  days of our  receipt  of an  executed  copy of a
conversion notice the transfer agent shall fail to issue and deliver to a holder
the number of shares of common stock to which such holder is entitled  upon such
holder's  conversion of the Series A Preferred Stock or to issue a new preferred
stock certificate  representing the number of shares of Series A Preferred Stock
to which such holder is entitled, we shall pay additional damages to such holder
on each  business day after such 3rd business  day that such  conversion  is not
timely  effected  in an amount  equal 0.5% of the  product of (A) the sum of the
number of shares of common  stock not issued to the holder on a timely basis and
to which  such  holder is  entitled  and,  in the  event we failed to  deliver a
preferred  stock  certificate  to the  holder on a timely  basis,  the number of
shares  of common  stock  issuable  upon  conversion  of the  shares of Series A
Preferred Stock  represented by such  certificate,  as of the last possible date
which we could have issued such  certificate  to such holder  timely and (B) the
closing bid price of our common stock on the last  possible  date which we could
have issued such common stock and such certificate,  as the case may be, to such
holder timely. If we fail to pay those additional damages within 5 business days
of the date incurred,  then such payment shall bear interest at the rate of 2.0%
per month (pro rated for partial months) until such payments are made.

         The conversion price of the Series A Preferred Stock may be adjusted in
the event of (i)  combination,  stock split, or  reclassification  of the common
stock; (ii) capital reorganization; (iii) distribution of dividends; or (iv) the
issuance  or  sale  of  additional  shares  of  common  stock  or  common  stock
equivalents.

         Liquidation. In the event of the liquidation, dissolution or winding up
of our  affairs,  whether  voluntary  or  involuntary,  the holders of shares of
Series A Preferred Stock then outstanding  shall be entitled to receive,  out of
our assets  available for distribution to its  stockholders,  an amount equal to
$0.75 per share or the liquidation  preference amount, of the Series A Preferred


                                       44


Stock plus any accrued and unpaid  dividends before any payment shall be made or
any assets  distributed  to the holders of the common  stock or any other junior
stock.  If  our  assets  are  not  sufficient  to pay in  full  the  liquidation
preference  amount plus any accrued and unpaid dividends  payable to the holders
of  outstanding  shares  of the  Series A  Preferred  Stock  and any  series  of
preferred  stock or any other class of stock ranking pari passu, as to rights on
liquidation,  dissolution or winding up, with the Series A Preferred Stock, then
all of said  assets  will be  distributed  among  the  holders  of the  Series A
Preferred  Stock and the other  classes  of stock  ranking  pari  passu with the
Series A Preferred  Stock,  if any,  ratably in accordance  with the  respective
amounts that would be payable on such shares if all amounts payable thereon were
paid  in  full.  The  liquidation  payment  with  respect  to  each  outstanding
fractional  share  of  Series A  Preferred  Stock  shall  be equal to a  ratably
proportionate amount of the liquidation payment with respect to each outstanding
share of Series A Preferred Stock. All payments  pursuant  thereto,  shall be in
cash,  property (valued at its fair market value as determined by an independent
appraiser  reasonably  acceptable  to the  holders of a majority of the Series A
Preferred Stock) or a combination thereof; provided, however, that no cash shall
be paid to holders of junior stock unless each holder of the outstanding  shares
of  Series  A  Preferred  Stock  has  been  paid in cash  the  full  Liquidation
Preference  Amount plus any accrued and unpaid dividends to which such holder is
entitled as provided herein.  After payment of the full  liquidation  preference
amount plus any accrued and unpaid  dividends  to which each holder is entitled,
such  holders of shares of Series A Preferred  Stock will not be entitled to any
further participation as such in any distribution of our assets.


WARRANTS

Series A-D and E-H Warrants


         Each A-D  Warrant  allows  its holder to  purchase  one share of common
stock for $1.15, $1.35, $1.85, $2.25 respectively,  subject to adjustment, until
five years after the date of issuance.  The E-H  Warrants  have the same pricing
and term as the A-D  Warrants.  As of  October  5, 2006  there  were  19,552,020
Warrants outstanding.


         In the event  that our  registration  statement  is not  effective,  as
required by the registration rights agreement between us and investors,  holders
would also be permitted  exercise the warrants through a cashless exercise using
the following formula:
                  X = Y - (A)(Y)
                          ------
                            B

           Where  X = the  number of  shares  of  common  stock to be issued to
                      the holder.

                  Y = the number of shares of common stock purchasable upon
                      exercise  of all of the Warrant or, if only a portion of
                      the Warrant is being exercised, the portion of the
                      Warrant being exercised.

                  A = the exercise price of the Warrant.

                  B = the closing bid price of one share of our common stock.

         The  exercise  price of the Warrants and the number of shares of common
stock  purchasable  upon exercise of the Warrants are subject to adjustment upon
the  occurrence of certain  events.  Such events  include  recapitalizations  or
consolidations,  combinations  of our  common  stock,  dividends  payable in our
common stock,  and the issuance of rights to purchase  additional  shares of our
common stock or to receive other securities  convertible into additional  shares
of common stock.

                                       45


         Pursuant to the terms of the Warrants, we shall not effect the exercise
of any  Warrants,  and no person who is a holder of any  Warrant  shall have the
right to exercise their Warrants, to the extent that after giving effect to such
exercise,  such  person  would  beneficially  own in excess of 9.99% of the then
outstanding shares of our common stock.

         No  fractional  shares of common stock  issuable  upon  exercise of the
Warrants  will be issued in connection  with any  exercise,  but in lieu of such
fractional  shares,  we shall  round the  number  of  shares  to be issued  upon
exercise up to the nearest whole number of shares.

         The Warrants  expire at the close of business on the fifth  anniversary
of the date of issuance.


Series J Warrants


         Each  Warrant  allows its holder to purchase  one share of common stock
for $0.5625,  subject to adjustment,  until one year after the date of issuance.
As of October 5, 2006 there were 1,888,000 Warrants outstanding.


         In the event  that our  registration  statement  is not  effective,  as
required by the registration rights agreement between us and investors,  holders
would also be permitted  exercise the Warrants through a cashless exercise using
the following formula:
                  X = Y - (A)(Y)
                          ------
                            B

            Where X = the  number of  shares  of  common  stock to be issued to
                      the Holder.

                  Y = the  number of shares of common  stock  purchasable
                      upon  exercise  of all of the  Warrants  or, if only a
                      portion  of  the  Warrant  is  being  exercised,  the
                      portion of the Warrant being exercised.

                  A = the exercise price of the Warrant.

                  B = the closing bid price of one share of our common stock.


         The  exercise  price of the Warrants and the number of shares of common
stock  purchasable  upon exercise of the Warrants are subject to adjustment upon
the  occurrence of certain  events.  Such events  include  recapitalizations  or
consolidations,  combinations  of our  common  stock,  dividends  payable in our
common stock,  and the issuance of rights to purchase  additional  shares of our
common stock or to receive other securities  convertible into additional  shares
of common stock.

         Pursuant to the terms of the Warrants, we shall not effect the exercise
of any  Warrants,  and no person who is a holder of any  Warrant  shall have the
right to exercise their Warrants, to the extent that after giving effect to such
exercise,  such  person  would  beneficially  own in excess of 9.99% of the then
outstanding shares of our common stock.

                                       46


         No  fractional  shares of common stock  issuable  upon  exercise of the
Warrants  will be issued in connection  with any  exercise,  but in lieu of such
fractional  shares,  we shall  round the  number  of  shares  to be issued  upon
exercise up to the nearest whole number of shares.

         The Warrants  expire at the close of business on the first  anniversary
of the date of issuance.

DIVIDEND POLICY

         It is the policy of our Board of  Directors  to retain our earnings for
use in our day-to-day  operations and expansion of our  operations.  We have not
declared  any  dividends  on our common  stock,  nor do we intend to declare any
dividends in the foreseeable  future.  The description of our Series A Preferred
Stock above, describes the dividend policy associated with such stock.


REGISTRATION RIGHTS


         In  connection  with the  issuance of the Series A Preferred  Stock and
Warrants  issued on April 12,  2006,  May 30,  2006,  June 30, 2006 and July 11,
2006, we agreed to file the current  registration  statement with the Securities
and  Exchange  Commission  to  register  for resale  the shares of common  stock
issuable  upon the  exercise  of the  Warrants  and  conversion  of the Series A
Preferred  Stock.  We also  agreed  to  register  the  shares  of  common  stock
underlying  the placement  consultant  warrants we issued  pursuant to that same
financing.



TRANSFER AGENT


         The transfer  agent for our common stock is Empire Stock  Transfer Inc.
at 2470 Saint  Rose Pkwy,  Suite 304,  Henderson,  NV 89074,  702.818.5898,  Fax
702.974.1444.



                            MARKET FOR COMMON EQUITY
                         AND RELATED SHAREHOLDER MATTERS

The common  stock is currently  quoted on the  over-the-counter  Bulletin  Board
under the symbol "EDWT."

The  following  table sets forth the  quarterly  high and low bid prices for the
common stock since the quarter ended March 31, 2004.  The prices set forth below
represent inter-dealer quotations, without retail markup, markdown or commission
and may not be reflective of actual transactions.

FISCAL 2003                                             HIGH           LOW
                                                        ----           ---
  Quarter ended March 31, 2004                        n/a             n/a
  Quarter ended June 30, 2004                         n/a             n/a
  Quarter ended September 30, 2004                    $0.25           $0.25
  Quarter ended December 31, 2004                     $0.25           $0.25
  Quarter ended March 31, 2005                        $0.30           $0.25
  Quarter ended June 30, 2005                         $0.55           $0.30
  Quarter ended August 31, 2005                       $1.95           $0.52
  Quarter ended November 30, 2005                     $2.00           $1.35
  Quarter ended February 28, 2006                     $1.64           $1.10
  Quarter ended May 31, 2006                          $1.45           $0.80



                                       47






         At October 5, 2006, the closing bid price of the common stock was $1.35
and we had  approximately  114 record  holders of our common stock and 14 record
holders of our preferred  stock.  This number excludes any estimate by us of the
number of beneficial owners of shares held in street name, the accuracy of which
cannot be guaranteed.


         We have not paid cash  dividends  on any class of common  equity  since
formation  and we do not  anticipate  paying any  dividends  on our  outstanding
common stock in the foreseeable future.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following  table provides  information as of August 31, 2005 with respect to
compensation plans (including individual compensation  arrangements) under which
our securities are authorized for issuance:

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

                                           (a)                           (b)                         (c)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                    

Equity    Compensation   plans            282,000                       $1.50                     4,718,000*
approved by security holders
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity  compensation plans not              N/A                          N/A                          N/A
approved by security holders
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Total                                     282,000                       $1.50                      4,718,000
- ------------------------------- ---------------------------- ---------------------------- ----------------------------


*As of January 1 of each year, commencing with the year 2006 and ending with the
year 2008, the aggregate  number of shares  available for granting  Awards under
the Equity Plan shall automatically  increase by a number of Shares equal to the
lesser  of (x)  5% of  the  total  number  of  Shares  then  outstanding  or (y)
1,000,000.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The  following  discussion  should  be read  in  conjunction  with  our
financial  statements  and the notes  thereto  which  appear  elsewhere  in this
report.  The results shown herein are not necessarily  indicative of the results
to be expected in any future periods.  This discussion contains  forward-looking
statements based on current expectations,  which involve  uncertainties.  Actual
results   and  the  timing  of  events   could   differ   materially   from  the
forward-looking  statements as a result of a number of factors.  Readers  should
also  carefully  review  factors set forth in other reports or documents that we
file from time to time with the Securities and Exchange Commission.


OVERVIEW

In the second  quarter of 2006,  we  started  harvesting  our 2004 year class of
scallops and began  inspecting  our 2005 year class of scallops as we prepare to
begin moving these  scallops to their final grow-out stage in the second half of
2006.  We refer to the  year-class  of scallops  based on when the scallops were
spawned.  Generally,  the harvest  occurs  approximately  22 to 24 months  after
spawning of the  scallops.  Originally,  we planned to ear-hang  our entire 2005


                                       48


scallop crop,  but after  inspection of growth rates of the 2004 ear-hang  crops
and an analysis of labor costs of ear-hanging versus the cost of additional nets
we decided to use nets for the final grow-out stage of the 2005 crop.

The 2005 year-class scallops are currently maturing in our tenured growing sites
and joint venture locations.  We are currently  preparing our farm sites for the
transfer  of these  scallops to their final  stage  large  grow-out  nets.  This
transfer  will  be  completed  during  the  summer  of  2006  and we  anticipate
commencing  harvesting up to  approximately 4 million 2005  year-class  scallops
during April of 2007. The 2006 year-class  scallop  spawning season commenced in
March  of 2006  and  was  completed  in  April  2006.  The  scallop  brood-stock
conditioning  for these spawning began in mid-December  2005. We expect to begin
harvesting the 2006 year-class  scallops during the Spring of 2008,  however, we
could begin  harvesting  portions of the class sooner if  mortality  (at various
points of the growth cycle) are significantly better than our current projection
or if growth rates are substantially  higher. We anticipate that of the over 350
million larvae that were spawned,  at least 10 million scallops could reach full
maturity and thus be harvested.  The use of DNA based family analysis started in
2005 will  continue  through  2006,  with the goal of  breeding  high meat yield
scallops.


As a result of the above, we believe that the 2005 scallop-class will produce at
least $5.5 million of revenue  over a twelve month period  beginning in April of
2007. We anticipate  that the harvest of our 2006 scallop class will  eventually
result in total  revenue of at least $14.0  million over the twelve month period
beginning  in April  2008.  If our  mortality  rates are better than our current
projections,  our revenues from the 2005 and 2006 scallop class could be higher,
however,  conversely  if our mortality  rates are worse than we  anticipate  our
revenues  for this period could be lower than we  anticipate.  In the near term,
the sales of the remainder of our 2004 scallop  class  between  October 2006 and
March  2007  are   expected  to  produce  more  the  $1.0  million  of  revenue.
Additionally,  we plan on generating additional revenues via the sale of scallop
and possibly other shellfish seed.


LIQUIDITY AND CASH RESOURCES.


At May 31, 2006 we had a cash balance of  approximately  $1,372,000.  During the
three months ended May 31, 2006 we completed two private equity  financings that
resulted in net proceeds of approximately  $2,332,000.  These financings contain
warrants  which if fully  exercised  could  raise  approximately  an  additional
$20,470,000.  Prior to the three months ended May 31, 2006, our recent expansion
had  been  largely  funded  by a  short  term  note  with  a  maximum  limit  of
approximately  $1,451,000.  Previously,  we have also relied on short term loans
from certain  shareholders  to assist with our working capital needs and to meet
short term cash  requirements.  We used a portion of our recent  private  equity
financing  to repay  these  short  term loans and as a result we will be able to
deploy the bulk of the proceeds from our financing toward our business strategy.


As a result of our recent series of financings (April 12, May 30 and June 30 and
July 11), we received  net  procceeds  of  approximately  $4.99  million.  After
repaying the short term note that provided the capital for initial expansion, we
believe  that we will have  adequate  funding to  execute  our  planned  scallop
expansion  and our related  business  strategy in the upcoming  fiscal year.  We
currently  have  sufficient  cash to maintain  operations at their present level
through the next fiscal year and until such a time that projected scallops sales
will be sufficient enough to maintain and grow our scallop operations.


                                       49



In order to launch our planned commercialization of sablefish in the next two to
three  years,  we will require at least $5.0  million of  additional  capital to
finance this product.  In the event that all of the warrants associated with the
aforementioned financing were called and converted we would receive net proceeds
of approximately $34.350 million. If we are not able to raise additional capital
through warrant exercises, we will need to seek other sources of capital for our
planned sablefish expansion.  Alternatively,  we could choose to focus solely on
our scallop operations and minimize the need for any additional capital.


SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying  consolidated  financial statements include the accounts of the
acquired  entities since their respective dates of acquisition.  All significant
inter-company amounts have been eliminated.

Cash and equivalents

Cash and equivalents  include cash, checks issued in excess of funds on deposit,
bank indebtedness, and highly liquid short term market investments with terms to
maturity of three months or less.

Accounts receivable

Accounts  receivable is presented net of allowance  for doubtful  accounts.  The
allowance  for  doubtful  accounts  reflects  estimates  of  probable  losses in
accounts  receivable.  The allowance is determined based on balances outstanding
for over 90 days at the period end date, historical experience and other current
information.

Loans receivable

Loans receivable is presented net of an allowance for loan losses, as necessary.
The loans are written off when collectibility becomes uncertain.

Inventory

The Company maintains inventories of raw materials for its aquaculture products,
of biomass  (inventory of live aquaculture  product being actively  cultivated),
and of finished goods (aquaculture product ready for sale).

Raw  materials  are reported at the lesser of purchase  cost and  estimated  net
realizable value.

Biomass and finished  goods are reported at the lesser of cost and estimated net
realizable  value.  Cost includes  direct and reasonably  attributable  indirect
production costs related to hatchery,  cultivation,  harvesting,  and processing
activities. Carrying costs per unit are determined on a weighted average basis.

Long term investments

Long term  investments are recorded at cost. The Company reviews its investments
periodically to assess whether there is an "other than temporary" decline in the
carrying  value of the  investment.  The Company  considers  whether there is an
absence of an  ability  to  recover  the  carrying  value of the  investment  by
reference to projected undiscounted future cash flows for the investment. If the
projected  undiscounted future cash flow is less than the carrying amount of the
asset, the asset is deemed impaired. The amount of the impairment is measured as
the difference between the carrying value and the fair value of the asset.


                                       50



Intangible assets

Intangible  assets are recorded at cost.  Cost is amortized  over the  estimated
useful life of the asset unless that life is determined to be indefinite.

Intangible  assets not subject to  amortization  are tested for impairment on at
least an annual basis.  If the fair value of the intangible  asset is determined
to be less than the carrying  amount,  an  impairment  loss is recognized in the
amount of that difference.

Intangible  assets  subject to  amortization  are  reviewed  for  impairment  in
accordance with the provisions applying to long-live assets.

Property, plant, and equipment

Property,   plant,   and  equipment  are  recorded  at  cost  less   accumulated
amortization and are amortized in the following manner based on estimated useful
lives:

         Buildings                                   4% - 5% declining balance
         Seawater piping and tanks                   6% declining balance
         Boats                                       15% declining balance
         Field equipment                             20% declining balance
         Office equipment                            20% declining balance
         Vehicles                                    30% declining balance
         Computer equipment                          30% declining balance

Impairment of long-lived assets

The Company monitors the recoverability of long-lived assets, including property
and equipment and intangible assets,  based upon estimates using factors such as
expected future asset utilization, business climate, and undiscounted cash flows
resulting  from the use of the related  assets or to be  realized  on sale.  The
Company's  policy is to write  down  assets  to the  estimated  net  recoverable
amount,  in the period in which it is determined likely that the carrying amount
of the asset wilt not he recoverable.

Government assistance

Government  assistance received by the Company, such as grants,  subsidies,  and
tax credits, is recorded as a recovery of the appropriate related expenditure in
the period that the assistance is received.

The Company has received  government  assistance in the foam of loans, for which
repayment  may not be required if the Company fails to meets  sufficient  future
revenue  levels to repay these loans  based on a  percentage  of gross sales for
certain products over a defined period of time. Such assistance  received by the
Company is initially recorded as a liability,  until such time as all conditions
for forgiveness are met, and is then recognized as other income in that period.



                                       51


Farm license costs

The  Company  must pay annual  license  costs in  respect to  government-granted
tenures that it holds,  which give the Company the right to use certain offshore
ocean waters for the purpose of  aquaculture  farming.  Such  license  costs are
recognized as an expense when incurred.

Research and development costs

Development costs include costs of materials, wages, and reasonably attributable
indirect  costs incurred by the Company which are directly  attributable  to the
development of hatchery techniques for sablefish and shellfish,  these costs are
expensed when incurred.

Research costs are expensed when incurred.

