SB-2

As filed with the Securities and Exchange Commission on December 3, 2007

Registration No. 333- 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

EDGEWATER FOODS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-3113571
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

5552 West Island Highway, Qualicum Beach

British Columbia, Canada   V9K 2C8

(Address of principal executive offices (zip code))

(250) 757-9811

(Registrant’s telephone number, including area code)

Robert Saunders

PRESIDENT AND CHIEF EXECUTIVE OFFICER

5552 West Island Highway, Qualicum Beach

British Columbia, Canada   V9K 2C8

(Name, address and telephone number of agent for service)

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

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

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

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

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

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

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Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per unit (1)	Proposed maximum aggregate offering price (1)	Amount of registration fee
Common Stock underlying the Preferred Stock	897,444 (2) (3)	$1.01	$906,418,44	$27.83
Common Stock Underlying the Warrants and the Preferred Stock Underlying the Warrants	2,991,480	$1.01	$3,021,394.80	$92.76
Common Stock Underlying the Placement Consultant Warrants	373,932	$1.01	$377,671.32	$11.59
Total	4,262,856	$1.01	$4,305,484.56	$132.18

(1)

Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(c) of the Securities Act of 1933 based upon the average of the bid and asked price of the Registrant’s common stock as quoted on the Over-the-Counter Bulletin Board of $1.01 on November 28, 2007.

(2)

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

(3)

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

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

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

COPIES OF COMMUNICATIONS TO:

LOUIS E. TAUBMAN, ESQ.

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

17 State Street, 16^th Floor

New York, NY 10004

(212) 732-7184

FAX: (212) 202-6380

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

PRELIMINARY PROSPECTUS

Subject to completion, dated

EDGEWATER FOODS INTERNATIONAL, INC.

4,262,856 Shares of Common Stock

The 4,262,856 shares of common stock, $.0001 par value, being offered by the selling shareholders listed on page 11.  The shares of our common stock covered by this prospectus include:

·

897,444 shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock granted to investors in our November 2007 private financing; this number represents 120% of the aggregate number of shares of common stock necessary to convert the currently outstanding 747,870 shares of our Series C Preferred Stock, as required by the transaction documents;

·

2,991,480 shares of common stock issuable upon exercise of 2,991,480 warrants to purchase shares of our common stock and conversion of preferred stock underlying warrants to purchase shares of our preferred stock issued to investors in our November 2007 private financing; and,

·

373,932 shares of common stock issuable upon exercise of one placement consultant warrant granted to the placement consultant of our November 2007 private financing.  

This offering is not being underwritten.

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

Our common stock is listed on the Over the Counter Bulletin Board, also called the OTCBB, under the trading symbol “EDWT.”  On November 28, 2007, the closing bid for our common stock as reported on the OTCBB was $1.01 per share.  As of November 28, 2007, we had the following amount of shares issued and outstanding:

·

23,737,700 shares of Common Stock;  

·

7,773,998 shares of Series A Preferred Stock;

·

207 shares of Series B Preferred Stock; and,

·

747,870 shares of Series C Preferred Stock

THIS INVESTMENT INVOLVES RISK.  

SEE “RISK FACTORS”BEGINNING ON PAGE 3.

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

The date of this Prospectus is

TABLE OF CONTENTS

	Page
Corporate Information	vii
Prospectus Summary	1
Risk Factors	4
Cautionary Statement Regarding Forward Looking Statements	10
Use Of Proceeds	10
Selling Shareholders	11
Plan of Distribution	13
Business	15
Description of Property	22
Management	26
Executive Compensation	31
Security Ownership of Certain Beneficial Owners and Management	37
Certain Relationships And Related Transactions	39
Description Of Securities	39
Market for Common Equity and Related Shareholder Matters	44
Management’s Discussion and Analysis or Plan of Operations	45
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	54
Legal Proceedings	54
Experts	54
Legal Matters	54
Financial Statements	F-1

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PROSPECTUS SUMMARY

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

The Company

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

Recent Developments

Business

During the third quarter of our 2007 fiscal year, we started harvesting our 2005 year-class scallops, continued moving our 2006 scallop crop into final large grow-out nets at our tenure (farm) sites and started the spawn of our 2007 year-class.  We refer to the year-class of scallops based on when the scallops were spawned.  Generally, the harvest occurs approximately 22 to 24 months after spawning of the scallops.  The benefits of five years of selective breeding are starting to show benefits with the 2004 year-class, displaying a higher weight to shell ratio. Results from our initial plans to ear hang scallops as opposed to keeping them in nets during the final portion of their growth cycle were disappointing and resulted in greater mortality than expected, as well as sporadic growth.   As a result, and due to 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.  

In October 2006, we installed twenty new longlines at our Hindoo Creek scallop farm in Baynes Sound (1). Each longline is 108 yds (324 feet) long and submerged at approximately 25 ft depth. In July 2006, we received approval for an additional 23 longlines.  The October and July additions bring the tenure up to its management plan of 67.  At harvest, each new longline has the capacity to hold 90,000 scallops in final stage grow-out nets, thereby increasing the production of the farm to 6 million scallops.  Additionally, the Deep Bay tenure has been expanded to 32 longlines, which has the capacity to hold 2.8 million at harvest.  After an analysis of our production results to date, we decided to transition production to a combination of our ear-hanging method and the use of “lantern style” nets (for our grow-out nets), the later of which will allow for approximately 90,000 scallo ps per line (vs. 100,000 “ear-hung).  The costs of “lantern

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style” are similar to that of “ear-hanging” ($.08 per scallop in net vs. $.075 per ear hung scallop): labor costs for the lantern method are less because there is less handling of the scallops, however, capital costs are more since we will need to purchase boats capable of handling additional weight per line caused by use of nets vs. ear hanging.  In conjunction with the transfer of our 2005 scallop class from  small mesh nets to the final stage lantern nets, we also moved the 2006 crop from the pond sites (at our hatchery) to small mesh nets on our farms.  

The 2006 year-class scallop spawning season commenced in March of 2006 and was completed in April 2006.  The scallop brood-stock conditioning for these spawning began in mid-December 2005. 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.  During the third quarter of our 2007 fiscal year, we began spawning our 2007 scallop year-class.  Due to improved hatchery technology and infrastructure (due to improvements from recent capital investments) and lessons learned from the 2006 spawn, we were able to increase early stage survival rates.  As of August 2007, at least 100 million scallops had reached 2 mm size in our onshore hatchery ponds.  We recently began to move these scallops into grow-out nets at our farm sites and will continue to do so in th e coming months.  Based on the recent lessons learned and improved farm infrastructure, we anticipate that the 2007 spawning will yield up to 20 million scallops at full maturity/harvest. The use of DNA based family analysis that started in 2000 and will continue through 2008, 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.  

During the harvesting of our 2005 and sorting of our 2006 scallops classes, we were able to review our mortality rates and update our class size projections.  Based on this review, we expect to bring as many as 2 million 2005 year class scallops to market over the next twelve months and harvest over 1 million 2006 year class scallops starting in the fall of 2008.   

Series C Preferred Stock and Warrant Financing

On November 5, 2007, we completed a private equity financing of $897,444 with one accredited investor.  Net proceeds from the offering are approximately $801,000.  As part of this financing, the investor returned the following warrants to us, which it received as a result of Series B Preferred Stock Financing described below: Series J Warrant, Series D Warrant, Series E Warrant and Series F Warrant to purchase an aggregate of 3,739,350 shares of our common stock.  Pursuant to the current financing, we issued 747,870 shares of our Series C Preferred Stock,  par value $0.001 per share and the investor also received one of each of the following warrants: (i) Series A Warrant, (ii) Series B Warrant, (iii) Series C Warrant, (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 preferred stock issued to the investor, except for the Series J Warrants, which shall entitle the investor to purchase a number of shares of our Series C Preferred 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 5 years, except for the Series J Warrants, which have a term of 1 year.  Each share of the preferred stock is convertible into one fully paid and nonassessable share of our common stock at an initial conversion price of $1.20, subject to adjustment.  In connection with the financing, our management agreed not to sell any of our securities owned by them, their

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affiliates or anyone they have influence over until the registration statement has been effective for six months.    

In connection with this financing, we paid cash compensation to a placement consultant in the amount of $72,000 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) 74,787 shares of Series C 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 37,393 shares of common stock, except for the Series J Warrants, which shall entitle the Consultant to purchase 74,787 shares of our Series C Preferred Stock.  Like the investor, the placement consultant returned part of the placement consultant warrant it received in the Series B Pref erred Stock financing to us in exchange for the new placement consultant warrant.

In connection with the November 2007 financing, we agreed to file this registration statement with the Securities and Exchange Commission, on or before December 5, 2007, to register for resale the shares of our common stock into which the shares of our Series C Preferred Stock may be converted and the shares of common stock issuable upon the exercise of the warrants and issuable upon conversion of the preferred stock issuable upon exercise of the warrants issued in such financing.  We are required to keep this registration statement continuously effective under the Securities Act for the Effectiveness Period which continues until such date as is the earlier of the date when all of the securities covered by the registration statement have been sold or the date on which such securities may be sold without any restriction pursuant to Rule 144.  If this registration statement ceases to be effective pr ior to the expiration of the Effectiveness Period, we will be required to pay liquidated damages equal to 2.0% of the amount invested for each calendar month or portion thereof thereafter such date until the registration statement is declared effective.  Pursuant to the November 2007 financing, in no event shall the amount of liquidated damages payable at any time and from time to time exceed an aggregate of 20% of the amount of the initial investment in the Series C Preferred Stock; however, no liquidated damages shall be paid with respect to any shares that we are not permitted to include in the Registration Statement due to the Commission’s application of Rule 415.

The net proceeds from the financing are to be used for working capital and general corporate

purposes.  

Series B Preferred Stock and Warrant Financings

On January 16, 2007, we completed a private equity financing of $2,070,000 with two accredited investors.  Net proceeds from the offering were approximately $1,864,400.  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 our common stock equal to 50% of the number of shares of common stock issuable upon conversion of the investor’s Series B Preferred Stock, except for the Series J Warrants, which entitle the investor to purchase a number of shares of our common stock equal to 100% of the number of shares of common stock issuable upon conversion of the investor’s Series B

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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 Series B 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 stock for each share of converted preferred stock. In connection with the financing, our management agreed not to sell any of our securities owned by them, their affiliates or anyone they have influence over until the registration statement has been effective for six months.    

In connection with the January 16, 2007 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.

Also in connection with the January 2007 financing, we agreed to file this registration statement with the Securities and Exchange Commission to register for resale the shares of common stock issuable upon conversion of the Series B Preferred Stock and exercise of the Warrants issued pursuant to the January 2007 financing. We are required to keep this registration statement continuously effective under the Securities Act for the Effectiveness Period which continues until such date as is the earlier of the date when all of the securities covered by this registration statement have been sold or the date on which such securities may be sold without any restriction pursuant to Rule 144(k).  If this registration statement ceases to be effective prior to the expiration of the Effectiveness Period, we will be required to pay liquidated damages equal to 2.0% of the amount invested for each calendar month or po rtion thereof thereafter such date until the registration statement is declared effective.  Pursuant to the January 2007 financing, in no event shall the amount of liquidated damages payable at any time and from time to time exceed an aggregate of 20% of the amount of the initial investment in the Series B Preferred Stock.  

The net proceeds from the January 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 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.

Series A Preferred Stock and Warrant Financings

On April 12, 2006 we completed a private equity financing of $1,062,000 with 2 accredited investors.  Net proceeds from the offering, were approximately $952,040.  We issued 1,888,000 shares of our Series A Preferred Stock,  par value $0.001 per share and stated value of $0.75 per share, at a purchase price of $0.5625 per share and each investor also received one of

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each of the following warrants: (i) Series A Warrant, (ii) Series B Warrant, (iii) Series C Warrant, (iv) Series D Warrant, (v) Series J Warrant, (vi) Series E Warrant, (vii) Series F Warrant, (viii) Series G Warrant, and (ix) Series H Warrant, each to purchase a number of shares of Common Stock equal to 50% of the number of shares of Series A Preferred Stock purchased, except for the Series J Warrants, which entitled the investor to purchase a number of shares of our common stock equal to 100% of the number of shares of Series A Preferred Stock purchased.  As of the date of this filing, all of the Series J Warrants issued in the April 12, 2006 financing have been exercised.  We issued a total of 9,440,000 Warrants.  Each of the Warrants has a term of five (5) years, except for the Series J Warrants, which have a term of one (1) year.  Each share of the Series A Preferred Stock is convertible into one fully paid and nonassessable share of our common stock.  

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

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

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

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

On June 30, 2006 and July 11, 2006 we completed two final rounds of private equity financing accepting subscriptions in the aggregate amount of $2,840,000 from 9 institutional and accredited investors pursuant to the May 30, 2006 Series A Convertible Preferred Stock Purchase.  On June 30, 2006 and July 11, 2006, we entered into separate Joinder Agreements to

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

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

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

In connection with the April, May, June and July 2006 financings, we filed, as agreed to in the corresponding Registration Rights Agreement, a registration statement with the Securities and Exchange Commission to register for resale the shares of our common stock into which the shares of our Series A Preferred Stock may be converted and the shares of common stock issuable upon the exercise of the warrants (Registration No. 333-135796).  We are required to keep that registration statement continuously effective under the Securities Act for the Effectiveness Period which continues until such date as is the earlier of the date when all of the securities covered by that registration statement have been sold or the date on which such securities may be sold without any restriction pursuant to Rule 144.  If that registration statement ceases to be effective prior to the expiration of the Effectiveness Pe riod, we will be required to pay liquidated damages equal to 1.0% of the amount invested for each calendar month or portion thereof thereafter such date until this registration statement is declared effective.  Pursuant to the April 12, 2006 financing, in no event shall the amount of liquidated damages payable at any time and from time to time exceed an aggregate of 24% of the amount of the initial investment in the Series A Preferred Stock.  Pursuant to the May 30, 2006, June 30, 2006 and July 11, 2006 financings, in no event shall the amount of liquidated damages payable at any time and from time to time exceed an aggregate of 10% of the amount of initial investment in the Series A Preferred Stock pursuant to such rounds of financing.  As of the date of this filing, Post-Effective Amendment No. 1 to Registration No. 333-135796 was declared effective on December 8, 2006 and Post-Effective Amendment No. 2 was declared effective on February 5, 2007.    

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For further information regarding the preferred stock and warrants see “Description of Securities – Series A Preferred Stock,” “Description of Securities – Series B Preferred Stock” and “Description of Securities –Warrants.”

RISK FACTORS

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

Risks Relating to Aquaculture

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

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

Paralytic Shellfish Poisoning (PSP or Red Tide) could limit the amount of scallops available for sale.

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

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

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

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(maximum time being 24 hours).

Boring sponges and worms can adversely impact our scallop yield.

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

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

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

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

Starfish are a major predator of scallops, particularly in bottom culture.  If the hanging techniques are far enough from the bottom, even during extreme low tides, then this does is not problematic.  Since starfish and crabs have a free-swimming larval stage as part of their life cycle, it is possible that these larvae can settle within the “grow-out” nets and settle there and prey on these scallops.  However, with proper husbandry techniques these effects can be minimized.  

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

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

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

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

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Increased mortality rates would adversely impact our business.

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

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

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

Business Risks

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

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

We are dependent on certain key existing and future personnel.

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

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The fact that our directors and officers own approximately 43% of our capital stock and 59% of our voting capital stock may decrease your influence on shareholder decisions.

Our executive officers and directors, in the aggregate, beneficially own approximately 43% of our capital stock and 59% of our voting capital stock.  As a result, our officers and directors, will have the ability to influence our management and affairs and the outcome of matters submitted to shareholders for approval, including the election and removal of directors, amendments to our bylaws and any merger, consolidation or sale of all or substantially all of our assets.

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

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

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

In general, the aquaculture industry is intensely competitive and highly fragmented. Many of our competitors have greater financial, technical, marketing and public relations resources than we presently have. Our sales may be harmed to the extent we are not able to compete successfully against such seafood producers.

Contamination of our seafood would harm our business.

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

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

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

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Our business may be adversely affected price by volatility.

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

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

We conduct some of our business in foreign currencies.  Our profitability depends in part on revenues received in United States dollars as a result of sales into the United States.  A decline in the value of the United States dollar against the Canadian dollar would adversely affect earnings from sales in the United States. As part of our plans to acquire other businesses we may expand our operations to other countries, operate those businesses in foreign currencies, and export goods from those countries.   Thus far, we have not engaged in any financial hedging activities to offset the risk of exchange rate fluctuations.  We may in the future, on an as-needed basis, engage in limited financial hedging activities to offset the risk of exchange rate fluctuations.  There is a risk that a shift in certain foreign exchange rates or the imposition of unforeseen and adverse political ins tability and/or trade regulations could adversely impact the costs of these items and the liquidity of our assets, and have an adverse impact on our operating results.  In addition, the imposition of unforeseen and adverse trade regulations could have an adverse effect on our exported seafood operations. We expect the volume of international transactions to increase, which may increase our exposure to future exchange rate fluctuations.

Risks Relating to the Offering

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

There is currently only a limited public market for our common stock, which is listed on the Over-the-Counter Bulletin Board, and there can be no assurance that a trading market will develop further or be maintained in the future.   During the month of October 2007, our common stock traded an average of approximately 1,500 shares per day.  As of November 28, 2007, the closing bid price of our common stock was $1.01 per share.  As of November 28, 2007, we had approximately 56 shareholders of record of our common stock, 13 shareholders of record of our Series A Preferred Stock, 2 shareholders of record of our Series B Preferred Stock and 1 shareholder of record of our Series C Preferred Stock, not including shares held in street name.  In addition, during the past two years our common stock has had a trading range with a low price of $0.75 per share and a high price of $2.00 per share.

The market price of our common stock may be volatile.

The market price of our common stock has been and will likely continue to be highly volatile, as is the stock market in general, and the market for OTC Bulletin Board quoted stocks in particular. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our common stock.  These

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factors may materially adversely affect the market price of our common stock, regardless of our performance.  In addition, the public stock markets have experienced extreme price and trading volume volatility.  This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies.  These broad market fluctuations may adversely affect the market price of our common stock.

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

There are currently 29,243,568 warrants outstanding.  The terms of these warrants expire as early as 2007 and as late as 2013.  The exercise price of these warrants range from $0.5625 to $2.75 per share, subject to adjustment in certain circumstances.  Exercise of the warrants may cause dilution in the interests of other shareholders as a result of the additional common stock that would be issued upon exercise.  In addition, sales of the shares of our common stock issuable upon exercise of the warrants could have a depressive effect on the price of our stock, particularly if there is not a coinciding increase in demand by purchasers of our common stock.   Further, the terms on which we may obtain additional financing during the period any of the warrants remain outstanding may be adversely affected by the existence of these warrants as well.  

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

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

Our Auditors have given the Company a “Going Concern” opinion, raising substantial doubt about our ability to continuing to fund our operations.

