Edgewater Foods International, Inc. Exhibit 3.1

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JeUlUflfhag+TqgDaKgqMK7d80gjzez2fdGFDMs2WB6QEbj/unodoaA4ZU2toJx3 Jvlf9uFBpfk3s7fQCHzndQ== 0001121781-07-000094.txt : 20070413 0001121781-07-000094.hdr.sgml : 20070413 20070413160644 ACCESSION NUMBER: 0001121781-07-000094 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20070228 FILED AS OF DATE: 20070413 DATE AS OF CHANGE: 20070413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDGEWATER FOODS INTERNATIONAL, INC. CENTRAL INDEX KEY: 0001231339 STANDARD INDUSTRIAL CLASSIFICATION: FISHING, HUNTING & TRAPPING [0900] IRS NUMBER: 203113571 FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-52205 FILM NUMBER: 07766015 BUSINESS ADDRESS: STREET 1: 5552 WEST ISLAND HWY STREET 2: NONE CITY: QUALICUM BEACH STATE: A1 ZIP: V9K2C8 BUSINESS PHONE: 2507579811 MAIL ADDRESS: STREET 1: 5552 WEST ISLAND HWY STREET 2: NONE CITY: QUALICUM BEACH STATE: A1 ZIP: V9K2C8 FORMER COMPANY: FORMER CONFORMED NAME: HERITAGE MANAGEMENT INC DATE OF NAME CHANGE: 20030507 10QSB 1 edwt10qsb22807.txt EDGEWATER FOODS INTERNATIONAL, INC. U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2007 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _______________ COMMISSION FILE NUMBER EDGEWATER FOODS INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Nevada 20-3113571 ------ ---------- (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.) INCORPORATION) US REPRESENTATIVE OFFICE 5552 West Island Highway, Qualicum Beach, British Columbia, Canada V9K 2C8 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (250) 757-9811 (ISSUER'S TELEPHONE NUMBER) (FORMER ADDRESS) CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934 DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X ] NO [ ] INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE SECURITIES EXCHANGE ACT OF 1934) YES [ ] NO [X] AS OF APRIL 13, 2007, THERE WERE 23,285,291 SHARES OF COMMON STOCK, PAR VALUE $0.0001 OUTSTANDING, 8,010,133 SHARES OF SERIES A PREFERRED STOCK, PAR VALUE IS $.001 AND 207 SHARES OF SERIES B PREFERRED STOCK, PAR VALUE IS $.001. TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Consolidated Balance Sheet at February 28, 2007 3 Unaudited Consolidated Statements of Operations for the three and six month periods ended February 28, 2007 and 2006 5 Unaudited Consolidated Statements of Cash Flows for the six month period ended February 28, 2007 and 2006 6 Unaudited notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis or Plan of Operation 23 Item 3. Controls and Procedures 27 PART II - OTHER INFORMATION Item 1. Legal Proceedings 29 Item 2. Unregistered Sales of Equity Securities And Use Of Proceeds 29 Item 3. Defaults Upon Senior Securities 30 Item 4. Submission Of Matters To A Vote Of Security Holders 30 Item 5. Other Information 30 Item 6. Exhibits 31 2 PART I - FINANCIAL INFORMATION EDGEWATER FOODS INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEET FEBRUARY 28, 2007 (unaudited) 2007 ---- ASSETS Current assets: Cash $ 2,225,647 Accounts receivable, net 53,586 Inventory 1,416,432 Loans receivable, related party 56,684 Other current assets 82,988 ------------ Total current assets 3,835,337 Property, plant and equipment, net 2,287,545 Investments in other assets 3,444 ------------ Total assets $ 6,126,326 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short term debt $ 287,692 Current portion of long term debt 428,752 Accounts payable and accrued liabilities 648,378 ------------ Total current liabilities 1,364,822 Long term debt, net of current portion 383,074 ------------ Total liabilities 1,747,896 ------------ Commitments and contingencies Stockholders' equity Series A Preferred stock, par $0.001, 9,999,780 authorized, 7,821,333 issued and outstanding 7,821 Series B Preferred stock, par $0.001, 220 authorized, 207 issued and outstanding -- Common stock, par $0.0001, 100,000,000 authorized, 21,721,824 issued and outstanding 2,172 Additional paid in capital 20,782,333 Accumulated deficit (16,066,813) Accumulated other comprehensive income - foreign currency translation (347,083) ------------ 3 Total stockholders' equity 4,378,430 ------------ Total liabilities and stockholders' equity $ 6,126,326 ============ See accompanying notes to consolidated financial statements 4