Income taxes

The  Company  calculates  its  provision  for income  taxes in  accordance  with
Statement of  Financial  Accounting  Standards  No. 109  (Accounting  for Income
Taxes) ("SPAS 109"), which requires an asset and liability approach to financial
accounting  for  income  taxes.  This  approach  recognizes  the amount of taxes
payable or  refundable  for the current year, as well as deferred tax assets and
liabilities  attributable to the future tax consequences of events recognized in
the financial statements and tax returns.  Deferred income taxes are adjusted to
reflect the effects of enacted changes in tax laws or tax rates. Deferred income
tax assets are recorded in the financial statements if realization is considered
more likely than not.

Revenue recognition

The Company  recognizes  revenue when it is realized or realizable,  and earned.
The Company  considers  revenue  realized or  realizable  and earned when it has
persuasive  evidence of a  contract,  the  product  has been  delivered,  or the
services  have  been  provided  to the  customer,  the  sales  price is fixed or
determinable, and collectibility is reasonably assured.

Revenue of the Company is derived principally from the sale of scallops produced
by the Company or purchased  from third  parties,  and from the sale of seed and
farm supplies to other aquaculture farms.

Revenue from the sale of scallops and other products is recognized upon delivery
of the product and invoicing of the customer,  assuming collection is considered
reasonably assured.

Foreign exchange

The  functional  currency  of our  foreign  subsidiaries  is the  local  foreign
currency.  All assets and  liabilities  denominated  in foreign  currencies  are
translated  into United States  dollars at the exchange  rate  prevailing on the
balance sheet date. Revenues, costs and expenses are translated at average rates
of exchange prevailing during the period. Translation adjustments resulting from
translation  of  the  subsidiaries'  accounts  are  accumulated  as  a  separate
component  of  shareholders'  equity.  Gains and losses  resulting  from foreign
currency transactions are included in the consolidated  statements of operations
and have not been significant.


                                       52



Use of estimates

The  preparation  of financial  statements  in  conformity  with U.S.  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the reported amounts of assets,  liabilities,  revenues,
expenses and  disclosure of contingent  assets and  liabilities.  Such estimates
include  providing for  amortization  of property,  plant,  and  equipment,  and
valuation of inventory. Actual results could differ from these estimates.

Derivative Financial Instruments

In connection with the sale of debt or equity  instruments,  we may sell options
or  warrants to  purchase  our common  stock.  In certain  circumstances,  these
options or warrants may be classified as derivative liabilities,  rather than as
equity.  Additionally,  the debt or  equity  instruments  may  contain  embedded
derivative instruments,  such as embedded derivative features,  which in certain
circumstances  may  be  required  to be  bifurcated  from  the  associated  host
instrument and accounted for separately as a derivative instrument liability.

The Company  accounts for all  derivatives  financial  instruments in accordance
with SFAS No. 133. Derivative financial  instruments are recorded as liabilities
in the  consolidated  balance  sheet,  measured at fair value.  When  available,
quoted  market prices are used in  determining  fair value.  However,  if quoted
market prices are not available,  the Company  estimates fair value using either
quoted market prices of financial  instruments with similar  characteristics  or
other valuation techniques.

The  identification of, and accounting for,  derivative  instruments is complex.
Our derivative instrument liabilities are re-valued at the end of each reporting
period,  with changes in the fair value of the derivative  liability recorded as
charges  or credits to income,  in the period in which the  changes  occur.  For
options, warrants and bifurcated embedded derivative features that are accounted
for as derivative  instrument  liabilities,  we estimate fair value using either
quoted market prices of financial  instruments with similar  characteristics  or
other valuation techniques. The valuation techniques require assumptions related
to the remaining  term of the  instruments  and risk-free  rates of return,  our
current  common  stock  price and  expected  dividend  yield,  and the  expected
volatility  of  our  common  stock  price  over  the  life  of the  option.  The
identification   of,  and  accounting  for,   derivative   instruments  and  the
assumptions  used  to  value  them  can   significantly   affect  our  financial
statements.

Derivative  financial  instruments  that are not designated as hedges or that do
not meet the  criteria for hedge  accounting  under SFAS No. 133 are recorded at
fair value, with gains or losses reported currently in earnings.  All derivative
financial instruments held by the Company as May 31, 2006 were not designated as
hedges.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance  sheet  arrangements  that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial  condition,  revenues or expenses,  results of operations,  liquidity,
capital expenditures or capital resources that is material to our investors.


                                       53



Non-GAAP Financial Measures

To supplement our financial  information  presented in accordance with generally
accepted accounting principles (GAAP), below we use a non-GAAP financial measure
such term is defined in Regulation G under the rules of the Securities  Exchange
Commission, to clarify and enhance understanding future prospects.

While we believe that the non-GAAP financial measure is useful in evaluating us,
the  information  should be  considered as  supplemental  in nature and not as a
substitute  for or  superior to the related  financial  information  prepared in
accordance with GAAP.  Further,  the non-GAAP  financial measure may differ from
similarly titled measures presented by other companies.

INVESTMENTS IN TENURES AS COMPARED TO ESTIMATED MARKET VALUE OF TENURES

As of February 28, 2006, we currently  carry our investment in Island  Scallops'
tenures at $3,486.  This amount represents the initial carrying costs of certain
tenures  acquired by Island  Scallop's  subsidiary.  These tenures do not expire
until various dates ranging from 2021 - 2024, however, we believe that they have
an indefinite useful life because renewal on expiration is anticipated. The area
available for shellfish aquaculture within Baynes Sound is fully subscribed, and
as a result new  tenures  are not  available  through  the  Canadian  Provincial
application and review  process.  The shellfish  companies  within the Sound are
also well established and sales of tenures are quite rare, making the assessment
of the market value for the Island Scallops tenures difficult.  Historical sales
and government  auction of tenures have received as much as $300,000 (CDN) for a
small beach tenure (less than 4 acres) and $65,000  (CDN) for a small  deepwater
tenure without  infrastructure.  The few tenures on the market over the previous
12 months  suggest  that the current  market value is  approximately  $10,000 to
$25,000  (CDN) per acre.  Based on  listings  of tenures on the coast of British
Columbia,  discussions with local shellfish  growers and individuals from the BC
Assets and Land  Corporation,  and an  independent  appraisal  (commissioned  by
Island Scallops) that recently  estimated the value of our roughly 1018 acres of
tenures  (in  November  2005),  the  value  is  estimated  to  be  approximately
$8,600,000.  After the recent  approval of the  expansion of two of our tenures,
the  estimated  market  value  of  our  overall  tenures  increased  to  roughly
$11,060,000.  If our  planned  expansion  of our Deep Water  tenure  from bottom
seeding to long line  culture is  approved,  we believe  the total  value of our
tenures to increase to over $17.5 million.  The estimated  market value is based
on the size,  location and whether  they are beach or  deepwater  in nature.  In
addition,  the  valuation  method used assumes that smaller  farms have a higher
value per acre than larger  tenures.  Given the variable nature of the shellfish
tenures market,  the actual value that we receive from the sale of a tenure or a
partial tenure could vary significantly from these estimated values.

Although we cannot determine the exact amount we would  ultimately  receive from
the sale of our tenure(s),  based upon the information stated above we expect to
receive more than the carrying cost ($3,486)  from such sale.  Accordingly,  the
carrying  cost of our tenures is not  indicative  of their  actual  value.  This
analysis   indicates  our  cash  generating   capabilities   after   considering
investments  in capital  assets  necessary  to  maintain  and  enhance  existing
operations.


COMPARISON  OF RESULTS FOR THE FISCAL YEAR ENDED AUGUST 31, 2005,  TO THE FISCAL
YEAR ENDED AUGUST 31, 2004.

Revenues. Revenues for the fiscal year ended August 31, 2005, were approximately
$316,000.  We had revenues of  approximately  $450,000 for the fiscal year ended
August 31, 2004. This is a decrease of  approximately  $134,000 or 30%. In 2005,
the majority of our revenue resulted from the sale of scallops.  The decrease in
our revenue from 2004 to 2005 was due to increased  emphasis on the  development
and production of larger 2005 and 2006 scallop crops.  Management  believes that
our emphasis on expansion of future crops will yield a  significant  increase in
revenues in 2006 and beyond.


                                       54


Gross  profit  (loss).  Gross  loss for the year  ended  August  31,  2005,  was
approximately  $51,000, a decrease of approximately $29,000 as compared to gross
loss of roughly $80,000, for the year ended August 31, 2004. The decrease in the
amount  of gross  loss was  mainly  attributable  to  management's  decision  to
recognize the  recoverable  inventory  costs and no longer  assign  assigned nil
carrying amount to the biomass inventor of scallops.  Management  believed that,
given the  projected  increase  in upcoming  annual  crops,  the  capital  costs
associated  with inventory  could be recovered and the net realizable  value was
determined to be greater than the cost incurred. Furthermore,  Management of the
Company  believed that as of August 31, 2005 the Company had an adequate history
of successful  sales to justify  recognition  of  recoverable  inventory  costs.
Previously, the Company had assigned nil carrying amount to the biomass inventor
of scallops.

General and administrative.  General and administrative  expenses for the fiscal
year ended  August 31,  2005,  were  approximately  $221,000.  Our  general  and
administrative  expenses  were  approximately  $95,000 for the fiscal year ended
August 31,  2004.  This is an increase of  approximately  $126,000 or 133%.  Our
general  and  administrative  expenses  for the year ended  August 31, 2005 were
attributable to costs associated with establishing, building, and supporting our
infrastructure and included various consulting costs, legal and accounting fees,
overhead,  realized stock  compensation  and salaries.  We anticipate that these
costs will rise as we continue to expand our operations.

Stock compensation expense.  During the year ended August 31, 2005, our Board of
Directors authorized the issuance of shares of our restricted common stock to an
individual who would provide  services to Edgewater  Foods  International,  Inc.
Based upon the common stock  trading  price at the times of  issuance,  and FASB
rules, we were required to incur non-cash  expenses for the issuance of stock of
approximately  $10. As these  shares were issued by Edgewater in June 2005 prior
to the share exchange,  these shares were valued based on the par value, $0.0001
of the  stock at time of  issuance  and we  recorded  a $10  stock  compensation
expense for the issuance of these  shares  during the year ended August 31, 2005
and $0 for the issuance of these shares during the year ended August 31, 2004.

Other income (expense), net. Interest income for the year ending August 31, 2005
was approximately  $2,600.  Interest expense for the year ending August 31, 2005
was approximately $81,000.  Interest expense for the year ending August 31, 2004
was approximately $32,000. As a result, other expense for the year ending August
31, 2005 was approximately  $78,000 as compared to approximately $32,000 for the
year ending  August 31,  2004.  This is a increase in expenses of  approximately
$46,000  primarily  attributed  to  expenses  related  to the  expansion  of the
Company's scallop crops.

Net profit  (loss).  As a result of the  above,  the net loss for the year ended
August  31,  2005,  was  approximately  $350,000  as  compared  to a net loss of
approximately $135,000 for the year ended August 31, 2004.


COMPARISON OF RESULTS FOR THE THREE MONTHS AND NINE MONTHS ENDED MAY 31, 2006 TO
THE THREE AND SIX MONTHS ENDED MAY 31, 2005.

Revenues.  Revenues for the three months ended May 31, 2006, were  approximately
$133,000.  We had revenues of  approximately  $35,000 for the three months ended
May 31, 2005. This is an increase of approximately $98,000 or 280%. Revenues for
the nine  months  ended May 31, 2006 were  approximately  $437,000 as compare to
$308,000  for the nine  months  ended  May 31,  2005.  This was an  increase  of
approximately  $129,000 or 42%. For the three and nine month  periods  ended May
31,  2006 and  2005,  the  majority  of our  revenue  resulted  from the sale of


                                       55


scallops.  The slight  increase in our revenue  from 2005 to 2006 was due to the
increased emphasis on the development and production of larger scallops crops in
2005 and  continuing  into 2006 as opposed to our prior  emphasis on selling our
scallops  earlier in the growth cycle to generate  working  capital.  Management
believes that this emphasis on the  development and production of larger scallop
crops has  positioned  the  company for  revenue  growth and that our  continued
emphasis on expansion of future  crops  should yield a  significant  increase in
revenues in first part of 2007 and beyond.

Gross profit  (loss).  Gross loss for the three  months ended May 31, 2006,  was
approximately $37,000, an increase of approximately $43,000 as compared to gross
profit of roughly $6,000,  for the three months ended May 31, 2005. For the nine
months ended May 31, 2006, gross loss was approximately $39,000 as compared to a
gross profit of $20,000 for the nine months ended May 31, 2005.  The increase in
the amount of gross loss for the three and nine  months  ended May 31,  2006 was
mainly  attributable  to  management's  decision to focus on the  expansion  and
development  of larger scallop crops and larger scallop yields for the crop year
2005 and 2006. As a result, we expended a larger portion of our resources on the
maintaining,  developing  and tending our scallop crops in 2005 and 2006 and are
only  beginning  to see the  benefits  of our efforts in  developing  larger and
profits.

General and  administrative.  General and administrative  expenses for the three
months  ended  May 31,  2006,  were  approximately  $286,000.  Our  general  and
administrative  expenses were  approximately  $51,000 for the three months ended
May 31,  2005.  This is an  increase  of  approximately  $235,000.  General  and
administrative   expenses  for  the  nine  months  ended  May  31,  2006,   were
approximately   $394,000.   Our  general  and   administrative   expenses   were
approximately  $123,000  for the nine  months  ended  May 31,  2005.  This is an
increase of approximately  $271,000. Our general and administrative expenses for
the  three  and nine  months  ended  May 31,  2006  were  attributable  to costs
associated with  establishing,  building,  and supporting our infrastructure and
included various consulting costs, legal and accounting fees,  compensation paid
as result of our recent  financing,  overhead,  realized stock  compensation and
salaries.  We anticipate that these costs will rise as we continue to expand our
operations.

Stock  compensation  expense.  During the three months  ended May 31, 2006,  our
Board of Directors did not  authorize  the issuance of shares of our  restricted
common  stock  for  compensation.  As a  result,  we did  not  incur  any  stock
compensation expense for the three months ended May 31, 2006.

We did have an expense of  approximately  $183,00  during the three months ended
November 30, 2005. The expense was for two  consulting  groups who would provide
services  to  us.  As  such,  we  incurred  a  stock  compensation   expense  of
approximately $183,000 for the nine months ended May 31, 2006.

Other income (expense), net. Interest expense for the three months ended May 31,
2006 was approximately  $54,000. For the three months ended May 31, 2005, we had
interest expense of roughly $50,000. Other income for the three months ended May
31, 2006 was  approximately  $13,000 as opposed to no other income for the three
months  ended May 31,  2005.  The  Company  recognized  a loss of  approximately
$2,525,000  which was related to the change in the fair value of warrants issued
to three accredited  investors in conjunction with preferred stock financings on


                                       56


April 12 and May 30 and the market  price of the common  stock  underlying  such
warrants at May 31, 2006 No such loss was  recorded  for the three  months ended
May 31, 2005. As a result, other expense for the three months ended May 31, 2006
was  approximately  $2,566,000  as  compared to other  expense of  approximately
$50,000 for the three  months ended May 31, 2005.  This  increase was  primarily
attributed  to loss  associated  with the change in fair  value of the  recently
issued warrants.

Interest  expense  for the nine  months  ended  May 31,  2006 was  approximately
$160,000.  For the nine months  ended May 31, 2005,  we had interest  expense of
roughly $51,000. The Company recognized a loss of approximately $2,525,000 which
was  related  to the  change  in the fair  value  of  warrants  issued  to three
accredited  investors in conjunction with preferred stock financings on April 12
and May 30 and the market price of the common stock  underlying such warrants at
May 31, 2006 No such loss was  recorded  for the nine months ended May 31, 2005.
Other expense for the nine months ended May 31, 2006 was approximately  $501,000
as opposed to no other  expense for the nine  months  ended May 31,  2005.  As a
result,  other expense for the nine months ended May 31, 2006 was  approximately
$3,186,000  as compared to other expense of  approximately  $51,000 for the nine
months ended May, 2006. This is an increase of more than $3,100,000 is primarily
attributed  to loss  associated  with the change in fair  value of the  recently
issued  warrants and other expense  related to the issuance of 400,000 shares of
restricted  stock  (requiring us to incur non-cash  expenses for the issuance of
stock of approximately $520,000) to one group in consideration for the extension
of the due date on a share term loan to Island Scallops and expenses  related to
the  expansion of our scallop crops and interest  expenses  related to this term
loan.

Net profit (loss). As a result of the above, the net loss for the three and nine
months  ended May 31, 2006,  was  approximately  $2,929,000  and  $3,919,000  as
compared to a net loss of approximately  $114,000 and $209,000 for the three and
nine months  ended May 31, 2005.  The majority on the  increases to the net loss
can be  attributed to the loss  associated  with the change in fair value of the
recently issued warrants.


                CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                      ACCOUNTING AND FINANCIAL DISCLOSURE

We have had no disagreements  with our certified public accountants with respect
to accounting practices or procedures or financial disclosure.


                                LEGAL PROCEEDINGS

In 1998 Island Scallops entered into an agreement with two purchasers,  pursuant
to  which  Island  Scallops  was to  produce  and sell  geoduck  seed to the two
purchasers.  Island  Scallops  received  advance  payments  from each of the two
purchasers in 2002 totaling  approximately  $64,140.  As a result of breaches of
the purchase agreements by the purchasers, it is our position that we may retain
any unused portion of these advance payments.



                                       57



As of August  31,  2004,  one of the two  purchasers  had  claimed  that  Island
Scallops  owed it amounts  totaling  $85,888.  Since it is our position that the
purchasers breached their agreements with Island Scallops,  we have no intention
of  seeking a  settlement  of this  matter at this time.  We are  unaware of any
formal  proceedings  that  may have  been  commenced  by  either  of  these  two
purchasers in regard to any claims that they may have.

Other  than  as set  forth  herein,  we are not a party  to any  material  legal
proceeding and to our knowledge, no such proceeding is currently contemplated or
pending.

                                     EXPERTS

The financial  statements  included in the Prospectus have been audited by LBB &
Associates LTD, LLP independent  certified  public accountants to the extent and
for the periods set forth in their  report  appearing  elsewhere  herein and are
included in reliance  upon such report given upon the  authority of said firm as
experts in auditing and accounting.


                                  LEGAL MATTERS

Law  Offices of Louis E.  Taubman,  P.C.,  has passed  upon the  validity of the
securities being offered hereby.


            DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
                           SECURITIES ACT LIABILITIES

Our Articles of Incorporation  include provisions,  which limit the liability of
our  directors.  As  permitted  by  applicable  provisions  of the  Nevada  Law,
directors will not be liable to us for monetary damages arising from a breach of
their fiduciary duty as directors in certain circumstances. This limitation does
not  affect  liability  for  any  breach  of a  director's  duty  to us  or  our
shareholders  (i) with  respect to approval by the  director of any  transaction
from which he or she derives an improper personal benefit,  (ii) with respect to
acts or omissions involving an absence of good faith, that the director believes
to be  contrary  to  our  best  interests  or  our  shareholders,  that  involve
intentional  misconduct  or a  knowing  and  culpable  violation  of  law,  that
constitute an unexcused  pattern or inattention that amounts to an abdication of
his or her duty to us or our shareholders, or that show a reckless disregard for
duty to us or our  shareholders  in  circumstances  in which  he or she was,  or
should have been aware,  in the ordinary course of performing his or her duties,
of a risk of  serious  injury  to us or our  shareholders,  or  (iii)  based  on
transactions   between  us  and  our  directors  or  another   corporation  with
interrelated directors or based on improper  distributions,  loans or guarantees
under applicable sections of Nevada Law. This limitation of directors' liability
also does not affect the availability of equitable remedies,  such as injunctive
relief or rescission.

Insofar as indemnification  for liabilities  arising under the Securities Act of
1933 may be permitted to  directors,  officers  and  controlling  persons of the
small business issuer  pursuant to the foregoing  provisions,  or otherwise,  we
have been advised that in the opinion of the Securities and Exchange  Commission
such  indemnification  is against  public policy as expressed in the Act and is,
therefore, unenforceable.


                       WHERE YOU CAN FIND MORE INFORMATION

We have filed a  registration  statement  on Form SB-2 with the SEC covering the
securities  that may be sold under this  prospectus.  This  prospectus  does not
contain all of the information set forth in the registration  statement,  and we
strongly urge you to read the registration statement in its entirety.