We have suffered operating losses since inception in our efforts to establish and execute our business strategy.  As of August 31, 2007, we had a cash balance of approximately $1,657,000.  Although management believes that we have adequate funds to maintain our business operations into the next fiscal year and/or until we become cash flow positive, we continued to suffer operational losses in 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 of expanding our operations.  Based on these factors, there is substantial doubt about our ability to continue as a going concern.

CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING INFORMATION

From time to time, we may make written statements that are "forward-looking,"

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

(a) volatility or decline of our stock price;

(b) potential fluctuation in quarterly results;

(c) our failure to earn revenues or profits;

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

(e) inadequate capital to continue business;

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

(g) rapid and significant changes in markets;

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

(i) insufficient revenues to cover operating costs.

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

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

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USE OF PROCEEDS

We have registered these shares because of registration rights granted to the investors in our recent private equity financing and the other selling shareholders.   We will not receive any proceeds upon the conversion of the preferred shares into shares of our common stock, however, we received net proceeds of approximately $801,000 from the initial sale of the preferred shares and we could receive up to approximately $6,027,832, net of fees and expenses, from the exercise of the warrants when and if exercised.  The net proceeds from the sale of the Series C Preferred Stock and any proceeds received from the exercise of the warrants have been and will be used as set forth in the table below.

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

Use of Funds	Funds Received from Sale of Series C Preferred Stock	Funds Received from Exercise of the Warrants
Working Capital	$801,000	$6,027,832
Total	$801,000	$6,027,832

SELLING SHAREHOLDERS

The following table sets forth certain information concerning the resale of the shares of common stock by the selling shareholders (the “Selling Shareholders”).  None of the Selling Shareholders nor any of their affiliates has held any position or office with, been employed by or otherwise has had any material relationship with us or our affiliates during the three years prior to the date of this prospectus.   Unless otherwise indicated below, none of the Selling Shareholders are broker-dealers or affiliates of a broker-dealer within the meaning of Section 3 of the Securities Exchange Act.     

The Selling Shareholders may offer all or some portion of the shares of the common stock or the shares of common stock issuable upon conversion of the Series C Preferred Stock and/or exercise of the warrants.  Accordingly, no estimate can be given as to the amount or percentage of our common stock that will be held by the Selling Shareholders upon termination of sales pursuant to this prospectus.  In addition, the Selling Shareholder identified below may have sold, transferred or disposed of all or a portion of their shares since the date on which they provided the information regarding their holdings in transactions exempt from the registration requirements of the Securities Act. The amount of shares owned and offered hereby by the Selling Shareholders are calculated assuming the following conversion formulas and ratios: a conversion formula 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 Series B Preferred Stock and a conversion ratio of one share of common stock for each share of Series A Preferred Stock and each share of Series C Preferred Stock, which conversion price is subject to adjustment under certain circumstances.  See “Description of Securities.”  Individual

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beneficial ownership of the Selling Shareholders also includes shares of common stock that a person has the right to acquire within 60 days from November 28, 2007.  See “Description of Securities –Warrants.”

As of November 28, 2007, there were 23,737,700 shares of our common stock outstanding, 7,773,998 shares of our Series A Preferred Stock outstanding, 207 shares of our Series B Preferred Stock outstanding and 747,870 shares of our Series C Preferred Stock, which are treated on an as converted basis for the purposes of computing the percentage of outstanding securities owned by the Selling Shareholders.    Unless otherwise indicated, the Selling Shareholders have the sole power to direct the voting and investment over the shares owned by them. We will not receive any proceeds from the resale of the common stock by the Selling Shareholders.  We estimate that our costs and expenses of registering the shares listed herein for resale will be approximately $10,000.  

Unless otherwise indicated, all of the Selling Shareholders received their shares pursuant to the November 5, 2007 private financing, which is described above in Recent Developments, Series C Preferred Stock and Warrant Financings.  

Ownership Of Common Stock By Selling Shareholders

Name of Selling Stockholder	Number of Shares prior to the Offering	Number of Shares Offered Hereby	Number of Shares to be Owned After the Offering	Percentage of Ownership After the Offering (1) (2) (3)
Vision Opportunity Master Fund, Ltd.	28,559,331(4)	3,739,350 (5)	0 (2)	* (3)
Pai’s International Trade, Inc.	893,945 (6)	373,932 (7)	0 (2)	* (3)

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

1)

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

2)

Since we do not have the ability to control how many, if any, of their shares each of the selling shareholders listed above will sell, we have assumed that the selling shareholders will sell all of the shares offered herein and all of such selling shareholders’ shares offered in our other registration statements on Form SB-2 (Registration No. 333-135796 and Registration No. 333-140571) for purposes of determining how many shares they will own after the offering and their percentage of ownership following the offering.

3)

The number of shares offered by this prospectus will vary from time to time based upon several factors including the amount of Series C Preferred Stock the holder intends to convert and the amount of warrants that may be exercised.  See “Prospectus Summary – Recent Developments - Financing.”  Based upon the terms of the both the Series C Preferred Stock and the warrants issued in the November 2007 financing, holders may not convert the Series C Preferred Stock and/or exercise the warrants, if on any date, such holder would be deemed the beneficial owner of more than 4.99% of the then outstanding shares of our common stock.  Additionally, the shares of Series C Preferred Stock are subject to certain anti-dilution provisions, which would be triggered if we were to sell securities at a price below the price at which we sold the Series C Preferred Stock.

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4)

The person having voting, dispositive or investment powers over Vision Opportunity Master Fund, Ltd, is Adam Benowitz, Authorized Agent.  This number includes: 2,350,000 shares of common stock as a result of Vision’s conversion of 500,000 shares of Series A Convertible Preferred Stock, the receipt of 50,000 shares transferred to Vision from another selling shareholder, 1,800,000 shares of common stock issued pursuant to Vision’s exercise of some of the Warrants they received in the April 2006 financing, 4,633,333 shares of common stock issuable upon conversion of Vision’s Series A Convertible Preferred Stock, 13,866,668 shares of common stock issuable upon exercise of Vision’s Warrants Vision received in the April, May, June and July 2006 financings, 22,107 shares of common stock Vision received as dividends on June 30, 2006, 91,745 shares of common stock Vision received as dividends on December 31, 2006, 88,868 sh ares of common stock Vision received as dividends on June 30, 2007, 1,495,740 shares of common stock issuable upon conversion of Vision’s Series B Convertible Preferred Stock, 5,982,960 shares of common stock issuable upon exercise of Vision’s Warrants that it received in the January 16, 2007 financing and 27,910 shares of common stock Vision received as dividends on June 30, 2007.  All of the foregoing securities are registered in our Registration Statements on Form SB-2 File No. 333-135796 or File No. 333-140571.  

5)

This amount includes 747,870 shares of common stock issuable upon conversion of Vision’s Series C Convertible Preferred Stock and 2,991,480 shares of common stock issuable upon exercise of Vision’s Warrants that it received in the November 5, 2007 financing.  

6)

The person having voting, dispositive or investment powers over Pai’s International Trade, Inc. is Sam Pai, Authorized Agent.  This number includes 173,913 shares of common stock issuable upon conversion of Mr. Pai’s Series B Convertible Preferred Stock and 720,032 shares of common stock issuable upon exercise of Mr. Pai’s Warrants, all of which are only issuable upon exercise of the placement consultant warrant that Mr. Pai received in the January 16, 2007 financing.  All of Mr. Pai’s foregoing securities are registered in our Registration Statement on Form SB-2 File No. 333-140571.  

7)

This number includes 74,787 shares of common stock issuable upon conversion of Mr. Pai’s Series C Convertible Preferred Stock and 299,145 shares of common stock issuable upon exercise of Mr. Pai’s Warrants, all of which are only issuable upon exercise of the placement consultant warrant that Mr. Pai received in the November 5, 2007 financing

PLAN OF DISTRIBUTION

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

·

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

·

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

·

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

·

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

·

privately negotiated transactions;

·

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

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·

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

·

a combination of any of these methods of sale; and

·

any other method permitted pursuant to applicable law.

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

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

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

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

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

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

If any of the shares of common stock offered for sale pursuant to this prospectus are

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

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

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

BUSINESS

Overview

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

Our wholly owned subsidiary, Edgewater Foods International Inc., a Nevada Corporation, is the parent company of Island Scallops Ltd., a Vancouver Island aquaculture company. Island Scallops was established in 1989 and for over 15 years has successfully operated a scallop farming and marine hatchery business. Island Scallops is dedicated to the farming, processing and marketing of high quality, high value marine species: scallops and sablefish.  Scallop farming is relatively new to North America and Island Scallops is the only producer of both live-farmed Pacific scallops and live sablefish (or blackcod).  Given Island Scallops’ unique hatchery technology and extensive research and development, we believe that there is currently no significant competition for these marine species.   Island Scallops is committed to rapidly expanding production and profits while continuing to finance t he aggressive growth of the company and maintaining a healthy respect for the marine environment.  

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

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

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Japanese and Moroccan fisheries interests.

General Fisheries Market Overview

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

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

In the United States, consumption of scallops exceeded 64 million pounds in 2002.   Various communications between Island Scallops personnel and the National Marine Fisheries Service, Fisheries Statistics Division, Silver Spring, MD and analysis of data from the Fisheries Statistics & Economics Division of the National Marine Fisheries Service (NMFS) website for annual landings of commercial fisheries (http://www.st.nmfs.noaa.gov/st1/commercial/index.html), tell us that this represented a per capita consumption of 0.22 pounds, with a dollar value of US$342 million.  After shrimp, scallops represent one of the most popular shellfish products in the United States.  In general, per capita consumption of seafood in the United States has remained steady over the last six years ranging from 15.2 to 16.2 pounds per annum.   Based upo n Robert Saunders’, our chairman and president, communications with the National Marine Fisheries Service, Fisheries Statistics Division of Silver Spring, MD, and personal observations, given consumers' growing preoccupation with healthier foods and the increasing availability of seafood (due to the recent successes in aqua farming and improved distribution channels), we expect per capita consumption to continue to increase.

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

Key Corporate Objectives

Our key business development objectives over the next 36 months are to expand scallop and sablefish production using both existing and new infrastructure at our facilities in Qualicum Beach, Canada, which we anticipate will enable us to reach annual sales of as much as approximately US$40.0 million and earnings of approximately US$15.0 million by the end of

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our 2010 fiscal year on scallop sales alone.    This significant expansion will be accomplished as a result of the following four factors:

·

We expect to begin harvesting the 2007 year-class scallops during the spring of 2009, however, we could begin harvesting portions of the class sooner if mortality rates (at various points of the growth cycle) are significantly lower than our current projections or if growth rates are substantially higher.  We anticipate that at least 20 million scallops could reach maturity and thus be harvested.  

·

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

·

We plan to expand current distribution by establishing new strategic relationships with 10-15 American fisheries importers in Seattle, Portland, San Francisco, San Jose, and Los Angeles and overseas in Hong Kong in 2008 and the introduction of frozen on the half-shell product targeting the Eastern United States and Canada .

·

We expect to produce more than 200 million scallop seeds in 2008, with a projected 2008 scallop class of at least 40 million scallops at various sizes.

Marketing and Distribution

Our marketing and distribution strategy for Island Scallops is focused on developing and maintaining long-term relationships with distribution channel members.  Island Scallops also strives to differentiate its products to achieve consistent supply and quality. Island Scallops believes the scallop market effectively functions as a commodity market and therefore, relationships with distributors are important. To develop these relationships, Island Scallops has identified key purchasing criteria for the distributors: price, quality and consistent farmed supply. In the short term, Island Scallops intends to adopt a pricing policy equal to the market wholesale prices. In other words, we do not intend to set any promotional or premium prices for either the whole or shucked product, but instead intend to sell our products at the market rate. This would mean Island Scallops’ products would compete on oth er factors, such as supply and consistent quality.

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

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

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scallops, since we believe that we will be able to satisfy the demand of distributors, which will save them time and money.  

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

Traditionally, as described above, we have sold live scallops within the Pacific Northwest market.  We recently hired outside seafood sales and distribution consultants who have began to introduce new product lines of fresh meat and a new unique frozen half-shell product that is generating significant interest.  Part of the new marketing strategy includes working with various high-end restaurants and chefs to develop new menu items based on our scallops.  We believe that this will help create product and encourage additional wholesalers to carry our scallops.  As part of our overall strategy and in conjunction with the introduction of our frozen half-shell product, we are currently evaluating strategic relationships with three major US-based distributors.

Products

Current Products

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

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

Scallop Overview

Island Scallops’ main product is the "Pacific Scallop", which is a hybrid of the imported

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Japanese scallop and the local weathervane scallop.  Between 1993 and 1999, Island Scallops developed this new scallop using Japanese scallops that were imported under quarantine in the early 1990’s.  This unique scallop is marketed as the Pacific scallop and is the largest scallop in the world, reaching sizes of 15 cm and 500 grams.  The scallop species farmed by Island Scallops, has a proven record of being disease resistant, with a 95% survival rate during the grow-out phase.    We have the necessary farming infrastructure to produce up to 15 million scallops annually and, with an additional capital investment of approximately $1.0 million, which we hope to fund from the exercise of warrants or improving cash flow, up to 30 million scallops annually by the fall of 2009.  If we are not able to fund this expansion via the exercise of warrants or cash flow, we will have to seek additional financings.  Given the high worldwide demand for scallops, Island Scallops is po ised to rapidly expand production and significantly increase revenues.  

The Pacific Scallop is sold live in four sizes: medium, large, extra large and jumbo.  Pricing ranges from a low of US$3.95 per pound to $4.20 per pound for the larger sized scallops. Previously, due to the large demand and high value for live scallops, our focus was on the sale of live scallops in 2006.  We recently hired outside seafood sale and distribution consultants who have begun to introduce new product lines of fresh meat and a new unique frozen half-shell product that is generating significant interest.

The basis for our anticipated scallop farming production increase stems from a combination of our tenure expansion, our recent financing, improved grow-out techniques and our transition to a combination of “lantern-style” netting and ear-hanging methods.  Scallops culture utilizes two styles of small cages referred to as “pearl nets and lantern nets.”  Pearl nets are shaped like a pyramid with a 35 by 35 cm square base and grow small scallops from 2-3 mm to 10mm.  The 10-mm scallops are grown in cylindrical nets called lantern nets and are 60 cm in diameter and 1.2 meters deep containing 12 layers.  Once the scallops reach 5cm they can be grown out in lantern nets.  Our Hindoo Creek and Deep Bay tenures have been approved for expansion and once expansion of our Denman tenure is approved, which we believe will occur by our next fiscal year, we will be able to incr ease capacity to approximately 15,000,000 animals per annum.  Thereafter, we intend to change our management plan to include off bottom culture at our Bowser tenure in late 2007 or 2008, which would supply us with the capacity to produce an additional 20 million animals at harvest.  

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

·

Whole-live (shelf life of seven days);

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Whole dried;

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·

Eviscerated whole;

·

Shucked fresh (shelf life of about 15-20 days);

·

Shucked frozen (shelf life of about a year);

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Frozen on the half-shell (shelf life of about a year); and

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Value added forms (smoked, breaded, canned).

The shucked product form is the most significant form for North American markets.  A whole-liveproduct form is the most desirable from the aquaculturist’s point of view, as processing costs are minimal. Island Scallops has developed a market for whole live scallops, which exceeds 5,000 lbs. per week into Vancouver.  We are currently in the process of expanding our live scallop distribution network into Hong Kong and the western United States to up to 15,000 lbs. per week in the near future.  We are also in the process of introducing fresh scallop meat into high end restaurants in Toronto and Montreal and frozen half-shell product into the eastern US and Canada.  In 2008, we expected our overall product mixture to consist of 40% live scallops, 30% fresh meat and 30% frozen half-shell and 50% frozen half-shell, 30% live and 20% fresh thereafter.

Island Scallops currently distributes through specialty wholesalers with particular expertise in selling to restaurants and has developed a market for whole live scallops that exceeds 5,000 lbs. per week into Vancouver. Vancouver wholesalers include but are not limited to Albion Fisheries, Tri-Star Seafood Supply, Pacific Rim Shellfish, Sea World Fisheries and Teamway Fisheries.  As we expand our distribution, we will continue to focus on specialty wholesalers with strong ties to major restaurants.

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

Sablefish (Blackcod) Overview

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

Sablefish inhabit shelf and slope waters in depths of greater than 1,500 meters, from Baja California to the Aleutian Islands and the Bering Sea.  The larger populations of sablefish are centered in northern British Columbia and the Gulf of Alaska.  Adults favor mud bottoms and feed on benthic invertebrates, squid and numerous fish species.  In turn, they are prey for halibut, lingcod, hagfishes and marine mammals such as sea lions.  In addition, killer whales have been known to take sablefish from long line gear as it is being retrieved.  

Sablefish spawn from January to March along the continental shelf at depths of 250 to 750 meters.  Fecundity ranges from 60,000-200,000 eggs up to one million eggs for a 102-cm 

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fish. Larval sablefish are found in surface waters over the shelf and slope in April and May.  Juveniles are highly migratory with significant movement from nursery areas in northern B.C. to the Gulf of Alaska and the Bering Sea.  Sablefish move to deeper waters as they mature.  Growth is rapid with sizes at maturity reaching 52-61 cm for five-year-old males and 58-71 cm for five-to-seven year old females.  Sablefish growth appears to be rapid for the first three-to-five years and slow asymptotically thereafter.  Annual natural mortality of adults has been estimated to be about 10 percent.

Island Scallops plans to raise sablefish onshore using shallow ponds or above ground tanks.  This system has been successful in Texas for the culture of catfish.  Tests have shown that sablefish prove to be very hardy when grown in ponds and have the added advantage of causing sablefish to be parasite free.  Wild sablefish carry a parasite that does not allow the fish to be eaten raw.   With adequate funding, Island Scallops has already demonstrated the feasibility of onshore sablefish farming and plans to develop a new blackcod facility that could produce at least 500,000 sablefish as early as 2008, with production planned to increase by at least 500,000 annually by 2009 and beyond.  We currently plan to fund this new sablefish facility via the exercise of existing warrants.  Since the exercise of the warrants is, however, to a large extent depende nt upon the price of our stock in the public market, 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. If we are not able to fund this expansion via the exercise of warrants, we need to seek additional financings to fund this project.

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

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

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

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

·

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

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

At the present time, worldwide “non-farming” sablefish catches are struggling to meet the worldwide demand according to DFOWeb, NPFMCWeb and Pacific Fishery Management

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

Other Products

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

Description of Property

For the fiscal year ended August 31, 2007, our U.S. corporate office was located at 400 Professional Drive, Suite 310, Gaithersburg, Maryland 20878.  This space was provided on a rent free basis by one of our shareholders.

Island Scallops’ main office and hatcheries are located on the east side of Vancouver Island in the town of Qualicum Bay at 5552 West Island Highway, Qualicum Beach, British Columbia, Canada V9K 2C8.  The shellfish hatchery and processing facilities are housed in a 930 square meter building.  A 300 square meter sablefish hatchery is also located at this site. Corporate scallop farms are situated along the east and west coasts of Vancouver Island.  These facilities represent the largest private marine research hatchery and the first fully integrated shellfish producer in Canada.  