See accompanying notes to consolidated financial statements 5

See accompanying notes consolidated to financial statements 7 EDGEWATER FOODS INTERNATIONAL , INC. NOTES TO CONSOLIDATED Financial Statements (unaudited) 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. 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. 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 after the exchange, although Edgewater is the legal parent company. The share exchange was treated as a recapitalization of Edgewater. 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, 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. 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 Edgewater 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 contained herein 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 8 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, 2006. Results of operations for the three and six months ended February 28, 2007, are not necessarily indicative of the operating results for the full accounting year or any future period. Inventory Edgewater 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). Inventories are reported at the lesser of cost or estimated net realizable value. Biomass and finished goods 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 February 28, 2007, inventory consisted of the following: Biomass (Scallops): $1,416,432 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. Edgewater 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, Edgewater 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 9 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. None of Edgewater's derivative financial instruments held as of February 28, 2007 were designated as hedges. Change in Depreciation Method Effective September 1, 2006, as a result of management's evaluation of long-lived depreciable assets, we adopted the straight-line method of depreciation for all property, plant and equipment. Under the new provisions of SFAS No. 154 "Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3," which becomes effective as of September 1, 2006, a change in depreciation method is treated as a change in estimate. The effect of the change in depreciation method will be reflected on a prospective basis beginning September 1, 2006, and prior period results will not be restated. As the results of management's evaluation indicated the current estimated useful lives of our assets were appropriate, the depreciable lives of property, plant and equipment will not be changed. We believe that the change from the declining balance depreciation method to the straight-line method will better reflect the pattern of consumption of the future benefits to be derived from those assets being deprecated and will provide a better matching of costs and revenues over the assets' estimated useful lives. Reclassifications Certain 2006 amounts have been reclassified to conform to 2007 presentation. Recent accounting pronouncements In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position expected to be taken in a tax return. The Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Currently, there would be no effect of this Interpretation on our financial position and results of operations. During September 2006, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements ("FAS 157"). FAS 157 10 establishes a standard definition for fair value, establishes a framework under generally accepted accounting principles for measuring fair value and requires enhanced disclosures about fair value measurements. This standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, the adoption of FAS 157 will have on its financial position and results of operations. During September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 ("SAB 108"), Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statement. This SAB provides guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. This interpretation is effective for the first fiscal year ending after November 15, 2006. We do not expect the adoption of this interpretation to have an impact on our financial position or results of operations. In December 2006, the FASB issued FASB Staff Position EITF 00-19-2, Accounting for Registration Payment Arrangements ("FSP EITF 00-19-2"). FSP EITF 00-19-2 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies. A registration payment arrangement is defined in FSP EITF 00-19-2 as an arrangement with both of the following characteristics: (1) the arrangement specifies that the issuer will endeavor (a) to file a registration statement for the resale of specified financial instruments and/or for the resale of equity shares that are issuable upon exercise or conversion of specified financial instruments and for that registration statement to be declared effective by the US SEC within a specified grace period, and/or (b) to maintain the effectiveness of the registration statement for a specified period of time (or in perpetuity); and (2) the arrangement requires the issuer to transfer consideration to the counterparty if the registration statement for the resale of the financial instrument or instruments subject to the arrangement is not declared effective or if effectiveness of the registration statement is not maintained. FSP EITF 00-19-2 is effective for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to December 21, 2006. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of FSP EITF 00-19-2, this guidance is effective for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years. We do not expect the adoption of FSP EITF 00-19-2 to have a material impact on our consolidated financial statements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159") which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 will be effective for us on January 1, 2008. We are currently evaluating the impact of adopting SFAS 159 on our financial position, cash flows, and results of operations. 11 NOTE 3. PROPERTY, PLANT AND EQUIPMENT Property, Plant and Equipment at February 28, 2007 consisted of the following: Accumulated Net Book Cost Amortization Value ------------------------------------- Land $ 216,998 $ -- $ 216,998 Buildings 738,236 220,338 517,898 Seawater piping and tanks 537,720 268,105 269,615 Boats and Barge 333,939 124,047 209,892 Field equipment 1,853,843 799,349 1,054,494 Office equipment 14,406 12,654 1,752 Vehicles 36,430 34,938 1,492 Computer equipment 24,352 8,948 15,404 ---------- ---------- ---------- $3,755,924 $1,468,379 $2,287,545 ========== ========== ========== Depreciation expenses for the six month ended February 28, 2007 and 2006 was $147,017 and $135,923. NOTE 4. RELATED PARTY TRANSACTIONS We have six secured notes receivable from RKS Laboratories, Inc. ("RKS"), a Vancouver research and development company that is working towards developing superior strains of scallops with beneficial traits such as higher meat yield and rapid growth. (Robert Saunders, our President and CEO, owns 100% of RKS.) The first non-interest bearing note in the amount of $17,222 is secured by all assets of RKS is due on or before June 15, 2007. The second non-interest bearing note in the amount of $4,745 is also secured by all assets of RKS is due on or before August 31, 2007. The third non-interest bearing note in the amount of $17,222 is also secured by all assets of RKS is due on or before September 15, 2007. The fourth non-interest bearing note in the amount of $12,916 is also secured by all assets of RKS is due on or before September 21, 2007. The fifth non-interest bearing note in the amount of $2,324 is also secured by all assets of RKS is due on or before November 30, 2007. The sixth non-interest bearing note in the amount of $2,255 is also secured by all assets of RKS is due on or before February 28, 2008. These amounts are included in current assets as loans receivable. NOTE 5. INVESTMENTS IN TENURES Edgewater carries its Investment in Tenures at $3,444 at February 28, 2007. This amount represents the carrying costs of certain shellfish tenures acquired by Island Scallops' subsidiary, 377332 B.C. Ltd. Shellfish tenures are 12 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 Edgewater and our 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 one of our shareholders totaling $17,240 at February 28, 2007. 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 February 28, 2007, is an amount of $113,544 in respect to an agreement to purchase geoduck seed from us (for additional information see Note 13 - Contingent Liabilities). Included in accounts payable and accrued liabilities at February 28, 2007 is an amount of $69,947 payments due and 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). NOTE 7. SHORT TERM DEBT These consolidated financial statements include Island Scallop's mortgage loan repayable at $1,937 per month including interest calculated at the greater of 10% and (Canadian) prime plus 6% (11.5% as of February 28, 2007). The loan, which was due on April 1, 2007, is secured by a second charge on the real property of Island Scallops. The company is currently finalizing the terms of a new loan for this mortgage payable and the current due date has been extended by the lender until the new loan in completed. At February 28, 2007, the principal due is $183,771. Included in short-term debt at February 28, 2007, is estimated royalties of $57,310 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 3% of revenues from Island Scallops 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 $301,360 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 $57,310 as a current liability and we plan to pay it with available funds in the near future. 13 Included in short-term notes payable at February 28, 2007, is an unsecured non-interest bearing demand loan from an individual with a face value of $43,198 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 short-term debt is a bank loan repayable at $448 per month plus interest calculated at (Canadian) prime plus 3% per annum (9% as of February 28, 2007), that is unsecured and is due October 23, 2007. At February 28, 2007, the principal due is $3,413. These consolidated financial statements formerly included 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. Per the terms of the loan, if we were unable to generate sufficient revenues to repay the original amount of the loan by January 1, 2007, the remaining balance would be forgiven. As such, the remaining balance of approximately $159,000 was forgiven on January 1, 2007. NOTE 8. 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. In September 2006, we entered into a Settlement Agreement with the Minister of Western Economic Diversification to amend the repayment terms of our non-interest bearing loan of $597,103 (to Island Scallops) with the Western Diversification Program. We agreed to repay the $170,981 due as of August 31, 2006, in accordance with a payment schedule beginning with a payment of $62,736 in September 2006 and continuing with monthly payments of roughly $9,840 until August 15, 2007. The parties agreed that the remaining balance of the $426,122 shall be repaid via quarterly payments equal to the greater of $30,856 or 4% of the gross scallop sales starting the quarter beginning on June 1, 2007 and subsequent quarters until the balance is repaid. Under the terms of this agreement, the first quarter payment will be due on September 30, 2007. At February 28, 2007, the balance due is $473,884, of which $116,643 is reflected in the current portion of long term debt and the remaining balance of $357,241 is reflected as long term 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 revenues of Island Scallops until the earlier of full repayment or December 1, 2012. The amount repayable is up to 150% of the original advance of $379,424, 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 February 28, 2007, bear interest at a rate of 1% per month. At February 28, 2007, Island Scallops is in arrears in respect to the payment of these amounts. The National Council of Canada Industrial Research Assistance Program has requested payment of the 14 $69,947 that they claim is owed under this loan agreement. As such, at February 28, 2007, $69,947 is included in accounts payable and accrued liabilities and the remaining full principal balance of $312,109 is reflected in the current portion of long term debt. We are seeking to renegotiate the repayment terms. Included in long-term debt is one bank loan to Island Scallops. The bank loan is repayable at $1,076 per month, plus interest calculated at the floating base rate of the Business Development Bank of Canada plus 1.5% annum (9.5% as of February 28, 2007), is due February 23, 2009 and is secured by a General Security Agreement over the assets of Island Scallops, a mortgage charge on Island Scallops' real property and a personal guarantee of $43,055 by our Chairman, President and CEO, and former sole shareholder of Island Scallops. At February 28, 2007, the principal due is $25,833. NOTE 9. SERIES B PREFERRED STOCK FINANCING We completed a private equity financing of $2,070,000 on January 16, 2007, with two accredited investors. Net proceeds from the offering are approximately $1,864,500. We issued 207 shares of our Series B Preferred Stock, par value $0.001 per share and stated value of $10,000 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 J Warrant, (v) Series D Warrant, (vi) Series E Warrant, and (vii) Series F Warrant, each to purchase a number of shares of common stock equal to fifty percent (50%) of the number of shares of common stock issuable upon conversion of the purchaser's preferred stock, except for the Series J Warrants, which