S-1

As filed with the Securities and Exchange Commission on April 29, 2009                      Registration No.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

OCEAN SMART, INC.

(Exact name of Registrant as specified in its charter)

Nevada
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

400 Professional Drive, Suite 310, Gaithersburg, Maryland 20878

(250) 757-9811

(Address, including zip code, and telephone number,

including area code, of Registrant’s principal executive offices)

Louis E. Taubman, Esq.

Leser, Hunter, Taubman & Taubman

17 State Street, Suite 2000

New York, New York  10004

(212) 732-7184

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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, 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.   [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.   See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer	Accelerated filer
Non-accelerated filer	Smaller reporting company	X
(Do not check if a smaller reporting company)

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CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per unit	Proposed maximum aggregate offering price	Amount of registration fee
Common Stock underlying the Series A Preferred Stock	9,465,599 (1) (2)	$1.40 (3)	$13,251,838.60	$1,417.95
Common Stock Underlying the Warrants	1,888,000 (4)	$1.40 (3)	$30,016,028.00	$3,211.71
Common Stock Underlying the Placement Consultant Warrants	2,868,803	$1.40 (3)	$4,016,324.20	$429.75
Common Stock	647,860  (1) (5)	$1.40 (3)	$907,004.00	$97.05
Common Stock underlying the Series B Preferred Stock	1,980,096 (1) (6)	$1.25 (7))	$2,475,120.00	$264.84
Common Stock Underlying the Placement Consultant Warrants	893,945	$1.25 (7)	$1,117,431.25	$119.57
Common Stock underlying the Series C Preferred Stock	897,444 (1) (8)	$1.01 (9)	$906,418.44	$27.83
Common Stock Underlying the Placement Consultant Warrants	373,932	$1.01 (9)	$377,671.32	$11.59
Consultant Options	3,200,000 (13)
Common Stock	200,000 (10)	.20 (11)	$40,000.00	$2.32
Total	19,215,679	.20	$3,843,135.80	$5,582.61 (12)

(1) 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.

(2) This number represents 120% of the aggregate number of shares of common stock necessary to effect the conversion of all of our Series A Preferred Stock currently outstanding with the investors of our 2006 private financings.

(3) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(c) of the Securities Act of 1933 based upon the average of the bid and asked price of the Registrant’s common stock as quoted on the Over-the-Counter Bulletin Board of $1.40 on July 11, 2006.  These securities were previously registered on Registration Statement No. 333-135796, which was declared effective on October 16, 2006.  The registration fee for these securities was paid and is transferred and carried forward to this registration statement pursuant to Rule 429 under the Securities Act.

(4) Originally included an additional 19,552,020 shares (total of 21,440,020) issuable upon exercise of the warrants issued to investors of the financings we closed in 2006; however, these 19,552020 warrants were part of the May 2008 warrant exchange that resulted in us issuingan aggregate of 267,059 shares of Series D Preferred Stock.  The remaining 1,888,000 shares represent the common shares that were issued as a result of the exercise of Series J Warrants by certain investors in April 2007.

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

(6) This number represents 110% of the aggregate number of shares of common stock necessary to effect the conversion of all of our Series B Preferred Stock currently outstanding.

(7) 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 $1.25 on February 6, 2007.  These securities were previously registered on Registration Statement No. 333-140571, which was declared effective on February 28, 2007.  The registration fee for these securities was paid and is transferred and carried forward to this registration statement pursuant to Rule 429 under the Securities Act.

(8) 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.

(9) 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 January 16, 2008.  These securities were previously registered on Registration Statement No. 333-147786, which was declared effective on December 12, 2007.  The registration fee for these securities was paid and is transferred and carried forward to this registration statement pursuant to Rule 429 under the Securities Act.

(10) 200,000 shares of restricted common stock issued to one of our consultants in consideration for services provided to us.

(11) 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 $0.19 on April 27, 2009.

(12) As noted in footnote nos. 3, 7 and 10, above, $5,580.29 of the registration fee was previously paid to register securities subject to this registration statement that were previously registered on Registration No. 333-135796, which was originally declared effective on August 8, 2008.Pursuant to Rule 429 under the Securities Act, the $5,580.29 in previously paid registration fees for these securities is transferred and carried forward to this registration statement.

(13) 3,200,000 options vesting immediately and exercisable at different strike prices were issued to one of our consultants in consideration for services provided to us.

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, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

EXPLANATORY NOTE

We are filing this registration statement to conform the disclosure contained herein to the the disclosure contained in our Quarterly Report on Form 10-Q for the quarter ending February 28, 2009.The registrant is filing a single prospectus in this Registration Statement on Form S-1 pursuant to Rule 429 under the Securities Act of 1933, as amended, in order to satisfy the requirements of the Securities Act and the rules and regulations thereunder for this and other offerings registered on earlier registration statements. The combined prospectus in this registration statement relates to, and shall act, upon effectiveness, as a post-effective amendment to: (1) Registration Statement No. 333-135796, which was originally declared effective on August 8, 2008.

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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.  THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES PUBLICLY UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.  THIS 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.

SUBJECT TO COMPLETION, DATED April __, 2009

PROSPECTUS

OCEAN SMART, INC.

19,215,679 Shares of Common Stock

This prospectus relates to the resale by the selling stockholders of up to 19,215,679 shares of our common stock, all of which were registered in our Registration Statement on Form S-1 (Registration No. 333-135796), which was declared effective on August 8, 2008.  The selling stockholders named herein may sell common stock from time to time in the principal market on which the stock is traded at the prevailing market price, at prices related to such prevailing market price, in negotiated transactions or a combination of such methods of sale. We will not receive any proceeds from the sales by the selling stockholders.

Our shares of common stock are quoted on The Over-the-Counter Bulletin Board (the OTBB) under the symbol “EDWT.”  The average of the closing price of our common stock on April 27, 2009 was $0.19.

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.  YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT.  SEE “RISK FACTORS” BEGINNING ON PAGE 13 FOR A DISCUSSION OF RISKS APPLICABLE TO US AND AN INVESTMENT IN OUR COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is April __, 2009.

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TABLE OF CONTENTS

Summary	6
Risk Factors	16
Cautionary Statement Concerning Forward-Looking Statements	15
Use of Proceeds	22
Market Price and Dividends on Registrant’s Common Equity and Related Stockholder Matters	22
Management’s Discussion and Analysis	25
Business	39
Management
Compensation Discussion and Analysis
Principal Stockholders
About the Offering
Selling Stockholders	67
Plan of Distribution	72
Certain Relationships and Related Transactions
Description of Securities	74
Legal Matters	82
Experts	83
Disclosure of Commission Position on Indemnification for Securities Act Liabilities	49
Available Information
Index to Consolidated Financial Information	F-1

We have not authorized any person to give you any supplemental information or to make any representations for us. You should not rely upon any information about us that is not contained in this prospectus or in one of our public reports filed with the Securities and Exchange Commission (“SEC”) and incorporated into this prospectus. Information contained in this prospectus or in our public reports may become stale. You should not assume that the information contained in this prospectus, any prospectus supplement or the documents incorporated by reference are accurate as of any date other than their respective dates, regardless of the time of delivery of this prospectus or of any sale of the shares. Our business, financial condition, results of operations and prospects may have changed since those dates. The selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted.

In this prospectus the “company,” “we,” “us,” and “our” refer to Ocean Smart, Inc., a Nevada corporation and its subsidiaries.

Until [__], all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.  This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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 PROSPECTUR 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 20 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 Qualicum Beach Scallops and live sablefish (or blackcod).  Given Island Scallops’ unique hatchery technology and extensive research and development, we believe that there is no significant competition for the farming of these marine species in our geographic area.   Island Scallops is committed to rapidly expanding production and profits while continuing to finance the aggressive growth of the company and maintaining a healthy respect for the marine environment.

Recent Developments

Name Change

Pursuant to our shareholder’s approval, which we received at our Annual Shareholder Meeting held on January 12, 2009, we changed our corporate name from Edgewater Foods International, Inc. to Ocean Smart, Inc.  The name change is effective as of March 3, 2009; however, we did not receive any confirmation of this change from Nevada’s Secretary of State until March 30, 2009.  In connection with our name change, we also received a new cusip number: 67502R102.  We are also applying for a new OTC BB trading symbol, which we will report on a Current Report on Form 8-K after we receive it.  Accordingly, our stock still trades under the symbol EDWT.

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Business

 During our 2008 fiscal year and the first two quarters of our 2009 fiscal year, we continued the harvesting, processing and sale of our 2004 and 2005 year class of scallops, continued growing our 2006 scallop class and transferring our 2007 year-class scallops (which were still maturing in our tenured growing sites and on-shore ponds) to larger grow-out nets on our farm sites.  We also completed the spawning, grow-out in our on-shore nursery ponds and started transferring our 2008 scallop year class to our farm sites. We also began the spawning of our 2009 scallop class in February 2009.  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. For example, we plan to begin harvesting our 2009 scallop class (that was initially spawned in February of 2009) in December 2010.

During the first quarter of our 2009 fiscal year, we completed a large purchase order with Fanny Bay Oyster Co., a division of Taylor Shellfish Farms of Shelton, Washington (an international seafood distributor and the largest shellfish company on the West Coast).  The order includes live scallops, fresh scallop meat and frozen scallops that will be packaged and delivered in various scallop products (including live in-the-shell, frozen half-shell and fresh meat).   As a result of this order, Fanny Bay will effectively become the exclusive distributor of our scallops outside the European market.  We believe this order will reduce cost and encourage additional wholesalers within the Taylor network to carry our scallops.  In addition to the Taylor sales agreement, we recently finalized an order to provide frozen scallop meat with roe to the European market.  Due to problems with the cadmium levels in our frozen product, we were unable to complete the initial portion of this order.  We believe we have identified and solved this problem and should be able to begin European shipments in fall of 2009.  Despite the initial set back fulfilling this European order, we believe this order could represent an important first step towards establishing a large European demand for quality seafood products.

In addition to scallop sales, we plan on generating additional revenues via the sale of scallop and other shellfish seed (including mussels clams, geoducks and oysters).  In the future, Management may place emphasis on generating additional revenues via equipment sales to other aquaculture businesses.  Additionally, we recently started the process of investigating strategic acquisitions and/or business opportunities with seafood industry partners or additional strategic investors to enable the company to capitalize on our existing hatchery technology and expertise. As part of this initiative, we recently established an Acquisition/Business Opportunity Board Committee and are currently beginning initial, informal, conversations with both North American and Chinese based companies.  Aside from the November 2008 acquisition of Granscal Sea Farms Ltd., as of the date of this filing, no new definitive agreements have been signed.

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During the continued harvesting of our 2005, growing of our 2006 and 2007 year classes , we were able to review our mortality rates and update our class size projections.  Based on this review and recent sales, we expect to bring the remaining 1.1 million of our 2005 and 2006 year class scallops to market in the 2009 calendar year.  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. We noticed 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.  As of our most recent review of our scallop inventory, we currently believe that our 2007 year class that should yield up to 6 million scallops at full maturity/harvest.Although this is lower than initial estimates, it will still represent our largest year class to date.

In 2007 and 2008 respectively, expansion of our Deep Bay and Hindo Creek was 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.    In April 2008, we got approval to convert the method of farming at the Nile Creek tenure from bottom to off-bottom culture in one-third of the tenure area.In May 2008, we started the expansion of this Nile Creek tenure.  We installed thirteen new “triple” lines that will have the capacity to handle up to 135,000 scallops per line.  In the coming months, as funds are available, we will add an additional 58 lines and continue to outfit these new 300 meter lines with the necessary floats and netting required for scallop farming.

The Financings

Series D Preferred Stock Financing

On May 29, 2008, we signed a Series D Convertible Preferred Stock Purchase Agreement with one accredited investor whereby such investor was committed, subject to the satisfaction of certain closing conditions, to purchase $1,500,000 of our Series D Preferred Shares.  Pursuant to the Purchase Agreement, this investor is also committed to investing an additional $500,000 no later than 90 days from the initial closing date provided that we have hired a chief operating officer acceptable to such investor.  Pursuant to the Purchase Agreement, additional investments of up to an aggregate of $2,000,000 of Series D Preferred Shares could have been made in subsequent closings to be completed no later than June 30, 2008.  As part of this financing, we also entered into an Exchange Agreement with the investor and certain other holders of our outstanding warrants, whereby the Series J Warrant that the investor received pursuant to the Series C Preferred Stock and Warrant Financingwill be cancelled, and the investor and certain other holders of our outstanding warrants returned to us warrants to purchase an aggregate of 24,941,605 shares of our common stock, which the investor and such other warrant holders received pursuant to the Series A Preferred Stock and Warrant Financing, Series B Preferred Stock Warrant Financing and the Series C Preferred Stock Financing, in exchange for an aggregate of 267,059 shares of Series D Preferred stock. The net proceeds from the financing are to be used for supplies, processing plant upgrades, working capital and general corporate purposes.  All of the closing conditions were satisfied and accordingly we completed the private equity financing and received net proceeds of approximately $1.46 million on June 11, 2008.

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Pursuant to the Series D Preferred Stock Financing, we filed a Certificate of Designation of the Relative Rights and Preferences of our Series D Convertible Preferred Stock on May 29, 2008.  The Certificate of Designation designates 380,000 shares of our authorized preferred stock as Series D Convertible Preferred Stock, which ranks junior to our Series A, Series B and Series C Convertible Preferred Stock, but senior to our common stock.  Except with respect to specified transactions that may affect the rights, preferences, privileges or voting power of the Series D Preferred Shares and except as otherwise required by Nevada law, the Series D Preferred Shares have no voting rights.  At any time on or after the issuance date, the holder of any Series D Preferred Shares may, at the holder's option, elect to convert all or any portion of the Series D Preferred Shares held by such person into a number of fully paid and nonassessable shares of common stock equal to the quotient of (i) the stated value ($40.00 per share) of the Series D Preferred Shares being converted divided by (ii) the conversion price, which initially is $0.80 per share, subject to certain adjustments.  In the event of our liquidation, dissolution or winding up, the holders shall receive a liquidation preference equal to 120% of the stated value per Series D Preferred Share.