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

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area supports extensive beach culture (manila clams and oysters) as well as deepwater culture that produces oysters, scallops and some mussels.

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

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

Expansion of our Deep Bay and Hindoo Creek farms has been approved and such approval does not need to be renewed for twenty years.  An amended tenure agreement has been signed with the government of BC to expand the Denman Island site.  The biggest hurdle to completing the Denman expansion process is the re-zoning application, which must be approved before we can use the expanded tenure.   At the Bowser tenure, we are waiting for approval to convert the method of farming from bottom to off-bottom culture in one-third of the tenure area.  Once approved, this will allow us to accommodate around 20 million scallops.

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

The source of our raw material comes from our own hatchery brood stock.  In the case of the Pacific Scallop, we have been selectively breeding this species for superior growth and survival for the past 15 years.  The breeding program has produced a vigorous, rapid growing, disease resistant scallop with exceptional meat yield.  In the case of sablefish we have been selecting fast growing fish for the past 5 years; these display a high degree of domestication. The spawning season has been extended for both of these species allowing for juvenile production almost year round.  This ability to hold seed stock and select superior strains gives Island Scallops an advantage in the industry.  It also allows Island Scallops to tailor its production to varying seasonal and market demands.

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Competition

Fisheries Industry in General

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

Scallops

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

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

The primary British Columbia participants in scallop farming are Island Scallops joint venture farmers or independent scallop farmers, which receive their supply of seed scallops solely from Island Scallops. These farmers tend to be chronically underfinanced and production from these growers usually totals less than 1,000,000 scallops per year.  Island Scallops is uniquely positioned to rapidly expand these farms (up to six farms) under an exclusive farming and marketing contract.  Three joint venture farmers are currently farming scallops and receive free scallop seed, technology and support for a 12% royalty on the harvest and exclusive marketing of their product through Island Scallops.

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

Sablefish

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

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

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

Research and Development

Due to changes in Canadian Federal Government’s Research and Development tax credits (SRED) program, which prevents any part of the research to be combined with commercial production, no Research and Development claims were made in fiscal2006 and 2007.  Research did continue on the genetic selection of superior strains of scallops, as did developments in the culture process for both marine algae and developments in re-circulation systems.    In the near future Island Scallops plans to conduct research and development under a separate company called RKS Laboratories Ltd., which has no commercial production and whose primary goal is the genetic improvement in breeds of the Pacific Scallops and other marine species.  We believe that this will allow the continued support from the SRED program.  

Employees

At November 28, 2007, we have 26 full-time employees and 2 temporary employees.  We anticipate hiring between 10 and 15 temporary workers during the upcoming spring and summer growing seasons.

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

Regulatory Environment

Effect of Government Regulation

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

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

Tenure Expansion and Compliance with Environmental Laws

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

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

MANAGEMENT

Directors and Executive Officers  

The following table and text set forth the names and ages of all directors and executive officers as of November 28, 2007. The Board of Directors is comprised of only one class. All of the directors will serve until the next annual meeting of shareholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal.  Dr. Kristina Miller, our Chief Scientific Advisor is the wife of Robert Saunders, our Chairman, CEO and President; otherwise, there are no family relationships among our directors and executive officers. Also provided herein are brief descriptions of the business experience of each director, executive officer and advisor during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.

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Name	Age	Position
Robert Saunders	54	Chairman, CEO and President
Douglas C. MacLellan	51	Vice Chairman
Mark H. Elenowitz	37	Director
Robert L. Rooks	52	Director
Ian Fraser	46	Director
Michael Boswell	38	Director, Acting Chief Accounting Officer
Darryl Horton	57	Director
Victor Bolton	53	Director

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

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

Mark H. Elenowitz, Director.Mr. Elenowitz is a co-founder and managing director of TriPoint Capital Advisors, LLC. Mr. Elenowitz is responsible for the overall corporate development of the firm and assisting their clients with high-level financial services and general business development. In this role he provides high level advice regarding corporate finance, corporate structure, SOX 404 compliance, employee option programs and capital market navigation including providing advice as a member of the board of directors. Mr. Elenowitz integrates a

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strong, successful entrepreneurial background with extensive financial services and capital markets experience.  Mr. Elenowitz has assisted in numerous companies in a “soup-to-nuts” process of preparing a company for the public markets, bringing them public and advising on an ongoing basis via board seats and executive positions to oversee further rounds of financing, strategic acquisitions and a broader investor market via a listing on “higher” securities exchange or market. Mr. Elenowitz is also currently a director of Global Growth Acquisition Corp. 1, a Cayman Islands corporation. From December 2002 to September 2005, Mr. Elenowitz was a board member of AXM Pharma formerly (AMEX: AXJ) He was also the senior managing director of Investor Communications Company, LLC (ICC), a national investor relations firm he founded in 1996. Through ICC, Mr. Elenowitz has developed ongoing relationships with other investment banking firms, market makers, and analysts. Mr. Elenowitz has worked with over 50 publicly traded companies providing the above mentioned financial consulting and strategic planning services. Mr. Elenowitz holds the Series 24, 82 and 63 licenses and is also CEO of TriPoint Global Equities, LLC, a FINRA member firm. Mr. Elenowitz is the recipient of several entrepreneurial awards and has been profiled in BusinessWeek and CNBC, as well as several other publications. He is a graduate of the University of Maryland School of Business and Management, with a Bachelor of Science in Finance.

Dr. Robert L. Rooks, Director.  Dr. Robert L. Rooks has been Chief of Staff of All Care Animal Referral Center (ACARC) in Fountain Valley, California, since 1990.  ACARC is the largest strictly referral veterinary center in the United States.  Dr. Rooks has a staff of over 20 veterinarians in the areas of surgery, critical care, internal medicine, oncology, dentistry, radiology and neurology.  Their services include 24-hour critical care/emergency service, MRI and CT scans, color-flow Doppler ultrasounds, hyperbaric oxygen therapy, a complete orthopedic program including total hip replacements and joint reconstruction, cobalt radiation therapy, a complete neuro-diagnostic service, a kidney transplant program and a physical rehabilitation department and much more. He is the published author of over 100 journals, magazine and newspaper articles.  Dr. Rooks is also the author of the book & #147;Canine Orthopedics” published in 1997 by Howell Bookhouse. Dr. Rooks completed his undergraduate studies at Iowa State University in 1978.  He graduated from the College of Veterinary Medicine at Iowa State.  Dr. Rooks received his Masters Degree as well as completed his surgical residency at the University of Illinois in 1981.  He is a Diplomat of both the American College of Veterinary Surgeons and the American College of Veterinary Practitioner.

Ian Fraser, Director.  Since 1997, Mr. Ian Fraser has been President of Fraser Yacht Sales Ltd., a successful Yacht Brokerage located in Vancouver, B.C.  Prior to establishing Fraser Yacht Sales Ltd., Mr. Fraser gained experience in sales and marketing both nationally and internationally as a yacht broker for two top brokerage houses in Vancouver. Previously, Mr. Fraser was worked as an advertising sales executive with Naylor communications from 1988 to 1990 and learned valuable communication skills while working with numerous trades including the Truck Logger's association, the I.W.A of America, and the B.C. Construction industry. He also operated as a commercial fisherman on the West coast working on commercial salmon fishing boats for the B.C. Packer Corporation over a 4 year period and gained valuable knowledge of the coastline of Vancouver Island and along the m ainland from Victoria to the Queen Charlotte Islands.  Mr. Fraser also acquired sea time and commercial shipping skills while working on the deck department of the B.C. Ferry Corporation based out of Horseshoe Bay during his early professional career and during the summer months while attending school in the early 1980s.  Mr. Fraser also competes internationally on ocean racing yachts and has

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crossed the Pacific and sailed up and down the coast to Mexico on numerous occasions while racing and delivering racing yachts as captain. Mr. Fraser studied Business Administration at Simon Fraser University and Capilano College graduating with a diploma in Business Administration.

Michael Boswell, Director and Acting Chief Accounting Officer.  Mr. Boswell is a co-founder and member in TriPoint Capital Advisors, LLC, a boutique merchant bank focused on small and mid-sized growth companies and a co founder of the TriPoint family of companies. Mr. Boswell provides high-level financial services to start-up businesses and small to mid-sized companies. Mr. Boswell is also currently a director of Global Growth Acquisition Corp. 1, a Cayman Islands corporation. Mr. Boswell holds the Series 24, 82 and 63 licenses and is also Managing Director and Chief Compliance Officer of TriPoint Global Equities, LLC, a FINRA member firm.  Prior to the founding of TriPoint, Mr. Boswell had a number of executive positions focusing on business development and management consulting. Mr. Boswell also spent eight years as a senior analyst and/or senior engineer for various branches of the United States Government. He earned a MBA from John Hopkins University and a BS degree in Mechanical Engineering from University of Maryland.

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

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

Significant Employees

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

Bruce Evans, Farm Manager.   Mr. Bruce Evans has been involved in shellfish production since 1985. He successfully established an oyster business, employing methods of long-line and beach culture production.  That business is still in operation today, producing 7,000 gals of shucked oysters annually and employing 3 full time people and 4 part time people.  He moved to Island Scallops in 1989.  Mr. Evans was responsible for securing the leases from the Provincial

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government for this scallop grow-out project. He built the established long-line systems that currently produce scallops for Island Scallops.  Mr. Evans worked with a Japanese scallop farmer for two years in B.C. and spent a month working on highly acclaimed scallop farms in Japan.  Mr. Evans has BS in Marine Biology from the University of Victoria.

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

Audit Committee and Financial Expert

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

·

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

·

System of internal controls;

·

Financial accounting principles and policies;

·

Internal and external audit processes; and

·

Regulatory compliance programs.

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

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

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Audit Committee Financial Expert

Douglas MacLellan is our Audit Committee Financial Expert, as that term is defined in Item 407 of Regulation S-B and the Board has determined that Mr. MacLellan is independent, as that term is defined in Section 121 of the American Stock Exchange’s Listing Standards and Section 10A(m)(3) of the Securities Exchange Act of 1934.  Mr. MacLellan’s qualifications as an audit committee financial expert are described in his biography above.  

Board Committees

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

·

Audit Committee, which is comprised of Douglas MacLellan (Chair), Robert Rooks and Ian Fraser.  The Board has determined that all of these members are independent, as that term is defined in Section 121(A) of the American Stock Exchange’s Listing Standards.

·

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

·

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

·

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

·

Nominating Committee, which is comprised of Robert Saunders (Chair), Douglas MacLellan and Robert Rooks. The Board has determined that Mr. Rooks and Mr. MacLellan are independent, as that term is defined in Section 121(A) of the American Stock Exchange’s Listing Standards.

·

Sarbanes-Oxley Steering Committee, which is comprised of Douglas MacLellan, Robert Saunders, Michael Boswell and Louis Taubman (Louis Taubman is our outside corporate and securities counsel).

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EXECUTIVE COMPENSATION

Summary Compensation Table

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)
(a)	(b)	(c)	(d)	(e)	(f)
Robert Saunders Chief Executive Officer	2007	60,000 (1)	0	0	20,651 (3)
Robert Saunders Chief Executive Officer	2006	60,000 (1)	150,000 (1)	0	0
Michael Boswell Acting Chief Accounting Officer	2007	0 (2)	0	0	26,847 (3)
Michael Boswell Acting Chief Accounting Officer	2006	0 (2)	0	0	0

Name and Principal Position	Year	Non-Equity Incentive Plan Compensation ($)	Non-Qualified Deferred Compensation Earnings ($)	All other Compensation	Total ($)
(a)	(b)	(g)	(h)	(i)	(j)
Robert Saunders Chief Executive Officer	2007	0	0	1,000,000	1,080,651
Robert Saunders Chief Executive Officer	2006	0	0	1,000,000	1,210,000
Michael Boswell Acting Chief Accounting Officer	2007	0	0	0	26,847
Michael Boswell Acting Chief Accounting Officer	2006	0	0	0	0

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(1)

In June 2005, we entered into an employment agreement with Robert Saunders, our Chairman, CEO and President.  Mr. Saunders will serve at the pleasure of the Board of Directors.  Pursuant to his employment agreement, Mr. Saunders’ compensation will be $60,000 (USD) per annum for his services as our President.  Following the receipt of at least $5,000,000 (USD) min outside funding, Mr. Saunders will receive an additional $10,000 per month for his services as Chairman and, thereafter, $20,000 per month provided that we achieve gross revenues of at least $20,000,000 (USD) for our most recent fiscal year and continuing as long as we maintain gross revenues of at least $20,000,000 (USD) for each successive fiscal year.  If we fail to achieve gross revenue of $20,000,000 (USD) in a successive fiscal year, Mr. Saunders compensation as Chairman shall be reduced to $10,000 (USD) per month.  Additionally, we agreed to grant Mr. Saunders a signing bonus of $150,000 (USD) to be paid upon the closing of at least $3,500,000 in new third party financing.  In August 2006, our Board approved the following revisions to Mr. Saunders’ compensation: reduce Mr. Saunders’ compensation from $10,000 to $5,000 per month until our cash flow position improves, at which time the Compensation Committee will recommend that Mr. Saunders’ compensation increase back to $10,000 per month.  As of August 31, 2007, we had paid Mr. Saunders $75,000 of the $150,000 bonus that was due under the terms of the agreement.  Additionally, we are currently  discussing possible restructuring/payment terms of the accrued salary of  $130,000 as of August 31, 2007, until such time that we become significantly cash flow positive for its operations.  

(2)

Mr. Boswell served as our President from March to June 2005, at which time Mr. Saunders replaced Mr. Boswell as President.  Mr. Boswell has served as our Acting Chief Accounting Officer since August 2005.  Mr. Boswell indirectly owns a minority interest in TriPoint Capital Advisors, LLC, a significant shareholder and party with which we maintain a consulting agreement.  In August 2006, the Board approved the Compensation Committee’s recommendation to pay TriPoint $15,000 per month, which includes fees for Mr. Boswell’s services as our Acting Chief Accounting during 2005, however TriPoint agreed to reduce such fee to $7,000 per month until our cash flow position improves, at which time the Committee will reconvene and recommend a return to $15,000 per month.  In addition, TriPoint has agreed not to accept any additional fees, other than expenses, until we are s ufficiently funded to carry out our business and operations.  According to the above

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reasons, Mr. Boswell did not receive any compensation in 2006 and only received the options listed in the table above in 2007.  

(3)

On August 17, 2007, Mr. Saunders and Mr. Boswell were granted five-year nonqualified stock options, pursuant to our 2005 Equity Plan, that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007. Based on the Black-Scholes option pricing model, the total fair value of these options were determined to be $247,815 and $322,159 for Mr. Saunders and Mr. Boswell, respectively.  Since these options vest monthly, the company will incur a monthly cost of $20,651 and $26,847 respectively.  As of August 31, 2007, only one month of these stock options costs had been realized.

Outstanding Equity Awards at Fiscal Year-End

Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date
(a)	(b)	(c)	(d)	(e)	(f)
Robert Saunders	300,000 (1)	0	0	1.21	8-14-2007
Michael Boswell	390,000 (1)	0	0	1.21	8-14-2007

Name	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares of Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
(a)	(g)	(h)	(i)	(j)
Robert Saunders	275,000	227,164	0	0
Michael Boswell	357,500	295,312	0	0

(1)

Pursuant to our 2005 Equity Incentive Plan, Mr. Saunders and Mr. Boswell were granted five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our

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common stock on August 17, 2007.  As Of August 31, 2007 only 1/12 of these options have vested.

Retirement/Resignation Plans

We do not have any plans or arrangements in place regarding the payment to any of our executive officers following such persons retirement or resignation.  

Director Compensation

Name	Fees  Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Non-Equity incentive Plan Compensation ($)
(a)	(b)	(c)	(d)	(e)
Douglas MacLellan	36,000	0	13,768 (1) (2)	0
Mark Elenowitz	0	0	35,795 (1) (3) (4)	0
Darryl Horton	1,000	0	688 (1) (5)	0
Ian Fraser	1,000	0	5,163 (1) (6)	0
Victor Bolton	1,000	0	688 (1) (7)	0
Robert Rooks	1,000	0	3,442 (1) (8)	0

Name	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All other Compensation ($)	Total ($)
(a)	(f)	(g)	(h)
Douglas MacLellan	0	0	49,768
Mark Elenowitz	0	0	35,795
Darryl Horton	0	0	1,688
Ian Fraser	0	0	6,163
Victor Bolton	0	0	1,688
Robert Rooks	0	0	4,442

(1)

At the end of the fiscal year, 2,962,000 options are outstanding.  

(2)

These include the five-year incentive stock options granted to such individual on August 17, 2007 pursuant to our 2005 Equity Plan.  These options vest on a 1/12 monthly basis over a twelve month period beginning on the grant date and are exercisable at $1.21, which represents 110% of the closing price of our common stock on August 17, 2007. Based on the Black-Scholes option pricing model, the total fair value of these 200,000 options were determined to be $165,210.  Since these options vest monthly, we will incur a monthly cost of $13,768.  As of August 31, 2007, only one month of these stock options costs had been realized.

(3)

These include the five-year incentive stock options granted to such individual on August 17, 2007 pursuant to our 2005 Equity Plan.  These options vest on a 1/12 monthly basis over a twelve month period beginning on the grant date and are exercisable at

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$1.21, which represents 110% of the closing price of our common stock on August 17, 2007. Based on the Black-Scholes option pricing model, the total fair value of these 520,000 options were determined to be $429,546.  Since these options vest monthly, we will incur a monthly cost of $35,795.  As of August 31, 2007, only one month of these stock options costs had been realized.

(4)

Mr. Elenowitz  indirectly owns a minority interest in TriPoint Capital Advisors, LLC, a significant shareholder and party with which we maintain a consulting agreement.  In August 2006, the Board approved the Compensation Committee’s recommendation to pay TriPoint $15,000 per month, which includes fees for Mr. Elenowitz’s services as a Director; however, TriPoint agreed to reduce such fee to $7,000 per month until our cash flow position improves, at which time the Committee will reconvene and recommend a return to $15,000 per month.  In addition, TriPoint has agreed not to accept any additional fees, other than expenses, until we are sufficiently funded to carry out our business and operations.

(5)

These include the five-year incentive stock options granted to such individual on August 17, 2007 pursuant to our 2005 Equity Plan.  These options vest on a 1/12 monthly basis over a twelve month period beginning on the grant date and are exercisable at $1.21, which represents 110% of the closing price of our common stock on August 17, 2007. Based on the Black-Scholes option pricing model, the total fair value of these 10,000 options were determined to be $8,260.  Since these options vest monthly, we will incur a monthly cost of $688.  As of August 31, 2007, only one month of these stock options costs had been realized.

(6)

These include the five-year incentive stock options granted to such individual on August 17, 2007 pursuant to our 2005 Equity Plan.  These options vest on a 1/12 monthly basis over a twelve month period beginning on the grant date and are exercisable at $1.21, which represents 110% of the closing price of our common stock on August 17, 2007. Based on the Black-Scholes option pricing model, the total fair value of these 75,000 options were determined to be $61,954.  Since these options vest monthly, we will incur a monthly cost of $5,163.  As of August 31, 2007, only one month of these stock options costs had been realized.