shall entitle the investor to purchase a number of shares of our common stock equal to one hundred percent (100%) of the number of shares of common stock issuable upon conversion of the purchaser's preferred stock. Each of the Warrants has a term of 6 years, except for the Series J Warrants, which have a term of 1 year. Each share of the preferred stock is convertible into a number of fully paid and nonassessable shares of our common stock equal to the quotient of the liquidation preference amount per share ($10,000) divided by the conversion price, which initially is $1.15 per share, subject to certain adjustments, or approximately 8,696 shares of common for each share of converted preferred stock. We issued a total of 7,200,345 Warrants. In connection with this financing, we paid cash compensation to a placement consultant in the amount of $165,600 and issued him placement consultant warrants, exercisable for a period of three years from the date of issue. The placement consultant's warrants allow him to purchase up to (i) 20 shares of Series B Preferred Stock, and each of the following warrants, which are identical to the warrants issued to the investors of the financing: (i) Series A Warrant, (ii) Series B Warrant, (iii) Series C Warrant, (iv) Series D Warrant, (v) Series J Warrant, (vi) Series E Warrant, and (vii) Series F Warrant, each to purchase 90,004 shares of common stock, except for the Series J Warrants, which shall entitle the Consultant to purchase 180,008 shares of common stock. The placement consultant warrant is exercisable at a price of $1.15, for a period of three years. The fees were recorded as a cost of capital. The net proceeds from the January 16, 2007 financing are to be used for capital expenditures necessary to expand our operations into clam farming in Morocco (any remaining proceeds may be used for working capital and general corporate 15 purposes). We are currently conducting due diligence on a North African based aquaculture company that farms shellfish products in Morocco and pending the successful completion of such inquiry, may acquire a majority ownership interest in the company. At the date of this filing, we have not entered into any binding agreements for the purchase of such company and may or may not do so depending on the results of our due diligence investigation. NOTE 10. SERIES A PREFERRED STOCK WARRANT LIABILITIES The warrants that each investor received as a result of our April 12, May 30, June 30 and July 11 Preferred Stock Financing contained a cashless exercise provision that becomes effective one year after the original issuance date of such warrants if our registration statement (that we are required to file under the Series A Preferred Stock Financing's corresponding registration rights agreement) is not then in effect by the date such registration statement was required to be effective pursuant to the Registration Rights Agreement of the Preferred Stock Financing or not effective at any time during the Effectiveness Period (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement. 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. We determined the fair value of the warrants as follows as of April 12, 2006, May 30, 2006, June 30, 2006 and July 11, 2006 (the issuance dates). We 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), $1.40 (at May 30), $1.35 (at June 30) and $1.40 (July 11) 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), 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), a risk free rate of 4.71% and 4.70%, which equals the three and five-year yield on Treasury bonds at constant (or fixed) maturity (for those warrants issued on June 30) and a risk free rate of 4.71% and 4.70%, which equals the three and five-year yield on Treasury bonds at constant (or fixed) maturity (for those warrants issued on July 11); and volatility of 93%. Under the assumptions, the Black-Scholes option pricing model yielded an aggregate value of approximately $19,494,000 with a current portion of approximately $1,225,000. We performed the same calculations as of August 31, 2006, to revalue the warrants as of that date. In using the Black Scholes option-pricing model, we used an underlying stock price of $1.40 per share; no dividends; a risk free rate of 5.01%, 4.71% and 4.70%, which equals the one, three and five-year yield on Treasury bonds at constant (or fixed); and maturity volatility of 93%. The resulting aggregate allocated value of the warrants as of August 31 2006 equaled approximately $22,160,000. The change in fair value of approximately $2,666,000 (with a current portion of roughly $519,000) was recorded for the period ended August 31, 2006. We performed the same calculations as of November 30, 2006, to revalue the warrants as of that date. In using the Black Scholes option-pricing model, we 16 used an underlying stock price of $1.50 per share; no dividends; a risk free rate of 4.94%, 4.52% and 4.45%, which equals the one, three and five-year yield on Treasury bonds at constant (or fixed); and maturity volatility of 100%. The resulting aggregate allocated value of the warrants as of November 30, 2006 equaled approximately $24,928,000. The change in fair value of approximately $2,768,000 (with a current portion of roughly $198,000) was recorded for the period ended November 30, 2006. We performed the same calculations as of February 21, 2007 (date of reclassification of warrant liability, see Note 12 for additional information), to revalue the warrants as of that date. In using the Black Scholes option-pricing model, we used an underlying stock price of $1.15 per share; no dividends; a risk free rate of 5.05%, 4.74% and 4.68%, which equals the one, three and five-year yield on Treasury bonds at constant (or fixed); and maturity volatility of 96%. The resulting aggregate allocated value of the warrants as of February 21, 2007 equaled approximately $17,365,000. The change in fair value (gain) of approximately $7,563,000 (with a current portion of roughly $994,000) was recorded for the period ended February 21, 2007. 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 11. SERIES B PREFERRED STOCK WARRANT LIABILITIES The warrants that each investor received as a result of our January 16, 2007 Series B Preferred Stock Financing contained a cashless exercise provision that becomes effective one year after the original issuance date of such warrants if our registration statement (that we are required to file under the Series B Preferred Stock Financing's corresponding registration rights agreement) is then in effect by the required date or not effective at any time during the Effectiveness Period (as defined in the Registration Rights Agreement). 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. We determined the fair value of the warrants as follows as of January 16, 2007 (the issuance date): We 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 six), underlying stock price of $1.40 (at January 16), no dividends; a risk free rate of 5.06%, 4.79% and 4.74%, which equals the one, three and six-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 93%. Under the assumptions, the Black-Scholes option pricing model yielded an aggregate value of approximately $4,117,000 with a current portion of approximately $1,058,000. We performed the same calculations as of February 2, 2007 (date of reclassification of warrant liability, see Note 12 for additional information), to revalue the warrants as of that date. In using the Black Scholes option-pricing model, we used an underlying stock price of $1.15 per share; no dividends; a risk free rate of 5.05%, 4.74% and 4.68%, which equals the one, three and six-year yield on Treasury bonds at constant (or fixed); and maturity 17 volatility of 96%. The resulting aggregate allocated value of the warrants as of February 21, 2007 equaled approximately $3,085,000. The change in fair value (gain) of approximately $1,033,000 (with a current portion of roughly $342,000) was recorded for the period ended February 21, 2007. 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 12. RECLASSIFICATION OF WARRANT LIABILITIES ASSOCIATED WITH SERIES A AND SERIES B PREFERRED FINANCINGS The warrants that each investor received as a result of our April 12, May 30, June 30 and July 11, 2006 Series A Preferred Stock Financing and our January 16, 2007 Series B Preferred Stock Financing contained a cashless exercise provision that becomes effective one year after the original issuance date of such warrants if our registration statements (that we are required to file under the registration rights agreement for both financings) are not then in effect by the date such registration statement was required to be effective pursuant to the each Registration Rights Agreement of the Preferred Stock Financings or not effective at any time during the Effectiveness Period (as defined in each of the Registration Rights Agreements) in accordance with the terms of each of the Registration Rights Agreement. As such and in accordance with the accounting guidelines under SFAS No. 133 and ETIF Issue No. 00-19 (Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a, Company's Own Stock), we classified the warrants as a liability because the cashless exercise provision did not specify whether the contract could be settled via the delivery of unregistered shares of our common stock. As such and per the terms of paragraph 14 of ETIF 00-19 (see below), we assumed net-cash settlement and the warrants were classified as a derivative financial instrument and the corresponding liabilities were entered onto our consolidated balance sheet, measured at fair value. We determined the fair value of the warrants as follows as of April 12, 2006, May 30, 2006, June 30, 2006, July 11, 2006 and January 16, 2007 (the issuance dates) and we preformed the same calculation as of May 31, August 31, November 30 and February 28 to revalue the warrants at the end of each period (as described above in Notes 9 and 10). The change in fair value was then recorded for each period. On February 28, 2007, the cashless exercise provision for all warrants issued in conjunction with both the Series A and Series B Preferred Stock financings was modified to clarify that any shares issued in connection with the cashless exercise will be "restricted." As a result, we determined that (per the accounting guidelines under SFAS No. 133 and ETIF Issue No. 00-19) we are now able to net-share settle the contract by delivery of unregistered shares and that the warrant liability should be reclassified as permanent equity. The initial fair value of the Series A warrant liability was determined to be approximately $19,494,000 (with a current portion of approximately $1,225,000). Since this value exceeded our additional paid in capital ("APIC") balance, approximately $9,021,000 of the liability was allocated to APIC and the 18 remaining $10,472,000 was allocated to retained deficit. We made this decision because the changes in the fair value of the warrants are marked through our profit and loss. The initial fair value of the Series B warrant liability was determined to be approximately $4,117,000 (with a current portion of approximately $1,058,000). Since this value exceeded our additional paid in capital ("APIC"), approximately $2,099,000 of the liability was allocated to APIC and the remaining $2,018,000 was allocated to retained deficit. We made this decision because the changes in the fair value of the warrants are marked through our profit and loss. As described above, a portion of the fair value of the warrant liability was allocated to APIC and the remaining balance was allocated to retained deficit. Subsequent changes in the fair value of the warrants (at May 31, August 28, November 30, and February 28), were marked through our profit and loss. Since the terms of the cashless provision have been clarified and the warrants were reclassified as equity, we reversed the liabilities and allocated approximately $20,450,000 to APIC ($17,365,000 from the Series A financing warrants and $3,085,000 from the Series B financing warrants). NOTE 13. CONTINGENT LIABILITIES Our wholly owned subsidiary, Island Scallops, entered into an agreement in 1998 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 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 $113,544, is included in accounts payable and accrued liabilities. Management's position is that the two parties violated the terms of the agreement and we are therefore entitled to retain the balance of the deposits. Per the terms of the original agreement, Island Scallops 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 made claims that Island Scallops owed it an amount totaling $88,925. 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 $33,126. 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 covering the replacement of our inventory. Consequently, we are exposed to financial losses or failure as a result of this risk. 19 NOTE 14. STOCK-COMPENSATION EXPENSE On December 31, 2006, we issued 138,565 shares of common stock to the Series A Convertible Preferred Stock holders. The number of shares issued was based on the Dividend Payment at a rate of 8% per annum (subject to a pro rata adjustment) of the Liquidation Preference Amount ($1,416,000 for the April 12 financing, $1,500,000 for the May 30 financing, $1,550,000 for the June 30 financing and $1,450,000 for the July 11 financing) payable in shares equal to 90% of the quotient of (i) the Dividend Payment divided by (ii) the average of the VWAP for the twenty (20) trading days immediately preceding the date the Dividend Payment is due, but in no event less than $0.65. As such, the shares were valued at approximately $234,000 and the total aggregate value of the transaction was recorded as a preferred stock dividend. 