                                       58



We also file annual,  quarterly and special reports,  proxy statements and other
information  with the SEC.  You may  read or  obtain a copy of the  registration
statement  or any other  information  we file  with the SEC at the SEC's  Public
Reference Room at 100 F. Street, N.E., Washington, D.C. 20549. You may obtain
information  regarding the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Our SEC filings are also available to the public from the
SEC web site at www.sec.gov,  which contains our reports,  proxy and information
statements, and other information we file electronically with the SEC.














                                       59



                              FINANCIAL STATEMENTS


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Edgewater Foods International, Inc.
Qualicum Beach, British Columbia, Canada

We have audited the accompanying  consolidated  balance sheet of Edgewater Foods
International,  Inc.  as of August  31,  2005,  and the  related  statements  of
operations,  stockholders' equity, and cash flows for the year then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion of these financial  statements based on
our audit.

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

In our opinion, the financial statement referred to above present fairly, in all
material respects, the financial position of Edgewater Foods International, Inc.
as of August 31, 2005,  and the results of its operations and its cash flows for
the year then ended,  in conformity  with the  accounting  principles  generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming that Edgewater
will  continue as a going  concern.  As  discussed  in Note 15 to the  financial
statements,  Edgewater has incurred  losses from  operations  for the year ended
August  31,  2005  totaling  approximately  $272,000,  has  negative  net  worth
approximating  $1,300,000  and current  liabilities  exceed  current assets by a
significant amount. Edgewater will require additional working capital to develop
its business until Edgewater either (1) achieves a level of revenues adequate to
generate  sufficient  cash  flows from  operations;  or (2)  obtains  additional
financing  necessary  to  support  its  working  capital   requirements.   These
conditions raise substantial  doubt about  Edgewater's  ability to continue as a
going  concern.  Management's  plans regard to this matter are described in Note
15. The  accompanying  financial  statements do not include any adjustments that
might results from the outcome of these uncertainties.

/s/ LBB & Associates Ltd., LLP
- ------------------------------
LBB & Associates Ltd., LLP
Houston, Texas
November 16, 2005

                                       F-1




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Edgewater Foods International, Inc.
Qualicum Beach, British Columbia, Canada

We have audited the accompanying  consolidated  balance sheet of Edgewater Foods
International,  Inc.  as of August  31,  2004,  and the  related  statements  of
operations,  stockholders' deficit and cash flows for the year then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion of these financial  statements based on
our audit.

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

In our opinion, the financial statement referred to above present fairly, in all
material respects, the financial position of Edgewater Foods International, Inc.
as of August 31, 2004,  and the results of its operations and its cash flows for
the year then ended,  in conformity  with the  accounting  principles  generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming that Edgewater
Foods International, Inc. will continue as a going concern. As discussed in Note
18 to the financial statements, Edgewater Foods International, Inc. has incurred
a net  loss  from  operations  for the  year  ended  August  31,  2004  totaling
approximately  $135,000,  has negative net worth  approximating  $3,847,000  and
current  liabilities  exceed current assets by a significant  amount.  Edgewater
Foods International, Inc. will require additional working capital to develop its
business until Edgewater Foods  International,  Inc. either (1) achieves a level
of revenues adequate to generate  sufficient cash flows from operations;  or (2)
obtains   additional   financing   necessary  to  support  its  working  capital
requirements.  These  conditions raise  substantial  doubt about Edgewater Foods
International,  Inc. ability to continue as a going concern.  Management's plans
regard to this  matter  are  described  in Note 18. The  accompanying  financial
statements do not include any adjustments that might results from the outcome of
these uncertainties.

/s/ LBB & Associates Ltd., LLP
- ------------------------------
LBB & Associates Ltd., LLP
Houston, Texas
October 2, 2006











                          EDGEWATER FOODS INTERNATIONAL
                           CONSOLIDATED BALANCE SHEET
                            AUGUST 31, 2005 and 2004

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

ASSETS

Current assets:
     Cash                                                             $       560         12,910
     Accounts receivable                                                     --           25,416
     Loans receivable                                                        --            2,042
     Inventory                                                            540,126           --

     Other current assets                                                  28,520          7,476
                                                                      -----------    -----------

       Total current assets                                               569,206         47,844

Property, plant and equipment                                           1,096,986        620,636

Loans receivable                                                           20,387         17,051

Investments in tenures                                                      3,356          3,032
                                                                      -----------    -----------

     Total assets                                                     $ 1,689,935    $   688,563
                                                                      ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Checks issued in excess of funds on deposit                      $    38,538    $      --

     Bank indebtedness                                                     65,364           --
     Accounts payable and accrued liabilities                             489,724        276,412
     Short term debt                                                    1,125,141         88,465
     Shareholder debt                                                        --        2,946,789
     Current portion of long term debt                                    959,486        896,336
                                                                      -----------    -----------

     Total Current Liabilities                                          2,678,253      4,208,001

Long term debt                                                            369,632        327,879
                                                                      -----------    -----------

     Total Liabilities                                                  3,047,885      4,535,880
                                                                      -----------    -----------

Stockholders' Equity

     Common stock, no par $0.001, 50,000,000 authorized, 20,585,400
      issued and outstanding at August 31, 2005                             2,059          1,030
     Additional paid in capital                                         3,151,800         (1,029)
     Accumulated deficit                                               (4,341,406)    (3,991,330)
     Accumulated other comprehensive income                              (170,393)       144,012
                                                                      -----------    -----------

     Total Stockholders' Equity                                        (1,357,950)    (3,847,317)
                                                                      -----------    -----------
     Contingent Liabilities
     Total Liabilities and Stockholders' Equity                       $ 1,689,935        688,563
                                                                      ===========    ===========

See accompanying summary of accounting policies and notes to financial statements




                                       F-2




                       EDGEWATER FOODS INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      YEARS ENDING AUGUST 31, 2005 and 2004




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

Revenue                                            $    315,869    $    449,928
Cost of goods sold                                      366,724         530,319
                                                   ------------    ------------

Gross profit (loss)                                     (50,855)        (80,391)
                                                   ------------    ------------

Income (expenses) from Operations:
      General and administrative expenses              (137,337)        (31,366)
      Salaries and benefits                             (83,653)        (63,349)
       Gain on sale of tenure                              --           112,641
      Loss on settlement of lawsuit                        --           (40,551)
                                                   ------------    ------------

                                Total                  (220,990)        (22,625)
                                                   ------------    ------------


Loss from operations                                   (271,845)       (103,016)
                                                   ------------    ------------

Other income (expense):
      Interest(expense), net                            (80,868)        (31,869)
      Other income                                        2,637            --

                                                   ------------    ------------

                Other income (expense), net             (78,231)        (31,869)
                                                   ------------    ------------

Net income (loss)                                  $   (350,076)   $   (134,885)
                                                   ============    ============

Net income (loss) per Share
      Basic and diluted                            $      (0.03)          (0.01)

Weighted average shares outstanding
      Basic and diluted                              11,899,320      10,300,000


See  accompanying   summary  of  accounting  policies  and  notes  to  financial
statements



                                       F-3







                       EDGEWATER FOODS INTERNATIONAL, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                       FOR THE YEAR ENDED AUGUST 31, 2005


                                                                              Accumulated
                                                                             Other Comprehensive
                                                              Additional       Income -
                                        Common Stock            Paid in      Foreign Exchange      Accumulated
                                 -------------------------
                                  Number          Value         Capital       Adjustment            Deficit         Total
- ------------------------------- -----------    -----------    -----------    -----------          -----------     -----------
                                                                                                         

Balance at August 31, 2003       10,300,000    $     1,030    $  (1,029)    $    324,869          $(3,856,445)    $(3,531,575)

Comprehensive loss
  Net income (loss)                                                                                   (134,885)      (134,885)
Foreign exchange adjustment                                                     (180,857)                            (180,857)
                                                                                                                  -----------
Total comprehensive loss                                                                                             (315,742)
                                -----------    -----------    -----------    -----------           -----------    -----------

Balance at August 31, 2004       10,300,000          1,030         (1,029)       144,012            (3,991,330)    (3,847,317)


Comprehensive loss
  Net income (loss)                                                                                   (350,076)      (350,076)
  Foreign exchange adjustment                                                   (314,405)                            (314,405)
                                                                                                                  -----------
Total comprehensive loss                                                                                             (664,481)



Common stock issued for
 services                           100,000             10             --                                                  10

   Common stock issued in
   connection with
   recapitalization               8,600,000            860           (860)                                --              --


   Forgiveness of shareholder
   debt                                                         3,153,848                                           3,153,848

   Common stock issued
   in connection with
   recapitalization               1,585,400            159           (159)


                                -----------    -----------    -----------    -----------           -----------    -----------


Balance at August 31, 2005       20,585,400    $     2,059    $ 3,151,800    $  (170,403)          $(4,341,406)   $(1,357,950)
                                ===========    ===========    ===========    ===========           ===========    ===========



See accompanying summary of accounting policies and notes to financial statements





                                       F-4






                       EDGEWATER FOODS INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASHFLOWS
                      YEARS ENDED AUGUST 31, 2005 and 2004


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

Cash flows from operating activities:

        Net income (loss)                                                 $  (350,076)   $  (134,885)

        Adjustments to reconcile net loss to net cash used in operating
        activities:
          Depreciation, depletion and amortization                             80,435         39,660
          Common stock issued for services                                         10           --
          Bad debt expense                                                        347           --
          Gain on sale of tenure                                                 --         (112,641)
          Loss on settlement of lawsuit                                          --           40,551

        Changes in current assets and liabilities:
          Accounts receivable                                                  25,069           (557)
          Other current assets                                                (21,044)           489
          Loan receivable                                                      (1,294)          --
          Inventory                                                          (540,126)          --
          Accounts payable                                                    221,644         39,247
          Bank overdrafts                                                      38,538           --
          Deferred revenues                                                      --             --
                                                                          -----------    -----------

Net cash used in operating activities                                        (546,497)      (128,136)
                                                                          -----------    -----------

Cash flows from investing activities:

        Payment in settlement of interest in joint venture                       --          (37,547)
        Proceeds on sale of property, plant and equipment                        --           22,234
        Purchase of property, plant and equipment                            (493,018)        (4,884)
        Proceeds on sale of tenure                                               --          112,641
        Decrease in loans receivable                                             --           13,644
                                                                          -----------    -----------

Net Cash provided by (used in) investing activities                          (493,018)       106,088
                                                                          -----------    -----------

Cash flows from financing activities:

        Line of credit, net                                                     6,591           --
        Proceeds from short term debt                                       1,125,247           --
        Payments on short term debt                                           (38,128)          --
        Proceeds of long term debt                                               --          165,207
        Payment of long term debt                                             (25,408)       (98,238)
        Common stock issued for cash                                              860           --
                                                                          -----------    -----------

Net Cash provided by financing activities                                   1,069,162         66,969
                                                                          -----------    -----------

Foreign currency translation effect                                           (41,997)        (1,153)

Net increase in cash                                                          (12,350)        43,768

Cash, beginning of period                                                      12,910        (30,858)
                                                                          -----------    -----------

Cash, end of period                                                       $       560    $    12,910
                                                                          -----------    -----------

Supplemental disclosure of cash flow information

Net cash paid during the year
     Interest                                                             $    60,000    $    33,182
     Income taxes                                                         $         -    $         -

Non-cash transactions
     Forgiveness of shareholder debt                                      $ 3,152,978    $         -


See accompanying summary of accounting policies and notes to financial statements



                                       F-5



                       Edgewater Foods International, Inc.

                   Notes to Consolidated Financial Statements

NOTE 1.  BASIS OF PRESENTATION, ORGANIZATION AND NATURE OF OPERATIONS

Edgewater Foods International Inc., a Nevada Corporation,  is the parent company
of Island Scallops Ltd., a Vancouver Island aquaculture company. Island Scallops
was  established  in 1989 and for  over 15 years  has  successfully  operated  a
scallop  farming and marine hatchery  business.  Island Scallops is dedicated to
the  farming,  processing  and  marketing  of high  quality,  high value  marine
species:  scallops and  sablefish.  Scallop  farming is relatively  new to North
America and Island  Scallops is the only  producer of both  live-farmed  Pacific
scallops  and live  sablefish  (or  blackcod).  Given  Island  Scallops'  unique
hatchery  technology  and extensive  research and  development,  we believe that
there is no significant  competition  for the farming of these marine species in
our  geographic  area.   Island  Scallops  is  committed  to  rapidly  expanding
production and profits while continuing to finance the aggressive  growth of the
Company and maintaining a healthy respect for the marine environment.

On June 29, 2005, Edgewater Foods International,  Inc. ("Edgewater"),  a holding
private company  established under the laws of Nevada in order to acquire assets
in the  aquaculture  industry,  issued  10,300,000  shares  of  common  stock in
exchange for a 100% equity interest in Island Scallops,  Ltd. As a result of the
share  exchange,  Island  Scallops,  Ltd.  become the wholly own  subsidiary  of
Edgewater  Foods  International,  Inc. As a result,  the  shareholders of Island
Scallops  owned a majority  (54.21%)  of the  voting  stock of  Edgewater  Foods
International,  Inc. The  transaction  was regarded as a reverse  merger whereby
Island Scallops was considered to be the accounting acquirer as its shareholders
retained  control of Edgewater Foods after the exchange,  although  Edgewater is
the legal parent company.  The share exchange was treated as a  recapitalization
of Edgewater Foods. As such, Island Scallops, Ltd. (and its historical financial
statements) is the continuing entity for financial reporting purposes.

On August 15, 2005, we completed a reverse  acquisition  of Heritage  Management
Corporation,  a public shell  company,  as that term is defined in Rule 12b-2 of
the Exchange  Act,  established  under the laws of Nevada on June 12,  2000.  To
accomplish the share exchange we issued  19,000,000  shares of common stock on a
one to one ratio for a 100% equity interest in Edgewater Foods. Per the terms of
the Share Exchange and Bill of Sale of Heritage  Funding  Corporation and E. Lee
Murdoch, Heritage was delivered with zero assets and zero liabilities at time of
closing.  Following  the  reverse  acquisition,  we changed the name of Heritage
Management Corporation to "Edgewater Foods International,  Inc." The transaction
was regarded as a reverse  merger  whereby  Edgewater  was  considered to be the
accounting  acquirer as it  retained  control of  Heritage  after the  exchange.
Although the Company is the legal parent company, the share exchange was treated
as a  recapitalization  of  Edgewater.  Edgewater is the  continuing  entity for
financial reporting purposes.  The Financial Statements have been prepared as if
Edgewater had always been the reporting  company and then on the share  exchange
date, had changed its name and reorganized its capital stock.

NOTE 2.  SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation


                                       F-6



The accompanying  consolidated  financial statements include the accounts of the
acquired  entities since their respective dates of acquisition.  All significant
inter-company amounts have been eliminated.


Cash and equivalents

Cash and equivalents  include cash, checks issued in excess of funds on deposit,
bank indebtedness, and highly liquid short term market investments with terms to
maturity of three months or less.

Accounts receivable

Accounts  receivable is presented net of allowance  for doubtful  accounts.  The
allowance  for  doubtful  accounts  reflects  estimates  of  probable  losses in
accounts  receivable.  The allowance is determined based on balances outstanding
for over 90 days at the period end date, historical experience and other current
information.

Loans receivable

Loans receivable is presented net of an allowance for loan losses, as necessary.
The loans are written off when collectibility becomes uncertain.

Inventory

The Company maintains inventories of raw materials for its aquaculture products,
of biomass  (inventory of live aquaculture  product being actively  cultivated),
and of finished goods (aquaculture product ready for sale).

Raw  materials  are reported at the lesser of purchase  cost and  estimated  net
realizable value.

Biomass and finished  goods are reported at the lesser of cost and estimated net
realizable  value.  Cost includes  direct and reasonably  attributable  indirect
production costs related to hatchery,  cultivation,  harvesting,  and processing
activities. Carrying costs per unit are determined on a weighted average basis.

At August 31, 2005, inventory consisted of the following:

Biomass (Scallops):                         $540,126

Previously,  a nil amount was  assigned to biomass  inventory  of  scallops  (At
August 31, 2003 and 2004) as the Company had a recent history of larger negative
gross margins in respect to scallop sales and had  experience  past  significant
crop failures.  The Company wrote off these costs since the net realizable value
of the inventory was indeterminable if not zero.  However,  Management  believed
that,  given the projected  increase in upcoming annual crops, the capital costs
associated  with inventory  could be recovered and the net realizable  value was
determined to be greater than the cost occurred. Furthermore,  Management of the
Company  believed that as of August 31, 2005 the Company has an adequate history
of successful sales to justify recognition of recoverable inventory costs. Based


                                       F-7


on Management's review of Statement of Financial Accounting Standards (FASB) No.
154 (a  replacement of APB Opinion No. 20 and FASB  Statement  No.3),  we do not
believe that this decision  represents a change in an accounting  principle.  We
believe  the  inventory  accounting  policy  has  remained  unchanged,  but  the
application  of this policy  resulted in different  results for the period under
August 31, 2004 and August 31, 2005.


Long term investments

Long term  investments are recorded at cost. The Company reviews its investments
periodically to assess whether there is an "other than temporary" decline in the
carrying  value of the  investment.  The Company  considers  whether there is an
absence of an  ability  to  recover  the  carrying  value of the  investment  by
reference to projected undiscounted future cash flows for the investment. If the
projected  undiscounted future cash flow is less than the carrying amount of the
asset, the asset is deemed impaired. The amount of the impairment is measured as
the difference between the carrying value and the fair value of the asset.

Intangible assets

Intangible  assets are recorded at cost.  Cost is amortized  over the  estimated
useful life of the asset unless that life is determined to be indefinite.

Intangible  assets not subject to  amortization  are tested for impairment on at
least an annual basis.  If the fair value of the intangible  asset is determined
to be less than the carrying  amount,  an  impairment  loss is recognized in the
amount of that difference.

Intangible  assets  subject to  amortization  are  reviewed  for  impairment  in
accordance with the provisions applying to long-lived assets.

Property, plant, and equipment

Property,   plant,   and  equipment  are  recorded  at  cost  less   accumulated
amortization and are amortized in the following manner based on estimated useful
lives:

         Buildings                                   4% - 5% declining balance
         Seawater piping and tanks                   6% declining balance
         Boats                                       15% declining balance
         Field equipment                             20% declining balance
         Office equipment                            20% declining balance
         Vehicles                                    30% declining balance
         Computer equipment                          30% declining balance

Impairment of long-lived assets

The Company monitors the recoverability of long-lived assets, including property
and equipment and intangible assets,  based upon estimates using factors such as
expected future asset utilization, business climate, and undiscounted cash flows
resulting  from the use of the related  assets or to be  realized  on sale.  The
Company's  policy is to write  down  assets  to the  estimated  net  recoverable
amount,  in the period in which it is determined likely that the carrying amount
of the asset will not be recoverable.


                                       F-8



Government assistance

Government  assistance received by the Company, such as grants,  subsidies,  and
tax credits, is recorded as a recovery of the appropriate related expenditure in
the period that the assistance is received.

The Company has received  government  assistance in the foam of loans, for which
repayment  may not be required if the Company  fails to meet  sufficient  future
revenue  levels to repay these loans  based on a  percentage  of gross sales for
certain products over a defined period of time., Such assistance received by the
Company is initially recorded as a liability,  until such time as all conditions
for forgiveness are met, and is then recognized as other income in that period.

Farm license costs

The  Company  must pay annual  license  costs in  respect to  government-granted
tenures that it holds,  which give the Company the right to use certain offshore
ocean waters for the purpose of  aquaculture  farming.  Such  license  costs are
recognized as an expense when incurred.

Research and development costs

Development costs include costs of materials, wages, and reasonably attributable
indirect  costs incurred by the Company which are directly  attributable  to the
development of hatchery techniques for sablefish and shellfish.  These costs are
expensed when incurred.

Research costs are expensed when incurred.

Income taxes

The  Company  calculates  its  provision  for income  taxes in  accordance  with
Statement of  Financial  Accounting  Standards  No. 109  (Accounting  for Income
Taxes) ("SFAS 109"), which requires an asset and liability approach to financial
accounting  for  income  taxes.  This  approach  recognizes  the amount of taxes
payable or  refundable  for the current year, as well as deferred tax assets and
liabilities  attributable to the future tax consequences of events recognized in
the financial statements and tax returns.  Deferred income taxes are adjusted to
reflect the effects of enacted changes in tax laws or tax rates. Deferred income
tax assets are recorded in the financial statements if realization is considered
more likely than not.