(7)

These include the five-year incentive stock options granted to such individual on August 17, 2007 pursuant to our 2005 Equity Plan.  These options vest on a 1/12 monthly basis over a twelve month period beginning on the grant date and are exercisable at $1.21, which represents 110% of the closing price of our common stock on August 17, 2007. Based on the Black-Scholes option pricing model, the total fair value of these 10,000 options were determined to be $8,260.  Since these options vest monthly, we will incur a monthly cost of $688.  As of August 31, 2007, only one month of these stock options costs had been realized.

(8)

These include the five-year incentive stock options granted to such individual on August 17, 2007 pursuant to our 2005 Equity Plan.  These options vest on a 1/12 monthly basis over a twelve month period beginning on the grant date and are exercisable at $1.21, which represents 110% of the closing price of our common stock on August 17, 2007. Based on the Black-Scholes option pricing model, the total fair value of these 50,000 options were determined to be $41,302.  Since these options vest monthly, we will incur a monthly cost of $3,442.  As of August 31, 2007, only one month of these stock options costs had been realized.

Our directors who are employees do not receive any compensation from us for services rendered

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as directors. The Board has created three classes of fees for outside directors: (1) outside directors who are “independent,” as defined in the Exchange Act will be paid $500 per meeting, whether telephonic or in person for director fee – there shall not be any fees for written consents in lieu of board meetings; (2) outside directors who are not “independent” will not receive any fees at this time, but once our cash flow position improves, the Compensation Committee will reconvene and make recommendations; (3) the Vice Chairman will receive $3,000 per month, which includes $1,500 per month for his role as Chairman of our Audit Committee.  Additionally, although we do not currently have an arrangement or agreement to provide stock based compensation to our outside directors, we may, from time to time, grant outside directors incentive stock options pursuant to our 2005 Equity Incentive Plan.

2005 Equity Incentive Plan

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

Individuals eligible to receive awards under the Equity Plan include officers, directors, employees of and consultants to Edgewater and its affiliates.  The number of shares available under the Equity Plan shall be 5,000,000 shares of our common stock, as well as the following:  As of January 1 of each year, commencing with the year 2006 and ending with the year 2008, the aggregate number of Shares available for granting Awards under the Equity Plan shall automatically increase by a number of Shares equal to the lesser of (x) 5% of the total number of Shares then outstanding or (y) 1,000,000.  The Board may distribute those shares in whatever form of award they so choose within the Equity Plan’s guidelines.  There are no restrictions on the amount of any one type of award that may be granted under the Equity Plan.  

As of August 31, 2006, our Board of Directors granted 282,000 options to employees, directors and consultants under the Equity Plan.  No awards have been given to any of the named executive officers.  As of November 28, 2007, there are 6 Directors, 2 executive officers, 3 consultants and approximately 26 employees other than executive officers, who are eligible to receive awards under the Equity Plan.

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

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Section 162(m) of the Code, acting in accordance with the provisions of Section 3.  

On April 18, 2007 our board of directors authorized the issuance of 190,000 options to purchase our common stock to 19 employees pursuant to the Equity Plan.  The options vest on April 18, 2008.  Each option is exercisable for a period of five years from the vesting date and has an exercise price of $1.25 respectively. Otherwise, we do not have any definitive plans for granting further awards under the Equity Plan and no determination has been made as to the number of awards to be granted, or the number or identity of recipients of awards.  

Amending the Plan

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

Options and Rights

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

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

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exercise, methods of settlement, and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Board or the Committee.  The Board and the Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.

Federal Income Tax Consequences

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

Nonqualified Stock Options  

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

Incentive Stock Options

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

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Stock Awards  

If a recipient receives an unrestricted stock award, he/she will recognize compensation income upon the grant of the stock award. If a recipient receives a restricted stock award, he/she normally will not recognize taxable income upon receipt of the stock award until the stock is transferable by the recipient or no longer subject to a substantial risk of forfeiture, whichever occurs earlier. When the stock is either transferable or no longer subject to a substantial risk of forfeiture, the recipient will recognize compensation income in an amount equal to the fair market value of the shares (less any amount paid for such shares) at that time. A recipient may, however, elect to recognize ordinary compensation income in the year the stock award is granted in an amount equal to the fair market value of the shares (less any amount paid for the shares) at that time, determined without regard to the restrictions. We will generally be entitled to a corresponding deduction at the same time, and in the same amount, as the recipient recognizes

compensation income with respect to a stock award. Any gain or loss recognized by the recipient upon subsequent disposition of the shares will be capital gain or loss.

Tax Deductibility under Section 162(m)

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

Withholding  

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

Employment Agreements

In June 2005, we entered into an employment agreement with Robert Saunders, our Chairman, CEO and President.  Mr. Saunders will serve at the pleasure of the Board of Directors.  Pursuant to his employment agreement, Mr. Saunders’ compensation will be $60,000 (USD) per annum for his services as our President.  Following the receipt of at least $5,000,000 (USD) min outside funding, Mr. Saunders will receive an additional $10,000 per month for his services as Chairman and, thereafter, $20,000 per month provided that we achieve gross revenues of at least $20,000,000 (USD) for our most recent fiscal year and continuing as long as we maintain gross revenues of at least $20,000,000 (USD) for each successive fiscal year.  If we fail to achieve gross revenue of $20,000,000 (USD) in a successive fiscal year, Mr. Saunders compensation as Chairman shall be reduced to $10 ,000 (USD) per month.  Additionally, we agreed to grant Mr. Saunders a signing bonus of $150,000 (USD) to be paid upon the closing of at least $3,500,000

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in new third party financing.  In August 2006, our Board approved the following revisions to Mr. Saunders’ compensation: reduce Mr. Saunders’ compensation from $10,000 to $5,000 per month until our cash flow position improves, at which time the Compensation Committee will recommend that Mr. Saunders’ compensation increase back to $10,000 per month.   As of August 31, 2007, we had paid Mr. Saunders $75,000 of the $150,000 bonus that was due under the terms of the agreement.  Additionally, we are currently  discussing possible restructuring/payment terms of the accrued salary of  $130,000 as of August 31, 2007 until such time that we become significantly cash flow positive for its operations.    

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

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

As of November 28, 2007, we had a total of 23,737,700 shares of common stock, 7,773,998 shares of Series A Preferred Stock, 207 shares of Series B Preferred Stock  and 747,870 shares of our Series C Preferred Stock issued and outstanding, which are our only issued and outstanding equity securities.  However, our preferred stock does not have any voting rights except with respect to specified transactions that may affect the rights, preferences, privileges or voting power of such class and except as otherwise required by Nevada law.  (For further information regarding the preferred stock see “Description of Securities – Series A Preferred Stock” and “Description of Securities – Series B Preferred Stock” and “Description of Securities – Series C Preferred Stock”.)  At the date of this Prospectus, each share of our Series A Preferred Stock and Series C Preferred Stock is convertible into one share of common stock and each share of our Series B 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 Series B Preferred Stock.

The following table sets forth, as of November 28, 2007: (a) the names and addresses of each beneficial owner of more than five percent (5%) of our common stock and preferred stock (taken together as one class) known to us, the number of shares of common stock and preferred stock beneficially owned by each such person, and the percent of our common stock and preferred stock so owned; and (b) the names and addresses of each director and executive officer, the number of shares our common stock and preferred stock beneficially owned, and the percentage of our common stock and preferred stock so owned, by each such person, and by all of our directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of our common stock and preferred stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock and preferred stock, except as otherwise indicated.

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Name and Address	Amount and Nature of Beneficial Ownership	Percentage Of Voting of Securities (1)
Robert Saunders Chairman, President and CEO 5552 West Island Highway Qualicum Beach, British Columbia Canada V9K 2C8	10,025,000 (2)	29.44%
Douglas C. MacLellan Vice Chairman 8324 Delgany Avenue Playa del Ray, CA 90293	1,123,333 (3)	3.30%
Mark Elenowitz Director 400 Professional Drive Suite 310 Gaithersburg, MD 20879	1,454,667 (4) (5)	4.27%
Dr. Robert Rooks Director 912 Pine Avenue Huntington Beach, CA 90293	320,833 (6)	0.94%
Ian Fraser Director 3056 West 2nd Avenue Vancouver, British Columbia Canada V6T 1E9	831,250 (7) (8)	2.44%
Michael Boswell Director and Acting Chief Accounting Officer 400 Professional Drive Suite 310 Gaithersburg, MD 20879	1,100,500 (9) (10)	3.23%
Victor Bolton Director 345-916 W. Broadway Vancouver, BC V5Z 1K7	4,167 (11)	0.01%
Darryl Horton Director 33568 Eagle Mountain Drive Abbortsford, BC V3G 2X7	4,167 (12)	0.01%
Vision Opportunity Master Fund, Ltd. 20 West 55th St., 5th Floor New York, NY 10019	1,699,577 (13)	4.99%
All directors and officers as a group (8 persons)	14,863,917	43.64%

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(1)

All Percentages have been rounded up to the nearest one hundredth of one percent and such percentage is based upon the amount of outstanding our common stock and preferred stock, on an as converted basis.  The percentage assumes in the case of each shareholder listed in the above list that all warrants or options held by such shareholder that are exercisable currently or within 60 days were fully exercised by such shareholder, without the exercise of any warrants or options held by any other shareholders.

(2)

In addition to his stock ownership, Mr. Saunders was granted 300,000 five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007.  As of November 28, 2007, only 3/12 of these options have vested, but an additional 2/12 will vest within 60 days from such date.

(3)

In addition to his stock ownership, Mr. MacLellan was granted 200,000 five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007.  As of November 28, 2007, only 3/12 of these options have vested, but an additional 2/12 will vest within 60 days from such date.

(4)

Mr. Elenowitz is a one hundred (100%) percent shareholder of MHE, Inc., which owns 18,000 shares of our voting stock.  Additionally, MHE, Inc. is a forty percent (40%) member of TriPoint Capital Advisors, LLC, which owns 3,000,000 shares of our voting stock. Mr. Elenowitz owns 20,000 shares of our voting stock directly.  Therefore, Mr. Elenowitz beneficially owns 1,240,000shares of our voting stock.  

(5)

In addition to his stock ownership, Mr. Elenowitz was granted 520,000 five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007.  As of November 28, 2007, only 3/12 of these options have vested, but an additional 2/12 will vest within 60 days from such date.

(6)

In addition to his stock ownership, Dr. Rooks was granted 50,000 five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007.  As of November 28, 2007, only 3/12 of these options have vested, but an additional 2/12 will vest within 60 days from such date.

(7)

Mr. Fraser is a 100% shareholder of One Way Grill Limited, which owns 800,000 shares of our voting stock. Therefore, Mr. Fraser beneficially owns 800,000 shares of our voting stock.

(8)

In addition to his stock ownership, Mr. Fraser was granted 75,000 five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007.  As of November 28, 2007, only 3/12 of these options have vested, but an additional 2/12 will vest within 60 days from such date.

(9)

Mr. Boswell and his wife jointly own Invision, LLC, which owns 38,000 shares

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of our voting stock.  Additionally, Invision, LLC is a thirty percent (30%) member of TriPoint Capital Advisors, LLC, which owns 3,000,000 shares of our voting stock. Therefore, Mr. Boswell beneficially owns 938,000 shares of our voting stock.

(10)

In addition to his stock ownership, Mr. Boswell was granted 390,000 five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007.  As of November 28, 2007, only 3/12 of these options have vested, but an additional 2/12 will vest within 60 days from such date.

(11)

Mr. Bolton was granted 10,000 five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007.  As of November 28, 2007, only 3/12 of these options have vested, but an additional 2/12 will vest within 60 days from such date.

(12)

Mr. Horton was granted 10,000 five-year nonqualified stock options on August 17, 2007 that vest on a 1/12 monthly basis over a twelve month period beginning on the grant date.  The exercise price of the options is $1.21, which represents 110% of the closing price of our common stock on August 17, 2007.  As of November 28, 2007, only 3/12 of these options have vested, but an additional 2/12 will vest within 60 days from such date.

(13)

Vision owns 2,204,296 shares of common stock, 5,238,333 shares of common stock issuable upon conversion of their Series A Convertible Preferred Stock, 1,495,740 shares of common stock issuable upon conversion of their Series B Convertible Preferred Stock, 747,870 shares of common stock issuable upon conversion of their Series C Convertible Preferred Stock and 230,630 shares of common stock received as dividends.  However, based upon the terms of the preferred stock, Vision may not convert its preferred stock if on any date, it would be deemed the beneficial owner of more than 4.99% of the then outstanding shares of our common stock.  In addition to the shares listed in the table, Vision holds warrants to purchase up to 19,787,758 shares of our common stock, but based upon the terms of these warrants, Vision cannot exercise them if on any date, it would be deemed the beneficial owner of more than 4.99% of the then outstanding shares of our common stock.  However, Vision can elect to waive the cap upon 61 days notice to us or less if, and only if less than 61 days remain on the term of the warrant and in such case the waiver will not be effective until the warrant's expiration date.

Changes in Control

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

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Relationships And Related Transactions

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

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

Island Scallops, our wholly owned subsidiary, recently transferred 100% ownership of RKS Laboratories, Inc. to Robert Saunders, our Chairman, CEO and President.  RKS is a Vancouver research and development that is working towards developing superior strains of scallops (developed by Island Scallops and known as the Pacific Scallop) with beneficial traits such as higher meat yield and rapid growth.  Island Scallops agreed to transfer its ownership of RKS in consideration for the grant to Island Scallops by RKS and Robert Saunders of a right of first refusal to commercialize any intellectual property developed by RKS.  Island Scallops has the right to acquire or use any intellectual property from RKS at RKS’ cost, in perpetuity or until such time as RKS shall cease to exist.   Between June 2006 and August 2007, Island Scallops agreed to loan RKS a total of approximately $82,000 u nder eight non-interest bearing notes that are secured by all of RKS’ assets and are due on August 31, 2008.  

DESCRIPTION OF SECURITIES

Our authorized capital consists of 100,000,000 shares of common stock, $.0001 par value per share, and 10,000,000 shares of preferred stock, $.001 par value per share.  As of November 28, 2007, there were outstanding 23,737,700 shares of our common stock outstanding, 7,773,998 shares of our Series A Preferred Stock, 207 shares of our Series B Preferred Stock and 747,870 shares of our Series C Preferred Stock outstanding.   

Common Stock  

The holders of common stock are entitled to one vote for each share held of record on all

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

Preferred Stock

Our Board of Directors will be authorized, without further action by the shareholders, to issue, from time to time, up to 10,000,000 shares of preferred stock in one or more classes or series.  Similarly, our Board of Directors will be authorized to fix or alter the designations, powers, preferences, and the number of shares which constitute each such class or series of preferred stock.   Such designations, powers or preferences may include, without limitation, dividend rights (and whether dividends are cumulative), conversion rights, if any, voting rights (including the number of votes, if any, per share), redemption rights (including sinking fund provisions, if any), and liquidation preferences of any unissued shares or wholly unissued series of preferred stock. As of the date of this filing, we have designated 8,000,000 shares of our authorized preferred stock as Series A Convertible Prefe rred Stock, 220 shares of our authorized preferred stock as Series B Convertible Preferred Stock and 1,000,000 shares of our authorized preferred stock as Series C Convertible Preferred Stock.  

Series A Preferred Stock

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

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

Dividends. The holders of record of shares of Series A Preferred Stock are entitled to receive, out of any assets at the time legally available therefor and when and as declared by the Board of Directors, dividends at the rate of 8% per annum in shares of our common stock.  The number of shares of common stock to be issued to the holder shall be an amount equal to 90% of the quotient of (i) the dividend payment divided by (ii) the average of the daily volume weighted

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

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

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

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

Liquidation. In the event of the liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to receive, out of our assets available for distribution to its stockholders, an amount equal to $0.75 per share or the liquidation preference amount, of the Series A Preferred Stock plus any accrued and unpaid dividends before any payment shall be made or any assets distributed to the holders of the common stock or any other junior stock.  If our assets are not sufficient to pay in full the liquidation preference amount plus any accrued and

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

Series B Preferred Stock

Our Board of Directors of has designated 220 shares of our authorized preferred stock as Series B Convertible Preferred Stock.  The principal terms of the preferred stock are as follows:

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

Dividends. The holders of record of shares of Series B Preferred Stock are entitled to receive, out of any assets at the time legally available therefor and when and as declared by the Board of Directors, dividends at the rate of 6% per annum in shares of our common stock.  The number of shares of common stock to be issued to the holder shall be an amount equal to 90% of the quotient of (i) the dividend payment divided by (ii) the average of the daily volume weighted average price (VWAP) of our common stock for such date on the OTC Bulletin Board for the 20 trading days immediately preceding the date the dividend payment is due, but in no event less than $0.65.  Dividends on the Series B Preferred Stock are cumulative, accrue and are payable semi-annually.  Dividends on the Series B Preferred Stock are prior and in preference to any declaration or payment of any distribution on any outstanding shares of junior stock.  So long as any shares of Series B Preferred Stock are outstanding, we will not declare, pay or set apart for

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payment any dividend or make any distribution on any junior stock (other than dividends or distributions payable in additional shares of junior stock), unless at the time of such dividend or distribution we shall have paid all accrued and unpaid dividends on the outstanding shares of Series B Preferred Stock.

Voluntary Conversion.  At any time on or after the issuance date, the holder of any such shares of Series B Preferred Stock may, at the holder's option, elect to convert all or any portion of the shares of the Series B Preferred Stock held by such person into a number of fully paid and nonassessable shares of common stock equal to the quotient of (i) the liquidation preference amount ($10,000) of the shares of Series B Preferred Stock being converted plus any accrued but unpaid dividends divided by (ii) the conversion price, which initially is $1.15 per share, subject to certain adjustments.  If within 3 business days of our receipt of an executed copy of a conversion notice the transfer agent shall fail to issue and deliver to a holder the number of shares of common stock to which such holder is entitled upon such holder's conversion of the Series B Preferred Stock or to issue a new prefer red stock certificate representing the number of shares of Series B Preferred Stock to which such holder is entitled, we shall pay additional damages to such holder on each business day after such 3^rd business day that such conversion is not timely effected in an amount equal 0.5% of the product of (A) the sum of the number of shares of common stock not issued to the holder on a timely basis and to which such holder is entitled and, in the event we failed to deliver a preferred stock certificate to the holder on a timely basis, the number of shares of common stock issuable upon conversion of the shares of Series B Preferred Stock represented by such certificate, as of the last possible date which we could have issued such certificate to such holder timely and (B) the closing bid price of our common stock on the last possible date which we could have issued such common stock and such certificate, as the case may be, to such holder timely.  If we fail to pay those additional damages within 5 bu siness days of the date incurred, then such payment shall bear interest at the rate of 2.0% per month (pro rated for partial months) until such payments are made.  