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 August 31, 2006, our Board of Directors had authorized the issuance of 282,000 options to employees. In September 2006, we engaged PR Global Concept GBR to provide international investor relations services. The initial term of the agreement was for two years. Pursuant to the consulting agreement, we were to pay PR Global $5,000 per month for the term of the agreement. As additional compensation, we originally agreed to issue a total of 500,000 options to purchase our common stock in quarter installments, the first 125,000 of which was to vest immediately upon signing of the agreement and the remainder of which was to vest in three equal amounts of 125,000 after 3 months, 12 months and the final installment, 15 months after the date of signing; the options are exercisable at strike prices ranging from $1.40 to $2.25. The options were to be exercisable for a period of three years from the date of the vesting. In December 2006, we entered into an Amended and Restated Agreement with PR Global Concept GBR. Under the terms of the amended agreement, PR Global was only eligible to receive a total of 350,000 (as opposed to 500,000 in the original agreement) options to purchase our common stock in the following installments: 25,000 options every 3 months after the date of the Amended Agreement for a total of four installments; one installment of 125,000 options 18 months from the date of the Amended Agreement; and, one installment of 125,000 options 24 months from the date of the Amended Agreement. The options issued in the first four installments were to be exercisable at a strike price of $1.52 and the last two installments were to be exercisable at a strike price of $2.25. The options were to be exercisable for a period of three years from the date of the vesting. Additionally, PR Global would no longer receive the $5,000 monthly payment; we did however pay the one month owed to PR Global under the original agreement when the Amended Agreement was signed. The Amended Agreement was otherwise unchanged from the originally entered into agreement with PR Global. On January 20 12, 2007, however, we terminated our Amended and Restated Agreement with PR Global and ended our relationship with the firm. As such, we rescinded the 350,000 options that were to be issued under the amended agreement and PR Global is to receive no additional compensation. On February 1, 2007 we issued Kitsilano Capital Corp. four 100,000 options to purchase our common stock, pursuant to our Consulting Agreement with them. The first option vests on May 1, 2007, the second on August 1, 2007, the third on February 1, 2008 and the fourth on June 1, 2008, so long as Kitsilano continues to provide services to us under the Consulting Agreement. Each option is exercisable for a period of three years from the vesting date and has an exercise price of $1.20, $1.40, $1.60 and $1.80 respectively. The shares underlying the options have piggy-back registration rights that required us to register the shares in our last registration statement. The options and the shares underlying the options 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. Stock option activity during the period ending February 28, 2007 was as follows: Weighted Number of Average Shares Exercise Price --------------------------------- Outstanding, September 1, 2006 282,000 $ 1.50 Granted 400,000 1.50 Exercised -- -- Forfeited -- -- Expired -- -- --------------------------------- Outstanding, February 28, 2007 682,000 $ 1.50 ================================= Exercisable, February 28, 2007 282,000 $ 1.50 ================================= At February 28, 2007, 62,000 of the exercisable options expire in August 2010 with the remaining balance of 220,000 having an expiration date of August 2015. NOTE 15. SERIES A PREFERRED STOCK CONVERSION AND WARRANT EXERCISE On November 7, 2006, a holder of our series A preferred stock exercised their right to covert 66,666 shares of our series A preferred stock into 66,666 share of common stock. As such, we issued 66,666 shares of common stock and canceled 66,666 shares of our series A. On February 22, 2007, we issued 533,333 shares of common stock to an investor of our April 12, 2006 financing in connection with the exercise of 533,333 Series J warrants received by such investor as part of the financing. We received net proceeds of approximately $276,000 pursuant to the exercise of these warrants. NOTE 16. GOING CONCERN 21 Prior to the completion of our Preferred Stock Financing 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 February 28, 2007, we had a cash balance of approximately $2,226,000. Although management believes that we have adequate funds to maintain our business operations into the third and fourth quarter and/or until we become cash flow positive, we continued to suffer operational losses in the first half 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. Based on these factors, there is 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 17. SUBSEQUENT EVENTS On April 5 2007, we issued 88,000 shares of common stock to an investor of our April 12th financing in connection with the exercise of 88,000 Series J warrants received by such investor as part of the financing. We received net proceeds of approximately $45,600 pursuant to the exercise of these warrants. On April 12, 2007 we issued 1,266,667 shares of common stock to an investor of our April 12th financing in connection with such investor's exercise of 1,266,667 Series J warrants he received as part of the April 12th financing. We received net proceeds of approximately $655,500 pursuant to the exercise of these warrants. On April 12, 2007, we issued 188,800 shares of our Series A Preferred Stock and the followings 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 944,000 Warrants. Each of the Warrants has a term of 5 years, except for the Series J Warrants, which have a term of 1 year. Each share of the Series A Preferred Stock is convertible into one fully paid and nonassessable share of our common stock. These shares and warrants were issued as a result of the exercise of 188,800 placement consultant warrants received as a result of our April 12, 2006 financing. We received net proceeds of approximately $106,000 pursuant to the exercise of these warrants. On April 12, 2007, we issued 188,800 shares of common stock to the placement consultant of our April 12, 2006 financing in connection with the exercise of 188,800 Series J warrants, which the placement consultant received from his exercise of his placement consultant warrant. We received net proceeds of approximately $106,000 pursuant to the exercise of these warrants. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 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 first quarter of our 2007 fiscal year, we started harvesting the remaining balance of our 2004 year class of scallops and completed transferring our 2005 year-class scallops that were still maturing in our tenured growing 22 sites and joint venture locations, to final stage large grow-out nets on our farm sites. 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 scallop crop and subsequent year-classes, but after inspection of growth rates of the 2004 ear-hung crops and an analysis of the labor costs of ear-hanging versus lantern-style netting, we decided to use nets for the final grow-out stage of the 2005 crop and subsequent classes. The harvest of the remaining 2004 scallop-class started slower than expected as we worked to develop improved processing and handling facilities and because the handling and harvesting of these ear-hung scallops (on our farm sites) proved to be tougher and more time consuming than originally expected. The combination of these two factors resulted in slower than anticipated harvest rates in the first quarter. Management believes that the improved processing facility that was completed in the second quarter of 2007 will provide us with several important advantages that will lead to expedited sale processes in the upcoming months. Such advantages, which include a large onshore handling area that enables us to bring product indoors (when needed) for line-removal and mass sorting (versus having to do the same onboard boats) and provides a significantly larger inventory holding and handling area, will help prevent future weather related harvest delays to our sales. Starting with the 2005 scallop class, future scallops will be grown in nets and hung from our new and improved longline system thereby eliminating most of the problems that we experienced harvesting (and handling) the ear-hung product. Despite the slower than expected start to the 2004 year-class harvest and handling problems with our remaining ear hung product, we anticipate bringing a significant number scallops to market before the end of 2007 fiscal year. We began harvesting our 2005 scallop class in March of 2007 and expect to bring between 3 and 4 million scallops to market over the next twelve months. Additionally, we plan on generating additional near term revenues via the sale of scallop and possibly other shellfish seed. The use of DNA based family analysis that started in early 2000 and will continue through 2007, with the goal of breeding high meat yield scallops, began showing results in the harvest of our 2004 scallop class. Average weight per scallop increased from 150-180 grams to over 225-250 grams -- representing an increase of over 20% from the previous year. Management believes that the improved meat yield will allow us to continue to demand higher scallop prices per animal. Also, the Pacific scallop, farmed by us, continues to prove itself highly disease resistant, with up to a 95% survival rate during the grow-out phase. During the first and second quarter of our 2007 fiscal year, we continued moving the 2006 scallop crop from the onshore ponds at our harvest facility into grow-out nets at our tenure sites. We anticipate that of the over 350 million larvae that were spawned during the 2006 spawning season, at least 5 to 10 million scallops could reach full maturity and thus be harvested. 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 rates (at various points of the growth cycle) are significantly better than our current projection or if growth rates are substantially higher. In addition, we 23 expect our new longline and anchor systems, scallop nets and improved processing facility will continue to improve harvesting rates as our scallop classes increase in size. As a result of the above, we believe that the 2005 scallop-class will produce at least $5.5 million of gross 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 gross 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 addition, changes in the anticipated growth rates, projected harvesting cycles and large fluctuations in the price of scallops or the US-Canadian exchange rate could impact our current projections. COMPARISON OF RESULTS FOR THE THREE MONTHS AND SIX MONTHS ENDED FEBRUARY 28, 2007 TO THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2006. Revenues. Revenues for the three months ended February 28, 2007, were approximately $182,000. We had revenues of approximately $143,000 for the three months ended February 28, 2006. This is an increase of approximately $39,000 or 27%. Revenues for the six months ended February 28, 2007, was approximately $305,000 as compared to $304,000 for the six months ended February 28, 2006. The slower than expected increase in our revenues was mainly the result of a slower than anticipated start to the 2004 harvest and an unexpected early season winter storm that forced us to curtail harvesting operations during at least one week in November. Handling and harvesting of our 2004 ear-hung scallops also proved to be tougher and more time consuming than originally expected, thereby slowing our anticipated harvest rates. In addition, revenue for the six months ended February 28, 2006, was also bolstered by a one-time sale on inventory equipment and large scallop seed sales. As such, scallop-only sales were higher for the six months ending February 28, 2007, as opposed to the six months ending February 28, 2006. As in the previous year, management continued its emphasis on the development and production of larger future (2005 and 2006) scallop crops. Management believes that our emphasis on expansion of future crops coupled with the recently completed new processing facility will yield a significant increase in revenue starting as early as our next quarter and continuing thereafter. Gross profit (loss). Gross loss for the three months ended February 28, 2007, was approximately $92,000, an increase of approximately $102,000 as compared to gross profit of roughly $10,000, for the three months ended February 28, 2006. For the six months ended February 28, 2007, gross loss was approximately $160,000. For the six months ended February 28, 2006 gross loss was roughly $2,000. The increase in the amount of gross loss for this quarter (as compared to the same periods in our 2006 fiscal year) was mainly attributable to the slower than anticipated start to our 2004 class of scallops' harvest as we worked to develop improved processing and handling facilities. Additionally, because of an unusually large winter storm in November, we experienced some minor weather related sale delays as harvesting operations were under way during November. Aside from the slower than expected first quarter scallop sales, part 24 of the increase in gross loss was attributable to an increase in costs related to a ramp-up of our processing personnel in preparation for increased future harvests and sales. General and administrative. General and administrative expenses for the three months ended February 28, 2007, were approximately $245,000. Our general and administrative expenses were approximately $63,000 for the three months ended February 28, 2006. This is an increase of approximately $182,000 or 289%. General and administrative expenses for the six months ended February 28, 2007, were approximately $421,000. Our general and administrative expenses were approximately $106,000 for the six months ended February 28, 2006. This is an increase of approximately $315,000 or 297%. Our increase in general and administrative expenses for the three and six months ended February 28, 2007 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, and salaries. We anticipate that these costs may continue to rise as we continue to expand our operations. Stock compensation expense. During the three and six months ended February 28, 2007, 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 February 28, 2007. During the six months ended February 28, 2006, our Board of Directors authorized the issuance of shares of our restricted common stock to two consulting groups who would provide services to us. 