Revenue recognition

The Company  recognizes  revenue when it is realized or realizable,  and earned.
The Company  considers  revenue  realized or  realizable  and earned when it has
persuasive  evidence of a  contract,  the  product  has been  delivered,  or the
services  have  been  provided  to the  customer,  the  sales  price is fixed or
determinable, and collectibility is reasonably assured.

Revenue of the Company is derived principally from the sale of scallops produced
by the Company or purchased  from third  parties,  and from the sale of seed and
farm supplies to other aquaculture farms.


                                      F-9



Revenue from the sale of scallops and other products is recognized upon delivery
of the product and invoicing of the customer,  assuming collection is considered
reasonably assured.

Financial instruments

The carrying amount of the Company's financial instruments,  which include cash,
accounts  receivable,  loans  receivable,  checks  issued  in excess of funds on
deposit, bank indebtedness, accounts payable and accrued liabilities, short term
debt,  shareholder  debt,  and long  term debt  approximate  fair  value.  It is
management's  opinion that the Company is not exposed to  significant  interest,
currency  or  credit  risk  arising  from  these  financial  instruments  unless
otherwise noted.

Foreign exchange

The functional currency of the Company's foreign subsidiary is the local foreign
currency (Canadian dollars).  All assets and liabilities  denominated in foreign
currencies are translated  into U.S.  dollars at the exchange rate prevailing on
the balance sheet date.  Revenues,  costs and expenses are translated at average
rates  of  exchange  prevailing  during  the  period.   Translation  adjustments
resulting from  translation of the  subsidiaries'  accounts are accumulated as a
separate  component of  shareholders'  equity.  Gains and losses  resulting from
foreign currency  transactions  are included in the  consolidated  statements of
operations and have not been significant.

Use of estimates

The  preparation  of financial  statements  in  conformity  with U.S.  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the reported amounts of assets,  liabilities,  revenues,
expenses and  disclosure of contingent  assets and  liabilities.  Such estimates
include  providing for  amortization  of property,  plant,  and  equipment,  and
valuation of inventory. Actual results could differ from these estimates.

Concentration of risk

The Company operates in the regulated aquaculture industry.  Material changes in
this industry or the applicable  regulations could have a significant  impact on
the Company.

The quality and quantity of the aquaculture products  cultivated,  harvested and
processed by the Company could be impacted by biological and environmental risks
such as  contamination,  parasites,  predators,  disease  and  pollution.  These
factors  could  severely  restrict  the ability of the  Company to  successfully
market its products.

During the year ended August 31, 2005, three customers,  TriStar,  Sea World and
Lobsterman,  individually  accounted  for  23%,  17%  and  14% or  our  revenues
respectively,  and we therefore are materially  dependent  upon such  customers.
During the year ended August 31,  2004,  TriStar,  Summer  Breeze and Sea World,
individually  accounted for 27%, 15% and 10% or our revenues  respectively.  The
Company's  ongoing  operations  are  dependent on continued  business from these
customers.


                                      F-10




Stock-based compensation

The Company accounts for stock-based  employee  compensation  arrangements using
the  intrinsic  value method in  accordance  with the  provisions  of Accounting
Principles  Board  (APB)  Opinion  No.  25,  "Accounting  for  Stock  Issued  to
Employees,"  and  complies  with  the  disclosure  provisions  of SFAS  No.  123
"Accounting for Stock-Based Compensation," as amended by SFAS No. 148. Under APB
Opinion  No.  25,  compensation  cost  is  generally  recognized  based  on  the
difference, if any, on the date of grant between the fair value of the Company's
common stock and the amount an employee must pay to acquire the stock.



The Company  periodically  issues  common  stock for  acquisitions  and services
rendered.  Common stock issued is valued at the estimated fair market value,  as
determined by management  and the board of directors of the Company.  Management
and the board of  directors  consider  market  price  quotations,  recent  stock
offering prices and other factors in determining  fair market value for purposes
of valuing the common stock.

The following table  illustrated the effect on net income and earnings per share
if Edgewater had applied the fair value recognition provisions of FASB Statement
No. 123,  Accounting  for  Stock-Based  Compensation,  to  stock-based  employee
compensation.

                                                                            Year Ended
                                                                            August 31,
                                                                       2005               2004
                                                                                 


    Net income (loss), as reported                                   $   (350,076)     $   (134,885)

    Add:  Stock based intrinsic value included in report loss                   -                 -

    Less:  Total stock-based employee compensation
    expense determined under the fair value based method
    for all awards                                                       (370,565)                -
                                                                     -------------- -----------------

    Pro-forma net income (loss)                                      $   (720,641)     $   (134,885)
                                                                     -------------- -----------------

    Basis and diluted net loss per share
        As reported                                                         (0.03)            (0.01)
        Pro-forma                                                           (0.06)            (0.01)



The fair value of each option  granted is  estimated  on the date of grant using
the  Black-Scholes  option-pricing  model with the  following  weighted  average
assumptions:  dividend yield $0, expected  volatility of 100%, average risk-free
interest rate of 4.15%, and expected lives of 10 and 5 years.


Basic and diluted net loss per share

Basic income or loss per share  includes no dilution and is computed by dividing



                                      F-11


net income or loss by the  weighted-average  number of common shares outstanding
for the period. Diluted income or loss per share includes the potential dilution
that could occur if  securities  or other  contracts  to issue common stock were
exercised or converted  into common stock.  For all periods  presented,  diluted
loss per share equaled the basic loss per share as all  convertible  instruments
were anti-dilutive.

Recent accounting pronouncements


In November of 2004, the FASB issued Statement of Financial Accounting Standards
No.  151 ("SFAS  151").  SFAS 151 amends the  guidance  in  Accounting  Research
Bulletin  No. 43  (Inventory  Pricing) to clarify the  accounting  for  abnormal
amounts of idle facility expense,  freight,  handling costs, and waste material.
Among other  provisions,  SFAS 151 requires  that items,  such as idle  facility
expense, excessive spoilage, double freight, and rehandling costs, be recognized
as current period charges.  Additionally,  SFAS 151 requires that the allocation
of fixed  production  overheads to the costs of  conversions  be based on normal
capacity of the  production  facilities.  SFAS 151 is effective for fiscal years
beginning  after June 15, 2005,  and is required to be adopted by the Company in
the first quarter of fiscal 2006. In the opinion of Management,  the adoption of
this statement will not have any impact on the Company's  consolidated financial
statements.


In December of 2004, the FASB issued Statement of Financial Accounting Standards
No, 123 (revised  2004)  (Share-Based  Payment)  ("SFAS  123R").  SFAS 123R is a
revision of SFAS 123 (Accounting for Stock-Based  Compensation),  and supersedes
Accounting  Principles Beard ("APB") Opinion No. 25 (Accounting for Stock Issued
to  Employees).  SFAS 123R  requires  that the fair  value of  employees  awards
issued,   modified,   repurchased  or  cancelled  after  implementation,   under
share-based  payment  arrangements,  be  measured  as of the date  the  award is
issued,  modified,   repurchased  or  cancelled.  The  resulting  cost  is  then
recognized in the statement of earnings  over the service  period.  SFAS 123R is
required to be adopted by the  Company not later than for the 2007 fiscal  year.
In the opinion of  Management,  the adoption of this  statement  will not have a
significant impact on the Company's consolidated financial statements.

In December of 2004, the FASB issued Statement of Financial Accounting Standards
No. 153 (Exchanges of  Nonmonetary  Assets - An Amendment of APB Opinion No. 29,
Accounting for Nonmonetary  transactions)  ("SFAS 153"). SFAS 153 eliminates the
exception  from fair value  measurement  for  nonmonetary  exchanges  of similar
productive  assets in paragraph 21(b) of APB Opinion No. 29 and replaces it with
an exception  for  exchanges  that do not have  commercial  substance,  SFAS 153
specifies  that a nonmonetary  exchange has  commercial  substance if the future
cash flows of the entity are expected to change significantly as a result of the
exchange.  SFAS 153 is effective  for fiscal  periods  beginning  after June 15,
2005,  and is required to be adopted by the Company in the second quarter of the
2006 fiscal year. We do not currently  believe that the adoption of SFAS No. 153
will have a material impact on its consolidated financial statements.


In May  2005,  SFAS No.  154,  "Accounting  Changes  and Error  Corrections"  (a
replacement  of APB  Opinion No. 20 and SFAS No. 3) was  issued.  Statement  154



                                      F-12


requires  that all  voluntary  changes  in  accounting  principles  and  changes
required  by a  new  accounting  pronouncement  that  do  not  include  specific
transition  provisions be applied  retrospectively  to prior periods'  financial
statements,  unless it is  impracticable to do so. Opinion 20 required that most
voluntary  changes in  accounting  principle  be  recognized  by  including  the
cumulative effect of changing to the new accounting  principle as a component of
net income in the period of change. Statement 154 is effective prospectively for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after  December  15,  2005,  with  earlier   application   encouraged.   Earlier
application is permitted for accounting  changes and  corrections of errors made
in fiscal years  beginning  after the date the  Statement was issued (May 2005).
Statement  154  does  not  change  the  transition  provisions  of any  existing
accounting pronouncements,  including those that are in a transition phase as of
the effective date of the Statement. Accordingly, the Company will implement the
provisions  of this  accounting  pronouncement  in the fiscal  reporting  period
ending August 31, 2007.  We do not  currently  believe that the adoption of SFAS
145  No.  154  will  have  a  material  impact  on  our  consolidated  financial
statements.


NOTE 3.  PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment at August 31, 2005 consisted of the following:



                                                      Accumulated       Net Book
                                      Cost            Amortization      Value
                                      -----------------------------------------

Land                                  $  211,463      $     --        $  211,463
Buildings                                415,807         204,402         211,405
Seawater piping and tanks                417,558         239,200         178,358
Boats and Barge                          214,335          88,618         125,717
Field equipment                          952,751         592,691         360,060
Office equipment                          12,717          11,238           1,479
Vehicles                                  33,681          29,982           3,699
Computer equipment                         7,834           3,029           4,805
                                      ------------------------------------------
                                      $2,266,146      $1,169,160      $1,096,986

Property, plant and equipment at August 31, 2004 consisted of the following:


                                                      Accumulated       Net Book
                                      Cost            Amortization      Value
                                      -----------------------------------------

Land                                  $  190,996      $     --        $  190,996
Buildings                                368,875         175,301         193,574
Seawater piping and tanks                357,605         206,390         151,215
Boats                                     87,392          69,374          18,018
Field equipment                          551,901         492,604          59,297



                                      F-13



Office equipment                          11,052           9,870           1,182
Vehicles                                  30,421          25,648           4,773
Computer equipment                         3,272           1,691           1,581
                                      ------------------------------------------
                                      $1,601,514      $  980,878      $  620,636



Accumulated  amortization was $1,169,160 and $980,878 for the years ended August
31, 2005 and 2004,  respectively.  Depreciation expenses are $10,195 and $39,660
for the years ended August 31, 2005 and 2004, respectively.

NOTE 4.  LOANS RECEIVABLE

An unsecured note receivable from Seascal Enterprises, Ltd. ("Seascal") requires
monthly  interest  payments,  calculated  at the  Business  Development  Bank of
Canada's  operational  rate  plus  1%,  per  annum,  and  has no  fixed  term of
repayment.  The Company has an informal  arrangement to provide  scallop seed to
Seascal, for which the Company receives a percentage of ultimate sales.

NOTE 5.  INVESTMENTS IN TENURES

The Company  carries its  Investment in Tenures at $3,356 at August 31, 2005 and
$3,032 at August 31, 2004.  This amount  represent the carrying costs of certain
shellfish  tenures  acquired by the  subsidiary  of the  Company's  wholly-owned
subsidiary  Island  Scallops  Ltd.,  377332  B.C.  Ltd.  Shellfish  tenures  are
government-granted  rights  allowing  limited  use of  offshore  waters  for the
purposes of  cultivation of shellfish.  The granting of shellfish  tenure rights
are the responsibility of the Provincial  (British Columbia)  Government and not
the Canadian  Federal  Government.  As such, the government  assistance  that we
receive via loan  agreement with various  Federal  Agencies has no effect on our
ability to renew  and/or  modify  these  tenure  agreements.  The tenure held by
377332 B.C.  Ltd.  has an  expiration  date of July 10,  2021.  Other  shellfish
tenures held by the Company and its  subsidiaries  have expiration dates ranging
from 2021 to 2024.

These tenures are considered to have an indefinite  useful life because  renewal
on expiration is anticipated, and therefore are not subject to amortization.

NOTE 6.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Included in accounts  payable and accrued  liabilities are balances  outstanding
related to credit cards held in the name of the shareholder  totaling $95,210 at
August 31, 2005 and $44,681 at August 31,  2004.  The Company  used these credit
cards as a means of short term  financing  and incurs  interest  charges on such
unpaid balances.

Included in accounts  payable and accrued  liabilities  at August 31, 2005 is an
amount of  $110,648  (2004 is  $99,939)  related to  deposits  paid by two third
parties in respect to an  agreement  to purchase  geoduck  seed from the Company
(for additional information see Note 10 - Contingent Liabilities).


                                      F-14



Included in accounts  payable and accrued  liabilities  at August 31, 2005 is an
amount of $6,330  related  to  interest  accrued in respect to the loan from the
National Research Council of Canada Industrial  Research Assistance Program (see
Note 9 - Long Term Debt for additional information).

Other  accounts  payable at August 31,  2005  carry a balance  of  $267,314  and
accrued liabilities included a customer deposit of $10,223.

As a result, at August 31, 2005, the Company had an accounts payable and accrued
liabilities balance of $489,724.

NOTE 7.  SHORT TERM DEBT

Included  in  short-term  notes  payable is a loan with an  authorized  limit of
$1,258,706 secured by the assets of the Company,  including a mortgage charge in
the amount of $1,258,706 on land and building of the Company,  and by a personal
guarantee of Robert Saunders,  our Chairman,  President and CEO, and former sole
shareholder  of Island  Scallops.  The note bears  interest  at a rate of 1% per
month,  payable  monthly,  and is due  April 1,  2006.  As of August  31,  2005,
$991,533 of the authorized  limited had been lent to the Company's  wholly owned
subsidiary, Island Scallops.

Included in short-term debt at August 31, 2005 is estimated royalties of $55,848
(2004: $50,443) payable to a third party from who the former sole shareholder of
Island Scallops Ltd.  originally acquired the shares of Island Scallops Ltd. The
1992 share  purchase  agreement  (for Island  Scallops)  provided that the third
party was to receive  from the  Company 3% of revenues of the Company as earned,
on a quarterly  basis,  throughout  the period from December 1, 1992 to November
30, 2002. The third party holds a first charge (or first lien) over inventory of
the Company (including broodstock) in the amount of $293,698 (2004: $265,272) in
support of its royalty entitlement. The third party has not taken further action
to enforce payment of the arrears liability. To date, we have accrued the entire
balance of $55,848 as a current  liability and we plan to pay it with  available
funds in the near future.


Included  in  short-term  notes  payable  at  August  31,  2005 is an  unsecured
non-interest bearing demand loan from an individual with a face value of $42,096
(2004:  $38,022) and no specific  terms of  repayment.  However,  the lender has
informally requested that the loan be repaid in full by October 6, 2008.

Included  in the  short-term  notes  payable  at  August  31,  2005 is a  second
unsecured  non-interest  bearing demand loan with a face value of $35,664 and no
specific terms of repayment.

As a result, at August 31, 2005, the Company had $1,125,141  (2004:  $88,465) of
short-term notes.

NOTE 8.  FORGIVENESS OF NOTE DUE SHAREHOLDER

In August,  2005, our Board of Directors  approved the forgiveness of $3,153,848
of unsecured debt by owed by Island Scallops to Robert  Saunders,  our Chairman,


                                      F-15


President and CEO, and former sole  shareholder of Island  Scallops.  This debt,
which   represents  an  amount  advance  to  Island  Scallops  by  its  previous
shareholder,  was acquired by Mr. Saunders at the time of his acquisition of the
Island  Scallops  in 1992.  Since  this was a related  party  transaction,  this
forgiveness  of debt is reflected in  Additional  Paid in Capital on our Balance
Sheet and Statement of Stockholders' Equity.

NOTE 9. LONG TERM DEBT

These  consolidated  financial  statements  include  a  Western  Diversification
Program  non-interest  bearing loan to Island  Scallops that requires  repayment
equal to 12% of gross  revenues  from  scallop  sales  of the  Company,  payable
semi-annually, with no specified due date. At August 31, 2005 as Island Scallops
is in arrears in respect to the  payment of these  amounts,  the full  principal
balance of  $568,343  (2004:  $516,367)  is  reflected  as a current  liability.
Management of the Company is seeking to  renegotiate  terms of repayment of this
debt.

These  consolidated  financial  statements  include the  Company's  wholly owned
subsidiary's  (Island  Scallops)  unsecured  non-interest  bearing loan from the
National Research Council of Canada Industrial Research Assistance Program which
requires quarterly payments  commencing March 1, 2003 equal to 3% of gross black
cod  revenues  of the Island  Scallops  until the earlier of full  repayment  or
December 1, 2012. The amount  repayable is up to 150% of the original advance of
$370,128,  if  repayment  is before  December  1, 2007.  If at December 1, 2012,
Island Scallops has not earned  sufficient  revenues to be required to repay the
original  loan  amount,  the  remaining  portion of the loan is to be  forgiven.
Amounts  currently due at August 31, 2005, based on revenues of $32,908 (revenue
of $24,253 for the year ending  August 31,  2004) bear  interest at a rate of 1%
per month.  At August 31, 2005,  Island Scallops is in arrears in respect to the
payment  of these  amounts,  the  full  principal  balance  of  $369,745  (2004:
$333,959) is reflected as a current liability.

These consolidated  financial  statements include Island Scallop's mortgage loan
repayable at $1,808 per month  including  interest  calculated at the greater of
10% and  (Canadian)  prime plus 6%. The loan,  which is due on April 1, 2007, is
secured by a second  charge on the real property of Island  Scallops.  At August
31, 2005, the principal due is $182,418 (2004: $165,849).

These consolidated  financial  statements include a non-interest bearing loan to
Island Scallops from Industry Science and Technology Canada requiring  repayment
equal to 0.5% of gross scallop sales of the  Company's  wholly owned  subsidiary
(Island  Scallops) for each preceding year,  which is due January 1, 2007. If at
the due date the Company has not generated sufficient revenues to be required to
repay the original amount of $157,266,  the remaining  portion of the loan is to
be forgiven. Amounts currently due bear interest based on the published rates of
90 day (Canadian) treasury bills.

These  consolidated  financial  statements  include  two bank  loans for  Island
Scallops.  The first bank loan is repayable at $1,049 per month,  plus  interest
calculated at the floating base rate of the Business  Development Bank of Canada
plus 1.5% annum, is due February 23, 2009, and is secured by a General  Security
Agreement  over the assets of the  Company's  wholly  owned  subsidiary  (Island
Scallops),  a mortgage  charge on Island  Scallop's real property and a personal
guarantee  of $41,957  by our  Chairman,  President  and CEO,  and  former  sole
shareholder of Island Scallops. At August 31, 2005, the principal due is $44,055
(2004:  $51,160).  The  second  bank loan is  repayable  at $437 per month  plus


                                      F-16


interest  calculated at (Canadian)  prime plus 3% per annum, is unsecured and is
due October 23, 2007. At August 31, 2005,  the  principal due is $11,182  (2004:
$14,837).