Mandatory Conversion. Any and all outstanding shares of Series B Preferred Stock on January 16, 2012 shall automatically and without any action on the part of the holder thereof, convert into a number of fully paid and nonassessable shares of common stock equal to the quotient of (i) the Liquidation Preference Amount of the number of shares of Series B Preferred Stock being converted on such date divided by (ii) the conversion price, which initially is $1.15 per share, subject to certain adjustments.  Such mandatory conversion shall only take place however, if (i) the registration statement providing for the resale of shares of the common stock issuable upon conversion of the Series B Preferred Stock is effective and has been effective, without lapse or suspension of any kind, for a period 60 consecutive calendar days, or the shares of common stock into which the Series B Preferred Stock can be converted may be offered for sale to the public pursuant to Rule 144(k) under the Securities Act of 1933, as amended, (ii) trading in the common stock shall not have been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the common stock is trading), and (iii) we are in material compliance with the terms and conditions of the Certificate of Designation of the Rights and Preferences of the Series B Preferred Stock and other transaction documents creating same.  Notwithstanding the foregoing, the Mandatory Conversion Date will be extended if certain events occur, including events such as a lapse in the effectiveness of the registration statement registering the Series B Preferred Stock or the delisting of such stock from the then current principal exchange on which such security is traded.

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

Liquidation. In the event of the liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to receive, out of our assets available for distribution to its stockholders, an amount equal to $10,000 per share or the liquidation preference amount, of the Series B Preferred Stock plus any accrued and unpaid dividends before any payment shall be made or any assets distributed to the holders of the common stock or any other junior stock.  If our assets are not sufficient to pay in full the liquidation preference amount plus any accrued and unpaid dividends payable to the holders of outstanding shares of the Series B Preferred Stock and any series of preferred stock or any other class of stock ranking pari passu, as to rights on liquidation, dissolution or winding up, with the Series B Pre ferred Stock, then all of said assets will be distributed among the holders of the Series B Preferred Stock and the other classes of stock ranking pari passu with the Series B Preferred Stock, if any, ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.  The liquidation payment with respect to each outstanding fractional share of Series B Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with respect to each outstanding share of Series B Preferred Stock.  All payments pursuant thereto, shall be in cash, property (valued at its fair market value as determined by an independent appraiser reasonably acceptable to the holders of a majority of the Series B Preferred Stock) or a combination thereof; provided, however, that no cash shall be paid to holders of junior stock unless each holder of the outstanding shares of Series B Preferred Stock has been paid in cash th e full Liquidation Preference Amount plus any accrued and unpaid dividends to which such holder is entitled as provided herein.  After payment of the full liquidation preference amount plus any accrued and unpaid dividends to which each holder is entitled, such holders of shares of Series B Preferred Stock will not be entitled to any further participation as such in any distribution of our assets.

Series C Preferred Stock

Our Board of Directors of has designated 1,000,000 shares of our authorized preferred stock as Series C Convertible Preferred Stock.  The principal terms of the preferred stock are as follows:

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

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Dividends. The holders of record of shares of Series C Preferred Stock are entitled to receive, out of any assets at the time legally available therefor and when and as declared by the Board of Directors, dividends at the rate of 6% per annum in shares of our common stock.  The number of shares of common stock to be issued to the holder shall be an amount equal to 90% of the quotient of (i) the dividend payment divided by (ii) the average of the daily volume weighted average price (VWAP) of our common stock for such date on the OTC Bulletin Board for the 20 trading days immediately preceding the date the dividend payment is due, but in no event less than $0.65.  Dividends on the Series C Preferred Stock are cumulative, accrue and are payable semi-annually.  Dividends on the Series C Preferred Stock are prior and in preference to any declaration or payment of any distribution on any outstanding shares of junior stock.  So long as any shares of Series C Preferred Stock are outstanding, we will not declare, pay or set apart for payment any dividend or make any distribution on any junior stock (other than dividends or distributions payable in additional shares of junior stock), unless at the time of such dividend or distribution we shall have paid all accrued and unpaid dividends on the outstanding shares of Series C Preferred Stock.

Voluntary Conversion.  At any time on or after the issuance date, the holder of any such shares of Series C Preferred Stock may, at the holder's option, elect to convert all or any portion of the shares of the Series C Preferred Stock held by such person into a number of fully paid and nonassessable shares of common stock equal to the quotient of (i) the liquidation preference amount ($1.20) of the shares of Series C Preferred Stock being converted plus any accrued but unpaid dividends divided by (ii) the conversion price, which initially is $1.20 per share, subject to certain adjustments.  

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

Mandatory Conversion. Any and all outstanding shares of Series C Preferred Stock on November 5, 2012 shall automatically and without any action on the part of the holder thereof, convert into a number of fully paid and nonassessable shares of common stock equal to the quotient of (i) the Liquidation Preference Amount of the number of shares of Series C Preferred Stock being converted on such date divided by (ii) the current conversion price.  Such mandatory conversion shall only take place however, if (i) the registration statement providing for the resale

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of shares of the common stock issuable upon conversion of the Series C Preferred Stock is effective and has been effective, without lapse or suspension of any kind, for a period 60 consecutive calendar days, or the shares of common stock into which the Series C Preferred Stock can be converted may be offered for sale to the public pursuant to Rule 144(k) under the Securities Act of 1933, as amended, (ii) trading in the common stock shall not have been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the common stock is trading), and (iii) we are in material compliance with the terms and conditions of the Certificate of Designation of the Rights and Preferences of the Series C Preferred Stock and other transaction documents creating same.  Notwithstanding the foregoing, the Mandatory Conversion Date will be extended if certain events occur, including events such as a lapse in the effectiveness of the registration statement registering the Series C Preferred Stock or the delisting of such stock from the then current principal exchange on which such security is traded.

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

Liquidation. In the event of the liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to receive, out of our assets available for distribution to its stockholders, an amount equal to $1.20 per share or the liquidation preference amount, of the Series C Preferred Stock plus any accrued and unpaid dividends before any payment shall be made or any assets distributed to the holders of the common stock or any other junior stock.  If our assets are not sufficient to pay in full the liquidation preference amount plus any accrued and unpaid dividends payable to the holders of outstanding shares of the Series C Preferred Stock and any series of preferred stock or any other class of stock ranking pari passu, as to rights on liquidation, dissolution or winding up, with the Series C Prefe rred Stock, then all of said assets will be distributed among the holders of the Series C Preferred Stock and the other classes of stock ranking pari passu with the Series C Preferred Stock, if any, ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.  The liquidation payment with respect to each outstanding fractional share of Series C Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with respect to each outstanding share of Series C Preferred Stock.  All payments pursuant thereto, shall be in cash, property (valued at its fair market value as determined by an independent appraiser reasonably acceptable to the holders of a majority of the Series C Preferred Stock) or a combination thereof; provided, however, that no cash shall be paid to holders of junior stock unless each holder of the outstanding shares of Series C Preferred Stock has been paid in cash the full Liquidation Preference Amount plus any accrued and unpaid dividends to which such holder is entitled as provided herein.  After payment of the full liquidation preference amount plus any accrued and unpaid dividends to which each holder is entitled, such holders of shares of Series C Preferred Stock will not be entitled to any further participation as such in any distribution of our assets.

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Warrants

2006 Series A-D and E-H Warrants

Each A-D Warrant allows its holder to purchase one share of common stock for $1.15, $1.35, $1.85, $2.25 respectively, subject to adjustment, until five years after the date of issuance.  The E-H Warrants have the same pricing and term as the A-D Warrants, however the E-H Warrants may only be exercised once the holder exercises his/her Series J Warrant, which have all now been exercised.  As of November 28, 2007 there were 20,307,220 2006 Warrants outstanding.  

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

X = Y - (A)(Y)

     B

Where

X =

the number of restricted shares of common stock to be issued to the holder.

Y =

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

A =

the exercise price of the Warrant.

B =

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

The exercise price of the 2006 Warrants and the number of shares of common stock purchasable upon exercise of the 2006 Warrants are subject to adjustment upon the occurrence of certain events. Such events include recapitalizations or consolidations, combinations of our common stock, dividends payable in our common stock, and the issuance of rights to purchase additional shares of our common stock or to receive other securities convertible into additional shares of common stock.

Pursuant to the terms of the 2006 Warrants, we shall not effect the exercise of any Warrants, and no person who is a holder of any 2006 Warrant shall have the right to exercise his/her 2006 Warrants, to the extent that after giving effect to such exercise, such person would beneficially own in excess of 9.99% of the then outstanding shares of our common stock. However, the holder is entitled to waive this cap upon 61 days notice to us.

No fractional shares of common stock issuable upon exercise of the 2006 Warrants will be issued in connection with any exercise, but in lieu of such fractional shares, we shall round the number of shares to be issued upon exercise up to the nearest whole number of shares.     

The 2006 Warrants expire at the close of business on the fifth anniversary of the date of issuance.

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2007 Series A-C and D-F Warrants

Each 2007 A-C Warrant allows its holder to purchase one share of common stock for $1.41, $2.30, $2.60 respectively, subject to adjustment, until six years after the date of issuance , however the D-F Warrants may only be exercised once the holder exercises his/her Series J Warrant.  Pursuant to the November 2007 financing, as described elsewhere in this Registration Statement, some of the D-F Warrants we issued pursuant to the January 2007 financing were exchanged for the following warrants: a Series A-C Warrant, each of which allows its holder to purchase one share of common stock for $1.56, $2.45, $2.75 respectively, subject to adjustment, until five years after the date of issuance; and, a Series D-F Warrant, each of which have the same pricing and term as the A-C Warrants, however the D-F Warrants may only be exercised once the holder exercises his/her Series J Warrant.  As of November 28, 2007 there were 3,156,648 of the January 2007 Warrants outstanding and 2,243,610 of the November 2007 Warrants outstanding.  

In the event that our registration statement is not effective, as required by the registration rights agreement between us and investors, holders would also be permitted exercise the 2007 Warrants through a cashless exercise using the following formula:

X = Y - (A)(Y)

      B

Where

X =

the number of restricted shares of common stock to be issued to the holder.

Y =

the number of shares of common stock purchasable upon exercise of all of the 2007 Warrants or, if only a portion of the 2007 Warrant is being exercised, the portion of the 2007 Warrant being exercised.

A =

the exercise price of the 2007 Warrant.

B =

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

The exercise price of the 2007 Warrants and the number of shares of common stock purchasable upon exercise of the 2007 Warrants are subject to adjustment upon the occurrence of certain events. Such events include recapitalizations or consolidations, combinations of our common stock and dividends payable in our common stock.

Pursuant to the terms of the Warrants we issued in the January 2007 financing, we shall not effect the exercise of any such Warrants, and no person who is a holder of any Warrant shall have the right to exercise them, to the extent that after giving effect to such exercise, such person would beneficially own in excess of 9.99% of the then outstanding shares of our common stock.  However, the holder is entitled to waive this cap upon 61 days notice to us.  This limit was reduced to 4.99% for the Warrants we issued in the November 2007 financing and in addition to being able to waive the cap upon 61 days notice to us, during the 61 day period prior to the expiration date of the November 2007 warrants, the holders can waive the cap at any time during such 61 day period, but a waiver during such period will not be effective until the expiration date of such warrants.

No fractional shares of common stock issuable upon exercise of the 2007 Warrants will be issued in connection with any exercise, but in lieu of such fractional shares, we shall round the number of shares to be issued upon exercise up to the nearest whole number of shares.

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The 2007 Warrants expire at the close of business on the sixth anniversary of the date of issuance.

January 2007 Series J Warrants

Each January 2007 J Warrant allows its holder to purchase one share of common stock for $1.30, subject to adjustment, until one year after the date of issuance.  As of November 28, 2007 there were 304,347 January 2007 J Warrants outstanding.  

The exercise price of the January 2007 J Warrants and the number of shares of common stock purchasable upon exercise of such warrants are subject to adjustment upon the occurrence of certain events. Such events include recapitalizations or consolidations, combinations of our common stock, dividends payable in our common stock, and the issuance of rights to purchase additional shares of our common stock or to receive other securities convertible into additional shares of common stock.

Pursuant to the terms of the January 2007 J Warrants, we shall not effect the exercise of any Warrants, and no person who is a holder of any January 2007 J Warrant shall have the right to exercise such Warrants, to the extent that after giving effect to such exercise, such person would beneficially own in excess of 9.99% of the then outstanding shares of our common stock. However, the holder is entitled to waive this cap upon 61 days notice to us.

No fractional shares of common stock issuable upon exercise of the January 2007 J Warrants will be issued in connection with any exercise, but in lieu of such fractional shares, we shall round the number of shares to be issued upon exercise up to the nearest whole number of shares.     

The January 2007 J Warrants expire at the close of business on the first anniversary of the date of issuance.

November 2007 Series J Warrants

Each November 2007 J Warrant allows its holder to purchase one share of common stock for $1.30, subject to adjustment, until one year after the date of issuance.  As of November 28, 2007 there were 747,870 November 2007 J Warrants outstanding.  

Pursuant to the terms of the November 2007 J Warrants, we shall not effect the exercise of any such Warrants, and no person who is a holder of any November 2007 J Warrant shall have the right to exercise his/her November 2007 J Warrants, to the extent that after giving effect to such exercise, such person would beneficially own in excess of 4.99% of the then outstanding shares of our common stock. However, the holder is entitled to waive this cap upon 61 days notice to us, except that during the 61 day period prior to the expiration date of these warrants, the cap can be waived at any time but the waiver will not be effective until the expiration date.

No fractional shares of common stock issuable upon exercise of the November 2007 J Warrants will be issued in connection with any exercise, but in lieu of such fractional shares, we shall round the number of shares to be issued upon exercise up to the nearest whole number of shares.

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The 2007 J Warrants expire at the close of business on the first anniversary of the date of issuance.

Dividend Policy    

It is the policy of our Board of Directors to retain our earnings for use in our day-to-day operations and expansion of our operations.  We have not declared any dividends on our common stock, nor do we intend to declare any dividends on such stock in the foreseeable future. On June 30, 2006, we issued 22,860 shares of common stock to the Series A Preferred shareholders from our April 12 and May 30, 2006 financings as payment of the semi-annual dividend and on December 31, 2006, we issued 138,565 shares of common stock to Series A Preferred shareholders from our April 12, May 30, 2006, June 30, 2006 and July 11, 2006 financings as payment of the semi-annual dividend.  We have not paid any dividends to our Series B preferred shareholders.  Further description of our preferred stock dividend policies are described above in the description of our Series A Preferred Stock and Series B Preferred S tock.  

Registration Rights

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

In connection with the issuance of the Series B Preferred Stock and 2007 Warrants issued on January 16, 2007, we agreed to file this registration statement with the Securities and Exchange Commission to register for resale the shares of common stock issuable upon the exercise of the 2007 Warrants and conversion of the Series B Preferred Stock by February 14, 2007.  We also agreed to register the shares of common stock underlying the placement consultant warrants we issued pursuant to that same financing.

In connection with the issuance of the Series C Preferred Stock and November 2007 Warrants issued on November 5, 2007, we agreed to file this registration statement with the Securities and Exchange Commission to register for resale the shares of common stock issuable upon the exercise of the November 2007 Warrants and conversion of the Series C Preferred Stock on or before December 5, 2007.  We also agreed to register the shares of common stock underlying the placement consultant warrants we issued pursuant to that same financing

Transfer Agent

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

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MARKET FOR COMMON EQUITY

AND RELATED SHAREHOLDER MATTERS

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

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

	High	Low
Quarter ended December 31, 2004	$0.25	$0.25
Quarter ended March 31, 2005	$0.30	$0.25
Quarter ended June 30, 2005	$0.55	$0.30
Quarter ended August 31, 2005	$1.95	$0.52
Quarter ended November 30, 2005	$1.80	$1.45
Quarter ended February 28, 2006	$1.64	$1.10
Quarter ended May 31, 2006	$1.45	$0.80
Quarter ended August 31, 2006	$1.70	$1.20
Quarter ended November 30, 2006	$1.85	$1.01
Quarter ended February 28, 2007	$1.70	$1.01
Quarter ended May 31, 2007	$1.70	$1.01
Quarter ended August 31, 2007	$1.65	$1.05

At November 28, 2007, the closing bid price of the common stock was $1.01 and we had approximately 56 record holders of our common stock, 13 record holders of our Series A Preferred Stock, 2 record holders of our Series B Preferred Stock and 1 record holder of our Series C Preferred Stock. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.

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

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of August 31, 2007 with respect to compensation plans (including individual compensation arrangements) under which our securities are authorized for issuance:

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Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity Compensation plans approved by security holders	2,962,000	$1.26	4,038,000*
Equity compensation plans not approved by security holders	N/A	N/A	N/A
Total	2,962,000	$1.26	4,038,000*

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

On April 18, 2007 our board of directors authorized the issuance of 190,000 options to purchase our common stock to 19 employees pursuant to the 2005 Equity Incentive Plan.  The options vest on April 18, 2008.  Each option is exercisable for a period of five years from the vesting date and has an exercise price of $1.25.

On August 17, 2007, our board of directors authorized the issuance of 2,090,000 options to purchase our common stock to 19 of our employees, directors and consultants pursuant to the “Edgewater Foods International 2005 Equity Incentive Plan.”  The options vest on August 17, 2008.  Each option is exercisable for a period of five years from the vesting date and has an exercise price of $1.21 respectively.    

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Overview

In the 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 sites and joint venture locations, to final stage large grow-out nets on our farm sites.  During the third quarter of our 2007 fiscal year, we started harvesting our 2005 year-class scallops, continued moving our 2006 scallop crop into final large grow-out nets at our tenure (farm) sites and started the spawn of our 2007 year-class. 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 analysi s 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.

During the third quarter of 2007, harvest and sales of our 2005 scallop class started slower than expected as we worked to develop improved sales and marketing efforts as well as our continuing efforts to improve our processing and handling facilities.  These issues coupled with handling and harvesting problems associated with our 2004 ear-hung scallops (during the first and second quarters of 2007) resulted in lower than anticipated revenues during 2007.   

In June 2007, we hired marketing consultants with over 40 years of combined service in the seafood sales and distribution industry.  Traditionally, we have sold live scallops within the Pacific Northwest market.  Our seafood sale and distribution consultants have began to introduce new product lines of fresh meat and a new unique frozen on the half-shell product that is generating significant interest. We are currently in the process of expanding our live scallop distribution network into Hong Kong and the western United States to up to an additional 15,000 lbs. per week in the near future.  We are also in the process of introducing fresh scallop meat into high end restaurants in Toronto and Montreal and frozen on the half-shell product into the eastern United States and Canada.  In 2008, we expect our overall product mixture to consist of 40% live scallops, 30% fresh meat, 30% frozen on the half-shell and in 2009 and thereafter increase the frozen on the half-shell to 50%, and the remainder of 30% live and 20% fresh.

Management believes that these new marketing efforts, coupled with the recently completed processing plant will begin yielding significant revenue increases starting as early as first quarter of 2008 and continuing thereafter.  The completed processing plant supplies us with an improved processing facility and will provide us with several important advantages, including a significantly larger inventory holding and handling area and the ability to mitigate future weather related harvest delays to our sales.  We believe that this will lead to expedited sale processes in the upcoming months.  In addition, recent experience gained from harvesting and sorting

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scallops on the new longline systems should allow for greater future harvesting rates. Additionally, we plan on generating additional near term revenues via the sale of scallop and possibly other shellfish seed.    