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 $183,000. Other income (expense), net. Interest expense for the three months ended February 28, 2007, was approximately $5,000. Interest expense for the three months ending February 28, 2006, was approximately $53,000. The decrease in interest expense was mainly due to repayment of a large short term note in the third quarter of 2006. Other income for the three months ended February 28, 2007, was approximately $159,000 as opposed to other expense of approximately $517,000 for the three months ended February 28, 2006. This increase was mainly due to a one time gain of approximately $159,000 related to the forgiveness of a third party short-term debt. We recognized a gain of approximately $8,595,000 which was related to a reclassification of certain liabilities related to warrants issued to 10 institutional and accredited investors in conjunction with preferred stock financings on April 12, May 30, June 30, July 11, 2006 and January 16, 2007 and a resultant change in the fair value of such warrants as a result of the reclassification as well as the market price of the common stock underlying such warrants at November 30, 2006. No such gain or loss was recorded for the period ended February 28, 2006. Interest expense for the six months ended February 28, 2007 was approximately $12,000 as compared to interest expense of roughly $106,000 for the six months ending February 28, 2006. Other income for the six months ended February 28, 2007 was approximately $161,000. For the six months ended February 28, 2006, other expense was roughly $513,000. This increase in other income was mainly due to issuance of 520,000 share of restricted stock to one group in consideration for the extension of the due date on a share term loan to Island Scallops and a one time gain of approximately $158,000 related to the forgiveness of a third party short-term debt in 2007. We recognized a gain of approximately $5,827,000 which was related to the change in 25 the fair value of warrants issued to 10 institutional and accredited investors in conjunction with preferred stock financings on April 12, May 30, June 30, July 11, 2006 and January 16, 2007 and the market price of the common stock underlying such warrants for the six months ended February 28, 2007. No such gain or loss was recorded for the period six months ended February 28, 2006. As a result, other income for the three and six months ended February 28, 2007, was approximately $8,749,000 and $5,976,000 as compared to other expense of approximately $570,000 and $619,000 for the three and six months ended February 28, 2006. This increase was primarily attributed to gain associated with the reclassification of certain liabilities associated with warrants issued to investors in our Series A and B Preferred Stock financings and the resultant change in fair value of the warrants following the reclassification (See Foot Note 12 to our Financial Statements "Reclassification of Warrant Liabilities Associated with Series A and Series B Preferred Financings."). Net profit (loss). As a result of the above, the net profit for three and six months ended February 28, 2007, was approximately $8,339,000 and $5,235,000 as compared to a net loss of approximately $659,000 and $989,000 for the three and six months ended February 28, 2006. Liquidity and Cash Resources. At February 28, 2007, we had a cash balance of approximately $2,225,000. Between April 2006 and January 2007, we completed five private equity financings that resulted in net proceeds of approximately $7,004,000. These financings contain warrants which if fully exercised could raise approximately an additional $49,350,000. In February, 2007, one investor exercised warrants that net us an additional $276,000. The exercise of the any additional warrants is, however, to a large extent dependent upon the price of our stock in the public market. As a result, we cannot guarantee when any of the warrants will be exercised, if at all and, as a result, the proceeds from the exercise of the warrants may not be available to us at a time when we require additional financing or ever. Prior to the completion of the Preferred Stock Financing in the third quarter of 2006, our working capital had been primarily financed with various forms of debt. Previously, we 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 have been able to deploy the bulk of the proceeds from our financing toward our business strategy. In addition to the foregoing, we are currently conducting due diligence regarding the possible acquisition of a clam farming operation in Morocco. Although to date we have not entered into any definitive agreements, in the event that we determine to go ahead with such an acquisition it will result in commitment of up to $1,000,000 in capital to such acquisition over a period of approximately six months to one year. We anticipate that if we decide to move forward with such acquisition it would occur sometime in the third or fourth fiscal quarter of 2007. ITEM 3. CONTROLS AND PROCEDURES 26 (a) Evaluation of disclosure controls and procedures ------------------------------------------------ Under the supervision and with the participation of our management, including our principal executive officer and acting chief accounting officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of November 30, 2006. Based on this evaluation, our principal executive officer and our acting chief accounting officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that our Internal Controls are effective at that assurance level to provide reasonable assurance that our financial statements are fairly presented inconformity with accounting principals generally accepted in the United States. (b) Changes in internal controls ---------------------------- During the quarter ended February 28, 2007, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management does not expect that Disclosure Controls or Internal Controls will prevent all error and all fraud. A control system, no matter how well developed and operated, can provide only reasonable, but not absolute assurance that the objectives of the control system are met. Further, the design of the control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of a system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 27 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In 1998 our wholly owned subsidiary, Island Scallops, entered into an Agreement with two parties, pursuant to 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 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. As of August 31, 2004, one of the two purchasers had claimed that Island Scallops owed it amounts totaling $88,925. 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. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS (a) Unregistered Sales of Equity Securities Pursuant to the financing we closed on January 16, 2007, we issued 207 shares of our Series B Preferred Stock. The shares were issued to two 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 connection with the January 16, 2007 financing, we issued the placement consultant a placement consultant warrant, exercisable for a period of three years from the date of issue and has an exercise price of $1.15 per share. The warrant allows the placement consultant to purchase up to (i) 20 shares of Series B Preferred Stock, and each of the following warrants, which are identical to the warrants issued to the investors of the financing: (i) Series A Warrant, (ii) Series B Warrant, (iii) Series C Warrant, (iv) Series D Warrant, (v) Series J Warrant, (vi) Series E Warrant, and (vii) Series F Warrant, each to purchase 90,004 shares of common stock, except for the Series J Warrants, which shall entitle the consultant to purchase 180,008 shares of common stock. 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. 28 On February 1, 2007 we issued Kitsilano Capital Corp. four 100,000 options to purchase our common stock, pursuant to our Consulting Agreement with them. The first option vests on May 1, 2007, the second on August 1, 2007, the third on February 1, 2008 and the fourth on June 1, 2008, so long as Kitsilano continues to provide services to us under the Consulting Agreement. Each option is exercisable for a period of three years from the vesting date and has an exercise price of $1.20, $1.40, $1.60 and $1.80 respectively. The shares underlying the options have piggy-back registration rights that required us to register the shares in our last registration statement. The options and the shares underlying 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. (b) Not Applicable. (c) Not Applicable. (d) Not Applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES (a) Not Applicable. (b) Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At our 2007 Annual Shareholder Meeting, which was held on February 12, 2007, 15,591,851 (73.59%) of our shareholders voted to re-elect our entire board of directors. There were no votes against or withheld for any of the nominees, nor were there any broker non-votes or abstentions. ITEM 5. OTHER INFORMATION (a) On March 22, 2007, our directors amended and restated our bylaws by unanimous written consent in lieu of a board meeting. Article I, Section 1 of the bylaws was amended to accurately state the location of our current principal office, which is 400 Professional Drive, Suite 310, Gaithersburg, Maryland 20878 and Article II, Section 2 was amended to allow for directors to be elected by a plurality of the votes cast at the election (previously, directors were elected by a majority vote). Since Nevada law permits board of directors to be elected by a plurality, our directors determined that it was beneficial to amend our bylaws to permit same. Our amended and restate bylaws are attached as an exhibit to this report. 29 (b) Not applicable. ITEM 6. EXHIBITS (a) The following exhibits are filed as part of this report. Exhibit No. Document 3.1 Articles of Incorporation, as amended 3.2 Amended and Restated Bylaws 4.1 Form of Series B Convertible Preferred Stock Purchase Agreement, dated January 16, 2007, by and between the Company and each of the Purchasers thereto. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 17, 2007). 4.2 Form of Registration Rights Agreement, dated January 16, 2007, by and between the Company and each of the Purchasers thereto. (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on January 17, 2007). 4.3 Form of Certificate of Designation of Rights and Preferences of Series B Convertible Preferred Stock. (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on January 17, 2007). 4.4 Form of Lock-Up Agreement dated January 16, 2007 by and between the Company and each of the shareholders listed therein. (Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on January 17, 2007). 4.5 Form of Warrant to purchase Common Stock (Incorporated by reference to Exhibits 10.5 to 10.11 to the Company's Current Report on Form 8-K filed on January 17, 2007). 4.6 Placement Consultant Agreement with Pai's International Trade, Inc. dated March 9, 2006. (Incorporated by reference to Exhibit 10.7 in the Company's Registration Statement on Form SB-2 filed on October 10, 2006). 30 4.7 Form of Common Stock Purchase Warrant issued to Kitsilano Capital Corp. (Incorporate by reference to Exhibit 4.12 to the Company's Registration Statement on Form SB-2 filed on February 9, 2007). 10.1 Form of Escrow Agreement (Incorporated by reference to Exhibit 10.12 to the Company's Current Report on Form 8-K filed on January 17, 2007). 10.2 Consulting Agreement between Kitsilano Capital Corp. and the Company dated February 1, 2007 (Incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form SB-2 filed on February 9, 2007). 31.1 Certification of Chief Executive Officer and Acting Chief Financial Officer required by Rule 13a-14/15d-14(a) under the Exchange Act 32.1 Certification of Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 13, 2007 EDGEWATER FOODS INTERNATIONAL, INC. By: /s/ Robert Saunders --------------- Robert Saunders, Chief Executive Officer By: /s/ Michael Boswell --------------- Michael Boswell, Acting Chief Accounting Officer 31 EX-3.1 2 exhibit3one.htm ARTICLES OF INCORPORATION, AS AMENDED Edgewater Foods International, Inc. Exhibit 3.1