Pursuant to the terms of the Purchase Agreement, our Board of Directors shall be reduced to 7 persons and the investors in the financing maintain the right to designate (by approval of a majority of the Series D Preferred Shares outstanding at such time) 1 of the 7 directors so long as at least 20% of the Series D Preferred Shares remain outstanding.  However, if we fail to meet certain performance target as set forth in the Purchase Agreement, our Board of Directors shall be reduced to 5 persons and the investors maintain the right to appoint (by approval of a majority of the Series D Preferred Shares outstanding at such time) a majority of the directors so long as at least 20% of the Series D Preferred Shares remain outstanding.  In addition, the investors may appoint a designee to attend and observe, but not to vote at, all annual and special meetings of our Board of Directors.

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

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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 Preferred Stock financing to us in exchange for the new placement consultant warrant.

In connection with the November 2007 financing, we agreed to file a 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 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 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. We filed the registration statement for the November 2007 financing on December 3, 2007 and it was declared effective on December 12, 2007.

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, are approximately $1,864,500.  We issued 207 shares of our Series B Preferred Stock, par value $0.001 per share and stated value of $10,000 per share and each investor also received one of each of the following warrants: (i) Series A Warrant, (ii) Series B Warrant, (iii) Series C Warrant, (iv) Series J Warrant, (v) Series D Warrant, (vi) Series E Warrant, and (vii) Series F Warrant, each to purchase a number of shares of common stock equal to 50% of the number of shares of common stock issuable upon conversion of the purchaser’s Series B 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 100% of the number of shares of common stock issuable upon conversion of the purchaser’s Series B 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 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.

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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.

In connection with the January 2007 financing, 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 B Preferred Stock may be converted and the shares of common stock issuable upon the exercise of the warrants issued in such financing (Registration No. 333-140571).  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 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 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.  As of the date of this filing, our initial registration statement for the January 2007 financing was declared effective on February 28, 2007.

We previously disclosed that the net proceeds from the January 2007 financing may have been used for capital expenditures necessary to expand our operations into clam farming in Morocco – pending our due diligence investigation, and for working capital and general corporate purposes.  However, on January 10, 2008, our Board of Directors determined, based on due diligence concerns and because we were unable to negotiate what we believe to be appropriate terms, to terminate negotiations for the establishment of clam farming operations in Morocco.  We have not yet determined how we will allocate the funds that we reserved for this project.

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 $952,000.  We issued 1,888,000 shares of our Series A Preferred Stock,  par value $0.001 per share and stated value of $0.75 per share, at a purchase price of $0.5625 per share and each investor also received one of each of the following warrants: (i) Series A Warrant, (ii) Series B Warrant, (iii) Series C Warrant, (iv) Series D Warrant, (v) Series J Warrant, (vi) Series E Warrant, (vii) Series F Warrant, (viii) Series G Warrant, and (ix) Series H Warrant, each to purchase a number of shares of Common Stock equal to 50% of the number of shares of Series A Preferred Stock purchased, except for the Series J Warrants, which entitled the investor to purchase a number of shares of our common stock equal to 100% of the number of shares of Series A Preferred Stock purchased. As of the date of this filing, all of these 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.

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

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

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

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

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

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Also in connection with the issuance of the shares of our Series A Preferred Stock and Warrants issued in the April, May, June and July 2006 financings described above, we agreed to file 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.  We are required to keep the 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 the registration statement ceases to be effective prior to the expiration of the Effectiveness Period, 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.  The initial registration statement for the April, May, June and July 2006 financing was declared effective on October 16, 2006.

For further information regarding the preferred stock and warrants see the “Description of Securities” section below.

Risk Factors

The securities offered by this prospectus are speculative and involve a high degree of risks associated with our business, including the following:

· A significant portion of our sales is concentrated in a few major customers and the loss of any would have a material adverse impact on our revenues.

· Our business are susceptible to various environmental and disease risks that could materially and adversely affect our product and therefore our business.

· Our future success is partially dependent upon our ability to expand our tenures, without which our production capacity will be limited.

· 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.

For a more comprehensive discussion of these and other risk factors affecting us and our business, see the “Risk Factors” section beginning on page 13 of this prospectus.

THE OFFERING

Common stock being offered by Selling Stockholders	Up to 22,415,679shares of common stock
OTCBB Symbol	EDWT
Risk Factors	The securities offered by this prospectus are speculative and involve a high degree of risk and investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page 16.

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SUMMARY FINANCIAL DATA

The following table summarizes the relevant financial data for our business and should be read in conjunction with our financial statements which areincluded elsewhere in this prospectus.  The summary set forth below should be read together with our consolidated financial statements and the notes thereto, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus.

Consolidated Statement of Operations Data:

	Years ended August 31,						Six months ended February 28
	2008			2007			2009			2008
Revenues	$	1,584		$	657		$	1010		$	795
Gross profit		(479	)		(379	)		(359	)		(233	)
Net profit (Loss)		(3,681	)		(4,057	)		(1,076	)		(1,871	)
Foreign adjustment		(106	)		(151	)		(711	)		298
Comprehensive income (Loss)	$	(4,681	)	$	(3,689	)	$	(2,109	)	$	(2,047	)

Consolidated Balance Sheet Data:

	2008		As of February28, 2009
Balance Sheet Data:
Cash	$	712	$	94
Total assets		7,365		5, 351
Total Current Liabilities		1,622		1,462
Total Liabilities		2,170		1,901
Total stockholders’ equity		5,195		3,450

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this Form S-1 that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. From time to time, we may make written statements that are "forward-looking," including statements contained in this prospectus and other filings with the Securities and Exchange Commission, reports to our stockholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "may," "should," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to uncertainties associated with the following:

(a) volatility or decline of our stock price;

(b) potential fluctuation in quarterly results;

(c) our failure to earn revenues or profits;

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

(e) inadequate capital to continue business;

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

(g) rapid and significant changes in markets;

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

(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-Q and Annual Report on Form 10-K 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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RISK FACTORS

Investing in our securities involves a great deal of risk. Careful consideration should be made of the following factors as well as other information included in this prospectus before deciding to purchase our common stock. You should pay particular attention to the fact that we conduct all of our operations in China and are governed by a legal and regulatory environment that in some respects differs significantly from the environment that may prevail in other countries. Our business, financial condition or results of operations could be affected materially and adversely by any or all of these risks.

THE FOLLOWING MATTERS MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS, FINANCIAL OR OTHERWISE. REFERENCE TO THIS CAUTIONARY STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT OR STATEMENTS.

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 (maximum time being 24 hours).

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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.

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.

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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 local and national government approval, which can be a timely and costly process. Expansion of two of our tenures, Hindoo Creek and Deep Bay, was approved and the expansion of these sites is complete.  Another tenure, Bowser, was recently approved for partial conversion (one-third or 308 acres) to the off-bottom (suspended) culture and construction of this off bottom farm is now underway.    Our Denman tenure, although approved for expansion by all national government agencies, requires zoning approval from the local Islands Trust.   Our initial zoning application was denied, but we are considering our options for appeal.   The capacity to be gained by expanding the Denman tenure is small, but valuable nevertheless.  Based on our current estimates of near-term sales and capital costs of expanding our farms to increase future crop yields, we will require additional financings to continue our expansion.  As we have yet to raise additional capital and our sales have increased at a slower than expected pace, we have already scaled back some of our expansion plans and may have to further scale back the plans outlined herein.  If expansion of our tenures is denied or delayed due to lack of available funds, it will limit our production capacity.

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 andBrendan Fralick . 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 have an employment agreement with Mr. Saunders that expired in June 2008, but we are currently operating as if this employment agreement is still in effect while we discuss the terms of a new agreement with him. We do not maintain key man insurance for, nor do we currently have employment agreements with, any of our other key employees.  In addition, as our business plan is implemented, we will need to recruit and retain additional management and key employees in virtually all phases of our operations.  Key employees will require a strong background in the marine aquaculture industry.  We cannot assure that we will be able to successfully attract and retain key personnel.

The fact that our directors and officers own approximately 28% of our capital stock and 56% of our voting capital stock may decrease your influence on shareholder decisions.

Our executive officers and directors, in the aggregate, beneficially own approximately 28% of our capital stock and 56% 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.

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We have not met our performance Goals and our Board can be restructured by our investors

We were unable to meet our performance target as set forth in the Series D Convertible Preferred Stock Purchase Agreement.  Pursuant to such Purchase Agreement, some of our investors are therefore entitled to reduce our Board of Directors to 5 persons and maintain the right to appoint (by approval of a majority of the Series D Preferred Shares outstanding at such time) a majority of the directors so long as at least 20% of the Series D Preferred Shares remain outstanding.  AS of the date of this filing, our Series D shareholders have taken no action to restructure our Board of Directors.

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.

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.

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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 instability and/or trade regulations could adversely impact the costs of these items and the liquidity of our assets, and have an adverse impact on our operating results.  In addition, the imposition of unforeseen and adverse trade regulations could have an adverse effect on our exported seafood operations. We expect the volume of international transactions to increase, which may increase our exposure to future exchange rate fluctuations.

We have one major customer and any disagreement with that customer could have a material adverse affect on our business.

As a result of our recent sales agreement with Fanny Bay, Fanny Bay has effectively become the sole distributor of our scallops outside of the European market.  Such a large customer will account for a significant portion of our sales and, as a result, any disagreements or problems with Fanny Bay could have a material adverse effect on our business and operations.

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 April 27, 2009, the closing bid price of our common stock was $0.19 per share.  As of April 27, 2009, we had approximately 13 shareholders of record of our common stock, 56 shareholders of record of our Series A Preferred Stock, 3 shareholders of record of our Series B Preferred Stock, 2 shareholder of record of our Series C Preferred Stock and 9 shareholders of record of our Series D 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 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.

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

There are currently 3,282,338 warrants outstanding.  The terms of these warrants expire as early as 2010 and as late as 2011.  The exercise price of these warrants range from $1.15 to $2.25 per share, subject to adjustment in certain circumstances.  Exercise of the warrants may cause dilution in the interests of other shareholders as a result of the additional common stock that would be issued upon exercise.  In addition, sales of the shares of our common stock issuable upon exercise of the warrants could have a depressive effect on the price of our stock, particularly if there is not a coinciding increase in demand by purchasers of our common stock.   Further, the terms on which we may obtain additional financing during the period any of the warrants remain outstanding may be adversely affected by the existence of these warrants as well.

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

There are currently 5,892,000 options outstanding.  The terms of these options expire as early as 2010 and as late as 2015.  The exercise price of these options range from $0.15 to $1.50 per share, subject to adjustment in certain circumstances.  Exercise of the options 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 options 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 options remain outstanding may be adversely affected by the existence of these options 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, 2008, we had a cash balance of approximately $712,000.  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 2008 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.

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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 $9,115,400 from the initial sale of the preferred shares.  The net proceeds from the sale of the Series A, Series B, Series C and Series D Preferred Stock 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 the Series A Preferred Shares		Funds Received from Sale of the Series B Preferred Shares		Funds Received from Sale of the Series C Preferred Shares		Funds Received from Sale of the Series D Preferred Shares		Total Funds Received from the Sale of the Series A, B, C and D Preferred Shares		Total Funds Received from the Exercise of Warrants
Working Capital	$	3,690,000	$	1, 864,000	$	801,000	$	1,460,000	$	7,665,000	$	1,200,000
Repayment of Bridge Loan	$	1,450,000							$	1,450,000
Total	$	5,140,000	$	1, 864,000	$	801,000	$	1,460,000	$	9,115,000	$	1,200,000

MARKET FOR OUR COMMON STOCK, DIVIDENDS AND

RELATED STOCKHOLDER INFORMATION

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 November 30, 2005.  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 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
Quarter ended November 30, 2007	$	1.45	$	0.75
Quarter ended February 29, 2008	$	1.45	$	0.70
Quarter ended May 31, 2008	$	1.01	$	0.70
Quarter ended August 31, 2008	$	1.00	$	0.26
Quarter ended november 30, 2008	$	0.51	$	0.03
Quarter ended February 28, 2009	$	0.23	$	0.031

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At April 27, 2009, the closing bid price of the common stock was $0.19 and we had approximately  56  record holders of our common stock, 13 record holders of our Series A Preferred Stock, 3 record holders of our Series B Preferred Stock, 2 record holder of our Series C Preferred Stock and 9 record holders of our Series D 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.

Dividend Policy

We have never declared or paid dividends on our Common Stock.  We intend to retain earnings, if any, to support the development of our business and therefore do not anticipate paying cash dividends for the foreseeable future.  Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including current financial condition, operating results and current and anticipated cash needs.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of August 31, 2008 with respect to compensation plans (including individual compensation arrangements) under which our securities are authorized for issuance:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity Compensation plans approved by security holders		2,592,000	$	1.23		5,408,000	*
Equity compensation plans not approved by security holders		N/A		N/A		N/A
Total		2,592,000	$	1.23		5,408,000

* 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.

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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 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 vested 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.

On September 8, 2008, our board of directors authorized the issuance of an aggregate of 100,000 options to purchase our common stock to one of our directors pursuant to the “Edgewater Foods International 2005 Equity Incentive Plan.”  The options vest in two equal installments over the next two years (on September 8, 2009 and 2010).  Each option is exercisable for a period of five years from the issuance date and has an exercise price of $0.45 respectively.  .

On March 16, 2009, we entered into a consulting agreement with International Investment Consulting Company S.A..  As compensation for IICC’s services, we issued options to IICC exercisable at the following strike prices and vesting schedule pursuant to our 2005 Equity Incentive Plan.