As a result, at August 31, 2005, the Company had $1,329,118  (2004:  $1,224,215)
of long-term  debt less a current  portion of $959,486  (2004:  $896,336)  for a
balance of $369,632 (2004: $327,879).  Principal payments due within each of the
next  five  fiscal  years and  subsequently,  in  respect  to long term debt are
approximately as follows:

                           2006                               $959,486
                           2007                                $22,237
                           2008                                $18,041
                           2009                                $11,748
                           2010                                 $5,874
            2011 and subsequent                               $311,732
                                                   -------------------

                                                            $1,329,118
                                                   ===================



NOTE 10.  CONTINGENT LIABILITIES

The  Company's  wholly  owned  subsidiary,  Island  Scallops,  entered  into  an
Agreement in the 1998 year with two parties,  under which Island Scallops was to
produce and sell  geoduck  seed to the two  parties.  Island  Scallops  received
advance  payments from each of the two parties in the 2002 year of approximately
$64,140 and recognized  related  revenue of $43,705 in respect to seed delivered
in the 2002 year. The balance of the deposits received (advance  payments),  net
of sales,  totaling  $110,648,  is  included  in  accounts  payable  and accrued
liabilities.

The position of management  of the Company is that the two parties  violated the
terms of the agreement,  such that the Company is entitled to retain the balance
of the deposits.  Per the terms of the original  agreement,  Island  Scallop was
entitled to make up any shortfall in the product produced in the following year.
Although  product was available and offered by Island  Scallops in the following
year, the two parties  refused to honor the terms of the agreement and would not
accept the product (to make up the shortfall) in the following year.


As of August 31,  2004,  one of the two parties had made claims that the Company
owed to it amounts  totaling  $74,704.  This particular  party believed that the
agreement  required  Island  Scallops to deliver the product in year one and did
not allow Island Scallop to make up any shortfall  with product  produced in the
following year. The balance included in accounts payable and accrued liabilities
related to this party is $29,156.

Any  additional  liability to the  Company,  or any  reduction of the  currently
recognized liability,  in respect to these deposits will be recorded at the time
a conclusion to this matter can be determined.

Neither  the Company  nor its wholly  owned  subsidiary  maintain  insurance  in
respect to replacement of its inventory. Consequently, the Company is exposed to


                                      F-17


financial losses or failure as a result of this risk.

NOTE 11.  INCOME TAXES

The Company did not provide any current or deferred United States federal, state
or foreign income tax provision or benefit for the period  presented  because it
has experienced  operation  losses since  inception.  The Company has provided a
full  valuation  allowance  on the  deferred  tax  asset,  consisting  primarily
unclaimed  research  and  development   expenditures,   because  of  uncertainty
regarding the Company's ability to realize the benefit.

Deferred  income  taxes  reflect  the net tax  effect of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the net deferred taxes at August 31, 2005 are as follows:

                                                    August 31,       August 31,
                                                      2005             2004
                                                   -----------      -----------
       Deferred tax asset attributable to:                          $   599,019
           Net operating loss carryover            $   445,558           44,020
           Less, Change in valuation allowance        (445,558)        (643,039)
                                                   -----------      -----------
       Total net deferred tax asset                $         -      $        -
                                                   ===========      ===========

Edgewater follows Statement of Financial  Accounting  Standards Number 109 (SFAS
109),  "Accounting  for  Income  Taxes."  SFAS  No.  109  requires  a  valuation
allowance,  if any, to reduce the deferred tax assets  reported if, based on the
weight of the  evidence,  it is more likely than not that some portion or all of
the deferred tax assets will not be realized.  Management has determined  that a
valuation  allowance  of $445,558 at August 31, 2005 is  necessary to reduce the
deferred  tax  assets to the  amount  that will  more  than  likely  than not be
realized. The change in valuation allowance for 2005 was approximately $197,481.

At August 31, 2005 Edgewater had net operating loss  carryforwards  amounting to
approximately  $42,314 and $0 for U.S. and Canadian tax purposes,  respectively,
that  expires  in various  amounts  beginning  in 2009 and 2009 in the U.S.  and
Canada, respectively.

The federal  statutory tax rate reconciled to the effective tax rate for 2005 is
as follows:

                                                                     2005
                                                                 ----------
       Tax at U.S. statutory rate                                     34.0%
       State tax rate, net of federal benefits                         0.0
       Foreign tax rate in excess of U.S. statutory rate              17.6%
       Change in valuation allowance                              (201,607)
                                                                 ----------
       Effective tax rate                                              0.0%
                                                                 ==========


NOTE 12.  STOCK-COMPENSATION EXPENSE

On June 27 2005, the Company issued 100,000 shares of stock to an individual who
would provide services to Edgewater Foods  International,  Inc.  Subsequently in


                                      F-18



August 2005, Edgewater was acquired by the Company pursuant to a share exchange.
These shares were issued while  Edgewater  Foods was still a private company and
we recorded  the value of this  expense  based on the value of our shares at the
time of  issuance  (par value of  $0.0001).  This value was based on recent cash
purchases  of shares in  Edgewater  Foods at par  value by the  founders  of the
company.  As such, these shares were valued based on the par value,  $0.0001, of
our  stock at time of  issuance.  As a  result,  the  Company  recorded  a stock
compensation expense for the year ended August 31, 2005 of $10.

NOTE 13.  COMMITMENTS AND CONTINGENCIES

Corporate Offices

For the fiscal year ended August 31, 2005, our U.S. corporate office was located
at 400 Professional Drive, Suite 310,  Gaithersburg,  Maryland 20878. This space
was provided on a rent free basis by one of our shareholders.  As a result,  the
Company did not recognize rental expense in the fiscal year.

Employment Agreements

On June 29, 2005 the  Company  entered  into an  employment  agreement  with Mr.
Robert  Saunders as Chairman and President of Edgewater Foods effective June 29,
2005.  Subsequently  in August 2005, Mr. Saunders was appointed CEO by our Board
of  Directors.  Mr.  Saunders  will  serve  at  the  pleasure  of the  Board  of
Director's.  For serving as  President,  Mr.  Saunders  compensation  will be US
$60,000  per annum.  For  serving as  Chairman,  Mr.  Saunders  will  receive an
additional US $10,000 per month for the first twelve months of service following
receipt of US  $5,000,000  in outside  funding by the Company.  Thereafter,  Mr.
Saunders  will  receive US  $20,000  per month  provided  that the  Company  has
achieved gross revenue of at least US $20,000,000 in its most recent fiscal year
and continuing as long as the Company  continues to achieve gross revenues of at
least US $20,000,000.  Additionally,  the Company agreed to grant Mr. Saunders a
signing  bonus of US $150,000 to be paid on closing of at least US $3,500,000 in
third party financing.

NOTE 14. SETTLEMENT OF LAWSUIT

During the 1997 year,  the Company  entered into a joint venture  agreement with
Blackfin Research,  Ltd. ("BRL") for the purpose of researching and developing a
black cod hatchery. In the 2001 year, BRL made a legal claim against the Company
totaling  $353,965,  seeking to recover amounts it claimed it had contributed to
the joint venture.

During the 2004 year,  the Company  made a  settlement  with BRL under which the
Company was  required  to pay to BRL case of  $37,547,  and to transfer to BRL a
shellfish  tenure with a carrying amount of $3,004.  BRL agreed that the Company
would  retain sold rights to all  intellectual  property  developed by the joint
venture.

The settlement resulted in a loss to the Company of $40,551.


                                      F-19



NOTE 15. SALE OF TENURE

During  the 2004  year,  Island  Scallop  sold a  shellfish  tenure  which had a
carrying amount of $nil, for cash proceeds of $112,641.

NOTE 16. COMPARATIVE FIGURES

Certain of the  comparative  figures as of August 31, 2004 and for the year then
ended have been reclassified to conform to the presentation adopted for the 2005
year.

NOTE 17.  RECENT DEVELOPMENTS

On September 20, 2005,  Montgomery  Simus resigned as one of our directors.  Mr.
Simus,  who currently  serves on another public company's board of directors and
serves  as  President  and CEO of a private  company,  felt that he did not have
sufficient time to dedicate to his role as a director.  In conjunction  with his
resignation,  Mr. Simus agreed to cancel back to the Company the 150,000  shares
of common stock that was originally issued to him in June 2005.

In October  2005,  we engaged  Aurelius  Consulting  to  provide  marketing  and
investor  relations  services.  The initial  term of the  agreement is one year.
Aurelius is entitled to receive 25,000 shares of our restricted common stock per
quarter during the term of its agreement,  in consideration  for their services.
The shares were  valued at $1.45 per share,  the closing bid price for shares of
our common stock on the date of the  contract.  Therefore,  the total  aggregate
value of the transaction that will be recognized by Company in the first quarter
of 2006 will be $145,000.

At October 21, 2005 and  November  11,  2005,  our board  approved the issuing a
total of 25,000 shares of the Company's  common stock to The Shemano Group,  LLC
for preparing a research report for the Company. The shares were valued at $1.50
per  share,  the  closing  market  bid of our  common  stock  on the date of the
resolution.  Therefore,  the total aggregate  value of the  transaction  will be
recognized by Company in the first quarter of 2006 will be $37,500.


NOTE 18.  GOING CONCERN

As of August 31, 2005, the Company's working capital has been primarily financed
with various forms of debt. The Company has suffered  operating losses since its
inception in its efforts to establish  and execute its  business  strategy.  The
Company  anticipates that it will continue to require additional working capital
to fund its ongoing operations and execute its business  strategy.  In the event
that the Company does not continue to raise such required capital it would raise
substantial doubt about the Company's ability to continue as a going concern.

The  Financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.  The Company's  ability to
continue as a going concern is dependent upon its ability to generate sufficient
cash flows to meet its  obligations  on a timely basis and  ultimately to attain
profitability.  The  Company's  management  intends  to obtain  working  capital
through  operations  and to seek  additional  funding  through  debt and  equity
offerings  to help fund the  Company's  operations  as it  expands.  There is no
assurance that the Company will be successful in its efforts to raise additional
working capital or achieve profitable  operations.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.



                                      F-20



NOTE 19.    FOREIGN OPERATIONS

The Company's  share of the net assets held outside of the United States totaled
approximately $1,690,000 at August 31, 2005.






















                                      F-21



INTERIM FINANCIAL STATEMENTS



                         EDGEWATER FOODS INTERNATIONAL
                           CONSOLIDATED BALANCE SHEET
                                    UNAUDITED
                                  MAY 31, 2006


ASSETS

Current assets:
     Cash                                                          $  1,371,392
     Accounts receivable, net                                            16,176
     Inventory                                                          986,850
     Other current assets                                                94,305
                                                                   ------------

       Total current assets                                           2,468,723

Property, plant and equipment, net                                    1,249,556

Investments in other assets                                               3,629
                                                                   ------------

     Total assets                                                  $  3,721,908
                                                                   ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Bank indebtedness                                             $      4,536
     Short term debt                                                  1,932,311
     Current portion of warrant liabilities                           1,757,884
     Current portion of long term debt                                1,014,169
     Accounts payable and accrued liabilities                           312,342
                                                                   ------------

     Total current liabilities                                        5,021,242

Warrant liabilities, net current portion                             12,336,175
Long term debt, net current portion                                      45,259

     Total liabilities                                               17,402,676
                                                                   ------------

Stockholders' deficit

     Series A Preferred  stock,  par $0.001,10,000,000
     authorized, 3,888,000 issued and outstanding at May 31, 2006         3,888
     Common stock, par $0.001, 100,000,000 authorized,
     20,960,400 issued and outstanding at May 31, 2006                    2,096


     Additional paid in capital                                               0
     Accumulated deficit                                           ((13,412,932)




                                      F-22


     Accumulated other comprehensive income -                          (273,820)
      foreign exchange adjustment

                                                                   ------------

     Total stockholders' deficit                                    (13,680,768)
                                                                   ------------

     Total liabilities and stockholders' deficit                   $  3,721,908
                                                                   ============

See  accompanying   summary  of  accounting  policies  and  notes  to  financial
statements







                                      F-23





                          EDGEWATER FOODS INTERNATIONAL
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                THREE AND NINE MONTHS PERIOD ENDING MAY 31, 2006


                                                   THREE MONTHS ENDED              NINE MONTHS ENDED
                                                        MAY 31,                           MAY 31,
                                               ---------------------------   ---------------------------
                                                  2006             2005            2006           2005
                                              ------------    ------------    ------------    ------------
                                               (unaudited)     (unaudited)     (unaudited)     (unaudited)
                                                                                      


Revenue                                       $    133,120    $     35,444    $    437,045    $    307,915
Cost of goods sold                                 170,485          29,287         475,767         288,282
                                              ------------    ------------    ------------    ------------

Gross profit (loss)                                (37,365)          6,157         (38,722)         19,633
                                              ------------    ------------    ------------    ------------

Expenses:
      General and administrative expenses          286,449          51,876         393,550         122,550
      Salaries and benefits                         38,316          18,190         118,015          54,661
      Stock compensation expense                      --              --           182,500            --
                                              ------------    ------------    ------------    ------------

                             Total                 324,765          70,066         694,065         177,211
                                              ------------    ------------    ------------    ------------

Loss from operations                              (362,130)        (63,909)       (732,787)       (157,578)
                                              ------------    ------------    ------------    ------------

Other income (expense):
      Interest (expense), net                      (54,178)        (49,896)       (160,269)        (51,221)
      Change in fair value of warrants          (2,525,419)           --        (2,525,419)           --
      Other income  (expense)                       12,805            --          (500,711)           --

                Other income (expense), net     (2,566,791)        (49,896)     (3,186,399)        (51,221)
                                              ------------    ------------    ------------    ------------

Net income (loss)                             $ (2,928,922)   $   (113,805)   $ (3,919,186)   $   (208,799)
                                              ============    ============    ============    ============

Foreign currency translation                       (51,467)        (80,129)       (103,417)       (201,787)
                                              ------------    ------------    ------------    ------------

                                              ============    ============    ============    ============
Total Comprehensive (loss)                    $ (2,980,389)   $   (193,934)   $ (4,022,603)   $   (410,586)
                                              ============    ============    ============    ============

Net income (loss) per Share
      Basic and diluted                       $      (0.14)   $      (0.01)   $      (0.19)   $      (0.02)

Weighted average shares outstanding
      Basic and diluted                         20,969,400      10,300,000      20,738,971      10,300,000



See  accompanying   summary  of  accounting  policies  and  notes  to  financial
statements


                                      F-24





                          EDGEWATER FOODS INTERNATIONAL
                      CONSOLIDATED STATEMENTS OF CASHFLOWS
                         NINE MONTHS ENDED MAY 31, 2006


                                                                                       NINE MONTHS ENDED
                                                                                             MAY 31,
                                                                                   --------------------------
                                                                                      2006            2005
                                                                                   -----------    -----------
                                                                                   (unaudited)     (unaudited)
                                                                                            

Cash flows from operating activities:

     Net income (loss)                                                             $(3,919,186)   $  (208,799)

     Adjustments to reconcile net loss to net cash used in operating activities:
        Depreciation, depletion and amortization                                        90,003         51,220

        Changes in fair value of warrants                                            2,525,419           --

        Common stock issued for services                                               702,500           --

     Changes in current assets and liabilities:
        Accounts receivable                                                            (16,176)        18,103
        Prepaid expenses                                                               (65,785)        (1,289)

        Other current assets                                                              --             --
        Loan receivable                                                                 20,387          1,126
        Inventory                                                                     (446,724)      (237,371)
        Accounts payable                                                              (177,382)        75,081

        Bank overdrafts                                                                (38,538)          --
                                                                                   -----------    -----------

Net cash used in operating activities                                               (1,325,482)      (301,930)
                                                                                   -----------    -----------

Cash flows from investing activities:

     Purchase of property, plant and equipment                                        (158,170)      (315,818)
                                                                                   -----------    -----------

Net cash provided by (used in) investing activities                                   (158,170)      (315,818)
                                                                                   -----------    -----------

Cash flows from financing activities:


     Line of credit, net                                                               (60,828)          --
     Proceeds from short term debt                                                     504,198        664,606

     Payment of short term debt                                                       (148,408)          --

     Proceeds of long term debt                                                          2,268           --
     Payment of long term debt                                                         (19,624)       (21,797)

     Proceeds from sale of preferred Stock                                           2,562,000           --
                                                                                   -----------    -----------

Net Cash provided by financing activities                                            2,839,606        642,809
                                                                                   -----------    -----------

Foreign currency translation effect                                                     14,878         (9,256)



                                      F-25



Net increase in cash                                                                 1,370,832         15,805


Cash, beginning of period                                                                  560         12,910
                                                                                   -----------    -----------

Cash, end of period                                                                $ 1,371,392    $    28,715
                                                                                   ===========    ===========

Supplemental disclosure of cash flow information

Net cash paid during nine months
Interest                                                                           $   160,269    $    51,221
                                                                                   ===========    ===========

Income taxes                                                                       $      --      $      --
                                                                                   ===========    ===========



See  accompanying   summary  of  accounting  policies  and  notes  to  financial
statements



                                      F-26




                       Edgewater Foods International, Inc.

                   Notes to Consolidated Financial Statements
                                   (unaudited)

NOTE 1.  BASIS OF PRESENTATION, ORGANIZATION AND NATURE OF OPERATIONS

Edgewater Foods International Inc. ("Edgewater"),  a Nevada Corporation,  is the
parent company of Island Scallops Ltd., a Vancouver Island aquaculture  company.
Island Scallops Ltd. ("Island Scallops") was established in 1989 and for over 15
years has successfully  operated a scallop farming and marine hatchery business.
Island  Scallops is dedicated to the farming,  processing  and marketing of high
quality, high value marine species:  scallops and sablefish.  Scallop farming is
relatively new to North America and Island Scallops is the only producer of both
live-farmed  Pacific  scallops and live  sablefish (or  blackcod).  Given Island
Scallops' unique hatchery technology and extensive research and development,  we
believe that there is no significant competition for the farming of these marine
species  in our  geographic  area.  Island  Scallops  is  committed  to  rapidly
expanding  production  and profits while  continuing  to finance our  aggressive
growth and maintaining a healthy respect for the marine environment.

On June 29, 2005,  Edgewater,  a holding private company  established  under the
laws of Nevada in order to acquire assets in the  aquaculture  industry,  issued
10,300,000  shares of common  stock in exchange  for a 100%  equity  interest in
Island Scallops.  As a result of the share exchange,  Island Scallops become the
wholly own  subsidiary of Edgewater.  As a result,  the  shareholders  of Island
Scallops  owned a  majority  (54.21%)  of the  voting  stock of  Edgewater.  The
transaction  was  regarded  as a reverse  merger  whereby  Island  Scallops  was
considered to be the accounting acquirer as its shareholders retained control of
Edgewater  Foods after the  exchange,  although  Edgewater  is the legal  parent
company.  The share  exchange  was treated as a  recapitalization  of  Edgewater
Foods. As such, Island Scallops (and its historical financial statements) is the
continuing entity for financial reporting purposes.

On August 15, 2005, we completed a reverse  acquisition  of Heritage  Management
Corporation ("Heritage"), a public shell company as that term is defined in Rule
12b-2 of the  Exchange  Act,  established  under  the laws of Nevada on June 12,
2000. To accomplish  the share exchange  Heritage  issued  19,000,000  shares of
common  stock on a one to one  ratio for a 100%  equity  interest  in  Edgewater
Foods.  Per the terms of the Share Exchange and Bill of Sale of Heritage Funding
Corporation  and E. Lee Murdoch,  Heritage  delivered  will zero assets and zero
liabilities at time of closing.  Following the reverse  acquisition,  we changed
the name of Heritage Management  Corporation to "Edgewater Foods  International,
Inc." The  transaction  was regarded as a reverse merger  whereby  Edgewater was
considered  to be the  accounting  acquirer as it  retained  control of Heritage
after the exchange.  Although  Heritage is the legal parent  company,  the share
exchange  was  treated as a  recapitalization  of  Edgewater.  Edgewater  is the
continuing entity for financial  reporting  purposes.  The financial  statements



                                      F-27


have been  prepared as if Edgewater  had always been the  reporting  company and
then on the share  exchange  date,  had  changed  its name and  reorganized  its
capital stock.

NOTE 2.  SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our unaudited  consolidated financial statements are prepared in conformity with
accounting  principles  generally  accepted in the United  States of America for
reporting  interim  financial  information  and the rules and regulations of the
Securities  and  Exchange  Commission.   In  the  opinion  of  management,   all
adjustments  necessary for a fair  presentation  of the  financial  position and
results of operations for the periods  presented  have been  included.  All such
adjustments  are of a normal  recurring  nature.  These  unaudited  consolidated
financial statements should be read in conjunction with the audited consolidated
financial  statements  included in our Annual Report on Form 10-KSB for the year
ended August 31, 2005. Results of operations for the three and nine months ended
May 31, 2006 are not  necessarily  indicative of the  operating  results for the
full accounting year or any future period.