ARTICLES OF INCORPORATION

EDGEWATER FOODS INTERNATIONAL, INC.

I, the undersigned natural person of the age eighteen (18) years or more, acting as incorporator of a corporation under the General Corporation Law of the State of Nevada, do hereby adopt the following Articles of Incorporation:

ARTICLE I

The name of this corporation is Edgewater Foods International, Inc.

ARTICLE II

Its registered office in the State of Nevada is to be located at 2533 North Carson Street, Carson City, Nevada 89706. The registered agent in charge thereof is Laughlin Associates at 2533 North Carson Street, Carson City, Nevada 89706.

ARTICLE III

The nature of the business and, the objects and purposes proposed to be transacted, promoted and carried on, are to do any or all the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz:

"The purpose of the corporation is to engage in any lawful act or

activity for which corporations may be organized under the General

Corporation Law of the State of Nevada."

ARTICLE IV

The authorized capital is made up of two classes:

(a)

100,000,000 shares of Common Stock of USD .001 par value;

(b)

8,000,000 shares of Series A Convertible Preferred Stock with $.001 par value per share (“Series A Convertible Preferred Stock”);

(c)

220 shares of Series B Convertible Preferred Stock with a $.001 par value per share (“Series B Convertible Preferred Stock”) and,

(d)

1,999,780 shares Preferred Stock with $.001 par value per share (“Blank Check Preferred Stock”).

ARTICLE V

The name and address of the incorporator signing the articles of incorporation is as follows:

Lee Murdock

1529 E. I-30, Suite 104

Garland, Texas 75043

ARTICLE VI

The governing board of this corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided in the bylaws of this corporation, provided that the number of directors shall not be reduced less than one or be more than ten.

The name and address of the first director, which is one in number, is as follows:

Lee Murdock

1529 E. I-30, Suite 104

Garland, Texas 75043

ARTICLE VII

Meetings of stockholders may be held outside of the State of Nevada at such place or places as may be designated from time to time by the board of directors or in the bylaws of the corporation.

ARTICLE VII

This corporation reserves the right to amend, alter, change or repeal any provision contained in the articles of incorporation, in the manner now or hereafter prescribed, and all rights conferred upon stockholders herein are granted subject to this reservation.

ARTICLE VII Elimination or Limitation of Liability of Directors

No director shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director: provided, however, that nothing contained herein shall eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for any transaction from which the director derived an improper personal benefit, or (iv) for any act or omission occurring prior to their directorship.