AMOUNT	STRIKE PRICE	VESTING SCHEDULE
50,000	$0.15	Vests immediately
50,000	$0.20	Vests immediately
50,000	$0.25	Vests immediately
50,000	$0.30	Vests immediately
75,000	$0.35	Vests immediately
75,000	$0.40	Vests immediately
75,000	$0.45	Vests immediately
75,000	$0.50	Vests immediately
200,000	$0.55	Vests immediately
200,000	$0.60	Vests immediately
500,000	$0.80	Vests immediately
800,000	$1.00	Vests immediately
1,000,000	$1.20	Vests immediately

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 MANAGEMENT DISCUSSION AND ANALYSIS

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

During our the first and second quarter of our 2009 fiscal year , we continued the harvesting, processing and sale of our 2004 and 2005 year classes of scallops, continued growing our 2006 scallop class and transferring our 2007 year-class scallops (which were still maturing in our tenured growing sites and on-shore ponds) to larger grow-out nets on our farm sites.  We also completed the spawning, grow-out in our on-shore nursery ponds and started transferring our 2008 scallop year class to our farm sites.  We refer to the year-class of scallops based on when the scallops were spawned.  Generally, the harvest begins approximately 22 to 24 months after spawning of the scallops. For example, we plan to begin harvesting our 2009 scallop class (that was initially spawned in February of 2009) in December 2010.

During the first quarter of our 2009 fiscal year, we completed a large purchase order with Fanny Bay Oyster Co., a division of Taylor Shellfish Farms of Shelton, Washington (an international seafood distributor and the largest shellfish company on the West Coast).  The order includes live scallops, fresh scallop meat and frozen scallops that will be packaged and delivered in various scallop products (including live in-the-shell, frozen half-shell and fresh meat).   As a result of this order, Fanny Bay will effectively become the exclusive distributor of our scallops outside the European market.  We believe this order will reduce cost and encourage additional wholesalers within the Taylor network to carry our scallops.  In addition to the Taylor sales agreement, we finalized an order to provide frozen scallop meat with roe to the European market.  Due to problems with the cadmium levels in our frozen product, we were unable to complete the initial portion of this order.  We believe we have indentified and solved this problem and should be able to begin European shipments in summer of 2009.  Despite the initial problem fulfilling this European order, we believe this order could represent an important first step towards establishing a large European based demand for our seafood products.

Management believes that these new sales agreements, coupled with the improved processing plant will yield increased revenues in our 2009 fiscal year and thereafter.  Management believes that the combination of the Fanny Bay (Taylor) sales and marketing network and the Island Scallop processing plant and product will result in both improved sales and margins in 2009 and beyond.

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In addition to scallop sales, we plan on generating additional revenues via the sale of scallop and other shellfish seed (including clams, mussels, geoducks and oysters).  In the future, Management may place emphasis on generating additional revenues via equipment sales to other aquaculture businesses.  Additionally, we recently started the process of investigating strategic acquisitions and/or business opportunities with seafood industry partners or additional strategic investors to enable the company to capitalize on our existing hatchery technology and expertise. As part of this initiative, we recently established an Acquisition/Business Opportunity Board Committee and are currently beginning initial, informal, conversations with both North American and Chinese based companies.  Part of this process may involve locating opportunities to increase near-term revenues via the sale of shellfish seed or shellfish larvae produced in our hatchery.  We are initially focusing on companies that we believe could significantly benefit from our hatchery technology and expertise and that would add additional revenue and/or have a geographically desirable location.  We are evaluating both potential acquisitions and partnerships with such companies in order to reach our goal of capitalizing on our hatchery technology in order to increase cash flows.   Aside from the November 2008 acquisition of Granscal Sea Farms Ltd., as of the date of this filing, no new definitive agreements have been signed. Additionally, we have not yet located and/or finalized financing sources for any possible acquisition.  Management currently plans to fund any future acquisition via either debt financing or additional equity financings.  Alternatively, Management believes that opportunities exist where we could provide our technology and knowledge to a joint venture that is funded by the other party.

We are also moving forward with our discussions with various First Nations1 groups about possible partnerships or joint ventures on potential farm sites on First Nation owned lands.  Originally, Management believed that we would be able to formalize our first joint venture with a first nations group as early as the start of the 2009 calendar year.  To date, we have yet to finalize a revenue producing First Nations joint venture.  Despite these delays, management believes that the initial joint ventures will soon be finalized.  This will provide us with additional growing areas for scallops and we believe that such a partnership will begin producing significant new revenue sometime in our 2010 fiscal year.

Despite the increased revenues for the first six months of our 2009 fiscal year (as compared to 2008), we were not able to achieve positive operational cash flows during this quarter.  As a result of our new sales agreements with Fanny Bay, improved processing plant and increasing shellfish seed sales, Management expects our sales and margins to increase and to achieve positive cash flows in 2009.   Management is still in the process of evaluating the impact of the recent global economic downturn and is unsure of the direct impact it will have on our sales and projects.  It is possible that the North American recession could materially impact future revenues and growth.

________________________

1 First Nations commonly refers to the indigenous peoples in what is now Canada. There are currently over 600 recognized First Nations governments or bands in Canada, roughly half of which are in the provinces of Ontario and British Columbia.

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During the first six months ended February 28, 2009, we continued working with 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.    As part of this relationship, we loaned RKS  an additional approximately $57,000 that is secured by all assets of RKS.  As a result, we currently have five secured notes receivable from RKS that total approximately $155,000.  Management, originally expected RKS to begin repaying at least a portion of these loans as early as the second quarter of 2009.  To date, RKS has yet to begin repaying a portion of these loans, but we are hopeful that initial repayment will begin in the upcoming quarter as RKS begins to realize repayment of government R&D credits.

During the continued harvesting of our 2005 class and 2006 scallops classes and transfer of our 2007 scallop classes, we were able to continue to review our mortality rates and update our class size projections.  Based on this review and recent sales, we expect to bring the remaining 1.1 million of our 2005 and 2006 year class scallops to market in the 2009 calendar year.  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, will 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. We noticed 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.  As of our most recent review of our scallop inventory, we currently believe that our 2007 year class should yield up to 6 million scallops at full maturity/harvest. Although this is lower than initial estimates, it will still represent our largest year class to date.

During the first and second quarter of 2009, we continued to the transfer of our 2008 scallop class from our hatchery ponds and into the ocean farms.  We originally expected to produce up to 24 million full-size scallops in this year class, but due to survival problems associated with our hatchery spawns and funding limitations, we now expect to produce as few as 2.2 million full-size scallops.   Based on our initial review of the hatchery spawn, we believe the mortality problems were the result of large blooms of toxic marine algae at the critical stage prior to metamorphosis of approximately 600 million scallop larvae.   These blooms corresponded to high levels of Paralytic Shellfish Poisoning in our ocean farms and although it did not harm any of our juvenile or mature scallops, it is believed that pre-metamorphic larvae are particularly susceptible. Procedures are now in place to prevent the introduction of toxic algae into the hatchery system in the coming years.

The  spawning season started on February 10, 2009 with a total of 400 million pre metamorphic larvae produced.  New larval husbandry methods increase overall larval survival and corresponding larval competency or the ability of the larvae to successfully undergo metamorphosis.   Anticipated larval settlement in early March was expected to be over 350 million larvae.    Management believed that this could produce a minimum of 35 million 3-5 mm scallop for ocean entry in mid May.   The second scallop spawn was scheduled for the first week of March with an additional 250 million larvae expected to be produced.

As a result of a recent review of our business plan and sales and marketing efforts to date, we currently plan to harvest and sell approximately 6 million full-size 2007 scallops over the 12 months ending December 2010.  In addition, we estimate that our 2008 year class will produce at least 2.2 million full-size scallops. The size of our 2009 and 2010 year classes will (in some ways) be determined by our ability to generate positive cash flows and/or our ability to locate additional financing.  As a result of our lower than expected sales and yields, we are still evaluating the cash available for farming and infrastructure costs related to expanding our future yields.  These classes will be harvested and sold in subsequent 12 month periods following the sales our 2007 year class.  Based on our current review of sales and marketing conditions, we believe our scallops will yield as much $1.00 of revenue per scallop.  The yield per scallop could increase significantly if we are able to sell a greater percentage of live scallops.  Additionally, we are beginning to place a greater emphasis on scallop seed sales and it is possible, although we cannot make any assurances, that we will produce and/or sell a significantly larger amount of 2009 and 2010 scallop seed.  As described above, our current estimated inventory size and projected sales cycle is summarized in the following table.

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			Estimated Inventory (value) to be Sold
Year-class	Accumulated Cost to Date		next 12 months		next 24 months		beyond 24 months
2005	$	118,084	$	118,084
2006	$	577,861	$	577,861
2007	$	577,014	$	144,254	$	432,760
2008	$	306,721					$	306,721
2009	$	51,541					$	51,541
Totals	$	1,631,221	$	, 840,199	$	432,760	$	358,262

Please note that the above table represents estimates of inventory to be sold over the next 12 months, 24 months and beyond.  It is possible that actual results could differ significantly from our estimates.

We periodically evaluate the carrying value of our inventory for impairment whenever events or changes in circumstances indicate that such carrying values may not be recoverable.  Management uses its best judgment based on the current facts and circumstances relating to its business when determining whether any significant impairment factors exist.  As of February 28, 2009, management performed an undiscounted cash flow analysis to determine that impairment of $75,000 existed in carrying value our 2006 scallop year class inventory.   As such, the impairment of $75,000 was charged against operations for the period ending February 28, 2009.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products will continue or allow the Company to realize the value of its long-lived assets and prevent future impairment.

If our mortality rates are better than our current projections, our yield and 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.  Furthermore, if we cannot achieve our estimated product mixture (live/fresh/frozen) than our average sales price per scallop will be lower.  Alternatively, if we are able to sell a large percentage of high yield products (live or frozen on the half shells) than our average price per scallop will be higher.

Despite our efforts to improve our cost of goods relative to our selling price, we are still operating at a negative margin.    Part of this problem was associated with operational inefficiencies that were identified during our recently completed top-down operation review.  As a result, we expect our cost of goods sold to  improve for our 2006 and 2007 year classes and in the coming years we expect to see continued improvements in cost of goods.

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Based on our current estimates of near-term sales and capital costs of expanding our farms to increase future crop yields, we will require additional financings to continue our expansion.  As we have yet to raise additional capital and our sales have increased at a slower than expected pace, we have already scaled back some of our expansion plans and may have to further scale back the plans outlined herein.  We originally anticipated that we would need approximately $1.0 million over the next 12 months to continue our originally planned expansion activities, however, we now plan to align our future expansions with our ability to generate positive cash flows from our current scallop crops and/or our ability to locate additional financing.  Additionally, management intends to place a greater emphasis on increasing scallop and other shellfish seed sales in 2009 and 2010.

Liquidity and Cash Resources

At February 28, 2009, we had a cash balance of approximately $94,000.  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.  Prior to the completion of our initial Preferred Stock Financing, our initial expansion had been largely funded by a short term note with a maximum limit of approximately $1,451,000.   This short term note was repaid with proceeds from the 2006 preferred stock financings and is no longer available to us.  These 2006 and 2007 financings formerly contained warrants, which if fully exercised, could have raised approximately an additional $49,350,000.  To date, the exercise of these warrants resulted in net proceeds of roughly $1,200,000; however, the financing we completed in June 2008, resulted in a warrant exchange that eliminated most of the remaining warrants from the 2006 and 2007 financings.  We have suffered operating losses since inception in our efforts to establish and execute our business strategy.   After the completion of the June 2008 financing, management believed that we had adequate funds to maintain our business operations into our 2009 fiscal year and/or until we become cash flow positive, but we continue to suffer operational losses in our 2009 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.  In fact,   based on our current estimates of future sales and capital costs of expanding our farms in order to increase future crop yields, we will require additional financings to continue expanding our operations.  Based on these factors, there is substantial doubt about our ability to continue as a going concern. Management plans to address this situation by utilizing our new sales agreements, improved processing plant, recent harvesting and sorting experience and increasing scallop and shellfish seed sales to increase our revenues and begin achieving cash flow positive operations.  In addition, Management believes that opportunities exist with other aquaculture companies, equipment vendors, seafood distributors and/or First Nations groups that could result in possible partnerships, joint ventures and/or acquisitions that could result in significantly improved cash flows.  To date, we have been unable to achieve positive cash flows.

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.

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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 $262,298 at August 31, 2008.  We have not experienced any losses, in such accounts and we believe that we are 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.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company evaluates the carrying value of its inventory for impairment whenever events or changes in circumstances indicate that such carrying values may not be recoverable.  The Company uses its best judgment based on the current facts and circumstances relating to its business when determining whether any significant impairment factors exist.  The Company’s management performs an undiscounted cash flow analysis to determine if impairment exists. If impairment exists, the Company measures the impairment based on the difference between the inventory’s carrying amount and its fair value, and the impairment is charged to operations in the period in which the inventory impairment is determined by management. Based on its analysis, the Company believes that impairment of $75,000 of the carrying value of its current inventory assets existed at February 28, 2009. There can be no assurance, however, that market conditions will not change or demand for the Company’s products will continue or allow the Company to realize the value of its long-lived assets and prevent future impairment.

Management has classified the costs of crops expected to be sold beyond a 12-month cycle from the date of the financial statements as noncurrent.

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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 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.

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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. 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 we hold, 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.

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.

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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 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 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, 2008 were not designated as hedges.

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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.

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 $3,175.  This amount represents the initial carrying costs of certain tenures acquired by Island Scallops’ 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 for new companies are not available through the Canadian Provincial application and review process.  The shellfish companies within the Sound are also well established and sales of tenures are quite rare, making the assessment of the market value for the Island Scallops tenures difficult.  Historical sales and government auction of tenures have received as much as $300,000 (CDN) for a small beach tenure (less than 4 acres) and $65,000 CDN) for a small deepwater tenure without infrastructure.  The few tenures on the market over the previous 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.  As a result of the recently approved tenure expansions, the estimated market value of our overall tenures has increased 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 tenure could vary significantly from these estimated values.

Although we cannot determine the exact amount we would ultimately receive from the sale of our tenure(s), based upon the information stated above we expect to receive more than the carrying cost ($3,175) 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.

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Comparison of results for the fiscal year ended August 31, 2008, to the fiscal year ended August 31, 2007.