Inventory

We maintain  inventories  of raw  materials  for its  aquaculture  products,  of
biomass (inventory of live aquaculture product being actively  cultivated),  and
of finished goods (aquaculture product ready for sale).

Raw  materials  are reported at the lesser of purchase  cost and  estimated  net
realizable value.

Biomass and finished  goods are reported at the lesser of cost and estimated net
realizable  value.  Cost includes  direct and reasonably  attributable  indirect
production costs related to hatchery,  cultivation,  harvesting,  and processing
activities. Carrying costs per unit are determined on a weighted average basis.

At May 31, 2006, inventory consisted of the following:

Biomass (Scallops):                         $986,850

Derivative Financial Instruments

In connection with the sale of debt or equity  instruments,  we may sell options
or  warrants to  purchase  our common  stock.  In certain  circumstances,  these
options or warrants may be classified as derivative liabilities,  rather than as
equity.  Additionally,  the debt or  equity  instruments  may  contain  embedded
derivative instruments,  such as embedded derivative features,  which in certain
circumstances  may  be  required  to be  bifurcated  from  the  associated  host
instrument and accounted for separately as a derivative instrument liability.



                                      F-28



The Company  accounts for all  derivatives  financial  instruments in accordance
with SFAS No. 133. Derivative financial  instruments are recorded as liabilities
in the  consolidated  balance  sheet,  measured at fair value.  When  available,
quoted  market prices are used in  determining  fair value.  However,  if quoted
market prices are not available,  the Company  estimates fair value using either
quoted market prices of financial  instruments with similar  characteristics  or
other valuation techniques.

The  identification of, and accounting for,  derivative  instruments is complex.
Our derivative instrument liabilities are re-valued at the end of each reporting
period,  with changes in the fair value of the derivative  liability recorded as
charges  or credits to income,  in the period in which the  changes  occur.  For
options, warrants and bifurcated embedded derivative features that are accounted
for as derivative  instrument  liabilities,  we estimate fair value using either
quoted market prices of financial  instruments with similar  characteristics  or
other valuation techniques. The valuation techniques require assumptions related
to the remaining  term of the  instruments  and risk-free  rates of return,  our
current  common  stock  price and  expected  dividend  yield,  and the  expected
volatility  of  our  common  stock  price  over  the  life  of the  option.  The
identification   of,  and  accounting  for,   derivative   instruments  and  the
assumptions  used  to  value  them  can   significantly   affect  our  financial
statements.

Derivative  financial  instruments  that are not designated as hedges or that do
not meet the  criteria for hedge  accounting  under SFAS No. 133 are recorded at
fair value, with gains or losses reported currently in earnings.  All derivative
financial instruments held by the Company as May 31, 2006 were not designated as
hedges.


Recent accounting pronouncements


In May  2005,  SFAS No.  154,  "Accounting  Changes  and Error  Corrections"  (a
replacement  of APB  Opinion No. 20 and SFAS No. 3) was  issued.  Statement  154
requires  that all  voluntary  changes  in  accounting  principles  and  changes
required  by a  new  accounting  pronouncement  that  do  not  include  specific
transition  provisions be applied  retrospectively  to prior periods'  financial
statements,  unless it is  impracticable to do so. Opinion 20 required that most
voluntary  changes in  accounting  principle  be  recognized  by  including  the
cumulative effect of changing to the new accounting  principle as a component of
net income in the period of change. Statement 154 is effective prospectively for



                                      F-29


accounting  changes and  corrections  of errors made in fiscal  years  beginning
after  December  15,  2005,  with  earlier   application   encouraged.   Earlier
application is permitted for accounting  changes and  corrections of errors made
in fiscal years  beginning  after the date the  Statement was issued (May 2005).
Statement  154  does  not  change  the  transition  provisions  of any  existing
accounting pronouncements,  including those that are in a transition phase as of
the  effective  date  of the  Statement.  Accordingly,  we  will  implement  the
provisions  of this  accounting  pronouncement  in the fiscal  reporting  period
ending August 31, 2007.  We do not  currently  believe that the adoption of SFAS
145  No.  154  will  have  a  material  impact  on  our  consolidated  financial
statements.

NOTE 3.  PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment at May 31, 2006 consisted of the following:



                                           Accumulated     Net Book
                               Cost        Amortization    Value
                            ----------------------------------------

Land                        $  228,613     $     --       $  228,613
Buildings                      449,530        228,966        220,564
Seawater piping and tanks      470,942        267,401        203,541
Boats and Barge                284,128        112,272        171,856
Field equipment              1,112,886        699,725        413,161
Office equipment                13,748         12,373          1,375
Vehicles                        36,413         33,228          3,185
Computer equipment              11,848          4,587          7,261
                            ----------------------------------------
                            $2,608,108     $1,358,552     $1,249,556


Depreciation  expenses  for the nine  months  ended  May 31,  2006 and 2005 were
$90,003 and $51,220.

NOTE 4.  INVESTMENTS IN OTHER ASSETS (TENURES)

We carry our  investment  in other  assets  (tenures) at $3,629 at May 31, 2006.
This amount  represents the carrying costs of certain shellfish tenures acquired
by our  wholly-owned  subsidiary  Island  Scallops  Ltd.  Shellfish  tenures are
government-granted  rights  allowing  limited  use of  offshore  waters  for the
purposes of  cultivation of shellfish.  The granting of shellfish  tenure rights
are the responsibility of the Provincial  (British Columbia)  Government and not
the Canadian  Federal  Government.  As such, the government  assistance  that we
receive via loan  agreement with various  Federal  Agencies has no effect on our
ability  to renew  and/or  modify  these  tenure  agreements.  One tenure has an


                                      F-30


expiration  date of July  10,  2021.  Other  shellfish  tenures  that we and our
subsidiaries hold have expiration dates ranging from 2021 to 2024.

These tenures are considered to have an indefinite  useful life because  renewal
on expiration is anticipated, and therefore are not subject to amortization.

NOTE 5.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Included in accounts  payable and accrued  liabilities are balances  outstanding
related to credit cards held in the name of the shareholder  totaling $10,298 at
May 31, 2006. We used these credit cards as a means of short term  financing and
incur interest charges on such unpaid balances.

Included in  accounts  payable  and  accrued  liabilities  at May 31, 2006 is an
amount of $119,622  related to deposits  paid by two third parties in respect to
an agreement to purchase  geoduck seed from us (for  additional  information see
Note 9 - Contingent Liabilities).

Included in  accounts  payable  and  accrued  liabilities  at May 31, 2006 is an
amount of $3,683  related  to  interest  accrued in respect to the loan from the
National Research Council of Canada Industrial  Research Assistance Program (see
Note 8 - Long Term Debt for additional information).

Other accounts  payable and accrued  liabilities at May 31, 2006 carry a balance
of $178,739.

As a result,  at May 31, 2006, we had accounts  payable and accrued  liabilities
balance of $312,342.

NOTE 6.  SHORT TERM DEBT

Included in  short-term  debt is a loan with an  authorized  limit of $1,451,510
secured by our assets,  including a mortgage  charge in the amount of $1,451,510
on our land and building,  and by a personal  guarantee of Robert Saunders,  our
Chairman, President and CEO, and former sole shareholder of Island Scallops. The
note bears interest at a rate of 1% per month,  payable monthly, and is due June
30, 2006. As of May 31, 2006, the entire authorized limit of $1,451,510 had been
lent to Island Scallops.  In addition,  Island Scallops was currently in arrears
on interest payment for $14,785.  As a result, the debt is carried as $1,466,295
of short term debt on the balance sheet.

Included in  short-term  debt is Island  Scallop's  mortgage  loan  repayable at
$1,918  per  month  including  interest  calculated  at the  greater  of 10% and
(Canadian) prime plus 6%. The loan, which is due on April 1, 2007, is secured by
a second charge on the real property of Island  Scallops.  At May 31, 2006,  the
principal due is $194,314.



                                      F-31




Included in short-term  debt is a non-interest  bearing loan to Island  Scallops
from Industry Science and Technology Canada requiring repayment equal to 0.5% of
Island  Scallops'  gross scallop  sales for each  preceding  year,  which is due
January 1, 2007. If at the due date we have not generated sufficient revenues to
be required to repay the original amount of $165,814,  the remaining  portion of
the loan is to be forgiven.  Amounts  currently due bear  interest  based on the
published rates of 90 day (Canadian) treasury bills.

Included in  short-term  debt at May 31, 2006 is estimated  royalties of $60,378
payable  to a third  party  from  whom the  former  sole  shareholder  of Island
Scallops  originally  acquired  the  shares of Island  Scallops.  The 1992 share
purchase  agreement (for Island  Scallops)  provided that the third party was to
receive from us 3% of our revenues as earned,  on a quarterly basis,  throughout
the period from  December 1, 1992 to November 30, 2002.  The third party holds a
first charge (or first lien) over our inventory  (including  broodstock)  in the
amount of $317,518 in support of its  royalty  entitlement.  The third party has
not taken further action to enforce payment of the arrears  liability.  To date,
we have accrued the entire  balance of $60,738 as short term debt and we plan to
pay it with available funds in the near future.

Included in short-term  notes debt at May 31, 2006 is an unsecured  non-interest
bearing  demand  loan from an  individual  with a face value of  $45,510  and no
specific terms of repayment.  However,  the lender has informally requested that
the loan be repaid in full by October 6, 2008.

As a result, at May 31, 2006, we had $1,932,311 of short-term notes.

NOTE 7. LONG TERM DEBT

These  consolidated  financial  statements  include  a  Western  Diversification
Program  non-interest  bearing loan to Island  Scallops that requires  repayment
equal to 12% of gross  revenues from our scallop sales,  payable  semi-annually,
with no specified due date. At May 31, 2006 as Island Scallops is  approximately
$173,000  in  arrears  in respect  to the  payment  of these  amounts,  the full
principal  balance of $614,437 is  reflected  as a current  liability as current
portion of long-term  debt. Our  management is seeking to  renegotiate  terms of
repayment of this debt.

These  consolidated  financial  statements  include Island  Scallops'  unsecured
non-interest   bearing  loan  from  the  National  Research  Council  of  Canada
Industrial   Research  Assistance  Program  which  requires  quarterly  payments
commencing  March 1, 2003 equal to 3% of gross black cod  revenues of the Island
Scallops  until the earlier of full  repayment  or December 1, 2012.  The amount
repayable  is up to 150% of the original  advance of  $399,732,  if repayment is
before December 1, 2007. If at December 1, 2012,  Island Scallops has not earned
sufficient  revenues  required to repay the original loan amount,  the remaining
portion of the loan is to be forgiven. The $39,917 currently due at May 31, 2006
bears interest at a rate of 1% per month. At May 31, 2006, Island Scallops is in



                                      F-32


arrears in respect to the payment of these amounts,  the full principal  balance
of $399,732 is reflected as a current  liability as current portion of long-term
debt.

These  consolidated  financial  statements  include  two bank  loans for  Island
Scallops.  The first bank loan is repayable at $1,134 per month,  plus  interest
calculated at the floating base rate of the Business  Development Bank of Canada
plus 1.5% annum, is due February 23, 2009, and is secured by a General  Security
Agreement over Island  Scallops'  assets , a mortgage charge on Island Scallop's
real property and a personal guarantee of $45,360 by our Chairman, President and
CEO,  and former sole  shareholder  of Island  Scallops.  At May 31,  2006,  the
principal  due is $37,422.  The second bank loan is  repayable at $472 per month
plus interest calculated at (Canadian) prime plus 3% per annum, is unsecured and
is due October 23, 2007. At February 28, 2006, the principal due is $7,837.

As a result, at May 31, 2006, we had $1,059,428 of long-term debt less a current
portion of $1,014,169 for a balance of $45,259.

NOTE 8.  WARRANT LIABILITIES


The warrants that each investor  received as a result of our April 12 and May 30
Preferred  Stock Financing (see Note 11 Preferred Stock Financing for additional
details)  contained a cashless exercise  provision that becomes effective if our
registration  statement  (that we are  required  to file under the  registration
rights  agreement) is not declared  effective  one-year  after the initial issue
date of each warrant.  As such and in accordance with the accounting  guidelines
under SFAS No. 133, we valued the warrants as a derivative  financial instrument
and the  corresponding  liabilities were entered onto our  consolidated  balance
sheet,  measured at fair value.  The  Company  determined  the fair value of the
warrants as follows as of April 12, 2006 and May 30, 2006 (the issuance date):

The  Company  used the Black  Scholes  option-pricing  model with the  following
assumptions:  an expected  life equal to the  contractual  term of the  warrants
(one,  three or five),  underlying  stock price of $1.10 (at April 12) and $1.40
(at May 30), no  dividends;  a risk free rate of 4.91%,  4.90% and 4.91%,  which
equals the one,  three and  five-year  yield on Treasury  bonds at constant  (or
fixed)  maturity (for those warrants issued on April 12) and a risk free rate of
4.99%,  which equals three and five-year yield on Treasury bonds at constant (or
fixed)  maturity (for those  warrants  issued on May 30); and volatility of 97%.
Under the  assumptions,  the  Black-Scholes  option  pricing  model  yielded  an
aggregate  value  of  approximately   $11,569,000  with  a  current  portion  of
approximately 1,240,000.

The Company  performed the same  calculations as of May 31, 2006, to revalue the
warrants as of that date. In using the Black Scholes  option-pricing  model, the
Company used an underlying stock price of $1.40 per share; no dividends;  a risk
free rate of 5.07%,  5.03% and 5.04%,  which equals the one, three and five-year
yield on Treasury bonds at constant (or fixed); and maturity  volatility of 97%.
The  resulting  aggregate  allocated  value  of the  warrants  as of May 31 2006
equaled  approximately  $14,094,000.  The change in fair value of  approximately


                                      F-33


$2,525,000  (with a current  portion of roughly  $518,000)  was recorded for the
period ended May 31, 2006.

Upon the earlier of the warrant  exercise or the  expiration  date,  the warrant
liability will be reclassified into shareholders'  equity.  Until that time, the
warrant  liability  will be  recorded  at fair  value  based on the  methodology
described above. Liquidated damages under the registration rights agreement will
be expensed as incurred and will be included in operating expenses.


NOTE 9.  CONTINGENT LIABILITIES

Island  Scallops  entered  into an  Agreement in the 1998 year with two parties,
under which  Island  Scallops  was to produce and sell  geoduck  seed to the two
parties.  Island Scallops received advance payments from each of the two parties
in the 2002 year of  approximately  $64,140 and  recognized  related  revenue of
$43,705 in  respect  to seed  delivered  in the 2002  year.  The  balance of the
deposits  received  (advance  payments),  net of sales,  totaling  $119,622,  is
included in accounts payable and accrued liabilities.

The  position of  Management  is that the two parties  violated the terms of the
agreement,  such that we are entitled to retain the balance of the deposits. Per
the terms of the original agreement,  Island Scallop was entitled to make up any
shortfall in the product  produced in the following year.  Although  product was
available and offered by Island  Scallops in the following year, the two parties
refused to honor the terms of the agreement and would not accept the product (to
make up the shortfall) in the following year.

As of May 31,  2006,  one of the two  parties had made claims that we owed to it
amounts  totaling  $89,417.  This  particular  party believed that the agreement
required  Island  Scallops  to deliver the product in year one and did not allow
Island Scallops to make up any shortfall with product  produced in the following
year. The balance included in accounts payable and accrued  liabilities  related
to this party is $34,899.

Any  additional  liability to us, or any reduction of the  currently  recognized
liability,  in  respect  to  these  deposits  will  be  recorded  at the  time a
conclusion to this matter can be determined.

Neither we nor our wholly  owned  subsidiary  maintain  insurance  in respect to
replacement of its inventory.  Consequently,  we are exposed to financial losses
or failure as a result of this risk.

NOTE 10.  STOCK-COMPENSATION EXPENSE

In October  2005,  we engaged  Aurelius  Consulting  to  provide  marketing  and
investor  relations  services.  The initial  term of the  agreement is one year.
Aurelius is entitled to receive 25,000 shares of our restricted common stock per
quarter during the term of its agreement,  in consideration  for their services.
The shares were  valued at $1.45 per share,  the closing bid price for shares of
our common stock on the date of the  contract.  Therefore,  the total  aggregate


                                      F-34


value of the transaction  recognized by the Company in the first quarter of 2006
was $145,000.

At October 21, 2005 and  November  11,  2005,  our board  approved the issuing a
total of 25,000 shares of the Company's  common stock to The Shemano Group,  LLC
for preparing a research report for the Company. The shares were valued at $1.50
per  share,  the  closing  market  bid of our  common  stock  on the date of the
resolution.  Therefore,  the total aggregate value of the transaction recognized
by the Company in the first quarter of 2006 was $37,500.

On January 31, 2006, we issued 400,000 shares of our restricted  common stock to
World Wide  Mortgage  as  consideration  for  agreeing to extend the due date to
April 15, 2006 for us to repay our CDN  $1,500,000  loan  pursuant to the bridge
loan  agreement  dated November 9, 2004 and amended on April 15, 2005 between us
and World Wide. The shares have piggy-back  registration  rights that require us
to  register  the shares in our next  registration  statement.  The shares  were
valued at $1.30 per share,  the closing bid price for shares of our common stock
on the date we issued the shares.  Therefore,  the total  aggregate value of the
transaction is $520,000 which was recorded as other expense.

Stock Options

In  August  2005,  our  Board  of  Directors   approved  the  "Edgewater   Foods
International  2005  Equity  Incentive  Plan." The Board of  Directors  reserved
5,000,000  shares of our  common  stock to be  issued  in the form of  incentive
and/or  non-qualified stock options for employees,  directors and consultants to
Edgewater.  As of May 31,  2006,  our  Board of  Directors  had  authorized  the
issuance of 282,000 options to employees.

Stock option  activity  during the nine month period  ending May 31, 2006 was as
follows:

                                                             Weighted
                                           Number of          Average
                                            Shares          Exercise Price
                                         ---------------------------------
Outstanding, August 31, 2005                    282,000    $         1.50
    Granted                                          --                --
    Exercised                                        --                --
    Forfeited                                        --                --
    Expired                                          --                --
                                         ---------------------------------
Outstanding, May 31, 2006                       282,000    $         1.50
                                         =================================
Exercisable, May 31, 2006                       282,000    $          1.50
                                         =================================

At May 31, 2006,  62,000 of the  outstanding  options expire in August 2010 with
the remaining balance of 220,000 having an expiration date of August 2015.

NOTE 11.  PREFERRED STOCK FINANCING



                                      F-35



On April 12, 2006, we completed a private  equity  financing of $1,062,000  with
two accredited  investors.  Net proceeds from the financing  were  approximately
$952,000.  We issued 1,888,000 shares of our Series A Preferred Stock, par value
$0.001 per share and stated  value of $0.75 per  share,  at a purchase  price of
$0.5625 per share.  Each  investor  also  received one of each of the  following
warrants:  (i) Series A Warrant, (ii) Series B Warrant,  (iii) Series C Warrant,
(iv) Series D Warrant, (v) Series J Warrant, (vi) Series E Warrant, (vii) Series
F Warrant,  (viii) Series G Warrant, and (ix) Series H Warrant, each to purchase
a number  of  shares  of  common  stock  equal to 50% of the  number of Series A
Preferred Stock purchased,  except for the Series J Warrants, which entitled the
investor  to  purchase a number of shares of common  stock  equal to 100% of the
number of shares of Series A  Preferred  Stock  purchased.  We issued a total of
9,440,000 Warrants.  Each of the Warrants has a  term of 5 years, except for the
Series J Warrants, which have a term of 1 year.

In connection with the April 12, 2006 financing, we paid  cash compensation to a
placement  consultant in the amount of $84,960 and issued him 188,800  warrants.
Each of the placement  consultant's  warrants allow him to purchase one share of
our Series A Preferred  Stock,  and one half of each of the Series A-I  Warrants
and one  Series  J  warrant.  Each of the  placement  consultant's  warrants  to
purchase the securities described above is exercisable at a price of $0.5625 per
warrant, for a period of three years.