During the harvesting of our 2005 and sorting of our 2006 scallops classes, we were able to review our mortality rates and update our class size projections.  Based on this review, we expect to bring as many 2 million 2005 year class scallops to market over the next twelve months and harvest over 1 million 2006 year class scallops starting in the fall of 2008.   Originally, we believed that our 2006 spawning would yield between 5 and 10 million scallops at full maturity/harvest.  However, mortality rates were at the higher end of our projections due to the handling and sorting learning curve associated with the roll-out of our new longline and anchor system.  Additionally, problems associated with the timing of moving scallops to large nets (also known as “ocean timing”) and the density (i.e. number of scallops per net level) contributed to additional mortality problems.   ;We anticipate that survival rates for the future classes, starting with the 2007 scallop class, will significantly improve due to the addition of more lines and anchors, better spacing and sorting within each lantern net, experience gained from the sorting and farming of both the 2005 and 2006 year classes and lessons learned on ocean timing and scallop density during the handling of our 2006 scallop class.

During the third quarter of our 2007 fiscal year, we began spawning our 2007 scallop year-class.  Due to improved hatchery technology and infrastructure (due to improvements from recent capital investments) and lessons learned from the 2006 spawn, we were able to increase early stage survival rates.  As of August 2007, at least 100 million scallops had reached 2 mm size in our onshore hatchery ponds.  We recently began to move these scallops into grow-out nets at our farm sites and will continue to do so in the coming months.  Based on the recent lessons learned and improved farm infrastructure, we anticipate that the 2007 spawning will yield up to 20 million scallops at full maturity/harvest. In fact, we are already noticing significant gains in animal survival rates and individual scallop size in the 2007 class as compared to the 2006 class at a similar point in its development.  In a ddition, we plan to hold up to 5 million scallops (from 2007 spawning) in our onshore ponds until February 2008 as reserve scallops.  We expect that at least 2.5 million of these scallops will eventually reach harvest size.

The use of DNA based family analysis that started in early 2000 and will continue through 2008, 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 approximately 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.

As a result of the above, we believe that the remaining 2005 scallop-class will produce at least $3.0 million of gross revenue over the next twelve months.  Although we originally anticipated that the harvest of our 2006 scallop class would eventually result in total gross revenue of up to $14.0 million over the twelve month period beginning in April 2008, we now believe the gross revenue from the harvest of the 2006 scallop class will only result in up to $2.0 million gross revenue over a much shorter period beginning in the fall of 2008 due to the higher than expected mortality rates and problems with handling of long lines discussed above.  Based on our current projections for the 2007 scallop class, we believe this year’s class could produce more than $40.0

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million over the life of its harvest.  Although the 2006 class is expected to produce less revenue than originally expected, the improving survival rates of the 2007 class coupled with the short harvest time of 2006 class is expected to maintain our overall revenue levels within range of our original projections over the next 24 to 36 months.  In 2007, our cost of goods sold increased more rapidly than our overall revenues.  Part of this increase was attributable to extreme circumstances related to costs associated with handling problems with our 2004 ear-hang scallop class and initial operations in our improved processing plant.  In future years, we expect this trend to reverse (as the many of the reasons for the increased cold of goods sold were unique to this fiscal year) and to have our sales increase significantly faster than our cost of goods sold.  As such, we expect our margins to improve in future years.

If our mortality rates are better than our current projections, our revenues from the 2005, 2006 and 2007 scallop class could be higher; 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.

Liquidity and Cash Resources

 At August 31, 2007, we had a cash balance of approximately $1,657,000. We originally expected to reach positive operating cash flow during the second half of our 2007 fiscal year, but slower than expected harvest rates and handling and harvesting problems resulted in lower than expected revenues.  As a result of recent processing improvements, experience gained in 2007 and new marketing efforts, we now expect to achieve operating positive cash flow in first half of 2008.  During the year ending August 31, 2007, we completed one private equity financing  and had investors exercise various warrants that resulted in net proceeds of approximately $3,075,000.  During the year ending August 31, 2006, we relied on four private equity financings that resulted in net proceeds of approximately $5,140,000.  These 2006 and 2007 financings contain warrants which if fully exercised, could raise approximately an additional $49,350,000.  To date, exercises of these warrants resulted in net proceeds of approximately $1,200,000; accordingly, if all of the remaining warrants from the 2006 and 2007 financings are exercised, we could receive an additional $48,150,000.  The exercise of the 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 should we require additional financing or ever.  Prior to the completion of the private equity financings in 2006, our initial expansion had been largely funded by a short term note with a maximum limit of approximately $1,451,000.  Previously, we have also relied on short term loans from certain shareholders to assist with our working capital needs and to meet short term cash requirements.  We used a portion of the 2006 private equity financing to repay these short term loans and as a result we were able to deploy the bulk of the proceeds from our financing toward our business strategy.

Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the acquired entities

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since their respective dates of acquisition.  All significant inter-company amounts have been eliminated.

Cash and equivalents

Cash and equivalents include cash, bank indebtedness, and highly liquid short term market investments with terms to maturity of three months or less.  The Company considers all highly liquid investments with original maturities of 90 days or less to be cash equivalents.  The Company maintains its cash balances primarily in on financial institution, which exceeded federally insured limits by $1,561,136 at August 31, 2007.  The Company has not experienced any losses, in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts receivable

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

Loans receivable

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

Inventory

We maintain inventories of raw materials for our 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.

Long term investments

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

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Property, plant, and equipment

Property and equipment are carried at cost, less accumulated depreciation.  Depreciation is calculated by using the straight-line method for financial reporting and accelerated methods for income tax purposes.  The recovery classifications for these assets are listed as follows:

	Years
Headend Facility and Fiber Infrastructure	20
Manufacturing Equipment	3–7
Furniture and Fixtures	2–7
Office Equipment	5
Leasehold Improvements	Life of lease
Property and Equipment	5
Vehicles	5

Expenditures for maintenance and repairs are charged against income as incurred whereas major improvements are capitalized. 

Impairment of long-lived assets

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

Government assistance

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

We have received government assistance in the form of loans, for which repayment is may not be required if we fail to meet sufficient future revenue levels to repay these loans based on a percentage of gross sales for certain products over a defined period of time. If we receive any such assistance, it is initially recorded as a liability, until such time as all conditions for forgiveness are met, and is then recognized as other income in that period.

Farm license costs

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

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Research and development costs

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

Research costs are expensed when incurred.

Income taxes

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

Revenue recognition

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

Our revenue is derived principally from the sale of scallops we produce or purchase from third parties, and from the sale of seed and farm supplies to other aquaculture farms.

Cost of goods

Cost of goods sold consists primarily of farming, harvesting and processing costs associated with the growth, transfer and sales preparation of our products (principally scallops).  These costs consist primarily of salaries and benefits and allocated overhead costs for consulting and support personnel engaged in the farming, harvesting and processing of our products.  All costs are recognized at time of delivery.

Financial instruments

The carrying amount of our financial instruments, which include cash, accounts receivable, loans receivable, bank indebtedness, accounts payable and accrued liabilities, short term debt and long term debt approximate fair value. It is management’s opinion that  we are not exposed to significant interest, currency or credit risk arising from these financial instruments unless otherwise noted.

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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.

We account 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, we estimate fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques.

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

Derivative financial instruments that are not designated as hedges or that do not meet the criteria for hedge accounting under SFAS No. 133 are recorded at fair value, with gains or losses reported currently in earnings.  All derivative financial instruments held by us at August 31, 2007 were not designated as hedges.

Foreign exchange

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

Use of estimates

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

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Off-Balance Sheet Arrangements

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

Investments in Tenures as Compared to Estimated Market Value of Tenures

We currently carry our investment in Island Scallops’ tenures at $3,770.  This amount represents the initial carrying costs of certain tenures acquired by Island Scallop’s subsidiary.  These tenures do not expire until various dates ranging from 2021 – 2024, however, we believe that they have an indefinite useful life because renewal on expiration is anticipated.  The area available for shellfish aquaculture within Baynes Sound is fully subscribed, and as a result new tenures are not available through the Canadian Provincial application and review process.  The shellfish companies within the Sound are also well established and sales of tenures are quite rare, making the assessment of the market value for the Island Scallops tenures difficult.  Historical sales and government auction of tenures have received as much as $300,000 (CDN) for a small beach tenure (les s than 4 acres) and $65,000 CDN) for a small deepwater tenure without infrastructure.  The few tenures on the market over the previous 24 months suggest that the current market value is approximately $10,000 to $25,000 (CDN) per acre.  Based on listings of tenures on the coast of British Columbia, discussions with local shellfish growers and individuals from the BC Assets and Land Corporation, and an independent appraisal (commissioned by Island Scallops) that recently estimated the value of our roughly 1018 acres of tenures, the  value is estimated to be approximately $8,600,000.  If the proposed expansion of two of our tenures is approved, the estimated market value of our overall tenures would increase to roughly $10,600,000.  The estimated market value is based on the size, location and whether they are beach or deepwater in nature.  However, given the variable nature of the shellfish tenures market, the actual value that we receive from the sale of a tenure or a partial ten ure could vary significantly from these estimated values.

Although we cannot determine the exact amount we would ultimately receive from the sale of our tenure(s), based upon the information stated above we expect to receive more than the carrying cost ($3,770) from such sale.  Accordingly, the carrying cost of our tenures is not indicative of their actual value.  This analysis indicates our cash generating capabilities after considering investments in capital assets necessary to maintain and enhance existing operations.

Comparison of results for the fiscal year ended August 31, 2007, to the fiscal year ended August 31, 2006.

Revenues.  Revenues for the fiscal year ended August 31, 2007, were approximately $657,000.  We had revenues of approximately $528,000 for the fiscal year ended August 31, 2006.  This is an increase of approximately $129,000 or 24%.  The increase in our revenue was mainly the result of an increase in the sales of our own scallops.  In fact, sales of our own scallops increased by more than 281%.  Previously, our increase in sales was the result of an increase in oyster and scallop seed sales and increased joint venture sales.  As was the case in 2006, management continued its emphasis on the development and production of larger scallop crops.  Management believes that our emphasis on expansion of future crops will yield a significant increase in revenues starting in 2008 and beyond.

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Gross profit (loss). Gross loss for the year ended August 31, 2007, was approximately $379,000, a increase of approximately $331,000 as compared to gross loss of roughly $48,000, for the year ended August 31, 2006. The increase in the amount of gross loss for 2007 (as compared to 2006) was mainly attributable to management’s continued focus on the expansion and development of larger scallop crops and larger scallop yields for future years.  Part of this increase was attributable to extreme circumstances related to costs associated with handling problems with our 2004 ear-hang scallop class.  We do not expect these problems to continue in future years.  Our cost of sales also increased due to higher processing plant and trucking costs as we began to establish a larger sales effort.  In the future, we expect our sales to increase more rapidly that these costs and margins to quickly improve.  We continued to focus resources on maintaining, developing and tending to our scallop crops and believe that we have already seen the initial benefits in increased sales of our own scallops and that we will continue to see additional benefits from our efforts in developing larger crops in the first quarter of 2008 and beyond.

General and administrative.  General and administrative expenses for the fiscal year ended August 31, 2007, were approximately $1,222,000.  Our general and administrative expenses were approximately $512,000 for the fiscal year ended August 31, 2006.  This is an increase of approximately $710,000 or 109%.     Our increase in general and administrative expenses for the year ended August 31, 2007 was attributable to costs associated with establishing, building, and supporting our infrastructure and included various consulting costs, legal and accounting fees compensation paid as result of our recent financing, overhead, realized stock compensation, stock option expenses and salaries.  We anticipate that these costs may continue to slightly rise as we continue to expand our operations.  However, we believe that we now have the necessary general and administrative staff in place to maintain our expansion into scallop crops of 30 million and beyond.

Stock compensation expense.  During the year ended August 31, 2007, we had stock compensation expense of approximately $62,000.  The expense was for outside seafood sale and distribution consultants who we hired to help develop new sales and marketing programs.  During the year ended August 31, 2006, we had stock compensation expense of approximately $183,000.  The expense was for two consulting groups who would provide services to us. As such, we incurred a stock compensation expense of approximately $183,000 for year ended August 31, 2006.  

Other income (expense), net.  Interest expense for the year ended August 31, 2007 was approximately $16,000.  Interest expense for the year ending August 31, 2006 was approximately $696,000.  The decrease in interest expense was mainly due to the repayment of a large short term note in the late 2006.  Other income for the year ended August 31, 2007 was approximately $167,000 as opposed to other income of approximately $45,000 for the year ending August 31, 2006.  The increase in other income was mainly the result of a one time gain of approximately $122,000 related to the forgiveness of a third-party debt in 2007.  For the year ended August 31, 2007, we recognized a one-time gain of approximately $5,827,000 which was related to the change in fair value of warrants issued to 10 institutional and accredited investors in conjunction with preferred stock.  We recognized a l oss of approximately $2,666,000 which was related to the change in 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 and July 11 and the market price of the common stock underlying such warrants at August 31, 2006.

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As a result, other income for the year ended August 31, 2007 was approximately $5,978,000 as compared to other expense of approximately $3,316,000 for the year ended August 31, 2006.  This increase was primarily attributed to loss associated with the change in fair value of the recently issued warrants and interest expense related to the extension of a former bridge financing loan. 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 income for the year ended August 31, 2007, was approximately $3,538,000 as compared to a net loss of approximately $4,235,000 for the year ended August 31, 2006.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

LEGAL PROCEEDINGS

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

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.

EXPERTS

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

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LEGAL MATTERS

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

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

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

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

WHERE YOU CAN FIND MORE INFORMATION

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

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

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FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Edgewater Foods International, Inc.

Qualicum Beach, British Columbia, Canada

We have audited the accompanying consolidated balance sheet of Edgewater Foods International, Inc. (the “Company”) as of August 31, 2007, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the years in the two-year period ended August 31, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Edgewater Foods International, Inc. as of August 31, 2007, and the results of its operations and its cash flows for each of the years in the two-year period ended August 31, 2007 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 19 to the consolidated financial statements, the Company's absence of significant revenues, recurring losses from operations, and its need for additional financing in order to fund its projected loss in 2008 raise substantial doubt about its ability to continue as a going concern. The 2007 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ LLB & Associates Ltd., LLP

LBB & Associates Ltd., LLP

Houston, Texas

October 28, 2007

F-1

EDGEWATER FOODS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
AUGUST 31, 2007
		2007
ASSETS
Current assets:
	Cash	$    1,656,868
	Accounts receivable, net	73,423
	Inventory	1,827,513
	Other current assets	61,242
	Total current assets	3,619,046
Property, plant and equipment, net		2,963,234
Loans receivable, related party		82,260
Investments in other assets		3,770
	Total assets	$       6,668,310
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Short term debt	$       110,800
	Current portion of long term debt	462,306
	Accounts payable and accrued liabilities	721,292
	Total current liabilities	1,294,398
Long term debt, net current portion		526,299
	Total liabilities	1,820,697
Stockholders' Equity
	Series A Preferred  stock,  par $0.001, 10,000,000	7,774
	authorized, 7,773,998 issued and outstanding
	Series B Preferred  stock, par $0.001, 100	-
	authorized, 207 issued and outstanding
	Common stock, par $0.0001, 100,000,000 authorized,	2,371
	23,712,700 issued and outstanding
	Additional paid in capital	22,471,315
	Accumulated deficit	(17,528,303)
	Accumulated other comprehensive income (loss) -	(105,544)
	foreign exchange adjustment
	Total stockholders' equity	4,847,613
	Total liabilities and stockholders' equity	$    6,668,310

See accompanying summary of accounting policies and notes to financial statements

F-2

EDGEWATER FOODS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2007 and 2006
	2007		2006
Revenue	$         657,065		$         527,623
Cost of goods sold	1,036,313		576,069
Gross profit (loss)	(379,248)		(48,446)
Expenses:
General and administrative expenses	1,222,184		512,370
Salaries and benefits		319,008	323,186
Total operating expenses	(1,541,192)		(835,556)
Loss from operations	(1,920,440)		(884,002)
Other income (expense):
Interest (expense), net	(15,876)		(695,889)
Change in fair value of warrants	5,826,631		(2,665,571)
Other income (expense)	167,144		45,185
Total other income (expense), net	5,977,899		(3,316,275)
Net income (loss)	4,057,458		(4,200,277)
Dividend on preferred stock	(518,900)		(34,709)
Net income (loss) applicable to
common shareholders	3,538,558		(4,234,986)
Foreign currency translation	150,776		(85,917)
Accumulated other comprehensive
income (loss)	$      3,689,334		$     (4,320,903)
Net income (loss) per Share
Basic	$              0.16		$             (0.20)
Diluted	$              0.11		$             (0.20)
Weighted average shares outstanding
Basic	22,228,633		20,969,400
Diluted	32,273,888		20,969,400

See accompanying summary of accounting policies and notes to financial statements

F-3

						EDGEWATER FOODS INTERNATIONAL
						CONSOLIDATED STATEMENT OF STOCKHOLDERS'
						EQUITY FOR THE YEAR ENDED AUGUST 31, 2007
								Other Comprehensive
	Preferred Stock						Additional	Income -
	Series A		Series B		Common Stock		Paid in	Foreign Exchange	Accumulated
	Number	Value	Number	Value	Number	Value	Capital	Adjustment	Deficit	Total
Balance at August 31, 2005	-	-	-	-	20,585,400	2,059	3,151,800	(170,403)	(4,341,406)	(1,357,950)
Comprehensive loss
Net income (loss)									(4,200,277)	(4,200,277)
Foreign								(85,917)		(85,917)
Total comprehensive loss										(4,286,194)
Common stock cancelled	-	-	-	-	(150,000)	(15)	15	-	-	-
Common stock issued for services	-	-	-	-	525,000	52	702,448	-	-	702,500
Common stock issued for dividends	-	-	-	-	22,860	2	34,707	-	(34,709)	-
Preferred Series A Stock issued in connection with financing	7,887,999	7,888	-	-	-	-	5,132,136	-	-	5,140,024
Value Assigned to Warrants	-	-	-	-	-	-	(9,021,106)	-	(10,472,774)	(19,493,880)
Balance at August 31, 2006	7,887,999	7,888	-	-	20,983,260	2,098	-	(256,320)	(19,049,166)	(19,295,500)
Comprehensive loss
Net income (loss)									4,057,458	4,057,458
Foreign								150,776		150,776
Total comprehensive loss										4,208,234
Conversion of Series A Preferred Stock	(302,801)	(303)	-	-	302,801	30	273	-	-	-
Common stock issued for dividends	-	-	-	-	309,839	31	518,869	-	(518,900)	-
Preferred Series B Stock issued in connection with financing	-	-	207	-	-	-	1,864,502	-	-	1,864,502
Value Assigned to Series B Warrants	-	-	-	-	-	-	(2,099,044)	-	(2,017,695)	(4,116,739)
Issue of Common and Series A preferred Stock for warrants, net of expense	188,800	189	-	-	2,076,800	208	1,189,042	-		1,189,439
Stock Option expense	-	-	-	-	-	-	486,118	-	-	486,118
Series A Warrants reclassification	-	-	-	-	-	-	17,364,812	-	-	17,364,812
Series B Warrants reclassification	-	-	-	-	-		3,084,747	-	-	3,084,747
Common Stock issues for Services	-	-	-	-	40,000	4	61,996	-	-	62,000
Balance at August 31, 2007	7,773,998	7,774	207	-	23,712,700	2,371	22,471,315	(105,544)	(17,528,303)	4,847,613