Revenues.  Revenues for the fiscal year ended August 31, 2008, were approximately $1,584,000.  We had revenues of approximately $657,000 for the fiscal year ended August 31, 2007.  This is an increase of approximately $927,000 or 141%.  The increase in our revenue was largely the result of an increase in the sales of our own scallops.  In fact, sales of our own scallops increased by more than 93% or roughly $509,000.  If not for the loss of live scallop sales due to the temporary closing of our harvest areas due to Red Tide issues, our overall sales may have increased by at least an additional $100,000.  Our overall average price per scallop remained roughly unchanged from 2007 to 2008.  Therefore, the increase in revenue generated from the sales of our own scallops was directly due to increased volume.  Aside from the increase in the overall number of scallops sold, management also placed great emphasis on equipment sales to other aquaculture companies, which resulted in a large volume of equipment sales that increased revenues by approximately $120,000 over the prior year.  Particularly in the final quarter of our 2008 fiscal year, Management also began increasing its focus on generating additional revenues through the sale of both scallop and other shellfish seed sales.  This resulted in increased overall volume of both scallop seed and oyster seed sales as compared to the previous fiscal year.As was the case in 2007 and 2006, management continued its emphasis on the development and production of larger scallop crops.  Management believes that our emphasis on expansion of future crops coupled with our new sales agreements will yield increased revenues starting in 2009 and beyond.

Gross profit (loss). Gross loss for the year ended August 31, 2008, was approximately $479,000, a increase of approximately $100,000 as compared to gross loss of roughly $379,000, for the year ended August 31, 2007. The increase in the amount of gross loss for 2008 (as compared to 2007) was mainly attributable to management’s continued focus on the expansion and development of larger scallop crops and larger scallop yields for future years and increased marketing efforts.  Part of this increase was attributable to increased costs due to higher processing plant and trucking costs as we began to establish a larger sales effort.  In the future, as we capitalize on our new sales agreements, 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, 2008, were approximately $3,185,000.  Our general and administrative expenses were approximately $1,541,000 for the fiscal year ended August 31, 2007.  This is an increase of approximately 1,644,000 or 107%.  The majority of this increase was directly attributable to stock option expense of roughly $1,780,000 as compared to $486,000 for the same period in 2007.  To date, we have already expensed the majority of the stock option expenses related to the 2,592,000 options that were outstanding as of August 31, 2008.  As such, management believes general and administrative expenses will drop significantly in the upcoming fiscal year.     Our increase in general and administrative expenses for the year ended August 31, 2008, 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 handle an expansion of up 30 million scallop crops and beyond.

Common stock issued for services.  During the year ended August 31, 2008, we had stock compensation expense of approximately $91,000.  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, 2007, we had stock compensation expense of approximately $62,000.  The expense was also for outside seafood sale and distribution consultants who we hired to help develop new sales and marketing programs. As such, we incurred a stock compensation expense of approximately $62,000 for year ended August 31, 2007.

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Other income (expense), net.  Interest expense for the year ended August 31, 2008 was approximately $11,000.  Interest expense for the year ending August 31, 2007 was approximately $16,000.  Other expense for the year ended August 31, 2008 was approximately $6,000 as opposed to other income of approximately $167,000 for the year ending August 31, 2007.  The other income for the year ended August 31, 2007 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 on April 12, May 30, June 30, July 11 and January 16, 2007.  As a result of the reclassifying these warrant liabilities on February 21, 2007, no such gain or loss was recorded for the year ended August 31, 2008.

As a result, other expense for the year ended August 31, 2008, was approximately $17,000 as compared to other income of approximately $5,978,000 for the year ended August 31, 2007.  As described above, the other income for the year ended August 31, 2007, was mainly a result of one-time gains associated with the forgiveness of third-party debt and change in fair-value of warrants.  Without these one-time items, other expense would have been relatively unchanged at $17,000 (for 2008) as compared to $16,000 (for 2007).

Net profit (loss).  As a result of the above, the net loss for the year ended August 31, 2008, was approximately $4,575,000 as compared to a net income of approximately $3,538,000 for the year ended August 31, 2007.

Comparison of results for the three and six months ended February 28, 2009 to the three and six months ended February 29, 2008.

Revenues.  Revenues for the three months ended February 28, 2009, were approximately $433,000.  We had revenues of approximately $366,000 for the three months ended February 29, 2008.  This is an increase of approximately $67,000 or 18%.  If not for the recent improvement of the US dollar relative to the Canadian dollar for the three months ended February 28, 2009 (as compared to the same period in 2008), our overall sales increase would have been greater.  In fact, sales in absolute Canadian dollars improved by 47% over the three month period.  Revenues for the six months ended February 28, 2009, were approximately $1,010,000.  We had revenues of approximately $795,000 for the six months ended February 29, 2008.  This is an increase of approximately $215,000 or 27%.  If not for the recent improvement of the US dollar relative to the Canadian dollar for the six months ended February 28, 2009 (as compared to the same period in 2008), our overall sales increase would have been greater.  In fact, sales in absolute Canadian dollars improved by 50% over the six month period.  Although our overall volume of scallops sales increased over the previous six month period, our average price per scallop slightly decreased from the previous periods.  As a result, revenue generated by scallops sales increased slightly from the previous period.  In the first six months of our 2009 fiscal year, management also continued to place a greater emphasis on equipment sales to other aquaculture companies and continued their efforts to increase revenues generated from both scallop and shellfish seed sales. This resulted in increased seed sales and new equipment sales as compared to the previous fiscal year.  In fact, the majority of increased revenue was directly related to increase seed and equipment sales.  As was the case in the previous six month period, management continued its emphasis on the development and production of larger scallop crops.  Management believes that our emphasis on expansion of future crops coupled with our new sales agreements will yield increased revenues in our 2009 fiscal year and beyond.

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Gross loss. Gross loss for the three months ended February 28, 2009 was approximately $296,000, an increase of approximately $168,000 as compared to gross loss of roughly $128,000, for the three months ended February 29, 2008. For the six months ended February 28, 2009, gross loss was roughly $359,000.  Gross loss for the six months ended February 29, 2008 was approximately $233,000.  This is an increase of $126,000 or roughly 54%. The increase in gross loss for the three and six months ended February 28, 2009 (as compared to the same period in the previous year) was mainly attributable to increased cost of inventory and cost of scallop seed relative to the previous periods.  The increase in the cost of inventory (per scallop) was the result of certain inventory downgrades related to mortality and survivability issues that we believe have been corrected in future classes.   The increase in the cost of scallop seed inventory was the results of certain older inventory that as deemed too small for processing and was therefore sold as seed.  In addition, as of February 28, 2009, management performed an undiscounted cash flow analysis to determine that impairment of $75,000 existed in carrying value our 2006 scallop year class inventory.   As such, the impairment of $75,000 was charged against operations for the three and six ending February 28, 2009.  This increase in gross losses reversed the one-time reduction of gross loss that we experience for the previous quarter.  Despite this increase in gross loss for the three and six months ended February 28, 2009, we believe that we are beginning to capitalize on management’s continued focus on both the expansion and development of larger scallop crops and larger scallop yields for future years as well as an increased emphasis on seed sales.  Additionally, Management believes that we have addressed issues that resulted in higher cost of inventory and seed costs.  Management believes that in the future our sales will continue to increase while costs of goods will only increase slightly. As a result, we expect our margins to improve in future years.  In the future, as we capitalize on our new sales agreements, we expect our sales to increase more rapidly and for these costs and margins to quickly improve.  We continued to focus resources on maintaining, developing and tending to our scallop crops and shellfish seed and believe that we have already seen the initial benefits in increased sales of our own scallops and increased seed sales and that we will continue to see additional benefits from our efforts in developing larger crops and expanding our seed sales in the 2009 fiscal year and beyond.

General and administrative.  General and administrative expenses for the three months ended February 28, 2009, were approximately $338,000.  Our general and administrative expenses were approximately $761,000 for the three months ended February 29, 2008.  This is a decrease of approximately $423,000 or 56%. This decrease was directly attributable to a reduction in stock option expense of roughly $510,000 as compared to the third months ended February 29, 2008.  For the six months ended February 28, 2009, our general and administrative expenses were roughly $526,000.  As compared to roughly $1,485,000 for the six months ended February 29, 2008.  This decrease of approximately $959,000 was mainly the result of a reduction of roughly $1,021,000 in stock option expense.

To date, we have already expensed the majority of the stock option costs related to the 2,692,000 outstanding options and are currently scheduled to only incur approximately an additional $32,000 through August 31, 2010.  However, we will incur an additional $220,000 of stock option expense in our next fiscal quarter as a result of new stock option grants.  As such, management expects that general and administrative expenses (excluding stock options expense) may 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.  In addition, as our overall stock option and stock compensation expenses are reduced to pre-2007 levels, our overall general and administrative expenses will significantly drop.

Stock compensation and stock option expense.  During the three and six months ended February 28, 2009, our Board of Directors did not authorize the issuance of any shares of our restricted common stock for compensation.  As a result, we did not incur any stock compensation expense for the three and six months ended February 28, 2009.  During the three and six months ended February 29 2008, we had stock compensation expense of approximately $12,000 and $50,000, respectively. We did however, issue 100,000 new options during the six months ended February 28, 2009.  As a result, we have stock option expense of roughly $11,000 for the six months ended February 28, 2009.  We did not issue any new options during the six months ended February 29, 2008.  However, due to options issued to employees, consultants and directors during 2007 and based upon the common stock trading price at the times of issuance, vesting schedules and FASB rules, we incurred stock option compensation expenses of approximately $516,000 and $1,033,000 during the three and six months ended February 29, 2008, respectively.

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Other income (expense), net.  Interest expense for the three months ended February 28, 2009, was approximately $12,000.  Interest income for the three months ended February 29, 2008, was approximately $3,000.  Other expense for the three months ended February 28, 2009, was nil as opposed to other expense of approximately $36,000 for the three months ended February 29, 2008.

Interest expense for the six months ended February 28, 2009, was approximately $23,000.  Interest income for the six months ended February 29, 2008, was approximately $7,000.  Other expense for the six months ended February 28, 2009, was nil as opposed to other income of approximately $28,000 for the six months ended February 29, 2008.

Net profit (loss).  As a result of the above, the net loss for three months ended February 28, 2009 was approximately $729,000 as compared to a net loss of approximately $1,015,000 for the three months ended February 29, 2008. Net loss for six months ended February 28, 2009 was approximately $1,076,000 as compared to a net loss of approximately $1,871,000 for the six months ended February 29, 2008.

Liquidity and Cash Resources. At February 28, 2009, we had a cash balance of approximately $94,000.  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.  Prior to the completion of our initial Preferred Stock Financing, our initial expansion had been largely funded by a short term note with a maximum limit of approximately $1,451,000.   This short term note was repaid with proceeds from the 2006 preferred stock financings and is no longer available to us.  These 2006 and 2007 financings formerly contained warrants, which if fully exercised, could have raised approximately an additional $49,350,000.  To date, the exercise of these warrants resulted in net proceeds of roughly $1,200,000; however, the financing we completed in June 2008, resulted in a warrant exchange that eliminated most of the remaining warrants from the 2006 and 2007 financings.  We have suffered operating losses since inception in our efforts to establish and execute our business strategy.   After the completion of the June 2008 financing, management believed that we had adequate funds to maintain our business operations into our 2009 fiscal year and/or until we become cash flow positive, but we continue to suffer operational losses in our 2009 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.  In fact,   based on our current estimates of future sales and capital costs of expanding our farms in order to increase future crop yields, we will require additional financings to continue expanding our operations.  Based on these factors, there is substantial doubt about our ability to continue as a going concern. Management plans to address this situation by utilizing our new sales agreements, improved processing plant, recent harvesting and sorting experience and increasing scallop and shellfish seed sales to increase our revenues and begin achieving cash flow positive operations.  In addition, Management believes that opportunities exist with other aquaculture companies, equipment vendors, seafood distributors and/or First Nations groups that could result in possible partnerships, joint ventures and/or acquisitions that could result in significantly improved cash flows.  To date, we have been unable to achieve positive cash flows.

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BUSINESS

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 Ocean Smart, Inc., the parent company of Island Scallops Ltd. an aquaculture company located in Vancouver Island, British Columbia. As a result of the Share Exchange, Ocean Smart became our wholly owned subsidiary and Ocean Smart’s shareholders became the owners of the majority of our voting stock.  Pursuant to the terms of the Share Exchange Agreement, Ocean Smart’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.  Effective March 3, 2009, we changed our name from Edgewater Foods International, Inc. to Ocean Smart, Inc., which we believe will bring us greater exposure and name recognition because the new name more accurately describes our business and operations.

Our wholly owned subsidiary, Ocean Smart, a Nevada Corporation, is the parent company of Island Scallops Ltd., a Vancouver Island aquaculture company. Island Scallops was established in 1989 and for almost 20 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 Qualicum Beach Scallop s and live sablefish (or blackcod).  Given Island Scallops’ unique hatchery technology and extensive research and development, we believe that there is currently no significant competition for these marine species.   Island Scallops is committed to rapidly expanding production and profits while continuing to finance the aggressive growth of the company and maintaining a healthy respect for the marine environment.

Ocean Smart 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 Qualicum Beach Scallop s for sale in the west coast of North America.  Island Scallops offers a variety of other products and services to the industry including aquaculture equipment, consulting, research and development, and custom processing and marketing.  Internationally, Island Scallops has collaborated with both Japanese and Moroccan fisheries interests.

General Fisheries Market Overview

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

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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 upon Robert Saunders’, our chairman and president, communications with the National Marine Fisheries Service, Fisheries Statistics Division of Silver Spring, MD, and personal observations, given consumers' growing preoccupation with healthier foods and the increasing availability of seafood (due to the recent successes in aqua farming and improved distribution channels), we expect per capita consumption to continue to increase.