On May 30,  2006,  we completed  another  round of private  equity  financing of
$1,500,000  with one  accredited  investor  pursuant  to a Series A  Convertible
Preferred  Stock  Purchase  Agreement.  Net proceeds  from this  financing  were
approximately  $1,380,000.  We issued 2,000,000 shares of our Series A Preferred
Stock,  stated value of $0.75per  share,  at a purchase price of $0.75 per share
and the investor also received one of each of the following warrants: (i) Series
A Warrant,  (ii)  Series B Warrant,  (iii)  Series C Warrant,  and (iv) Series D
Warrant,  each to purchase a 1,000,000  shares of Common  Stock;  therefore,  we
issued a total of 4,000,000 Warrants. Each of the Warrants has a term of 5 years
and is identical  to the Series A-D Warrants we issued to investors  pursuant to
the financing we closed on April 12, 2006 as disclosed in our Current  Report on
Form 8-K filed on April 14, 2006.  Each share of the Series A Preferred Stock is
convertible  into one fully paid and  nonassessable  share of our common  stock.
Pursuant to the Purchase  Agreement,  the investor was  committed to purchase an
additional  $2,400,000 of our Series A Preferred Stock in subsequent closings to
be completed no later than June 30, 2006.

In connection  with the May 30, 2006 financing,  we paid cash  compensation to a
placement  consultant in the amount of $120,000 and issued him 200,000 warrants.
Each of the placement  consultant's  warrants allow him to purchase one share of
our Series A preferred  stock,  and one half of each of the Series A-D Warrants.
Each of the placement consultant's warrants to purchase the securities described
above is exercisable at a price of $0.75 per warrant, for a period of 3 years.






                                      F-36




NOTE 12.  GOING CONCERN

Prior to the  completion  of our  Preferred  Stock  Financing  (see  Note 11 for
additional  details),  our working  capital  had been  primarily  financed  with
various forms of debt. We have suffered  operating losses since inception in our
efforts to establish  and execute our business  strategy.  As of May 31, 2006 we
had a cash balance of approximately  $1,370,000.  Although  management  believes
that we have adequate  funds to maintain our business  operations  into the next
fiscal year and until we become cash flow positive, we are likely to continue to
suffer operational losses until the first quarter of our 2007 fiscal year. Until
our operations are able to demonstrate and maintain  positive cash flows, we may
require  additional  working capital to fund our ongoing  operations and execute
our  business  strategy.  If we are  unable  to  raise  such  capital,  if it is
required,  it could raise  substantial  doubt about our ability to continue as a
going concern.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and classification of liabilities that might be necessary should
we be unable to continue as a going concern.  Our ability to continue as a going
concern is dependent upon our ability to generate  sufficient cash flows to meet
our  obligations on a timely basis and ultimately to attain  profitability.  Our
Management  intends to obtain  working  capital  through  operations and to seek
additional funding through debt and equity offerings to help fund our operations
as we expand. There is no assurance that we will be successful in our efforts to
raise additional working capital or achieve profitable operations. The financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

NOTE 13.  SUBSEQUENT EVENTS

On June 30, 2006 and July 11,  2006,  we  completed  two final rounds of private
equity financing,  accepting subscriptions in the aggregate amount of $2,840,000
from nine  institutional and accredited  investors  pursuant to the May 30, 2006
Series A Convertible  Preferred  Stock  Purchase.  On June 30, 2006 and July 11,
2006,  we  entered  into  separate  Joinder  Agreements  to each of the Series A
Convertible  Preferred  Stock  Purchase  Agreement and the  Registration  Rights
Agreement,  each dated as of May 30, 2006,  with each of the new investors which
added  such  investors  as  additional  parties  to the May 30,  2006  financing
documents.   Net  cash  proceeds  from  these  two  rounds  were   approximately
$2,659,000.  Pursuant to these round two final financings,  we issued a total of
3,786,666  shares of our Series A  Preferred  Stock,  stated  value of $0.75 per
share,  at a purchase  price of $0.75 per share and each  investor also received
one of each of the  following  warrants:  (i)  Series A Warrant,  (ii)  Series B
Warrant,  (iii)  Series C Warrant,  and (iv) Series D Warrant,  each to purchase
1,893,338  shares of Common  Stock ;  therefore,  we issued a total of 7,573,352
Warrants in these two final rounds of financing. Each of the Warrants has a term
of 5 years and is  identical  to the Series A-D  Warrants we issued to investors
pursuant to the  financings  we closed on April 12, 2006 and May 30, 2006.  Each
share of the Series A  Preferred  Stock is  convertible  into one fully paid and
nonassessable share of our common stock.




                                      F-37



In  connection  with the June 30,  2006 and July 11, 2006  financing,  we paid a
total placement  consultant fee of $217,000.  The placement  consultant received
$160,000 of his fee in securities (as described below) and $57,000 in cash. As a
result,  we issued  the  placement  consultant  213,333  shares of our  Series A
Preferred Stock,  and one of each of the A-D Warrants,  each to purchase 106,667
shares of our Common Stock. The A-D Warrants issued to the placement  consultant
are identical to the Series A-D Warrants we issued to the investors as described
above.

We used a  portion  of the  proceeds  of the  above  referenced  private  equity
financings  to repay the entire  balance of  short-term  loan with an authorized
limit of $1,451,510  secured by our assets,  including a mortgage  charge in the
amount of  $1,451,510  on land and  building of the  Company,  and by a personal
guarantee of Robert Saunders,  our Chairman,  President and CEO, and former sole
shareholder of Island Scallops. (For additional information on this note, please
see Note 7 - Short Term Debt above)

On June 30,  we issued  22,860  shares  of  common  stock to the two  accredited
investors  of our  April  12 and May  30,  2006  financings  as  payment  of the
semi-annual  dividend per the terms of the  Certificate  of  Designation  of the
Relative Rights and Preferences of the Series A Convertible Preferred Stock.






                                      F-38




                       EDGEWATER FOODS INTERNATIONAL, INC.





                        --------------------------------

                                   PROSPECTUS

                        --------------------------------






















                                       i



                                     PART II


ITEM 24.   INDEMNIFICATION OF DIRECTORS AND OFFICERS

         Our  Articles  of  Incorporation  include  provisions,  which limit the
liability of our directors.  As permitted by applicable provisions of the Nevada
Law, directors will not be liable to Edgewater for monetary damages arising from
a breach of their  fiduciary  duty as directors in certain  circumstances.  This
limitation  does not affect  liability  for any breach of a  director's  duty to
Edgewater  or our  shareholders  (i) with respect to approval by the director of
any transaction from which he or she derives an improper personal benefit,  (ii)
with respect to acts or omissions  involving an absence of good faith,  that the
director  believes to be  contrary to the best  interests  of  Edgewater  or our
shareholders,  that  involve  intentional  misconduct  or a knowing and culpable
violation of law,  that  constitute  an unexcused  pattern or  inattention  that
amounts to an abdication of his or her duty to Edgewater or our shareholders, or
that show a reckless  disregard  for duty to  Edgewater or our  shareholders  in
circumstances in which he or she was, or should have been aware, in the ordinary
course of performing his or her duties, of a risk of serious injury to Edgewater
or our  shareholders,  or (iii) based on transactions  between Edgewater and our
directors  or  another  corporation  with  interrelated  directors  or  based on
improper distributions,  loans or guarantees under applicable sections of Nevada
Law.  This  limitation  of  directors'   liability  also  does  not  affect  the
availability of equitable remedies, such as injunctive relief or rescission.

         We have been  advised that it is the  position of the  Commission  that
insofar as the provision in Edgewater's  Articles of Incorporation,  as amended,
may be invoked for  liabilities  arising under the Securities Act, the provision
is against public policy and is therefore unenforceable.

ITEM 25.   OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

         We are issuing a new series of Preferred Stock under this  Registration
Statement.  All common stock registered pursuant to this Registration  Statement
is being registered on behalf of selling shareholders. We have agreed to pay all
costs  of  this  Registration   Statement.   The  estimated   expenses  for  the
distribution  of the common stock  registered  hereby,  other than  underwriting
commissions, fees and Representative's  nonaccountable expense allowance are set
forth in the following table:

       ITEM                                     AMOUNT
       ----                                     ------

       SEC Registration Fee                  $ 5,156.45
       Transfer Agent Fees                   $     0.00
       Legal Fees                            $32,500.00
       Accounting Fees                       $10,000.00
       Printing and Engraving Costs          $     0.00
       Miscellaneous                         $ 5,000.00
                                             ----------
       Total                                 $52,656.45
                                             ==========



ITEM 26.   RECENT SALES OF UNREGISTERED SECURITIES

         During the past three years, we effected the following  transactions in
reliance upon exemptions from registration  under the Securities Act as amended.
Unless  stated  otherwise;  (i) that  each of the  persons  who  received  these
unregistered  securities  had knowledge and experience in financial and business
matters  which  allowed  them to evaluate  the merits and risk of the receipt of
these  securities,  and that they were  knowledgeable  about our  operations and
financial  condition;  (ii) no underwriter  participated  in, nor did we pay any
commissions  or fees to any  underwriter  in connection  with the  transactions;
(iii)  the  transactions  did not  involve  a public  offerings;  and (iv)  each
certificate issued for these unregistered  securities contained a legend stating
that the securities have not been registered under the Act and setting forth the
restrictions on the transferability and the sale of the securities.


                                       ii



         To accomplish the Share Exchange with Edgewater, we issued an aggregate
of  19,000,000  shares of common  stock in  exchange  for all of the  issued and
outstanding capital stock of Edgewater.  The shares were issued to 17 accredited
investors  pursuant to the exemption from registration  provided by Section 4(2)
of the Securities Act for issuances not involving any public offering.

         In October 2005, we engaged  Aurelius  Consulting to provide  marketing
and investor relations services.  The initial term of the agreement is one year.
Aurelius is entitled to receive 25,000 shares of our restricted common stock per
quarter during the term of its agreement,  in consideration  for their services.
The shares were  valued at $1.45 per share,  the closing bid price for shares of
our  common  stock  on the date of the  contract.  The  shares  were  issued  in
accordance with the exemption from the registration provisions of the Securities
Act of 1933, as amended,  provided by Section 4(2) of such Act for issuances not
involving any public offering.

         On October 21, 2005 and  November  11,  2005,  our board  approved  the
issuing a total of 25,000  shares of the  Company's  common stock to The Shemano
Group,  LLC for  preparing a research  report for the  Company.  The shares were
valued at $1.50 per share,  the  closing  market bid of our common  stock on the
date of the resolution.  The shares were issued in accordance with the exemption
from the  registration  provisions  of the  Securities  Act of 1933, as amended,
provided by Section  4(2) of such Act for  issuances  not  involving  any public
offering.

         On January 31, 2006, we issued 400,000 shares of our restricted  common
stock to World Wide  Mortgage as  consideration  for  agreeing to extend the due
date for us to  repay  our CDN  $1,500,000  loan  pursuant  to the  bridge  loan
agreement  dated  November 9, 2004 and amended on April 15, 2005  between us and
World Wide. The shares have  piggy-back  registration  rights that require us to
register the shares in our next registration  statement.  The shares were valued
at $1.30 per share,  the closing bid price for shares of our common stock on the
date we issued  the  shares.  The  shares  were  issued in  accordance  with the
exemption  from the  registration  provisions of the  Securities Act of 1933, as
amended,  provided by Section 4(2) of such Act for  issuances  not involving any
public offering.

         Pursuant to the financings we closed on April 12, May 30, June 30, 2006
and July 11, 2006, we issued an aggregate of 30,905,619  shares. The shares were
issued to 9 accredited  investors  pursuant to the exemption  from  registration
provided by Section 4(2) of the  Securities  Act for issuances not involving any
public offering.


ITEM 27.  EXHIBITS

        EXHIBIT   DESCRIPTION
        NUMBER    -----------
        -------
         3.1      Articles  of  Incorporation,  (Incorporated  by  reference  to
                  Exhibit 3.1 to the Company's  Annual Report on Form 10-K filed
                  on December 14, 2005).

         3.2      Amended and  Restated  Bylaws,  (Incorporated  by reference to
                  Exhibit 3.1 to the Company's  Current Report on Form 8-K filed
                  on August 16, 2005).

         4.1      Securities  Purchase  Agreement  dated  as of April  12,  2006
                  (Incorporated  by reference  to Exhibit 10.0 to the  Company's
                  Current Report on Form 8-K filed on April 14, 2006).

         4.2      Registration  Rights  Agreement  dated  as of April  12,  2006
                  (Incorporated  by reference  to Exhibit 10.2 to the  Company's
                  Current Report on Form 8-K filed on April 14, 2006).

         4.3      Designation  of Rights and  Preferences  of Series A Preferred
                  Stock dated as of April 12, 2006 (Incorporated by reference to
                  Exhibit 10.3 to the Company's Current Report on Form 8-K filed
                  on April 14, 2006).

         4.4      Form of Warrant to  Purchase  Common  Stock  (Incorporated  by
                  reference  to Exhibits  10.6  through  10.14 to the  Company's
                  Current Report on Form 8-K filed on April 14, 2006).


                                     iii



         4.5      Amendment to Registration Rights Agreement dated as of May 30,
                  2006  (Incorporated  by  reference  to  Exhibit  10.7  to  the
                  Company's Current Report on Form 8-K filed on May 30, 2006).

         4.6      Form of Joinder Agreement to the Securities Purchase Agreement
                  dated as of June 30,  2006 and July 11, 2006  (Incorporate  by
                  reference to Exhibits 10.1 and 10.2 to the  Company's  Current
                  Report on Form 8-K filed on June 30, 2006).

         4.7      Joinder  Agreement to the Registration  Rights Agreement dated
                  as of  June  30,  2006  and  July  11,  2006  (Incorporate  by
                  reference to Exhibits 10.1 and 10.2 to the  Company's  Current
                  Report on Form 8-K filed on June 30, 2006).

         5.1      Opinion and Consent of Law Offices of Louis E. Taubman, P.C.

         10.1     Employment  Agreement  of  Robert  Saunders   (Incorporate  by
                  reference  to  Exhibits  10.1  to the  Company's  Registration
                  Statement on Form SB-2 filed on July 14, 2006).


         10.5     Consulting  Agreement  with Aurelius  Consulting  Group,  Inc.
                  (Incorporate   by   reference  to  Exhibits   10.5   Company's
                  Registration Statement on Form SB-2 filed on July 14, 2006).

         10.6     Consulting   Agreement   with   Gallatin   Consulting,    Inc.
                  (Incorporate   by   reference  to  Exhibits   10.6   Company's
                  Registration Statement on Form SB-2 filed on July 14, 2006).

         23.1     Consent of LBB & Associates LTD, LLP



ITEM 28.  UNDERTAKINGS.

   a)    The undersigned Registrant hereby undertakes:

1)       To file,  during any period in which  offers or sales are being made, a
         post-effective amendment to this registration statement:

         (i)      To include any prospectus  required by Section 10(a)(3) of the
                  Securities Act of 1933, as amended (the "Securities Act");

         (ii)     To reflect in the prospectus any facts or events arising after
                  the effective date of this registration statement (or the most
                  recent post-effective  amendment thereof) which,  individually
                  or in the  aggregate,  represent a  fundamental  change in the
                  information   set   forth  in  the   registration   statement.
                  Notwithstanding the foregoing, any increase or decrease in the
                  volume of  securities  offered (if the total  dollar  value of
                  securities offered would not exceed that which was registered)
                  and any  deviation  from the low or high end of the  estimated
                  maximum  offering  range  may  be  reflected  in the  form  of
                  prospectus  filed with the SEC  pursuant  to Rule 424(b) if in
                  the  aggregate,  the changes in volume and price  represent no
                  more  than  a 20  percent  change  in  the  maximum  aggregate
                  offering price set forth in the  "Calculation  of Registration
                  Fee" table in the effective registration statement; and,

         (iii)    To include any material  information  with respect to the plan
                  of distribution not previously  disclosed in this registration
                  statement or any material  change to such  information in this
                  registration statement; provided, however, that paragraphs (1)
                  (i),  (1) (ii) and (1) (iii) do not  apply if the  information
                  required to be included in a post-effective amendment by those
                  paragraphs  is  contained  in periodic  reports  filed with or
                  furnished to the SEC by the Registrant  pursuant to Section 13
                  or Section  15(d) of the  Securities  Exchange Act of 1934, as
                  amended  (the  "Exchange   Act")  that  are   incorporated  by
                  reference in this registration statement


2)       That,  for  the  purposes  of  determining   any  liability  under  the
         Securities Act, each  post-effective  amendment shall be deemed to be a
         new registration  statement relating to the securities offered therein,
         and the offering of such  securities  at the time shall be deemed to be
         the initial bona fide offering thereof.

3)       To remove from registration by means of a post-effective  amendment any
         of  the  securities   being  registered  which  remain  unsold  at  the
         termination of the offering.

4)       Not applicable.

5)       That for the purpose of determining  liability under the Securities Act
         of 1933 to any purchaser:

                                       iv



(i)      If the registrant is relying on Rule 430B:

         (A)      Each prospectus  filed by the registrant  pursuant to Rule 424
                  (b)(3)  shall  be  deemed  to  be  part  of  the  registration
                  statement as of the date the filed  prospectus was deemed part
                  of and included in the registration statement; and

         (B)      Each  prospectus   required  to  be  filed  pursuant  to  Rule
                  424(b)(2),  (b)(5),  or  (b)(7)  as  part  of  a  registration
                  statement  in  reliance  on Rule 430B  relating to an offering
                  made  pursuant  to  Rule  415(a)(1)(i),  (vii)  or (x) for the
                  purpose of providing the information required by Section 10(a)
                  of the  Securities  Act of 1933  shall be deemed to be part of
                  and included in the  registration  statement as of the earlier
                  of the  date  such  form of  prospectus  is first  used  after
                  effectiveness  or the date of the  first  contract  of sale of
                  securities  in the offering  described in the  prospectus.  As
                  provided in Rule 430B,  for  liability  purposes of the issuer
                  and any person that is at that date an underwriter,  such date
                  shall be deemed to be a new effective date of the registration
                  statement  relating  to the  securities  in  the  registration
                  statement to which that prospectus  relates,  and the offering
                  of such  securities  at that  time  shall be  deemed to be the
                  initial bona fide offering thereof. Provided, however, that no
                  statement made in a registration  statement or prospectus that
                  is part of the  registration  statement  or made in a document
                  incorporated  or deemed  incorporated  by  reference  into the
                  registration  statement  or  prospectus  that  is  part of the
                  registration  statement will, as to a purchaser with a time of
                  contract of sale prior to such  effective  date,  supersede or
                  modify  any  statement  that  was  made  in  the  registration
                  statement  or  prospectus  that was  part of the  registration
                  statement or made in any such  document  immediately  prior to
                  such effective date; or

(ii)     If the  registrant  is  subject  to Rule 430C,  each  prospectus  filed
         pursuant to Rule 424(b) as part of a registration statement relating to
         an offering, other than registration statements relying on Rule 430B or
         other than prospectuses filed in reliance on Rule 430A, shall be deemed
         to be part of and included in the registration statement as of the date
         it is  first  used  after  effectiveness.  Provided,  however,  that no
         statement made in a registration  statement or prospectus  that is part
         of the  registration  statement or made in a document  incorporated  or
         deemed  incorporated  by reference into the  registration  statement or
         prospectus  that is part of the  registration  statement  will, as to a
         purchaser  with a time of  contract  of sale  prior to such  first use,
         supersede  or modify any  statement  that was made in the  registration
         statement or prospectus that was part of the registration  statement or
         made in any such document immediately prior to such date of first use.