ARTICLE VIII Indemnification of Directors and Officers

The corporation shall indemnify the directors and officers of the corporation, and of any subsidiary of the corporation, to the full extent provided by the laws of the State of Nevada. Expenses incurred by a director or officer in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. In addition, the corporation may advance expenses of such nature on any other terms and/or in any other manner authorized by law.

ARTICLE IX Amendment of Bylaws

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is authorized, subject to the bylaws, if any, adopted by the shareholders, to adopt, alter or amend the bylaws of the corporation.

EX-3.2 3 exhibit3two.htm AMENDED AND RESTATED BYLAWS Edgewater Foods International, Inc. Exhibit 3.2

Edgewater Foods International, Inc.

AMENDED AND RESTATED

BY-LAWS

ARTICLE I

OFFICES

Section 1. The principal office shall be located at 400 Professional Drive, Suite 310, Gaithersburg, Maryland 20878.

Section 2. The corporation may also have offices at such other places within or without the State of Nevada as the Board of Directors may from time to time determine, or as the business of the corporation may require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 1. Meetings of the shareholders shall be held at such place within or without the State of Nevada as shall be specified in the notice of the meeting or in a waiver thereof.

Section 2. An annual meeting of the shareholders, commencing in the year 2001, shall be held as soon as practicable after the fiscal year end. At such meeting, a board of directors shall be elected by a plurality of the votes cast at the election, and may transact such other business as may properly be brought before the meeting.

Section 3. Special meetings of the shareholders may be called: (1) by the Chairman of the Board of Directors, the President, or the Board of Directors; or (2) by the holders of at least twenty percent (20%) of the shares entitled to vote at the proposed special meeting. The record date for determining shareholders entitled to call a special meeting is the date the first shareholder signs the notice of that meeting. In addition, a majority of the shareholders may act without notice at a meeting.

Section 4. Written or printed notice stating the place, day, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer

or person calling the meeting, to each shareholder at his address as it appeared on the stock transfer books of the corporation with postage thereon prepaid.

Section 5. Any notice required to be given to any shareholder, under any provision of the Corporation Law of the State of Nevada, the Articles of Incorporation, or these Bylaws, need not be given to the shareholder if (1) notice of two consecutive annual meetings and all notices of meetings held during the period between those annual meetings, if any, or (2) all (but in no event less than two) payments (if sent by first class mail) of distributions or interest on securities during a 12-month period have been mailed to that person, addressed at his address as shown on the records of the corporation, and have been returned undeliverable. Any action or

meeting taken or held without notice to such a person shall have the same force and effect as if the notice had been duly given and, if the action taken by the corporation is reflected in any articles or document filed with the Secretary of State, those articles or that document may

state that notice was duly given to all persons to whom notice was required to be given. If such a person delivers to the corporation a written notice setting forth his then current address, the requirement that notice be given to that person shall be reinstated.

Section 6. Only business within the purpose or purposes described in the notice of any special meeting of shareholders may be conducted at such special meeting.

Section 7. The holders of a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at meetings of shareholders except as otherwise provided in the Articles of Incorporation. If, however, a quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person, or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At

such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which may have been transacted at the meeting as originally notified.

Section 8. The vote of the holders of a majority of the shares entitled to vote and represented at a meeting at which a quorum is present shall be the act of the shareholders’ meeting, unless the vote of a greater number is required by law or by the Articles of Incorporation.

Section 9. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. Each proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest.

Section 10. The officer or agent having charge of the stock transfer books shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each, which list, for a period of ten (10) days prior

to such meeting, shall be kept on file at the registered office of the corporation, and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer

book shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any such meeting of shareholders.

Section 11. Any action required by law to be taken at a meeting of the shareholders, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by a majority of the shareholders entitled to vote with respect to the subject matter thereof.

ARTICLE III

DIRECTORS

Section 1. (a) The number of directors of the corporation shall be not less than one (1) nor more than nine (9). The directors shall be elected at the annual meeting of shareholders, except as provided in Sections 2, 3, 4, or 5 of this Article III, and each director elected shall hold office until his successor is elected and qualified. Directors need not be residents of the State of Nevada or shareholders of the corporation.

(b) Any director may be removed with cause by the affirmative vote of the holders of a majority of the shares represented at any shareholders' meeting at which a quorum is present; provided, that the proposed removal is stated in the notice of the meeting.

Section 2. Any vacancy occurring in the Board of Directors shall be filled in accordance with Section 5 of this Article III or may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office.

Section 3. A directorship to be filled by reason of an increase in the number of directors may be filled in accordance with Section 5 of this Article III or may be filled by the Board of Directors for a term of office continuing only until the next election of one (1) or more directors by the shareholders; provided, that the Board of Directors may not fill more than two (2) such directorships during the period between any two (2) successive annual meetings of the shareholders.

Section 4. Notwithstanding Sections 2 and 3 above, whenever the holders of any class or series of shares are entitled to elect one or more directors by the provisions of the Articles of Incorporation, any vacancies in such directorships and any newly created directorships of such class or series to be filled by reason of an increase in the number of such directors shall be filled in accordance with the provisions of the Nevada Business Corporation Act.

Section 5. Any vacancy occurring in the Board of Directors or any directorship to be filled by reason of an increase in the number of directors may be filled by election at an annual or special meeting of shareholders called for that purpose.

Section 6. The business and affairs of the corporation shall be managed by its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by law or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders.

Section 7. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Nevada.

Section 8. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, providing a quorum shall be present. In the event of the failure of the

shareholders to fix the time and place of such a first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice

given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.

Section 9. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board.

Section 10. Special meetings of the Board of Directors may be called by one-third of the directors then in office or by the Chairman of the Board of Directors or the President and shall be held at such place, on such date and such time as they or he shall fix. Notice of the place, date and time of each such special meeting shall be given to each director by whom it is not waived by mailing written notice not less than three days before the meeting or by telegraphing, telefaxing or emailing the same not less than 18 hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

Section 11. A majority of the directors shall constitute a quorum for the transaction of business, and the act of the majority of the directors present at the meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is required by the Articles of Incorporation or elsewhere in these Bylaws. If a quorum shall not be present at

any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 12. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate one or more directors to constitute an executive committee and one or more other committees, each of which, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the corporation except as otherwise provided by law. Vacancies in the membership of any such committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The committees shall keep regular minutes of their proceedings and report the same to the Board when required. The designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law.

Section 13. Any action required or permitted to be taken at a meeting of the Board of Directors or any committee may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the Board of Directors or committee, as the case may be.

ARTICLE IV

NOTICES

Section 1. Notices to directors and shareholders shall be in writing, shall specify the time and place of the meeting, and shall be delivered personally or mailed to the directors or shareholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when same shall be mailed. Notice to directors may also be

given by telegram.

Section 2. Whenever any notice is required to be given to any shareholder or director under the provisions of any laws or of the Articles of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice.

Section 3. Attendance of a director at a meeting shall constitute a waiver of notice of such a meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE V

OFFICERS

Section 1. The officers of the corporation shall consist of a President and a Secretary, and may include one or more Vice Presidents, a Treasurer, and a Chairman of the Board, each of whom shall be elected by the Board of Directors. Any two or more offices may be held by the same person.

Section 2. The Board of Directors, at its first meeting after each annual meeting of shareholders, shall choose a President and a Secretary and may choose one or more Vice Presidents and a Treasurer, none of whom need be a member of the Board, and may appoint one of their number Chairman of the Board.

Section 3. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors.

Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors.

Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer or agent or member of the executive committee elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgement the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any vacancy occurring in any office of the corporation by death, resignation, removal, or otherwise shall be filled by the Board of Directors.

Chairman of the Board and President

Section 6. The Board of Directors may designate whether the Chairman of the Board, if such an officer shall have been appointed, or the President, shall be the chief executive officer of the corporation. In the absence of a contrary designation, the President shall be the chief executive officer. The chief executive officer shall preside at all meetings of the shareholders and the Board of Directors, and shall have such other powers and duties as usually pertain to such office or as may be delegated by the Board of Directors. The President shall have such powers and duties as usually pertain to such office, except as the same may be modified by the Board of Directors. If the Board of Directors shall not hav e appointed a Treasurer, then all the duties and powers set forth in Sections 11 through 14 of this Article V to be performed or

exercised by such an officer shall be performed or exercised by the President. Unless the Board of Directors shall otherwise delegate such duties, the President shall have general

and active management of the business of the corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect.