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

Key Corporate Objectives

Our key business development objectives over the next 36 months are to expand scallop production using both existing and new infrastructure at our facilities in Qualicum Beach, move forward possible joint ventures with three First Nations groups, investigate strategic acquisitions and/or business opportunities and look for possible partners or additional strategic investors to enable the company to capitalize on its existing black cod technology.  In general, we plan on leveraging our existing hatchery technology and expertise via joint venture and/or acquisitions that will enable us to reach signicantly increase sales over the next three years.  Specifically, we plan to expand our business and operations as follows:

· Leverage our recently completed $2.0 million order with Fanny Bay Oyster Co., a division of Taylor Shellfish Farms of Shelton, Washington (an international seafood distributor and the largest shellfish company on the West Coast) to expand overall scallops and reduce selling costs.  The initial order is for more than 800,000 lbs. of Ocean Smart’s proprietary Qualicum Beach scallops to be delivered to Fanny Bay over the next 13 months. The order includes live scallops, fresh scallop meat and frozen scallops to be farmed inOcean Smart’s Qualicum Beach, British Columbia, operation, and packaged and delivered in various scallop products (including live in-the-shell, frozen half-shell and fresh meat).

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· Continue to move forward with our discussions with various First Nations groups about possible partnerships or joint ventures on potential farm sites on First Nation owned lands.  This will provide the company with additional growing areas for scallops and future joint venture revenues.

· Investigate possible acquisitions of other aquaculture companies, equipment vendors and/or seafood distributors.  We plan to initially focus on companies that we believe could significantly benefit from our hatchery technology and expertise.  As part of this initiative we recently established an Acquisition/Business Opportunity Board Committee and are currently beginning initial conversions with both North American and Chinese based companies.  Aside from the November 2008 acquisition of Granscal Sea Farms Ltd., a Kanish Bay Company, as of the date of this filing, no new definitive agreements have been signed.

· Look to indentify either new strategic investors and/or possible joint venture partners who could help us capitalize on existing sablefish (or blackcod) hatchery technology and expertise.   One possible arrangement would be for us to license our blackcod hatchery technology and expertise to a strategic partner.  As of the date of this filing, we have yet to locate either a strategic investor or a joint venture of licensing partner.  If we do indentify a suitable arrangement, our goal would be 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 scallop distribution by leveraging our initial 500,000 piece frozen roe on scallop meat order with European Union seafood distributors.  While our arrangement with Taylor Shellfish will focus on North America markets, we believe this order could represent an important first step towards establish a large European based demand for our scallops. We plan to begin European shipments in fall of 2009.

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 other factors, such as supply and consistent quality.

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

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

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

Traditionally, as described above, we have sold live scallops within the Pacific Northwest market.  We recently received a $2.0 million order with Fanny Bay Oyster Co., a division of Taylor Shellfish Farms of Shelton, Washington (an international seafood distributor and the largest shellfish company on the West Coast).  The order includes live scallops, fresh scallop meat and frozen scallops to be farmed in Ocean Smart  Qualicum Beach, British Columbia, operation, and packaged and delivered in various scallop products (including live in-the-shell, frozen half-shell and fresh meat).   As a result of this order, Fanny Bay will become the effective exclusive distributor of our scallops outside the European market.  We believe this order will reduce cost and encourage additional wholesalers within the Taylor network to carry our scallops.  In addition to the Taylor sales agreement, we also finalized an order to provide frozen scallop meat with roe to the European market.  We believe that this strategic relationships with enable us to capitalize on the large European demand for quality seafood products.

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 Qualicum Beach 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.

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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 Qualicum Beach 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. 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 "Qualicum Beach Scallop", which is a hybrid of the imported Japanese scallop and the local weathervane scallop.  Between 1993 and 1999, Island Scallops developed this new scallop using Japanese scallops that were imported under quarantine in the early 1990’s.  This unique scallop is marketed as the Qualicum Beach 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 we could increase our annual harvest capacity to 30 million scallops in the near future.  We hope to fund this expansion via either increasing cash flow or additional equity or debt   financings.    If we are unable to locate financing or develop positive cash flow, we will not be able to continue to expand our production capabilities.

The Qualicum Beach Scallop is sold live in four sizes: medium, large, extra large and jumbo.  Pricing typically ranged from a low of US$3.95 per pound to $4.20 per pound for the larger sized scallops.  In the early days of our business, due to the large demand and high value for live scallops, our focus was on the sale of live scallops.   However, with the recent sales agreement with Fanny Bay and new European product line, our average selling prices are expected to be between $1.00 and $1.20 per scallop.  Although the average selling price per unit will be slightly lower than the per unit cost of live in-the-shell scallops (only), we believe the reduce sales and administrative costs will enable the company to significantly increase our future margins.

The basis for our recently completed and possible additional 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 “pearl nets and lantern-style” farming 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 50 by 50 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.  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 increase capacity to approximately 30,000,000 animals per annum (with additional funding).  Thereafter, we intend to change our management plan to include off bottom culture at our Nile Creek farm in late 2007 or 2008, which would supply us with the capacity to produce an additional 12-24 million scallops at harvest( depending on the size of nets used).

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

· Whole-live (shelf life of seven days);

· Whole dried;

· Eviscerated whole;

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

· Shucked frozen (shelf life of about a year);

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

· Value added forms (smoked, breaded, canned).

The shucked product form is the most significant form for North American markets.  A whole-live product form is the most desirable from the aquaculturist’s point of view, as processing costs are minimal. Previously, Island Scallops has developed a market for whole live scallops, which exceeds 5,000 lbs. per week into Vancouver.  As described above, our scallop sales efforts are currently focused on our Fanny Bay (Taylor Seafood) order and our European orders.  We believe that these strategic relationships with enable us to capitalize on established selling networks and proven distributors to capitalize on demand for quality seafood products.

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, 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.

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

Island Scallops plans to raise sablefish onshore using shallow ponds or above ground tanks.  This system has been successful in Texas for the culture of catfish.  Tests have shown that sablefish prove to be very hardy when grown in ponds and this has 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.   If we are able to located financing, a strategic partner or license the technology, we believe that Island Scallops has already demonstrated the feasibility of onshore sablefish farming and plans to develop a new sablefish facility that could produce at least 500,000 sablefish within 12 months of funding.  Furthermore, we believe that production could be increased by at least 500,000 annually in future years.

Over the past nine 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).  If we are able to locate suitable funding and/or partners, Island Scallops will be able to capitalize on our breakthrough sablefish hatchery technology by constructing a new sablefish hatchery consisting of the following:

· 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.

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

· 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.

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At the present time, worldwide “non-farming” sablefish catches are struggling to meet the worldwide demand according to DFOWeb, NPFMCWeb and Pacific Fishery Management Council Website. Currently, there are only three hatchery facilities that have produced sablefish juveniles. Current production is approximately 500,000 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 mainly on expanding its scallop sales. However, the Company is also looking to develop increasing shellfish larvae and seed sales and equipment sales in the near future.  In addition, we will continue to investigate funding sources and/or partners for the development of our sablefish operation with a goal of further commercialization of sablefish in two to four years.

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.

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 has yet to be introduced.  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.

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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 Qualicum Beach Scallop s 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.

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

Island Scallops is currently only one of three 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, 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.

Research and Development

Due to changes in Canadian Federal Government’s Research and Development tax credits (SRED) program, which prevents any part of the research to be combined with commercial production, no Research and Development claims were made in fiscal and 2008.  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 by a separate company called RKS Laboratories Ltd., which has no commercial production and whose primary goal is the genetic improvement in breeds of the Qualicum Beach Scallops and other marine species.  We believe that this will allow the continued support from the SRED program.

Employees

At August 31, 2008, we have 35 full-time 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.

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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.

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

Tenure Expansion And Compliance With Environmental Laws

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

Our Deep Bay and Hindo Creek tenures have received final CEA Act approval, which lasts for twenty years and which allows us to expand these 2 tenures.   An amended tenure agreement has been signed with the government of BC to expand the Denman Island site.    In April 2008, we got approval to convert the method of farming at the Nile Creek (formerly called the Bowser Tenure) tenure from bottom to off-bottom culture in one-third of the tenure area, but we need to complete that construction before we can take full advantage of the conversion.  Please see our risk factor, If we are unable to expand our tenures, our projected production may be delayed.

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.

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Property

For the fiscal year ended August 31, 2008, 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 five farm sites for scallops.  These sites are held as "tenures" with the British Columbia government, which grants rights to use offshore waters to cultivate shellfish.  Three of these scallop farms are located in Baynes Sound, 25 minutes north of the main facility. These farms sites total approximately 200 acres and can currently accommodate more than 8 million scallops. Approximately 30% of the farm area is currently being farmed.  As part of our expansion plans, we are currently adding additional main lines and plan to increase our capacity at these tenures to more than 24 million scallops in the near future.  An additional bottom tenure of 926 acres is located 10 minutes north of the main facility (at Bowser) and is capable of producing at least 30 million scallops annually.  The final farm site on the west coast of Vancouver Island near Tofino is capable of producing at least three million scallops, although that site is currently under-developed. Baynes Sound, the marine waterway situated between eastern Vancouver Island and the western shore of Denman Island, is considered the most productive and highly utilized shellfish growing area in coastal British Columbia.  The area supports extensive beach culture (manila clams and oysters) as well as deepwater culture that produces oysters, scallops and some mussels.

Common Site Name	Lands File No.	ACRES	Type
Denman Point	1406063	38.6	Deepwater
Hindoo Creek	1406664	123.32	Deepwater
Deep Bay	1406711	43.0	Deepwater
Tofino	1406061	9.6	Deepwater
Nile Creek (formerly Bowser)	1407517
		926	Deepwater

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

Expansion of our Deep Bay and Hindo Creek has been approved and such approval does not need to be renewed for twenty years.  An amended tenure agreement has been signed with the government of BC to expand the Denman Island site.  In April 2008, we got approval to convert the method of farming at the Nile Creek tenure from bottom to off-bottom culture in one-third of the tenure area; once the conversion is complete, we believe we will be able to accommodate approximately 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 Qualicum Beach 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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DIRECTORS AND EXECUTIVE OFFICERS

The following table and text set forth the names and ages of all directors and executive officers as of April 27, 2009. 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.

Name	Age	Position
Robert Saunders	55	Chairman,CEO and President, Director
Douglas C.MacLellan	53	Vice Chairman
Mark H. Elenowitz	39	Director
Javier Idrovo	41	Director
Michael Boswell	39	Director, Acting Principal Accounting and Principal Financial Officer and Acting Chief Financial Officer
Darryl Horton	58	Director
Victor Bolton	54	Director

Robert Saunders, Chairman, CEO and President and Director. 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 Chief Executive Officer and Executive Chairman of AMDL, Inc. (AMEX: ADL), a publicly held biotechnology firm.  He was previously a member of the board of directors and chairman of the audit committee of ADML, Inc.  From 2002 until September 2005, Mr. MacLellan was Vice Chairman and a Director of AXM Pharma, Inc. (NYSE 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, from May 1997 to January 2008, was a director of Datalex Corporation, a Canadian-based legacy software solution provider. From November 1996 to March 1998, Mr. MacLellan was co-Chairman and an Investment Committee member of the Strategic East European Fund.  From November 1995 to March 1998, Mr. MacLellan was President, Chief Executive Officer and a Director of PortaCom Wireless, Inc., a company engaged as a developer and operator of cellular and wireless telecommunications ventures in selected developing world markets.  Mr. MacLellan is a former member of the board of directors and co-founder of FirstCom Corporation (NASDAQ: FCLX), an international telecommunications company that operates a competitive access fiber and satellite network in Latin America, which became AT&T Latin America (NASDAQ: ATTL) in August 2000.  During 1996, he was also the Vice-Chairman of Asia American Telecommunications (now Metromedia China Corporation), a majority-owned subsidiary of Metromedia International Group, Inc. (AMEX: MMG). Mr. MacLellan was educated at the University of Southern California in economics and finance, with advanced training in classical economic theory.

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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 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.

Javier Idrovo, Director. Currently, Mr. Idrovo works as the Senior Vice President of Strategy and Business Development for The Hershey Company.Mr. Idrovo has been involved in the food industry since 2001 when he joined Dole Food Company, Inc. as Vice President of Strategy. In 2004, Mr. Idrovo was promoted to Senior Vice President of Strategy.  In 2005, he became Vice President and CFO of Dole Packaged Foods, one of the operating divisions of Dole Food Company.  In 2006, he was promoted to President of Dole Packaged Foods and held that title until March 2008.  Prior to joining Dole, Mr. Idrovo worked as a management consultant for The Boston Consulting Group, Inc. holding positions of increasing responsibility from Associate Consultant to Manager.  As a consultant, Mr. Idrovo worked for clients on projects that focused on strategy issues as well as organizational effectiveness issues across a number of industries including, but not limited to, Telecommunications, Retailing, Manufacturing, and Financial Services.  He received a Bachelor of Science degree in 1989 and a Master of Engineering degree in 1990 both from Harvey Mudd College.  Mr. Idrovo also received a Master of Business Administration degree from Harvard Business School in 1995.

Michael Boswell,Director, Acting Chief Financial Officer and Acting Principal Accounting and Principal Financial 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 currently a member of the board of directors and chairman of the audit committee of AMDL, Inc. (NYSE AMEX: ADL), a publicly held biotechnology firm.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.

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

Dr. Kristina M. Miller, Chief Scientific Advisor.  Dr. Miller is currently Head of the Molecular Genetics Section in the Pacific Region for the Department of Fisheries and Oceans, Canada (DFO).   She has been a research scientist at DFO since obtaining her PhD in Biological Sciences from Stanford University in 1992.  The Molecular Genetics section she oversees contains a staff of 26, including scientists, biologists, computer analysts and research technicians.  Dr. Miller conducts research on the genetic composition, adaptation, immunity and physiology of wild and domesticated fish and shellfish species using both molecular and genomic approaches.  She has been a leader in the development of molecular technologies to aid in the conservation and management of aquatic resources.  In the past 10 years, she has published over 40 scientific peer-reviewed journal manuscripts, and her group has been the focus of numerous magazine and newspaper articles.  Dr. Miller brings a strong scientific component to the management of Ocean Smart, 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.

CORPORATE GOVERNANCE

Board Committees

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

· Acquisition/Business Opportunity Committee, which is comprised of Javier Idrovo, Victor Bolton and Douglas MacLellan.