See accompanying summary of accounting policies and notes to financial statements

F-4

EDGEWATER FOODS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2007 and 2006
		2007	2006
Cash flows from operating activities:
	Net income (loss)	$      4,057,458	$     (4,200,277)
	Adjustments to reconcile net income (loss) to net cash used in operating activities:
	Depreciation and amortization	351,092	123,008
	Changes in fair value of warrants	(5,826,630)	2,665,570
	Stock option expense	486,118	-
	Common stock issued for services	62,000	702,500
	Gain on forgiveness of debt	(158,728)	-
	Changes in current assets and liabilities:
	Accounts receivable	(34,573)	(38,850)
	Prepaid expenses	(16,661)	(16,061)
	Other current assets	-	(2,628)
	Loan receivable	(59,245)	-
	Inventory	(575,462)	(711,925)
	Accounts payable	33,198	197,681
	Bank overdrafts	-	(38,538)
Net cash used in operating activities		(1,681,433)	(1,319,520)
Cash flows from investing activities:
	Purchase of property, plant and equipment	(1,408,247)	(784,291)
Net cash used in investing activities		(1,408,247)	(784,291)
Cash flows from financing activities:
	Net proceeds from line of credit	-	(64,675)
	Proceeds from short term debt	4,175	862,451
	Payment of short term debt	(199,384)	(1,609,901)
	Proceeds from long term debt	237,486	62,112
	Payment of long term debt	(259,688)	(382,456)
	Common stock issued for cash	1,083,239	-
	Preferred stock issued for cash	1,970,702	5,140,024
Net cash provided by financing activities		2,836,530	4,007,555
Foreign currency translation effect		93,276	(87,562)
Net increase (decrease) in cash		(159,874)	1,816,182
Cash, beginning of period		1,816,742	560
Cash, end of period		$      1,656,868	$      1,816,742
Supplemental disclosure of cash flow information
Net cash paid during year ended
Interest		$           31,533	$         160,269
Income taxes		$                    -	$                    -
Supplemental disclosure of non-cash flow information
Issuance of stock for dividends		$         518,900	$                    -
Warrant liability incurred in connection with financing		$      4,116,739	$                    -
Reclassification of warrant liability to equity		$    (20,449,559)	$                    -

See accompanying summary of accounting policies and notes to financial statements

F-5

EDGEWATER FOODS INTERNATIONAL , INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Basis of Presentation, Organization and Nature of Operations

Edgewater Foods International Inc., a Nevada Corporation, is the parent company of Island Scallops Ltd., a Vancouver Island aquaculture company. Island Scallops was established in 1989 and for over 15 years has successfully operated a scallop farming and marine hatchery business. Island Scallops is dedicated to the farming, processing and marketing of high quality, high value marine species: scallops and sablefish.  

Note 2.  Significant Accounting Policies

Principles of Consolidation

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

Cash and equivalents

Cash and equivalents include cash, bank indebtedness, and highly liquid short term market investments with terms to maturity of three months or less.  We consider all highly liquid investments with original maturities of 90 days or less to be cash equivalents.  We maintain our cash balances primarily in on financial institution, which exceeded federally insured limits by $1,561,136 at August 31, 2007.  We have not experienced any losses, in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts receivable

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

Loans receivable

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

Inventory

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

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.

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At August 31, 2007, inventory consisted of the following:

Biomass (Scallops):

$1,827,513

Reclassification

Certain amounts in the 2006 financial statements have been reclassified to conform to the 2007 financial statement presentation.

Long term investments

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

Property, plant, and equipment

Property and equipment are carried at cost, less accumulated depreciation.  Depreciation is included with general and administrative expenses in the accompanying statement of operations and calculated by using the straight-line method for financial reporting and accelerated methods for income tax purposes.  The recovery classifications for these assets are listed as follows:

	Years
Headend Facility and Fiber Infrastructure	20
Manufacturing Equipment	3–7
Furniture and Fixtures	2–7
Office Equipment	5
Leasehold Improvements	Life of lease
Property and Equipment	5
Vehicles	5

Expenditures for maintenance and repairs are charged against income as incurred whereas major improvements are capitalized. 

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

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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 depreciated and will provide a better matching of costs and revenues over the assets’ estimated useful lives.

Impairment of long-lived assets

We monitor the recoverability of long-lived assets, including property, plant and equipment and intangible assets, based upon estimates using factors such as expected future asset utilization, business climate, and undiscounted cash flows resulting from the use of the related assets or to be realized on sale. Our policy is to write down assets to the estimated net recoverable amount, in the period in which it is determined likely that the carrying amount of the asset will not be recoverable.  At August 31, 2007 no indication of impairment was present.

Government assistance

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

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

Farm license costs

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

Research and development costs

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

Research costs are expensed when incurred.

Income taxes

We calculate our provision for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (Accounting for Income Taxes) (“SFAS 109”), which requires an asset and liability approach to financial accounting for income taxes. This approach recognizes

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the amount of taxes payable or refundable for the current year, as well as deferred tax assets and liabilities attributable to the future tax consequences of events recognized in the financial statements and tax returns. Deferred income taxes are adjusted to reflect the effects of enacted changes in tax laws or tax rates. Deferred income tax assets are recorded in the financial statements if realization is considered more likely than not.

Revenue recognition

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

Our revenue is derived principally from the sale of scallops we produce or purchase from third parties, and from the sale of seed and farm supplies to other aquaculture farms.

Cost of goods

Cost of goods sold consists primarily of farming, harvesting and processing costs associated with the growth, transfer and sales preparation of our products (principally scallops).  These costs consist primarily of salaries and benefits and allocated overhead costs for consulting and support personnel engaged in the farming, harvesting and processing of our products.  All costs are recognized at time of delivery.

Financial instruments

The carrying amount of our financial instruments, which includes cash, accounts receivable, loans receivable, bank indebtedness, accounts payable and accrued liabilities, short term debt, shareholder debt, and long term debt, approximate fair value. It is management’s opinion that we are not exposed to significant interest, currency or credit risk arising from these financial instruments unless otherwise noted.

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.

We account 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, we estimate 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

F-9

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

Derivative financial instruments that are not designated as hedges or that do not meet the criteria for hedge accounting under SFAS No. 133 are recorded at fair value, with gains or losses reported currently in earnings.  All derivative financial instruments we held as of August 31, 2007, were not designated as hedges.

Foreign exchange

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

Use of estimates

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

Concentration of risk

We operate in the regulated aquaculture industry.  Material changes in this industry or the applicable regulations could have a significant impact on our business.

The quality and quantity of the aquaculture products we cultivate, harvest and process could be impacted by biological and environmental risks such as contamination, parasites, predators, disease and pollution.  These factors could severely restrict our ability to successfully market our products.

During the year ended August 31, 2007, four customers, Sea World Fisheries, TriStar Seafood Supply Ltd., Port Hardy Seafood Ltd. and Lobsterman, individually accounted for 17%, 13%, 12% and 12% or our revenues respectively, and we therefore are materially dependent upon such customers. Our ongoing operations are dependent on continued business from these customers.

F-10

Location risk

Most, if not all, of our aquaculture are concentrated in one growing region off the coast of Vancouver Island, British Columbia.  As such, if there were a major environmental disaster, our ongoing operations could be materially impacted.

Stock-based compensation

We account for stock-based employee compensation arrangements using the fair value method in accordance with the provisions of the FASB issued Statement of Financial Accounting Standards No, 123 (revised 2004) (Share-Based Payment) (“SFAS 123R”). SFAS 123R is a revision of SFAS 123 (Accounting for Stock-Based Compensation), and supersedes Accounting Principles Beard (“APB”) Opinion No. 25 (Accounting for Stock Issued to Employees). SFAS 123R requires that the fair value of employees awards issued, modified, repurchased or cancelled after implementation, under share-based payment arrangements, be measured as of the date the award is issued, modified, repurchased or cancelled. The resulting cost is then recognized in the statement of earnings over the service period.

We periodically issue common stock for acquisitions and services rendered.  Common stock issued is valued at the estimated fair market value, as determined by our management and board of directors.  Management and the board of directors consider market price quotations, recent stock offering prices and other factors in determining fair market value for purposes of valuing the common stock.  The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the various weighted average assumptions, including dividend yield, expected volatility, average risk-free interest rate and expected lives

Basic and diluted net loss per share

Basic income or loss per share includes no dilution and is computed by dividing net income or loss by the weighted-average number of common shares outstanding for the period.  Diluted income or loss per share includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock (using the treasury stock method for stock options and using the if-converted method for convertible notes), if dilutive. 

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations (in thousands, except per share data):

F-11

	Year ending August 31, 2007
Numerator:
Net income	$3,358,558
Denominator:	--
Denominator for basic net income per share:	22,228,633
Weighted average dilutive potential common shares
Series A Preferred Stock	7,752,699
Series B Preferred Stock	1,114,574
Options and warrants	1,177,982
Denominator for diluted net income per share	32,273,888
Basic net income per share	$0.16
Diluted net income per share	$0.11

The computation of diluted net income per share for the fiscal year ended August 31, 2007, excludes the impact of options to purchase 2.86 million shares of common stock and warrants to purchase 24.04 shares of common stock, respectively, as such an impact would be anti-dilutive. The treasury stock effect of options and warrants to purchase shares of common stock outstanding at August 31, 2006 has not been included in the calculation of the net loss per share as such effect would have been anti-dilutive. As a result of these items, the basic and diluted loss per share for the year ending August 31, 2006 are presented are identical.

Recent accounting pronouncements

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 f or 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.

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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 September 1, 2008. We are currently evaluating the impact of adopting SFAS 159 on our financial position, cash flows, and results of operations.

Management has evaluated other recent accounting pronouncements and do not believe that the adoption of these would have a material impact on our consolidated financial statements.

Note 3.  Property, Plant and Equipment

Property, plant and equipment at August 31, 2007 consisted of the following:

Accumulated

Net Book

Cost                 Amortization

Value

_________________________________________

Land

$237,534

$

     -

  $237,534

Buildings

  953,896

    (256,913)

    696,983

Seawater piping and tanks

  630,877

    (308,509)

    322,368

Boats and barge

  398,551

    (151,355)

    247,196

Field equipment

           2,425,922          (1,012,682)                  1,413,240

Office equipment

    19,556

      (14,044)                         5,512

Vehicles

    66,466               (39,778)                       26,688

Computer equipment

    28,021               (14,308)                       13,713

_________________________________________

$4,760,823        $(1,797,589)              $2,963,234

Depreciation expense for the years ended August 31, 2007 and 2006 was approximately $351,000 and 123,000, respectively.

Note 4.  Related Party Transactions

We have eight secured notes receivable from RKS Laboratories, Inc., 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 seven non-interest bearing notes in the combined amount of $73,701 are secured by all assets of RKS were originally due on or before various dates between June 15, 2007 and May 31, 2008, but were recently extended to August 31, 2008.  The eighth non-interest bearing note in the amount of $8,559 is also secured by all assets of RKS is due on or before August 31, 2008.  These amounts are included in assets as loans receivable. 

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Note 5.  Investments in Tenures

We carry our Investment in Tenures at $3,770 at August 31, 2007.  This amount represents the carrying costs of certain shellfish tenures acquired by Island Scallops’ subsidiary, 377332 B.C. Ltd.  Shellfish tenures are government-granted rights allowing limited use of offshore waters for the purposes of cultivation of shellfish.  The granting of shellfish tenure rights are the responsibility of the Provincial (British Columbia) Government and not the Canadian Federal Government.  As such, the government assistance that we receive via loan agreement with various Federal Agencies has no effect on our ability to renew and/or modify these tenure agreements.  The tenure held by 377332 B.C. Ltd. has an expiration date of July 10, 2021.  Other shellfish tenures held by us 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 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 $25,578 at August 31, 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 August 31, 2007, is an amount of $124,290 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 August 31, 2007 is an amount of $87,869 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

Included in short-term debt at August 31, 2007, is estimated royalties of $62,734 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 $326,909 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 $62,734 as a current liability and we plan to pay it with available funds in the near future.

Included in short-term notes payable at August 31, 2007, is an unsecured non-interest bearing demand loan from an individual with a face value of $47,287 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 an unsecured bank loan repayable at $490 per month plus interest calculated at (Canadian) prime plus 3% per annum (9.25% as of August 31, 2007), and is due October 23, 2007.  At August 31, 2007, the principal due is $779.   

F-14

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 in the quarter beginning on June 1, 2007 and each quarter thereafter until the balance is repaid.  Under the terms of this agreement, the first quarter payment was due on September 30, 2007.  At August 31, 2007, the balance due is $422,613, of which $131,963 is reflected in the current portion of long term debt and the remaining balance of $290,650 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 $418,212, if repayment is before December 1, 2007.  If at December 1, 2012, Island Scallops has not earned sufficient revenues to be required to repay the original loan amount, the remaining portion of the loan is to be forgiven.  Amounts currently due at August 31, 2007, bear interest at a rate of 1% per month.  At August 31, 2007, Island Scallops is in arrears in respect to the payment of these amounts.  The National Council of Canada Industrial Research Assistance Program h as requested payment of the $87,869 that they claim is owed under this loan agreement.  As such, at August 31, 2007, $87,869 is included in accounts payable and accrued liabilities and the remaining full principal balance of $330,343 is reflected in the current portion of long term debt. We are seeking to renegotiate the repayment terms.

These consolidated financial statements include Island Scallop’s mortgage loan repayable at $2,062 per month (currently interest only) calculated at 10.5%.  The loan is secured by a second charge on the real property of Island Scallops. At August 31, 2007, the principal due is $235,649.  

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

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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 (approximately $1.0 million and any remaining proceeds may be used for working capital and general corporate 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 t he 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).

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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 cons tant (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. 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 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 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 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  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 not 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,

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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.

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 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  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 a nd 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 instrumentand 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 i n fair value was then recorded for each period.  

On February 21, 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

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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 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 21) 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 $124,290, 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 $36,332.

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.

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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.

Note 14.  Income Taxes

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

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the net deferred taxes at August 31, 2007 are as follows:

	August 31,
	2007
Deferred tax asset attributable to:
Net operating loss carryover	$ 1,967,312
Less, valuation allowance	(1,967,312)
Total net deferred tax asset	$   -------------------

We follow Statement of Financial Accounting Standards Number 109 (SFAS 109), “Accounting for Income Taxes.” SFAS No. 109 requires a valuation allowance, if any, to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Management has determined that a valuation allowance of approximately $2,416,000 at August 31, 2007 is necessary to reduce the deferred tax assets to the amount that will more than likely than not be realized.  The change in valuation allowance for 2007 and 2006  was approximately $1,083,000 and $439,000 respectively.

At August 31, 2007, we had net operating loss carryforwards amounting to approximately $2,491,000 for U.S. and Canadian tax purposes, respectively, that expires in various amounts beginning in 2009 and 2009 in the U.S. and Canada, respectively.

The federal statutory tax rate reconciled to the effective tax rate for 2006 is as follows:

	2007	2006
Tax at U.S. statutory rate	34.0%	34%
State tax rate, net of federal benefits	0.0	0.0
Foreign tax rate in excess of U.S. statutory rate	17.6%	17.6%
Change in valuation allowance	(51.6%)	(51.6%)
Effective tax rate	0.0%	0.0%

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Note 15.  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.

In June 2007, our wholly owned subsidiary, Island Scallops, Ltd. entered into a Consulting Agreement with Pacific Crab Co., pursuant to which ISL will issue a total of 100,000 shares of our common stock in exchange for consulting and marketing services Pacific will provide to ISL.  Pursuant to the agreement, ISL issued 40,000 of such shares to Pacific when the Agreement was signed; the remaining 60,000 shares will vest ratably (5,000 shares per month) at the beginning of each month for each month during the term of the agreement, which initially is twelve months.  ISL also agreed that if certain goals are met within the agreed upon timeframe, it will issue15,000 shares to Pacific at such time as the goals are reached, in which case the remaining 45,000 shares will continue to vest as described above.  The 40,000 shares issued were valued at $1.55 per share, the closing bid of our common stock on the date of issue.  Therefore, total aggregate value of the transaction recognized by the company in 2007 was $62,000. Going forward the cost of these shares will be expense  at current market price as they are issued.

On June 30, 2007, we issued 137,685 shares of common stock to the investors of our April 12, May 30, June 30 and July 11, 2006 financings as payment of the semi-annual dividend (8% per annum) per the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock. 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 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 approximate ly $228,000 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

On June 30, 2007, we issued 33,589 shares of common stock to the investors of our January 16, 2007 financing as payment of the semi-annual dividend (6% per annum) per the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Preferred Stock (see Note 9 – Series B Preferred Shares Financing for additional information on the Series B Convertible Preferred Stock).  The number of shares issued was based on the dividend payment at a rate of 6% per annum (subject to a pro rata adjustment) of the Liquidation Preference Amount ($1,416,000) payable in shares equal to 90% of the quotient of (i) the dividend payment divided by (ii) the average of the VWAP for the 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 $56,000 and the total aggregate valu e of the transaction was

recorded as a preferred stock dividend.

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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 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 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.  To date, we have incurred stock option expense of approximately $267,000 and will incur an approximately an additional $84,000 through May 31, 2008. We used the Black Scholes option-pricing model with the following assumptions: an expected life equal to the contractual term of the options (one, three or six), underlying stock price of $1.30 per share, no dividends; a risk free rate of 4.88%, which equals the one, three and six-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 100%.

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On April 18, 2007, our board of directors authorized the issuance of 190,000 options to purchase our common stock to 19 employees, directors and consultants pursuant to the “Edgewater Foods International 2005 Equity Incentive Plan.”  The options vest on April 18, 2008.  Each option is exercisable for a period of five years from the vesting date and has an exercise price of $1.25 respectively. To date, we have incurred stock option expense of approximately $76,000 and will incur an approximately an additional $105,000 through May 31, 2008. We used the Black Scholes option-pricing model with the following assumptions: an expected life equal to the contractual term of the options (one, three or six), underlying stock price of $1.25 per share, no dividends; a risk free rate of 4.65%, which equals the one, three and six-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 100%.

In August 17, 2007, our board of directors authorized the issuance of an aggregate of 2,090,000 options to purchase our common stock to 19 of our directors, employees and consultants pursuant to the “Edgewater Foods International 2005 Equity Incentive Plan.”  The options vest on August 17, 2008.  Each option is exercisable for a period of five years from the vesting date and has an exercise price of $1.21 respectively. To date, we have incurred stock option expense of approximately $144,000 and will incur an approximately an additional $1,582,000 through August 31, 2008. We used the Black Scholes option-pricing model with the following assumptions: an expected life equal to the contractual term of the options (one, three or six), underlying stock price of $1.10 per share, no dividends; a risk free rate of 4.55%, which equals the one, three and six-year yield on Treas ury bonds at constant (or fixed) maturity and volatility of 100%.