Section 7. The President shall execute bonds, mortgages, and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation.

Vice President

Section 8. The Vice Presidents, if any such officers shall have been appointed, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Board of Directors shall prescribe.

Secretary

Section 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders, and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors

or the President, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation, and, when authorized by the Board of Directors, affix the same to any instrument requiring it, and, when so affixed, it shall be attested by his signature or the signature of the Treasurer, an Assistant Secretary, or an Assistant Treasurer.

Section 10. The Assistant Secretaries, if any such officers shall have been appointed, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability or the Secretary, perform the duties and exercise the power of the Secretary. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

Treasurer

Section 11. The Treasurer, if such an officer shall have been appointed, shall have the custody of the corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as

may be designated by the Board of Directors.

Section 12. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer, and of the financial condition of the

corporation.

Section 13. If required by the Board of Directors, the Treasurer shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the

corporation, in case of his death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in his possession or under his control belonging to the corporation.

Section 14. The Assistant Treasurers, if any such officers shall have been appointed, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

ARTICLE VI

CERTIFICATE FOR SHARES

Section 1. The corporation shall deliver certificates representing all shares to which shareholders are entitled; and such certificates shall be signed by the President and a Vice President, the Secretary, or an Assistant Secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. No certificate shall be issued for any share until the consideration therefor has been fully paid. Each certificate representing shares shall state upon the face thereof that the corporation is organized under the laws of the State of Nevada, the name of the person to whom issued, the number and class and the designation of the series, if any, which such certificate represents, and the par value of each share represented by such certificate or a statement that shares are without par value.

Section 2. The signature of the President and a Vice President, the Secretary, or an Assistant Secretary, as the case may be, upon a certificate may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of the issuance.

Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

Section 4. Upon surrender to the corporation, or the transfer agent of the corporation, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books.

Section 5. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive a distribution by the corporation (other than a distribution involving a purchase or redemption by the corporation of any of its own shares) or a share dividend, or in order to make a determination

of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, sixty (60) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty (60) days, and, in the case of a meeting of shareholders, not less than ten (10) days, &nb sp;prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock

transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive a distribution (other than a distribution involving a purchase or redemption by the corporation of any of its own shares) or a share dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such distribution or share dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determin ation shall apply to any adjournment thereof, except where the determination has been made through the closing of stock transfer books and the stated period of closing has expired.

Section 6. Distributions of cash or property (tangible or intangible) made or payable by the corporation, whether in liquidation or from earnings, profits, assets, or capital, including all distributions that were payable but not paid to the registered owner of the shares, his heirs, successors, or assigns but that are now being held in suspense by the corporation or that were

paid or delivered by it into an escrow account or to a trustee or custodian, shall be payable by the corporation, escrow agent, trustee, or custodian to the person registered as owner of the shares in the corporation's stock transfer books as of the record date determined for that distribution as provided in Section 5 of this Article VI, his heirs, successors, or assigns. The person in whose name the shares are or were registered in the stock transfer books of the corporation as of the record date shall be deemed to be the owner of the shares registered in his name at that time. Neither the corporation nor any of its officers, directors, or agents shall be under any liability for making such a distribution to a person in whose name shares were &nbs p;registered in the stock transfer books as of the record date or to the heirs, successors, or assigns of the person, even though the person, or his heirs, successors, or assigns, may not possess a certificate for shares.

Section 7. The corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive distributions or share dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of

Nevada or these Bylaws.

Section 8. When shares are registered on the books of the corporation in the names of two or more persons as joint owners with the right of survivorship, after the death of a joint owner and before the time that the corporation receives actual written notice that parties other than the surviving joint owner or owners claim an interest in the shares or any distributions

thereon, the corporation may record on its books and otherwise effect the transfer of those shares to any person, firm, or corporation (including that surviving joint owner individually) and pay any distributions made in respect of those shares, in each case as if the surviving joint owner or owners were the absolute owner(s) of the shares. The corporation by permitting such a

transfer by and making any distribution to such a surviving joint owner or owners before the receipt of written notice from other parties claiming an interest in those shares or distributions is discharged from all liability for the transfer or payment so made; provided, however, that the discharge of the corporation from liability and the transfer of full legal and equitable title of the shares in no way affects, reduces, or limits any cause of action existing in favor of any owner of an interest in those shares or distributions against the surviving owner or owners.

ARTICLE VII

GENERAL PROVISIONS

Section 1. The Board of Directors may authorize and the corporation may (1) make distributions or (2) pay share dividends, subject to any restrictions in its Articles of Incorporation and to the limitations set forth in the Nevada Revised Statutes.

Section 2. The Board of Directors may by resolution create a reserve or reserves out of its surplus or designate or allocate any part or all of surplus in any manner for any proper purpose or purposes, and may increase, decrease, or abolish any such reserve, designation, or allocation in the same manner.

Section 3. The Board of Directors must, when requested by the holders of at least twenty five percent (25%) of the outstanding shares of the corporation, present written reports of the situation and amount of business of the corporation.

Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

Section 5. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

Section 6. The corporate seal shall have inscribed thereon the name of the corporation and may be in such form as the Board of Directors may determine, and may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

ARTICLE VIII

INDEMNIFICATION OF OFFICERS AND DIRECTORS

The corporation shall indemnify directors, officers, employees, and agents of the corporation to the extent required by the Nevada Revised Statutes and shall indemnify such individuals to the extent permitted by the Nevada Revised Statutes. The corporation may purchase and maintain liability insurance, or make other arrangements for such obligations or otherwise, to the extent permitted by the Nevada Revised Statutes.

ARTICLE IX

AMENDMENTS

The Board of Directors may amend or Repeal the Bylaws of the corporation or adopt new Bylaws, unless: (1) the Articles of Incorporation or the Nevada Revised Statutes reserves

the power exclusively to the shareholders in whole or in part; or (2) the shareholders in amending, repealing, or adopting a particular bylaw expressly provide that the Board of Directors may not amend or repeal that bylaw. Unless the Articles of Incorporation or a bylaw adopted by the shareholders provides otherwise as to all or some portion of the Bylaws, the shareholders may amend, repeal, or adopt the Bylaws even though the Bylaws may also be amended, repealed, or adopted by the Board of Directors.

* * *

I certify that the foregoing is a true and correct copy of the Bylaws of Edgewater Foods International, Inc. adopted by the Board of Directors of said corporation on the ___ day of March 2007.

___________________, Secretary

EX-31.1 4 exhibit31one.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER Edgewater Foods International, Inc. Exhibit 31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Robert Saunders certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Edgewater Foods International, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this quarterly report;

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: April 13, 2007

/s/ Robert Saunders

Robert Saunders

Chief Executive Officer

EX-31.2 5 exhibit31two.htm CERTIFICATION OF ACTING CHIEF ACCOUNTING OFFICER Edgewater Foods International, Inc. Exhibit 31.2

CERTIFICATION OF ACTING CHIEF FINANCIAL OFFICER

I, Michael Boswell certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Edgewater Foods International, Inc.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely

affect the small business issuer’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: April 13, 2007

/s/ Michael Boswell

Michael Boswell

Acting Chief Accounting Officer

EX-32.1 6 exhibit32one.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER Edgewater Foods International, Inc. Exhibit 32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Edgewater Foods International, Inc. (the “Company”) on Form 10-QSB for the period ending February 28, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report’), I, Robert Saunders, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: April 13, 2007

/s/ Robert Saunders

Robert Saunders,

Chief Executive Officer

EX-32.2 7 exhibit32two.htm CERTIFICATION OF ACTING CHIEF ACCOUNTING OFFICER Edgewater Foods International, Inc. Exhitit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Edgewater Foods International, Inc. (the “Company”) on Form 10-QSB for the period ending February 28, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report’), I, Michael Boswell, Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: April 13, 2007

/s/ Michael Boswell

Michael Boswell,

Acting Chief Accounting Officer

-----END PRIVACY-ENHANCED MESSAGE-----