· Audit Committee, which is comprised of Douglas MacLellan (Chair), Javier Idrovo and Darryl Horton.  The Board has determined that all of these members are independent, as that term is defined in Section 803 of the NYSE Amex Company Guide (formerly 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 Victor Bolton, Darryl Horton 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) and Douglas MacLellan. The Board has determined that Mr. MacLellan are independent, as that term is defined in Section 803 of the NYSE Amex Company Guide (formerly 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).

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), Javier Idrovo and Darryl Horton.  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;

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· 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.

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 803 of the NYSE Amex Company Guide (formerly 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.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our officers, directors and persons who own more than 10% of any class of our securities registered under Section 12(g) of the Exchange Act to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

Based on our review of copies of such reports, we believe that there was compliance with all filing requirements of Section 16(a) applicable to our officers, directors and 10% stockholders during fiscal 2008.

Code of ethics

On August 3, 2005, we adopted a code of ethics that applies to our Chief Executive Officer and Principal Financial and Accounting Officer.  You may obtain a copy of any of our codes of ethics at no cost, by written request to:  Ocean Smart, Inc., 5552 West Island Highway, Qualicum Beach, British Columbia, Canada V9K 2C8; or, by oral request at: (250) 757-9811.

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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	2008	60,000 (1)	0	0	227,164 (3)
Robert Saunders Chief Executive Officer	2007	60,000 (1)	0	0	20,651
Michael Boswell Acting Chief Accounting Officer	2008	0 (2)	0	0	295,317 (3)
Michael Boswell Acting Chief Accounting Officer	2007	0 (2)	0	0	26,847

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	2008	0	0	0	287,164
Robert Saunders Chief Executive Officer	2007	0	0	0	80,651
Michael Boswell Acting Chief Accounting Officer	2008	0	0	0	295,317
Michael Boswell Acting Chief Accounting Officer	2007	0	0	0	26,847

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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.  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 Series A Preferred Stock Financing, Mr. Saunders was due the signing bonus of $150,000 and a monthly salary 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. This agreement expired in June 2008 and we are currently operating as if this employment agreement is still in effect as we discuss a new agreement with Mr. Saunders.  As of August 31, 2008, we had paid Mr. Saunders $100,000 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  $190,000 as of August 31, 2008, 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 sufficiently funded to carry out our business and operations.  According to the above 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 vested 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 vested monthly, the company incurred a monthly cost of $20,651 and $26,847 respectively between August 2007 and July 2008.  As of August 31, 2008, all of these stock options costs had been realized.

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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	0	0	0	0
Michael Boswell	0	0	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 common stock on August 17, 2007.  As of August 31, 2008 all 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	165,210 (1) (2)	0
Mark Elenowitz	0	0	429,546 (1) (3) (4)	0
Darryl Horton	1,000	0	8,260 (1) (5)	0
Victor Bolton	1,000	0	8,260 (1) (6)	0
Javier Idrovo	0	0	0 (7)	0

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Name	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All other Compensation ($)	Total ($)
(a)	(f)	(g)	(h)
Douglas MacLellan	0	0	201,210
Mark Elenowitz	0	0	429,546
Darryl Horton	0	0	9,260
Victor Bolton	0	0	9,260
Javier Idrovo	0	0	0

(1) At the end of the fiscal year, 2,592,000options 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 vested 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 vested monthly, we incurred a monthly cost of $13,768.  As of August 31, 2008, all 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 vested 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 520,000 options were determined to be $429,546.  Since these options vested monthly, we incurred a monthly cost of $35,795.  As of August 31, 2008, all 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 vested 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 vested monthly, we incurred a monthly cost of $688.  As of August 31, 2008, all 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 vested 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 vested monthly, we incurred a monthly cost of $688.  As of August 31, 2008, all of these stock options costs had been realized.

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(7) On September 8, 2008, our board of directors authorized the issuance of an aggregate of 100,000 options to purchase our common stock pursuant to our 2005 Equity Plan to Mr. Idrovo.   The options vest in two equal installments over the next two years (on September 8, 2009 and 2010).  Each option is exercisable for a period of five years from the issuance date and has an exercise price of $0.45. Based on the Black-Scholes option pricing model, we will incur approximately $43,000 through August 31, 2010 for these options. However, as of August 31, 2008, Mr. Idrovo had not yet been granted any options and therefore we have not yet incurred any stock option expense.

Our directors who are employees do not receive any compensation from us for services rendered as directors. The Board has created three classes of fees for outside directors: (1) outside directors who are “independent,” as defined in the Exchange Act will be paid $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 Ocean Smart by providing additional incentives to directors, executives and selected employees of and consultants to Ocean Smart so that such participants may acquire or increase their proprietary interest in Ocean Smart. The term "Corporation" shall include any parent corporation or subsidiary corporation of Ocean Smart as those terms are defined in Section 424(e) and (f) of the Internal Revenue Code of 1986, as amended. Stock options granted under the Plan may be either "Incentive Stock Options", as defined in Code section 422 and any regulations promulgated under that Section, or "Nonstatutory Options" at the discretion of our Board of Directors and as reflected in the respective written stock option agreements granted pursuant to this Equity Plan. Stock Appreciation Rights, Restricted Stock, Restricted Stock Unit, Performance Awards, Dividend Equivalents, or Other Stock-Based Awards may also be granted under the Equity Plan.  The Board believes that the Equity Plan will maintain the flexibility that Ocean Smart 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 Ocean Smart 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.

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As of August 31, 2008, our Board of Directors had granted 2,992,000options to employees, directors and consultants under the Equity Plan.  As of August 31, 2008 400,000 of these options had been canceled and 2,592,000 were outstanding.  As of August 31, 2008, there are 7 Directors, 1 executive officers, 1 consultant 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 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.  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 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.  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).

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

Federal Income Tax Consequences

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

Nonqualified Stock Options  

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

Incentive Stock Options

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

Stock Awards  

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

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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

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 Directors.  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 Series A Preferred Stock Financing, Mr. Saunders was due the signing bonus of $150,000 and a monthly salary 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, 2008 we had paid Mr. Saunders $100,000 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  $190,000 as of August 31, 2008 until such time that we become significantly cash flow positive for its operations.  As of August 31, 2008, the term of the initial employment agreement had expired and we are currently discussing finalizing a new employment agreement.  Until a new agreement is completed, we will continue to operate under the terms of this agreement.

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 April 27, 2009, we had a total of 25,477,777 shares of common stock, 7,773,998 shares of Series A Preferred Stock, 207 shares of Series B Preferred Stock, 747,870 shares of Series C Preferred Stock and 304,558 shares of Series D 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”)  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; 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; and, each share of our Series D Preferred Stock is convertible into a number of fully paid and nonassessable shares of our common stock equal to the quotient of the stated value of the Series D Preferred Stock ($40) divided by the conversion price, which initially is $0.80 per share, subject to certain adjustments.

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The following table sets forth, as of April 27, 2009: (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.

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	10,200,000 (2)	19.87%
Douglas C. MacLellan Vice Chairman 8324 Delgany Avenue Playa del Ray, CA 90293	1,240,000 (3)	2.42%
Mark Elenowitz Director 400 Professional Drive Suite 310 Gaithersburg, MD 20879	1,758,000 (4) (5)	3.41%
Javier Idrovo Director 400 Professional Drive Suite 310 Gaithersburg, MD 20879	0(6)	0.00%
Michael Boswell Director and Acting Chief Accounting Officer 400 Professional Drive Suite 310 Gaithersburg, MD 20879	1,328,000 (7) (8)	2.58%

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Victor Bolton 345-916 W. Broadway Vancouver, BC V5Z 1K7	10,000 (9)	0.02%
Darryl Horton 33568 Eagle Mountain Drive Abbortsford, BC V3G 2X7	10,000 (10)	0.02%
Vision Opportunity Master Fund, Ltd. 20 West 55th St., 5th Floor New York, NY 10019	2,538,793 (11)	4.99%
All directors and officers as a group (8 persons)	14,546,000	28.33%

________________

(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.  All of these options vested on August 17, 2008.

(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.  All of these options vested on August 17, 2008.  Additionally on October 13, 2008 and October 14, 2008 respectively, Mr. MacLellan purchased an additional 5,000 and 15,000 shares of common stock.

(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 1,238,000 shares 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.  All of these options vested on August 17, 2008.

(6) On September 8, 2008, our board of directors authorized the issuance of an aggregate of 100,000 options to purchase our common stock pursuant to our 2005 Equity Plan to Mr. Idrovo. The options shall vest in two equal installments over the next two years (on September 8, 2009 and 2010).  Each option is exercisable for a period of five years from the issuance date and has an exercise price of $0.45 respectively. As of August 31, 2008, Mr. Idrovo had not yet been granted any options. As of April 27, 2009, none of these options have vested and none will vest within 60 days from such date.

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(7) Mr. Boswell and his wife jointly own Invision, LLC, which owns 38,000 shares of our voting stock.  Additionally, Invision, LLC is a thirty percent (30%) member of TriPoint Capital Advisors, LLC, which owns 3,000,000 shares of our voting stock. Therefore, Mr. Boswell beneficially owns 938,000 shares of our voting stock.

(8) 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.  All of these options vested on August 17, 2008.

(9) 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.  All of these options vested on August 17, 2008.

(10) 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.  All of these options vested on August 17, 2008.

(11) 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, 12,714,650 shares of common stock issuable upon the conversion of their Series D Convertible Preferred Stock and 740,627 shares of common stock received as dividends.However, based upon the terms of the Preferred Stock, Vision may not convert such 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.  However, Vision can elect to waive the cap upon 61 days notice to us, except that during the 61 day period prior to the expiration date of their warrants, they can waive the cap at any time, but a waiver during such period will not be effective until the expiration date of the warrant.

Changes in Control

To the best of our knowledge, there are no arrangements that could cause a change in our control.

TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN

CONTROL PERSONS

We have not entered into any transactions during the last two fiscal years with any director, executive officer, director nominee, 5% or more shareholder, nor have we entered into transactions with any member of the immediate families of the foregoing person (include spouse, parents, children, siblings, and in-laws) nor is any such transaction proposed, except as follows:

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

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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 Qualicum Beach 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 2008, Island Scallops agreed to loan RKS a total of approximately $114,000 under five non-interest bearing notes that are secured by all of RKS’ assets and are due at various dates between November 30, 2008 and August 31, 2009.

Lock-Up Agreement

Our officers and directors, and certain of our shareholders have agreed that they will not, subject to certain limited exceptions set forth in the lock up agreement, offer, sell, contract to sell, assign, transfer, hypothecate, pledge or grant a security interest in or other dispose of any of his/her shares of our Common Stock from the period commencing on June 11, 2008 – the closing of the Series D Preferred Stock and Warrant Financing – and expiring on the date that is 18 months following such date.  In addition, for a period of 12 months following such period, no such shareholder shall sell more than one-twelfth of their total shares of Common Stock during any one month period.

Promoters and Certain Control Persons

Pursuant to the Share Exchange with Ocean Smart, Inc., the parent company of Island Scallops Ltd. an aquaculture company located in Vancouver Island, British Columbia in August 2005, we had 20,585,400 shares of common stock issued and outstanding. The Share Exchange provided the Ocean Smart shareholders with approximately 92.30% of our issued and outstanding voting shares. Following the Share Exchange with Ocean Smart and the related issuance of 19,000,000 shares of our common stock to Heritage shareholders, our CEO – Robert Saunders acquired approximately 50% of our outstanding stock; currently, Mr. Saunders maintains approximately 41% voting interest in our company.  Our officers and directors, in the aggregate control approximately 63% of our outstanding common stock.

Our only “promoters” (within the meaning of Rule 405 under the Securities Act), or persons who took the initiative in the formation of our business or in connection with the formation of our business received 10% of our debt or equity securities or 10% of the proceeds from the sale of such securities in exchange for the contribution of property or services, during the last five years were Robert Saunders and TriPoint Capital Advisors, LLC. As disclosed elsewhere in this Registration Statement, in connection with the Share Exchange, Robert Saunders (our CEO) and TriPoint Capital Advisors, LLC, received an aggregate of 13,300,000 shares of our common stock, representing approximately 64.6% of our issued and outstanding shares at the time of the Share Exchange.   Mr. Saunders owns approximately 41% of our voting stock.  We are party to a consulting agreement with TriPoint Capital Advisors, LLC, a company in which Mark Elenowitz (one of our directors) and Michael Boswell (one of our directors and our Acting Chief Accounting and Financial Officer), indirectly owns a 40% and 30%, respectively, interest in TriPoint.  Louis Taubman, our outside corporate and securities counsel also indirectly owns an interest (30%) in TriPoint. Mr. Elenowitz owns approximately 3% of our voting stock and Mr. Boswell owns approximately 2.5% of our voting stock.

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SELLING STOCKHOLDERS

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.

We do not know how long the selling stockholders will hold the shares before selling them or how many shares they will sell, and we currently have no agreements, arrangements or understandings with any of the selling stockholders regarding the sale of any of the resale shares.  The shares offered by this prospectus may be offered from time to time by the selling stockholders listed below.  Accordingly, no estimate can be given as to the amount or percentage of our common stock that will be held by the Selling Shareholders upon termination of sales pursuant to this prospectus.  In addition, the Selling Shareholder identified below may have sold, transferred or disposed of all or a portion of their shares since the date on which they provided the information regarding their holdings in transactions exempt from the registration requirements of the Securities Act. The amount of shares owned and offered hereby by the Selling Shareholders are calculated assuming a conversion ratio of one share of common stock for each share of preferred stock, which conversion price is subject to adjustment under certain circumstances.  See “Description of Securities.”  Individual beneficial ownership of the Selling Shareholders also includes shares of common stock that a person has the right to acquire within 60 days from April 27, 2009.  See “Description of Securities –Warrants.”

As of April 27, 2009, there were 51,027,632shares of our common stock outstanding, assuming that all of the shares of common stock underlying the preferred shares have been converted, respectively 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 $20,080.29.