Stock option activity during the period ending August 31, 2007 was as follows:

	Number of Shares	Weighted Average Exercise Price
Outstanding, August 31, 2005	282,000	$                   1.50
Granted	-	-
Exercised	--	--
Forfeited	--	--
Expired	--	--
Outstanding, August 31, 2006	282,000	1.50
Granted	2,680,000	1.25
Exercised	--	--
Forfeited	--	--
Expired	--	--
Outstanding, August 31, 2007	2,962,000	$                  1.26
Exercisable, August 31, 2007	482,000	$                  1.42

At August 31, 2007, 200,000 of the exercisable options expire in May 2010, 62,000 of the exercisable options expire in August 2010 with the remaining balance of 220,000 having an expiration date of August 2015.

Warrant activity during the period ending August 31, 2007 was as follows:

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	Number of Warrants	Weighted Average Exercise Price
Outstanding, August 31, 2005	-	-
Granted	22,207,487	$                   1.52
Exercised	--	--
Forfeited	--	--
Expired	--	--
Outstanding, August 31, 2006	22,207,487	1.52
Granted	8,144,365	1.87
Exercised	2,265,600	0.56
Forfeited	--	--
Expired	--	--
Outstanding, August 31, 2007	28,086,252	$                  1.75
Exercisable, August 31, 2007	28,086,252	$                  1.75

Note 16.  Series A Preferred Stock Conversion and Warrant Exercise

On November 7, 2006, a holder of our series A preferred stock exercised their right to convert 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 May 8, 2007, a holder of our series A preferred stock exercised their right to convert 30,000 shares of our series A preferred stock into 30,000 shares of common stock. As such, we issued 30,000 shares of common stock and canceled 30,000 shares of our series A.

On May 10, 2007, a holder of our series A preferred stock exercised their right to convert 500,000 shares of our series A preferred stock into 500,000 shares of common stock. As such, we issued 500,000 shares of common stock and canceled 500,000 shares of our series A.

On May 12, 2007, a holder of our series A preferred stock exercised their right to convert 70,800 shares of our series A preferred stock into 70,800 shares of common stock. As such, we issued 70,800 shares of common stock and canceled 70,800 shares of our series A.

On April 12, 2007, we issued 1,354,667 shares of common stock to the investors of our April 12, 2006 financing in connection with the exercise of 1,354,667 Series J warrants received by investor as part of the financing.  We also issued 188,800 series A preferred shares and 188,800 shares of common stock to the placement consultant from the April 12, 2006 financing in conjunction with the exercise of 188,880 placement agent warrants and 188,800 series J warrants.  We received net proceeds of approximately $913,000 pursuant to the exercise of these warrants.

On August 20, 2007, a holder of our series A preferred stock exercised their right to convert 65,335 shares of our series A preferred stock into 65,335 shares of common stock. As such, we issued 65,335 shares of common stock and canceled 65,335 shares of our series A.

F-24

On August 31, 2007, a holder of our series A preferred stock rescinded their right to converting of 430,000 shares of our series A preferred stock into 430,000 shares of common stock. As such, we issued 500,000 shares of our series A and canceled 430,000 shares of our common stock.

Note 17.  Commitments and Contingencies

Corporate Offices

For the fiscal year ended August 31, 2007, our U.S. corporate office was located at 400 Professional Drive, Suite 310, Gaithersburg, Maryland 20878.  This space was provided on a rent free basis by one of our shareholders.  As a result, the Company did not recognize rental expense in the fiscal year.

Employment Agreements

We entered into an employment agreement with Mr. Robert Saunders as our Chairman and President effective on June 29, 2005.  Subsequently in August 2005, Mr. Saunders was appointed CEO by our Board of Directors.  Mr. Saunders will serve at the pleasure of the Board of Director’s.  For serving as President, Mr. Saunders’ compensation will be US $60,000 per annum.  Additionally, we agreed to grant Mr. Saunders a signing bonus of US $150,000 to be paid on closing of at least US $3,500,000 in third party financing and increase his compensation to $120,000 per annum if we receive at least US $5,000,000 in outside funding.  After the completion of our Preferred Stock Financing (see Note 13 – Preferred Shares Financing for additional information on the Series A Convertible Preferred Stock), Mr. Saunders was due the signing bonus of $150,000 and a monthly s alary of $10,000 per month beginning in August 2006. However, Mr. Saunders agreed to reduce his monthly salary to $5,000 per month until such time that we become significantly cash flow positive for its operations.   As of August 31, 2007 we had paid Mr. Saunders $75,000 of the $150,000 bonus that was due under the terms of the agreement.  Additionally, we are currently  discussing possible restructuring/payment terms of the accrued salary of  $130,000 as of August 31, 2007 until such time that we become significantly cash flow positive for its operations.  

Marketing Consulting Agreements

In June 2007, our wholly owned subsidiary, Island Scallops, Ltd. (“ISL”) entered into a Consulting Agreement with Pacific Crab Co. (the “consultant’) to develop new markets and facilitate the sale and distribution of ISL’s products.  As compensation for the consultant’s marketing services, ISL shall pay the consultant $12,500 per month for the next twelve months.  In addition and pursuant to the terms of the agreement, the Company will issue a total of 100,000 shares of our common stock (under an agreed upon schedule) in exchange for consulting and marketing services Pacific will provide to ISL.  (for additional information on the distribution schedule see Note 15 – Stock Compensation Expense).

Note 18.  Subsequent Events (unaudited)

On October 31, we issued 25,000 shares of common stock to Pacific Crab Seafood Company, Inc. as part of the 100,000 shares of our common stock that our Board of Directors previously approved for the consulting and marketing services that they will provide to us.  The remaining 35,000 shares will be issued in equal monthly installments of 5,000 shares during the remaining

F-25

term of the agreement.  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.

We completed a private equity financing of $897,444 on November 5, 2007, with one accredited investor.  Net proceeds from the offering are approximately $801,000.  As part of this financing, the investor returned the Series J Warrant, Series D Warrant, Series E Warrant and Series F Warrant that they received as a result of our Series B financing completed on January 16, 2007.  Pursuant to the current financing, we issued 747,870 shares of our Series C Preferred Stock,  par value $0.001 per share and the investor also received one of each of the following warrants: (i) Series A Warrant, (ii) Series B Warrant, (iii) Series C Warrant, (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 Series C Preferred Stock equal to one hundred percent (100%) of the number of Series C Preferred Stock it received in the financing.  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 preferred stock is convertible into one fully paid and nonassessable share of our common stock at an initial conversion price of $1.20, subject to adjustment.  We are obligated to file a registration statement on or before December 5, 2007 providing for the resale of the shares of common stock issuable upon conversion of the preferred stock and the shares of common stock underlying the Warrants and underlying the preferred stock issuable upon exercise of the Warrants.  In connection with the financing, our management agreed not to sell any of our securities owned by them, their affiliates or anyone they have inf luence over until the registration statement has been effective for six months.    

In connection with this financing, we paid cash compensation to a placement consultant in the amount of approximately $72,000 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) 74,787 shares of Series C 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 37,393 shares of common stock, except for the Series J Warrants, which shall entitle the Consultant to purchase 74,787 shares of our Series C Preferred Stock.  

The net proceeds from the financing are to be used for working capital and general corporate purposes.  

Note 19.  Going Concern

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 August 31, 2007, we had a cash balance of approximately $1,657,000.  Although management believes that we have adequate funds to maintain our business operations into the next fiscal year and/or until we become cash flow positive, we continued to suffer operational losses in 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 of expanding

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our operations.  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 20.  Foreign Operations

The Company’s share of net assets held outside the United States totaled approximately $5,007,000 at August 31, 2007.

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EDGEWATER FOODS INTERNATIONAL, INC.

________________________________

Prospectus

________________________________

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PART II

Item 24.   Indemnification of Directors and Officers

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

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

Item 25.   Other Expenses of Issuance and Distribution

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

Item	Amount
SEC Registration Fee	$132.18
Transfer Agent Fees	$0.00
Legal Fees	$20,000.00
Accounting Fees	$0
Printing and Engraving Costs	$0.00
Miscellaneous	$5,000.00
Total	$25,132.18

Item 26.   Recent Sales of Unregistered Securities

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

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

In October 2005, we engaged Aurelius Consulting to provide marketing and investor relations services. The initial term of the agreement is one year.  Aurelius is entitled to receive 100,000 shares of our restricted common stock during the term of its agreement (25,000 per quarter), in consideration for their services. The shares were valued at $1.45 per share, the closing bid price for shares of our common stock on the date of the contract. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering.

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

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

Pursuant to the financings we closed on April 12, May 30, June 30, 2006 and July 11, 2006, we issued an

aggregate of 30,905,619 shares.  The shares were issued to 9 accredited investors pursuant to the exemption from

registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.    

On June 30, 2006 we issued 22,860 shares of common stock to the two accredited investors of our April 12 and

May 30, 2006 financings as payment of the semi-annual dividend (8% per annum) per the terms of the Certificate of

Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock.  The dividend

shares were issued to these investors pursuant to the exemption from registration provided by Section 4(2) of the

Securities Act for issuances not involving any public offering.

On December 31, 2006, we issued 138,565 shares of common stock to the investors of our April 12, May 30, 2006, June 30, 2006 and July 11, 2006 financings as payment of the semi-annual dividend (8% per annum) per the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock.  The dividend shares were issued to these investors pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.

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 with 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

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in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering.

On 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 invol ving any public offering.

On April 12, 2007, we issued 88,000 shares of common stock to an investor of our April 12^th 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.  The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.  

On April 12, 2007 we issued 1,266,667 shares of common stock to an investor of our April 12^th financing in connection with such investor’s exercise of 1,266,667 Series J warrants he received as part of the April 12^th financing.  We received net proceeds of approximately $655,500 pursuant to the exercise of these warrants.  The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.  

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 o ur common stock.  These shares and warrants were issued pursuant to 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.  The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.  

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, as described above.  We received net proceeds of approximately $106,000 pursuant to the exercise of these warrants.  The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.  

On May 8, 2007 we issued 30,000 shares of our common stock pursuant to a shareholders conversion of 30,000 shares of our Series A Preferred Stock that he owned.  We did not receive any proceeds from this conversion.  The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.  

On May 10, 2007 we issued 500,000 shares of our common stock pursuant to a shareholders conversion of 500,000 shares of our Series A Preferred Stock that he owned.  We did not receive any proceeds from this conversion.  The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.  

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On May 12, 2007 we issued 70,800 shares of our common stock pursuant to a shareholders conversion of 70,800 shares of our Series A Preferred Stock that he owned.  We did not receive any proceeds from this conversion. The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.  

On June 14, 2007, our board approved issuing a total of 100,000 shares of our common stock to Pacific Crab Seafood Company, Inc. for the consulting and marketing services that they will provide to us.  We issued 40,000 shares upon execution of our agreement with Pacific Crab and the remaining 60,000 will be issued in twelve (12) equal installments during the term of the agreement.  The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering.

On June 30, 2007, we issued 171,274 shares of common stock to the investors of our 2006 and 2007 financings as payment of the semi-annual dividend per the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock and Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Preferred Stock.  The dividend shares were issued to these investors pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.

On August 20, 2007, a holder of our series A preferred stock exercised their right to convert 65,335 shares of our series A preferred stock into 65,335 shares of common stock. As such, we issued 65,335 shares of common stock and canceled 65,335 shares of our series A.  The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for issuances not involving any public offering.

On November 5 2007, we issued 747,870 shares of our Series C Preferred Stock and the followings warrants to one accredited investor: (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 50% of the number of shares of common stock issuable upon conversion of the number of preferred stock issued to the investor, except for the Series J Warrants, which shall entitle the investor to purchase a number of shares of our Series C Preferred Stock equal to 100% of the number of shares of common stock issuable upon conversion of the preferred stock issued to the investor; all of these warrants can be exercised, assuming the preferred stock underlying the Series J Warrants are fully converted,  for an aggregate of 2,991,480 shares of common stock.  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.  The investor that received these securities returned warrants to purchase an aggregate of 3,739,350 shares of common stock that it received pursuant to our January 16, 2007 financing.  The shares were issued 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 November 5, 2007 financing, we issued the placement consultant a placement consultant warrant, exercisable for a period of three years from the date of issue with an exercise price of $1.20 per share. The warrant allows the placement consultant to purchase up to (i) 74,787, shares of Series C 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 37,393 shares of common stock, except for the Series J Warrants, which shall entitle the consultant  to purchase  74,787  shares of common stock. The placement consultant also returned a portion of the placement consultant warrant it received pursuant to the Janu ary 16, 2007 financing.  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

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Item 27.  Exhibits

Exhibit Number	Description
3.1	Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2 filed on April 18, 2007).
3.2	Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form SB-2 filed on April 18, 2007).
4.1	Securities Purchase Agreement dated as of April 12, 2006 (Incorporated by reference to Exhibit 10.0 to the Company’s Current Report on Form 8-K filed on April 14, 2006).
4.2	Registration Rights Agreement dated as of April 12, 2006 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 14, 2006).
4.3	Designation of Rights and Preferences of Series A Preferred Stock dated as of April 12, 2006 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 14, 2006).
4.4	Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibits 10.6  through 10.14 to the Company’s Current Report on Form 8-K filed on April 14, 2006).
4.5	Amendment to Registration Rights Agreement dated as of May 30, 2006 (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on May 30, 2006).
4.6	Form of Joinder Agreement to the Securities Purchase Agreement dated as of June 30, 2006 and July 11, 2006 (Incorporate by reference to Exhibits 10.1 and 10.2 to the Company’s Current Report on Form 8-K filed on June 30, 2006).
4.7	Joinder Agreement to the Registration Rights Agreement dated as of June 30, 2006 and July 11, 2006 (Incorporate by reference to Exhibits 10.1 and 10.2 to the Company’s Current Report on Form 8-K filed on June 30, 2006).
4.8	Securities Purchase Agreement dated as of January 16, 2007 (Incorporated by reference to Exhibit 10.0 to the Company’s Current Report on Form 8-K filed on January 17, 2007).
4.9	Registration Rights Agreement dated as of January 16, 2006 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 17, 2007).
4.10	Designation of Rights and Preferences of Series B Preferred Stock dated as of January 16, 2006 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on January 17, 2007).
4.11	Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibits 10.6  through 10.14 to the Company’s Current Report on Form 8-K filed on January 17, 2007).
4.12	Form of Series C Convertible Preferred Stock Purchase Agreement, dated November 5, 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 November 7, 2007).

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4.13	Form of Registration Rights Agreement 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 November 7, 2007).
4.14	Form of Certificate of Designation of Rights and Preferences of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 7, 2007).
4.15	Form of Lock-Up Agreement 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 November 7, 2007).
4.16	Form of Warrants (Incorporated by reference to Exhibits 10.5 through 10.11 to the Company’s Current Report on Form 8-K filed on November 7, 2007).
5.1	Opinion and Consent of Law Offices of Louis E. Taubman, P.C.
10.1	Employment Agreement of Robert Saunders (Incorporate by reference to Exhibits 10.1 to the Company’s Registration Statement on Form SB-2 filed on July 14, 2006).
10.2	Consulting Agreement with TriPoint Capital Advisors, LLC (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form SB-2 filed on October 16, 2006)
10.5	Consulting Agreement with Aurelius Consulting Group, Inc. (Incorporate by reference to Exhibits 10.5 Company’s Registration Statement on Form SB-2 filed on July 14, 2006).
10.6	Consulting Agreement with Gallatin Consulting, Inc. (Incorporate by reference to Exhibits 10.6 Company’s Registration Statement on Form SB-2 filed on July 14, 2006).
10.7	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).
10.8	Excerpt from Board of Directors’ Meeting summarizing Robert Saunders’ amended employment agreement (Incorporated by reference to Exhibit 10.8 in the Company’s Registration Statement on Form SB-2 filed on October 16, 2006).
10.9	Consulting Agreement between Kitsilano Capital Corp. and the Company dated February 1, 2007(Incorporated by reference to Exhibit 10.9 in the Company’s Registration Statement on Form SB-2 filed on February 9, 2007).
23.1	Consent of LBB & Associates, Ltd., LLP

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Item 28.  Undertakings.

a)

The undersigned Registrant hereby undertakes:

1)

To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:

(i)

Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);

(ii)

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

(iii)

Include any additional or changed material information on the plan of distribution.  Provided, however, that paragraphs (1) (i), (1) (ii) and (1) (iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the SEC by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are incorporated by reference in this registration statement

2)

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

3)

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

4)

Not applicable.

5)

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

(i)

If the registrant is relying on Rule 430B:

(A)

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

(B)

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

viii

statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

(ii)

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

(6)

That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)

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

(ii)

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

(iii)

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

(iv)

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

(b)

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

(c)

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

ix

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Vancouver , State of British Colubmia, on November 29, 2007 and the City of Gaithersburg, State of Maryland on November 29, 2007.

Edgewater Foods International, Inc.

By: /s/ Robert Saunders

Name:

Robert Saunders

Title:

President & Chief Executive Officer

By: /s/ Michael Boswell

Name:

Michael Boswell

Title:

Acting Chief Financial Officer and

Acting Chief Accounting Officer

Dated: November 29, 2007

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

/s/ Robert Saunders Robert Saunders President and Chief Executive Officer	Dated: November 29, 2007
/s/ Michael Boswell Michael Boswell Director & Acting Chief Financial Officer & Acting Chief Accounting Officer	Dated: November 29, 2007
/s/ Douglas C. MacLellan Douglas C. MacLellan Vice-chairman of the Board	Dated: November 29, 2007
/s/ Mark H. Elenowitz Mark H. Elenowitz Director	Dated: November 29, 2007
Ian Fraser Director	Dated:
Victor Bolton Director	Dated:

x

/s/ Darryl Horton Darryl Horton Director	Dated: November 29, 2007
/s/ Robert Rooks Robert Rooks Director	Dated: November 29, 2007

xi

EX-5.1

EXHIBIT 5.1

LESER HUNTER TAUBMAN & TAUBMAN

17 State Street, 16^th Floor

New York, New York 10004

(212) 732-7184   Fax:  (212) 202-6380

E-mail: Louistlaw@aol.com

November 17, 2007

Edgewater Foods International, Inc.

5552 West Island Highway

Qualicum Beach, British Columbia

Canada V9K 2C8

Ladies and Gentlemen:

We have acted as counsel to Edgewater Foods International, Inc. a Nevada company (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), of a Registration Statement on Form SB-2 (the “Registration Statement”), relating to the proposed sale by the selling shareholders listed therein (the “Selling shareholders”) of 4,262,856 shares of the Company’s common stock (the “Common Stock”).  

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

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

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

Sincerely,

Leser Hunter Taubman & Taubman

By: /s/Louis E. Taubman

Louis E. Taubman

EX-23.1