(6)      That, for the purpose of determining  liability of the registrant under
         the Securities Act of 1933 to any purchaser in the initial distribution
         of the  securities:  The  undersigned  registrant  undertakes that in a


                                       v


         primary offering of securities of the undersigned  registrant  pursuant
         to this registration  statement,  regardless of the underwriting method
         used to sell the  securities to the  purchaser,  if the  securities are
         offered  or sold to such  purchaser  by means  of any of the  following
         communications,  the  undersigned  registrant  will be a seller  to the
         purchaser and will be  considered  to offer or sell such  securities to
         such purchaser:

         (i)      Any  preliminary  prospectus or prospectus of the  undersigned
                  registrant  relating  to the  offering  required  to be  filed
                  pursuant to Rule 424;

         (ii)     Any free writing prospectus  relating to the offering prepared
                  by or on  behalf  of the  undersigned  registrant  or  used or
                  referred to by the undersigned registrant;

         (iii)    The portion of any other free writing  prospectus  relating to
                  the  offering  containing   material   information  about  the
                  undersigned  registrant  or its  securities  provided by or on
                  behalf of the undersigned registrant; and

         (iv)     Any other  communication that is an offer in the offering made
                  by the undersigned registrant to the purchaser.

         (b)  The  undersigned  Registrant  undertakes  that,  for  purposes  of
determining  any liability  under the Securities Act of 1933, each filing of the
registrant's  annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable,  each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the  registration  statement shall be
deemed to be a new  registration  statement  relating to the securities  offered
therein,  and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

         (c)  Insofar  as  indemnification  for  liabilities  arising  under the
Securities Act may be permitted to directors,  officers and controlling  persons
of  the  Registrant  pursuant  to  the  indemnification  provisions  herein,  or
otherwise,  the  Registrant has been advised that in the opinion of the SEC such
indemnification  is against public policy as expressed in the Securities Act and
is,  therefore,  unenforceable.  In the event  that a claim for  indemnification
against such  liabilities  (other than the payment by the Registrant of expenses
incurred or paid by a director,  officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy as  expressed  in the  Securities  Act and will be  governed by the final
adjudication of such issue.





                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this  registration
statement  to be  signed  on its  behalf  by the  undersigned,  in the  City  of
Vancouver,  State  of  British  Colubmia,  on  October  6,  2006 and the City of
Gaithersburg, State of Maryland on October 6, 2006.



Edgewater Foods International, Inc.

By: /s/  Robert Saunders
    --------------------
Name:    Robert Saunders
Title:   President & Chief Executive Officer


By: /s/  Michael Boswell
    --------------------
Name:    Michael Boswell
Title:   Acting Chief Accounting Officer


Dated: October 6, 2006

         In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.

       /s/  Robert Saunders                            Dated: October 6, 2006
       ---------------------------
       Robert Saunders
       President and Chief Executive Officer


       /s/  Michael Boswell                            Dated: October 6, 2006
       ---------------------------
       Michael Boswell
       Director & Acting Chief Accounting Officer

       /s/  Douglas C. MacLellan                       Dated: October 6, 2006
       ---------------------------
       Douglas C. MacLellan
       Vice-chairman of the Board

       /s/  Mark H. Elenowitz                          Dated: October 6, 2006
       ---------------------------
       Mark H. Elenowitz
       Director

                                                       Dated: October 6, 2006
       ---------------------------
       Robert L. Rooks
       Director

                                                       Dated: October 6, 2006
       ---------------------------
       Ian Fraser
       Director

       /s/ Victor Bolton                               Dated: October 6, 2006
       ---------------------------
       Victor Bolton
       Director

       /s/ Darryl Horton                               Dated: October 6, 2006
       ---------------------------
       Darryl Horton
       Director

EX-5.1

EXHIBIT 5.1

LAW OFFICES OF LOUIS E. TAUBMAN, P.C.

17 State Street, 16^th Floor

New York, New York 10004

(212) 732-7184   Fax:  (212) 202-6380

E-mail: Louistlaw@aol.com

October 5, 2006

Edgewater Foods International, Inc.

5552 West Island Highway

Qualicum Beach, British Columbia

Canada V9K 2C8

Ladies and Gentlemen:

We have acted as counsel to Edgewater Foods International, Inc. a Nevada company (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), of a Registration Statement on Form SB-2 (the “Registration Statement”), relating to the proposed sale by the selling shareholders listed therein (the “Selling shareholders”) of 34,422,282 shares of the Company’s common stock (the “Common Stock”).  

In so acting, we have examined and relied upon the originals or copies, certified or otherwise identified to our satisfaction, of such Company records, documents, certificates and other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. Based upon the foregoing and such examination of law as we have deemed necessary, we are of the opinion that the Common Stock to be offered by the Selling shareholders, when sold under the circumstances contemplated in the Registration Statement, will be legally issued, fully paid and non-assessable.

The opinions we express herein are limited to matters involving the Nevada corporate law and the federal laws of the United States and are further expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise as to any other matters relating to the Company or the Common Stock.

We consent to the use of this letter as an Exhibit to the Registration Statement and to the use of our name under the heading “Legal Matters” included in the Prospectus forming a part of the Registration Statement.

Sincerely,

Law Offices of Louis E. Taubman, P.C.

By: /s/    Louis E. Taubman

Louis E. Taubman,
President

EX-10.7

PLACEMENT CONSULTANT AGREEMENT

THIS AGREEMENT (“Agreement”) is made as of the 9^th day of March, 2006, by and between EDGEWATER FOODS INTERNATIONAL, INC. (the “Company”), and, Pai’s International Trade, Inc. , a New York corporation (the “Consultant”).

WITNESSETH:

WHEREAS, the Company desires to consider strategic alternatives available to it which include, but are not limited to, issuing and selling equity and/or debt of the Company in the amount of up to $5,000,000.00; and

WHEREAS, the Consultant has offered to assist the Company in the procurement, if necessary, of potential purchasers of the Company’s equity and/or debt, and the Company desires to secure the services of the Consultant on the terms and conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual promises, conditions and covenants herein contained, the parties hereto do hereby agree as follows:

1.

Engagement of Consultant.  

(a)

Appointment.  The Company hereby appoints the Consultant as a non-exclusive consultant to identify potential qualified purchasers of the Company’s unregistered restricted equity and/or debt securities (the “Consultant Services”).  The Consultant, on the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, accepts such appointment.  This appointment shall commence as of the date hereof and end upon the termination of the Agreement in accordance with Section 7 hereof (the “Term”).

(b)

Outside of Engagement.  Nothing in this Agreement shall be interpreted or construed to constitute the Consultant as the agent or representative of the Company with authority to sell or make offers to sell its securities.  In performance of this Agreement, neither the Consultant nor its affiliates shall take any action or fail to take any action that, either directly or indirectly, would cause any of them to come within the definition of a “broker,” “dealer,” “agent,” “sales representative,” “underwriter” or “investment advisor,” as those terms are defined and/or interpreted under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940 or the state securities laws of those jurisdictions in which the Consultant or its affiliates may act to locate financing for the Company, un less such persons are registered as such in all applicable jurisdictions with all required regulatory agencies.

1

(c)

Engagement as Finder.  The efforts of the Consultant shall be confined to introductions as a finder.  The Consultant is not authorized to engage in any negotiations on the Company's behalf and shall have no authority whatsoever to represent the Company in any such negotiations.  The Consultant shall not participate in the preparation of any materials specifically related to a financing, shall not distribute information relating to the Company to any prospective investor until such prospect is approved by the Company, and shall only distribute information with respect to the Company which has been approved by the Company and which does not contain any information other than the amount of financing the Company is seeking and information which may be publicly available.  The Consultant shall not perform any independent analysis of any financing or engage in any due dili gence activities.

2.

Representations and Warranties of the Company.  In order to induce the Consultant to enter into this Agreement, the Company hereby represents and warrants to and agrees with the Consultant as follows:

(a)

Accuracy of Information.  All information provided by the Company to the Consultant regarding the Company is complete and correct in all material respects and does not omit any material fact necessary to make such information, in light of the circumstances under which it was delivered, not misleading.  If during the Term, any event occurs or any event known to the Company relating to or affecting the Company and/or the Consultant shall occur as a result of which the information provided to the Consultant becomes incorrect or misleading, the Company shall inform the Consultant of such occurrence within a reasonable period of time.  Nothing in this Agreement shall be interpreted to require the Company to disclose or release to the Consultant any confidential information that the Company, in its sole and exclusive discretion, determines should not be disclosed or released.

(b)

No Defaults.  The execution and delivery of this Agreement, and the consummation of the transactions herein contemplated, and compliance with the terms of this Agreement will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, the Certificate of Incorporation or Bylaws of the Company (in any respect that is material to the Company), any material note, indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which the Company or any property of the Company is bound, or to the Company’s knowledge, any existing law, order, rule, regulation, writ, injunction or decree of any government, governmental instrumentality, agency or body, arbitration tribunal or court, domestic or foreign, having jurisdiction over the Company or any property of the Company. &nbs p;

(c)

Incorporation and Authorization.  The Company is duly formed and validly existing in good standing as a corporation under the laws of the State of its incorporation.  The execution and delivery by the Company of this Agreement have been duly authorized by all necessary action, and this Agreement is the valid, binding and legally enforceable obligation of the Company.

2

3.

Representations and Warranties of the Consultant.  In order to induce the Company to enter into this Agreement, the Consultant hereby represents and warrants to and agrees with the Company as follows:

(a)

No Defaults.  The execution and delivery of this Agreement, and the consummation of the transactions herein contemplated, and compliance with the terms of this Agreement will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, the Articles of Incorporation or By-Laws of the Consultant (in any respect that is material to the Consultant), any material note, indenture, mortgage, deed of trust, or other agreement or instrument to which the Consultant is a party or by which the Consultant or any property of the Consultant is bound, or to the Consultant’s knowledge, any existing law, order, rule, regulation, writ, injunction or decree of any government, governmental instrumentality, agency or body, arbitration tribunal or court, domestic or foreign, having jurisdiction over the Consultant or any property of the Con sultant.

(b)

Incorporation and Authorization.  The Consultant is duly formed and validly existing in good standing as a corporation under the laws of the State of its incorporation.  The execution and delivery by the Consultant of this Agreement have been duly authorized by all necessary action, and this Agreement is the valid, binding and legally enforceable obligation of the Consultant.

4.

Placement Fee.

(a)

Notice of Prospects Required.  The Consultant shall provide advance written notice (the “Notice”) to the Company of the names and addresses of all entities and persons it desires to contact or has identified (the “Prospects”) regarding a potential financing.  The Consultant shall not be entitled to give the Company Notice of any additional Prospects once it has received a notice of termination from the Company.  If an entity or person listed on the Notice meets, corresponds with, or engages in a telephone conversation with, an officer of the Company or other agent of the Company, to discuss a financing, then the Consultant shall be entitled to the placement fee, specified below, in the event a transaction is closed involving the Prospect and the Company within twelve (12) months of the date of the applicable Notice.  Notwithstanding the Consultant includ ing any person or entity in a Notice, the Consultant shall not be entitled to a fee in connection with any transaction with any person or entity with whom the Company has had contact prior to the Consultant providing the Company a Notice listing such person or entity unless otherwise agreed in writing by the Company.  The Company will notify the Consultant in writing as soon as possible after receipt of any Notice if the Company has had prior contact with any person or entity listed thereon.  The Consultant shall not initiate any correspondence or conversations with any contact provided in the Notice until it has received notification from the Company as to whether or not the Company has had prior contact with any person or entity listed in the Notice.

(b)

Fee.  The Company shall pay the Consultant, upon receipt of the cash proceeds from a financing that is completed with a Prospect within twelve (24) months of

3

the Notice relating to the Prospect as a direct result of the Consultant Services under this Agreement, a fee of $400,000 for $5,000,000 of the gross subscription proceeds of an equity offering received by the Company from purchasers procured by the Consultant; provided such subscriptions are accepted by the Company.   In the event that the gross subscription proceeds received by the Company are less than or greater that $5,000,000, the Company and the Consultant agree that the Consultant’s fee herein shall be adjusted in an equitable manner in order to reflect the difference in the amount of gross proceeds actually received.  The Company shall also issue, within ten (10) days of the closing of each financing completed as a direct result of the Consultant Services under this Agreement, to the Consultant warrants (“Warrants”) in an amount equal to ten percent (10%) of the number of shares of common stock or other securities issued by the Company in connection with the financing .  The Warrants shall be exercisable for three (3) years at an exercise price equal to the purchase price of the securities issued in the financing.  The Warrants shall have registration rights which are the same as those granted to purchasers procured by the Consultant.  It is agreed and acknowledged that the Company is not required to offer to sell or make its securities available for sale unless such sale can be accomplished in any jurisdiction in which it is to be offered for sale or sold pursuant to exemptions from all federal and state securities laws that require the filing of a registration statement.   In the event that the Consultant introduces the Company to a placement agent that charges a commission in consideration for introducing the Company to purchasers of its securities, in no event shall the aggregate commissions and f ees to be paid by the Company (including the fees due to the Consultant as set forth in this Section 4(b)) exceed a cash fee of 8% of the total gross proceeds received by the Company or warrant coverage in excess 10% of the total amount of securities issued by the Company in connection with the financing.

(c)

No Requirement to Close.  It is agreed and acknowledged that no compensation shall be earned by or paid to the Consultant arising out of or in connection with a financing that fails to close and that the Company shall be under no obligation to proceed with a proposed financing, or to seek to compel performance by such third-party of a proposed financing, for the benefit of the Consultant.  The Company may refuse, for any reason or no reason, to accept, proceed with or close on a proposed financing and in such event, shall not be obligated to pay the Consultant any fee.  The Consultant is responsible for paying all expenses incurred by it in connection with this Agreement.

5.

Non-Circumvention.

The Company hereby agrees as follows:

(a)

Client Confidentiality.  The Company agrees to maintain the confidentiality of the Consultant’s clients, except as required by applicable law.  Such clients shall be those entities or individuals that the Consultant has procured for investment in the Company.  For a period of two (2) years from the termination of this Agreement, the Company will not solicit or enter into any transaction covered by this Agreement with the Prospects without payment to the Consultant compensation no less than the compensation to be paid to the Consultant hereunder.

4

(b)

Breach.  In the event that the Company breaches Section 5(a) of this Agreement, the Consultant shall be entitled to receive compensation in the same proportion to the transaction done without the Consultant’s participation as the compensation to the Consultant under this Agreement bears to the transaction.

6.

Indemnification.

(a)

Indemnity by Company.  The Company agrees to indemnify and hold harmless the Consultant and the Consultant’s employees, accountants, attorneys and Consultants (the “Consultant’s Indemnities”) against any and all losses, claims, damages or liabilities to which they or any of them may become subject under any statute or at common law for any legal or other expenses (including the costs of any investigation and preparation) incurred by them in connection with any litigation, whether or not resulting in any liability, but only insofar as such losses, claims, damages, liabilities and litigation arise out of or are based upon a breach of this Agreement; provided, however, that the indemnity agreement contained in this Section 6(a) shall not apply to amount paid in settlement of any such litigation, if such settlements are made without the consent of the Company, nor shall it apply to the Consultant’s Indemnities in respect to any such losses, claims, damages or liabilities arising out of or based upon any breach on their part of this Agreement or their negligence or willful misconduct.  This indemnity is in addition to any other liability the Company may otherwise have to the Consultant’s Indemnities.  The Consultant’s Indemnities agree, within ten (10) days after the receipt by them of written notice of the commencement of any action against them in respect to which indemnity may be sought from the Company under this Section 6(a), to notify the Company in writing of the commencement of such action; provided, however, that the Company shall be entitled to participate in (and, to the extent that the Company shall wish, to direct) the defense thereof at its own expense, but such defense shall be conducted by counsel of recognized standing and reasonably satisfactory to the Consultant’s Indemnities in such lit igation.  The Company agrees to notify the Consultant’s Indemnities promptly of the commencement of any litigation or proceedings against the Company or any of the Company’s officers or directors related to this Agreement and to furnish to the Consultant’s Indemnities, at their request, copies of all pleadings therein and to permit the Consultant’s Indemnities to be observers therein and apprise the Consultant’s Indemnities of all developments therein.

(b)

Indemnity by Consultant.  The Consultant agrees, in the same manner and to the same extent as set forth in Section 6(a) above, to indemnify and hold harmless the Company and the Company’s employees, accountants, attorneys and Consultants (the “Company’s Indemnities”) with respect to any breach of any representation, warranty or covenant made by the Consultant in this Agreement or any negligence or willful misconduct of the Consultant.

(c)

Survival.  The indemnification obligations in this Section 6 shall survive termination of this Agreement.

5

7.

Termination.

(a)

Method of Termination.  This Agreement may be terminated by either party upon thirty (30) days prior written notice to the other party.

(b)

Effect of Termination.  Any termination of this Agreement pursuant to this Section shall be without liability of any character (including, but not limited to, loss of anticipated profits or consequential damages) on the part of any party thereto, except that the Company shall remain obligated to pay to the Consultant any fees earned by the Consultant for introduction of its clients, as specified in Sections 4 and 5; and the Company and the Consultant shall be obligated to pay, respectively, all losses, claims, damages or liabilities under Section 6 hereof.

8.

Miscellaneous.  

(a)

Notice.

  Whenever notice is required by the provisions of this Agreement to be given to the Company, such notice shall be in writing, addressed to the Company, at:

If to Company:

EDGEWATER FOODS INTERNATIONAL, INC.

400 Professional Drive, Suite 310

Gaithersburg, Maryland 20878

Phone: 240-864-0449

Fax: 240-864-0450

Whenever notice is required by the provisions of this Agreement to be given to the Consultant, such notice shall be given in writing, addressed to the Consultant, at:

If to the Consultant:

Pai's International trade, Inc

27 Maple Street

Roslyn Heights, NY 11577

Phone: (917) 293 2635

Fax: (516) 908 4144

By written notice to the other party, a party may amend this provision concerning the address for service, which writing will be deemed to amend and be incorporated into this Agreement.  Notice to be made to either party shall be determined to have been properly made if sent by registered mail or facsimile to the address or facsimile number as set forth above, or such other address or facsimile number that may have later been submitted by a party.

(b)

Governing Law.

The validity, interpretation, and construction of this Agreement will be governed by the Laws of the State of New York (without regard to conflict of laws).  The parties agree to submit to jurisdiction in Illinois and agree that any cause of action arising under this Agreement shall be brought in an arbitration proceeding

6

administered by the American Arbitration Association in accordance with its rules then in effect, before a single arbitrator with significant business experience.  The arbitration shall occur in New York, NY and the decision of the arbitrator be enforced by any court of competent jurisdiction.

(c)

Counterparts.

This Agreement may be executed in any number of counterparts, each of which may be deemed an original and all of which together will constitute one and the same instrument.

(d)

Confidential Information.

All confidential financial or business information (except publicly available otherwise obtained from another source) respecting either party will be used solely by the other party in connection with the within transactions, be revealed only to employees or contractors of such other party who are necessary to the conduct of such transactions, and be otherwise held in strict confidence.  Notwithstanding the foregoing, the Consultant and its affiliates shall keep confidential all information concerning the Company and its affiliates obtained by them in connection with the performance of the Consultant Services hereunder, except to the extent disclosure of such information is: (i) necessary to the performance of the Consultant Services (it being understood that persons to whom such disclosure is made shall be informed of the confidential nature of such information);  (ii) required by a pplicable law, regulation or legal process; or (iii) of information which has become public knowledge otherwise than through the actions or efforts of the Consultant or its affiliates or clients.  The Consultant shall return to the Company all confidential information provided by the Company to it upon request of the Company or termination of this Agreement.  In all events, the Company shall have the right to make any and all disclosures relating to this Agreement and any proposed financing as it believes may be required or advisable in connection with its disclosure obligations under the securities laws.  These obligations shall survive termination of this Agreement.

7

(e)

Entire Agreement.  This is the entire Agreement between the parties with respect to the subject matter hereof.  This Agreement may not be modified otherwise than by a writing signed by the party to be changed.

IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be executed as of the day and year first above written.

COMPANY

EDGEWATER FOODS INTL., INC.

By:  ______________________________

Name:  Robert Saunders

Title:  Chairman/CEO

CONSULTANT

Pai’s International Trade, Inc.

By:______________________________

Name:  Sam Pai

Title:  President

8

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use of our report dated November 16, 2005, to this Registration Statement on Form SB-2 Pre-Effective Amendment No. 2 of Edgewater Foods International, Inc. for the registration of shares of its common stock.

/s/  LBB &Associates Ltd., LLP

LBB &Associates Ltd., LLP

(formerly, Lopez, Blevins, Bork and Associates, LLP)

Houston, Texas

October 6, 2006