Unless otherwise indicated, all of the Selling Shareholders received their shares pursuant to the April, May, June or July 2006 financings, January 2007 financing, November 2007 financing, or the June 2008 financing, which are described above in Recent Developments, The Financings.

Ownership of Common Stock by Selling Shareholders

Name of Selling Stockholder	Number of Shares prior to the Offering(1)			Number of Shares Offered Hereby (4)			Number of Shares To Be Owned After the Offering (3)			Percentage of Ownership After the Offering (2)(3)
Vision Opportunity Master Fund, Ltd.		23,004,550	(5)		2,496,447	(5)		20,508,103	(5)		4.9	% (3)
Michael Ross		567,757	(6)		567,757	(6)		0			*
IRA FBO, Michael P. Ross, Pershing LLC as Custodian		66,667	(7)		66,667	(7)		0			*

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IRA FBO, Richard M. Ross, Pershing LLC as Custodian	266,560		266,560	(8)	0		*
Irene S. Ross 2005 GS Trust	266,560		266,560	(9)	0		*
Lenore Rabin-Koster	133,281	(10)	133,281	(10)	0		*
Jack Halpern	532,837	(11)	532,837	(11)	0		*
Judith S. Brauner	133,210	(12)	133,210	(12)	0		*
Union Bancaire Privée	3,407,297	(13)	2,496,447	(13)	910,850	(13)	2.20	%
Bridge Financing Group (doing business as “World Wide Mortgage Corporation”)	800,000		400,000	(14)	400,000		1.57	%
Aurelius Consulting Group, Inc.	90,000		90,000	(15)	0		*
Gallatin Consulting, Inc.	100,000		100,000	(16)	0		*
Gary Shemano	12,500		12,500	(17)	0		*
Christian Galatti	12,500		12,500	(17)	0		*
Lauren Stock	4,128	(18)	4,128	(18)	0		*
Ijaz Malik	50,768	(19)	50,768	(19)	0		*
Providence Consulting, LLC	1,529,410	(20)	1,529,410	(20)	0		*
Niel Kleinman	1,033,880	(21)	1,033,880	(21)	0		*
Pai’s International Trade, Inc.	443,925	(22)	0		443,925		*
Shu Ching and Chi Pai	270,458	(23)	270,458	(23)	0
Robert Kleinman	0		88,854	(24)	0		*
Steven Farber	0		103,078	(25)	0		*
Hector Calero	0		35,552	(26)	0		*
IICC	0		3,400,000	(27)	0		*

___________________

* Represents beneficial ownership of less than one percent of our outstanding shares.

1) Unless otherwise noted, the Selling Stockholder became one of our shareholders pursuant to the financings we completed in 2006, 2007 and 2008.  Accordingly, prior to the Offering, the Selling Stockholder only owned shares of common stock underlying the preferred stock received in the Financing (the “Securities”); however, based upon the terms of the preferred stock, holders may not convert such securities, if on any date, such holder would be deemed the beneficial owner of more than 4.99% or 9.9%, depending upon their agreement, of the then outstanding shares of our common stock; however, a holder may elect to waive the cap upon 61 days notice to us, except that during the 61 day period prior to the expiration date of their warrants, they can waive the cap at any time, but a waiver during such period will not be effective until the expiration date of the warrant. Therefore, unless otherwise noted, this number represents the number of Securities the Selling Stockholder received in the Financing that he/she can own based upon the ownership cap, assuming the ownership cap is not waived.  Additionally, the shares of preferred stock are subject to certain anti-dilution provisions, which would be triggered if we were to sell securities at a price below the price at which we sold the preferred stock.  See “Prospectus Summary – Recent Developments - Financings” and “Description of Securities.”

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

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

3) 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 for purposes of determining how many shares they will own after the Offering and their percentage of ownership following the offering.

4) The number of shares offered by this prospectus will vary from time to time based upon several factors including the amount of Series A 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 Series A, Series B and Series D Preferred Stock, holders may not convert such securities if on any date, such holder would be deemed the beneficial owner of more than 9.9% of the then outstanding shares of our common stock; based upon the terms of the Series C Preferred Stock, holders may not convert such securities 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 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 A Preferred Stock.

5) The person having voting, dispositive or investment powers over Vision Opportunity Master Fund, Ltd, is Adam Benowitz, Authorized Agent.  This amount includes 2,614,958 shares of common stock resulting from a combination of converting some of their Series A Preferred Stock, exercising some of the Warrants they received pursuant to our 2006 financings and transfers from other shareholders, 5,431,332 shares of common stock issuable upon conversion of Vision’s Series A Convertible Preferred Stock, 1,495,740 shares of common stock issuable upon conversion of Vision’s Series B Convertible Preferred Stock, 747,870 shares of common stock issuable upon conversion of Vision’s Series C Convertible Preferred Stock, 12,714,650 shares of common stock issuable upon conversion of Vision’s Series D Convertible Preferred Stock and an aggregate of 740,958 shares of common stock Vision received as dividends.  However, pursuant to the terms of the Series A, B and D Preferred Stock, Vision cannot convert such securities if as a result of such conversion, Vision would beneficially own in excess of 9.9% of the then issued and outstanding shares of our Common Stock, although the cap may be waived upon 61 days notice to us; pursuant to the terms of the Series C Preferred Stock, Vision cannot convert such securities if as a result of such conversion, Vision would beneficially own in excess of 4.99% of the then issued and outstanding shares of our Common Stock, although the cap may be waived upon 61 days notice to us.

6) This amount includes 88,000 shares of common stock issued pursuant to the exercise of some of the Warrants he received in the April 2006 financing, 141,333 shares of common stock issuable upon conversion of his Series A Convertible Preferred Stock and 302,400 shares of common stock issuable upon conversion of 6,048 shares of Series D Convertible Preferred Stock and an aggregate of 22,691 shares of common stock Mr. Ross received as dividends.  This amount also includes an additional 13,333 shares of common stock issuable upon conversion of 13,333 shares of Series A Convertible Preferred Stock and 26,664 shares of common stock issuable upon exercise of 26,664 Warrants Mr. Ross received from Chi Pai.

7) This amount includes 66,667 shares of common stock issuable upon conversion of his Series A Convertible Preferred Stock.

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8) This amount includes 133,333 shares of common stock issuable upon conversion of his Series A Convertible Preferred Stock, 120,000 shares of common stock issuable upon conversion of 2,400 shares of Series D Convertible Preferred Stock and an aggregate of 13,227 shares of common stock he received as dividends.

9) This amount includes 133,333 shares of common stock issuable upon conversion of her Series A Convertible Preferred Stock, 120,000 shares of common stock issuable upon conversion of 2,400 shares of Series D Convertible Preferred Stock and an aggregate of 13,227 shares of common stock she received as dividends.

10) This amount includes 66,667 shares of common stock issuable upon conversion of her Series A Convertible Preferred Stock, 60,000 shares of common stock issuable upon conversion of 1,200 shares of Series D Convertible Preferred Stock, and an aggregate of 6,614 shares of common stock she received as dividends.

11) This amount includes 266,667 shares of common stock issuable upon conversion of his Series A Convertible Preferred Stock, 240,000 shares of common stock issuable upon conversion of 4,800 shares of Series D Convertible Preferred Stock, and an aggregate of 26,170 shares of common stock he received as dividends.

12) This amount includes 66,667 shares of common stock issuable upon conversion of her Series A Convertible Preferred Stock, 60,000 shares of common stock issuable upon conversion of 1,200 shares of Series D Convertible Preferred Stock, and an aggregate of 6,543 shares of common stock she received as dividends.

13) The persons having voting, dispositive or investment powers over Union Bancaire Privée are Olivier Constantin and Franco Rossi,Authorized Agents.  This amount includes 1,333,333 shares of common stock issuable upon conversion of Union’s Series A Convertible Preferred Stock, 304,347 shares of common stock issuable conversion of Union’s Series B Convertible Preferred Stock, 1,610,850 shares of common stock issuable upon conversion of 32,217 shares of Series D Convertible Preferred Stock, and an aggregate of 158,767 shares of common stock it received as dividends; however, pursuant to the terms of the Preferred Stock, Union cannot convert such securities if as a result of such exercise, Union would beneficially own in excess of 9.9% of the then issued and outstanding shares of our Common Stock, although the cap may be waived upon 61 days notice to us.

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

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

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

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

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18) This amount includes 1,333 shares of common stock issuable upon conversion of her Series A Convertible Preferred Stock, 2,664 shares of common stock issuable upon exercise of her Warrants received from Chi Pai, and an aggregate of 131 shares of common stock she received as dividends.

19) This amount includes 16,666 shares of common stock, 33,332 shares of common stock issuable upon exercise of his Warrants received from Chi Pai, and 770 shares of common stock he received as dividends on December 31, 2006.

20) The person having voting, dispositive or investment powers over Providence Consulting, LLC is Chi Pai, Authorized Agent.  This amount includes 64,835 shares of common stock; 130,676 shares of common stock issuable upon exercise of their Warrants received from Chi Pai; 256,134 shares of common stock issuable upon exercise of the April 2006 financing Warrants that Providence received as a result of exercising some of their placement consultant warrants received from Chi Pai; 1,085,002 shares of common stock issuable upon exercise of their placement consultant warrants received from Chi Pai; and 1,098 shares of common stock and 1,665 shares of common stock Providence received as dividends on December 31, 2006 and June 30, 2007, respectively.

21) This amount includes 74,100 shares of common stock; 66,666 shares of common stock issuable upon conversion of his Series A Convertible Preferred Stock, 133,332 shares of common stock issuable upon exercise of his Warrant received from Chi Pai; 123,216 shares of common stock issuable upon exercise of the November 2007 financing Warrants that he received as a result of exercising some of the placement consultant warrants he received from Chi Pai; 651,001 shares of common stock issuable upon exercise of the placement consultant warrants he received from Chi Pai; and an aggregate of 5,565 shares of common stock he received as dividends.

22) The person having voting, dispositive or investment powers over Pai’s International Trade, Inc. is Sam Pai, Authorized Agent.  Although not being offered hereby, this number includes 173,913 shares of common stock issuable upon conversion of Mr. Pai’s Series B Convertible Preferred Stock and 270,012 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.  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 270,012 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.  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 270,012 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.

23) This amount includes 53,334 shares of common stock issuable upon conversion of their Series A Convertible Preferred Stock, 213,322 shares of common stock issuable upon exercise of the November 2007 financing Warrants that Shu Ching and Chi Pai received from Providence Consulting, Inc. and an aggregate of 3,802 shares of common stock they received as dividends.

24) This amount includes 17,750 shares of common stock and 71,104 shares of common stock issuable upon exercise of the April 2006 financing Warrants that he received as a result of exercising some of the placement consultant warrants he received from Neil Kleinman.

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25) This amount includes 49,750 shares of common stock and 53,328 shares of common stock issuable upon exercise of the April 2006 financing Warrants that he received as a result of exercising some of the placement consultant warrants he received from Neil Kleinman.

26) This amount includes 35,552 shares of common stock issuable upon exercise of the April 2006 financing Warrants that he received as a result of exercising some of the placement consultant warrants he received from Neil Kleinman.

 27) This amount has nothing to do with the financings we completed in 2006, 2007 and 2008. 200,000 shares of common stock were issued to International Investment Consulting Co. SA in accordance with a consulting agreement we entered into with them in March 2009 and as part of our share incentive plan.  Additionally, 3,200,000 options vesting immediately and exercisable at different strike prices were issued pursuant to that same agreement. 

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;

· 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.

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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 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.

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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.

DESCRIPTION OF SECURITIES

Our authorized capital consists of 100,000,000 shares of common stock, $.001 par value per share, and 10,000,000 shares of preferred stock, $.001 par value per share.  At April 27, 2009, we had approximately 25,477,777 shares of our common stock, 7,773,998 shares of our Series A Preferred Stock, 207 shares of our Series B Preferred Stock, 747,870 shares of our Series C Preferred Stock and  304,558 shares of our Series D Preferred Stock issued and outstanding.

Common Stock

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

Preferred Stock

Our Board of Directors will be authorized, without further action by the shareholders, to issue, from time to time, up to 10,000,000 shares of preferred stock in one or more classes or series.  Similarly, our Board of Directors will be authorized to fix or alter the designations, powers, preferences, and the number of shares which constitute each such class or series of preferred stock.   Such designations, powers or preferences may include, without limitation, dividend rights (and whether dividends are cumulative), conversion rights, if any, voting rights (including the number of votes, if any, per share), redemption rights (including sinking fund provisions, if any), and liquidation preferences of any unissued shares or wholly unissued series of preferred stock. As of the date of this filing, we have designated 8,000,000 shares of our authorized preferred stock as Series A Convertible Preferred Stock, 220 shares of our authorized preferred stock as Series B Convertible Preferred Stock, 1,000,000 shares of our authorized preferred stock as Series C Convertible Preferred Stock and 380,000 shares of our authorized preferred stock as Series D 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:

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

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

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

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

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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 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 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.

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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 ($10,000.00) 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 preferred 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 3rd business day that such conversion is not timely effected in an amount equal 0.5% of the product of (A) the sum of the number of shares of common stock not issued to the holder on a timely basis and to which such holder is entitled and, in the event we failed to deliver a preferred stock certificate to the holder on a timely basis, the number of shares of common stock issuable upon conversion of the shares of Series 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 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 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) ("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.

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 Preferred 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 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 B Preferred Stock will not be entitled to any further participation as such in any distribution of our assets.

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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.

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 3rd business day that such conversion is not timely effected in an amount equal 0.5% of the product of (A) the sum of the number of shares of common stock not issued to the holder on a timely basis and to which such holder is entitled and, in the event we failed to deliver a preferred stock certificate to the holder on a timely basis, the number of shares of common stock issuable upon conversion of the shares of Series 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 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.

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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 Preferred 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.

Series D Preferred Stock

Our Board of Directors of has designated 380,000 shares of our authorized preferred stock as

Series D 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 D Preferred Stock and except as otherwise required by Nevada law, the Series D 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 D 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 D 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 D Preferred Stock vote separately as a class.  The common stock into which the Series D 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 D Preferred Stock.

Dividends.The holders of the Series D Preferred Stock are not entitled to any dividends.

Voluntary Conversion.  At any time on or after the issuance date, the holder of any such shares of Series D Preferred Stock may, at the holder's option, elect to convert all or any portion of the shares of the Series D 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 Stated Value ($40) of the shares of Series D Preferred Stock being converted divided by (ii) the conversion price, which initially is $0.80 per share, subject to certain adjustments.

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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 D Preferred Stock or to issue a new preferred stock certificate representing the number of shares of Series D Preferred Stock to which such holder is entitled, we shall pay additional damages to such holder on each business day after such 3rd business day that such conversion is not timely effected in an amount equal 0.5% of the product of (A) the sum of the number of shares of common stock not issued to the holder on a timely basis and to which such holder is entitled and, in the event we failed to deliver a preferred stock certificate to the holder on a timely basis, the number of shares of common stock issuable upon conversion of the shares of Series D 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 D 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 D Preferred Stock then outstanding shall be entitled to receive, out of our assets available for distribution to its stockholders, an amount equal to the product of (A) the stated value ($40.00 per share) of the Series D Preferred Stock and (B) 120%, 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 payable to the holders of outstanding shares of the Series D 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 D Preferred Stock, then all of said assets will be distributed among the holders of the Series D Preferred Stock and the other classes of stock ranking pari passu with the Series D 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 D Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with respect to each outstanding share of Series D 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 D 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 D Preferred Stock has been paid in cash the full Liquidation Preference Amount.  After payment of the full liquidation preference amount to which each holder is entitled, such holders of shares of Series D Preferred Stock will not be entitled to any further participation as such in any distribution of our assets.

Warrants

Pursuant to the Exchange Agreement that was part of the financing that we closed on June 11, 2008, 24,941,605 previously outstanding warrants that were received pursuant to the financings that we closed in 2006 and 2007 - were cancelled and exchanged for an aggregate of 267,050 shares of our Series D Preferred stock.  Only 3,282,338 warrants remain outstanding, all of which were issued pursuant to the April, May, June and July 2006 financing and are held by the placement consultant and certain individuals who received such warrants pursuant to private transfers and were not a party to the Exchange Agreement.  The warrants that the placement consultant holds gives them the right to purchase up to an aggregate of 2,516,466 shares of our common stock underlying the preferred stock and warrants underlying their placement consultant warrants; the preferred stock and warrants underlying the placement consultant warrants have the same terms and conditions as those issued the investors of the related financing. The basic terms of the remaining outstanding warrants, which were issued pursuant to the April, May, June and July 2006 financing and are held by certain individuals who received such warrants pursuant to private transfers are as follows:

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· 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 July 23, 2008 there were 765,872 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.

81

Dividend Policy

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

Registration Rights

In connection with the financings we closed in 2006 and 2007, we agreed to file a registration statement with the Securities and Exchange Commission to register for resale the shares of common stock issuable upon the conversion of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, as well as the shares of common stock underlying the warrants issued in those financings and the common stock underlying the placement consultant warrants we issued pursuant to the financings. Accordingly, we filed: (i) Registration Statement No. 333-135796, which was originally declared effective on October 16, 2006; (ii) Registration Statement No. 333-140571, which was originally declared effective on February 28, 2007; and (iii) Registration Statement No. 333-147786, which was originally declared effective on December 12, 2007.  The investors of our Series D Financing were not granted any registration rights.  On July 25, 2008 we filed a Post Effective Amendment to our registration statements, which converted our registration statements from Form SB-2 to Form S-1 and upon effectiveness, acted as a post-effective amendment to all of the previously listed registration statements on Form SB-2; that amendment was declared effective on August 8, 2008.

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.

Certain Effects of Authorized but Unissued Stock

Our Articles and Bylaws permit the board of directors to increase our authorized stock without a shareholder vote.  Authorized but unissued shares of Common Stock may be issued without shareholder approval.  Your percentage of ownership in us will be diluted if and when we authorize and issue these additional shares.

LEGAL MATTERS

The validity of the securities offered hereby have been passed upon for us by Leser, Hunter, Taubman and Taubman, New York, New York.

82

EXPERTS

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

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933 with respect to the common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration statement and the exhibits of the registration statement, and we strongly urge you to read the registration statement in its entirety.  For further information with respect to us and the shares being offered under this prospectus, we refer you to the registration statement, including the exhibits and schedules thereto.

You may read and copy the registration statement of which this prospectus is a part at the SEC’s Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of the registration statement by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s Public Reference Room. In addition, the SEC maintains an Internet web site, which is located at www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.  You may access the registration statement of which this prospectus is a part at the SEC’s Internet web site. We are subject to the information reporting requirements of the Securities Exchange Act of 1934, and we will file reports, proxy statements and other information with the SEC.

83

OCEAN SMART, INC.

INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheet at August 31, 2008	F-3
Consolidated Statements of Operations for the years ended August 31, 2008 and 2007	F-4
Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended August 31, 2008 and 2007	F-5
Consolidated Statements of Cash Flows For the Years Ended August 31, 2008 and 2007	F-6
Notes to Consolidated Financial Statements	F-7
Consolidated Balance Sheets at February 28, 2009 (unaudited) and August 31, 2008	F-29
Unaudited Consolidated Statements of Operations for the three and six months ended February 28, 2009 and February 29, 2008	F-30
Unaudited Consolidated Statements of Cash Flows for the six months ended February 28, 2009 and February 29, 2008	F-31
Unaudited Notes to Consolidated Financial Statements	F-32

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors of

Edgewater Foods International, Inc.

Qualicum Beach, British Columbia, Canada

We have audited the accompanying consolidated balance sheets of Edgewater Foods International, Inc. (the “Company”) as of August 31, 2008 and 2007, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the years ended August 31, 2008 and 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit 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, 2008 and 2007, and the results of its operations and its cash flows for each of the years ended August 31, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 18 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 2009 raise substantial doubt about its ability to continue as a going concern. The 2008 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/  LBB & Associates Ltd., LLP

LBB & Associates Ltd., LLP

Houston, Texas

November 21, 2008

F-2

EDGEWATER FOODS INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2008 and 2007
		2008			2007
ASSETS
Current assets:
	Cash	$	712,298		$	1,656,868
	Accounts receivable, net		195,402			73,423
	Inventory		1,290,702			1,827,513
	Other current assets		80,011			61,242
	Total current assets		2,278,413			3,619,046
Property, plant and equipment, net			3,982,336			2,963,234
Inventory, non-current			986,327			-
Loans receivable, related party			114,079			82,260
Investments in other assets			3,758			3,770
	Total assets	$	7,364,913		$	6,668,310
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Short term debt	$	109,648		$	110,800
	Line of credit		124,766			-
	Current portion of long term debt		396,885			462,306
	Accounts payable and accrued liabilities		991,061			721,292
	Total current liabilities		1,622,360			1,294,398
Long term debt, net of current portion			548,004			526,299
	Total liabilities		2,170,364			1,820,697
Commitments and contingencies
Stockholders' equity
	Series A Preferred  stock, par $0.001, 10,000,000		7,774			7,774
	authorized, 7,773,998 issued and outstanding at August 31, 2008 and 2007, respectively
	Series B Preferred  stock, par $0.001, 220		-			-
	authorized, 207 and 207 issued and outstanding at August 31, 2008 and 2007, respectively
	Series C Preferred  stock, par $0.001, 1,000,000		748			-
	authorized, 747,870 and 0 issued and outstanding at August 31, 2008 and 2007, respectively
	Series D Preferred  stock, par $0.001, 380,000		305			-
	authorized, 304,558 and 0 issued and outstanding  a August 31, 2008 and 2007, respectively
	Common stock, par $0.0001, 100,000,000 authorized,		2,448			2,371
	24,479,150 and 23,712,700 issued and outstanding at August 31, 2008 and 2007, respectively
	Additional paid in capital		27,497,781			22,471,315
	Accumulated deficit		(22,103,314	)		(17,528,303	)
	Accumulated other comprehensive income (loss) -
	foreign exchange adjustment		(211,193	)		(105,544	)
	Total stockholders' equity		5,194,549			4,847,613
	Total liabilities and stockholders' equity	$	7,364,913		$	6,668,310

See accompanying summary of accounting policies and notes to financial statements

F-3

EDGEWATER FOODS INTERNATIONAL
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2008 and 2007
	2008			2007
Revenue	$	1,584,027		$	657,065
Cost of goods sold		2,062,758			1,036,313
Gross profit (loss)		(478,731	)		(379,248	)
Expenses:
General and administrative expenses		3,185,460			1,541,192
Total operating expenses		(3,185,460	)		(1,541,192	)
Loss from operations		(3,664,191	)		(1,920,440	)
Other income (expense):
Interest expense, net		(10,993	)		(15,876	)
Change in fair value of warrants		-			5,826,631
Other income (expense)		(5,938	)		167,144
Total other income (expense), net		(16,931	)		5,977,899
Net income (loss)		(3,681,122	)		4,057,459
Dividend on preferred stock		(630,142	)		(518,900	)
Deemed dividend for beneficial
conversion feature		(163,386	)		-
Deemed dividend for exchange of
warrants for series D preferred		(100,360	)		-
Net income (loss) applicable to
common shareholders		(4,575,010	)		3,538,559
Foreign currency translation		(105,649	)		150,776
Comprehensive
income (loss)	$	(4,680,659	)	$	3,689,335
Net income (loss) per Share
Basic	$	(0.19	)	$	0.16
Diluted	$	(0.19	)	$	0.11
Weighted average shares outstanding
Basic		23,993,935			22,228,633
Diluted		23,993,935			32,273,888

See accompanying summary of accounting policies and notes to financial statements

F-4

													EDGEWATER FOODS INTERNATIONAL
													CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY(Deficit)
													FOR THE YEAR ENDED AUGUST 31, 2008 and 2007
																									Other Comprehensive
	Preferred Stock																								Income -
	Series A						Series B				Series C				Series D			Common Stock				Additional Paid in			Foreign Exchange			Accumulated
	Number			Value			Number		Value		Number		Value		Number	Value		Number		Value		Capital			Adjustment			Deficit			Total
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																													4,057,458			4,057,458
Foreign     currency translation																										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
Comprehensive loss
Net loss																													(3,681,122	)		(3,681,122	)
Foreign currency translation																										(105,649	)					(105,649	)
Total comprehensive loss																																(3,786,771	)
Stock option expense																							1,780,882									1,780,882
Stock Issued for services																			85,000		9		90,591									90,600
Common stock issued for dividends																			681,450		68		630,075						(630,143	)		-
Preferred Series C Stock issued in connection with financing												747,870		748									799,900									800,648
Deemed Dividend																							163,386						(163,386	)		-
Preferred Series D Stock issued in connection with financing															37,500		38		-				1,461,539									1,461,577
Preferred Series D Stock issued in connection with warrant exchange															267,058		267						100,093						(100,360	)		-
Balance at August 31, 2008		7,773,998		$	7,774			207	$	-		747,870	$	748	304,558	$	305		24,479,150	$	2,448	$	27,497,781		$	(211,193	)	$	(22,103,314	)	$	5,194,549

See accompanying summary of accounting policies and notes to financial statements

F-5

EDGEWATER FOODS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2008 and 2007
	2008			2007
Cash flows from operating activities:
Net income (loss)	$	(3,681,122	)	$	4,057,458
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		563,456			351,092
Bad debt expense
Changes in fair value of warrants		-			(5,826,630	)
Stock option expense		1,780,882			486,118
Common stock issued for services		90,600			62,000
Gain on retirement of debt		-			(158,728	)
Changes in current assets and liabilities:
Accounts receivable		(121,979	)		(34,573	)
Other current assets		(18,769	)		(16,661	)
Loan receivables, related party		(31,819	)		(59,245	)
Inventory		(449,516	)		(575,462	)
Accounts payable and accrued liabilities		269,769			33,198
Net cash used in operating activities		(1,598,498	)		(1,681,433	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(1,592,581	)		(1,408,247	)
Net cash used in investing activities		(1,592,581	)		(1,408,247	)
Cash flows from financing activities:
Net proceeds from line of credit		131,917			-
Proceeds from short term debt		-			4,175
Payment of short term debt		(821	)		(199,384	)
Proceeds from long term debt		29,798			237,486
Payment of long term debt		(114,224	)		(259,688	)
Proceeds from sale of common stock		-			1,083,239
Proceeds from sale of preferred stock		2,262,225			1,970,702
Net cash provided by financing activities		2,308,895			2,836,530
Foreign currency translation effect		(62,386	)		93,276
Net decrease in cash		(944,570	)		(159,874	)
Cash, beginning of period		1,656,868			1,816,742
Cash, end of period	$	712,298		$	1,656,868
Supplemental disclosure of cash flow information
Net cash paid
Interest	$	42,059		$	31,533
Income taxes	$	-		$	-
Supplemental disclosure of non-cash flow information
Issuance of stock for dividends	$	630,142		$	518,900
Warrant liability incurred in connection with financing	$	-		$	4,116,739
Reclassification of warrant liability	$	-		$	(20,449,559	)

See accompanying summary of accounting policies and notes to financial statements

F-6

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 19 years has 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).

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 a financial institution, which exceeded federally insured limits by $262,298 at August 31, 2008.  We have not experienced any losses, in such accounts and believe it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts receivable

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

Inventory

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

F-7

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.

Management has classified the costs of crops expected to be sold beyond a 12-month cycle from the date of the financial statements as noncurrent.

At August 31, 2008 and 2007, inventory consisted of the Biomass (Scallops).

Reclassifications

Certain amounts in the 2007 financial statements have been reclassified to conform to the 2008 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, plant and equipment are carried at cost, less accumulated depreciation.  Depreciation is included with general and administrative expenses and in some cases cost of goods sold 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
Facility and operating plant	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. 

F-8

Change in Depreciation Method

Effective September 1, 2006, as a result of management’s evaluation of long-lived depreciable assets, we adopted the straight-line method of depreciation for all property, plant and equipment.  Under the new provisions of SFAS No. 154 “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3,” which becomes effective as of September 1, 2006, a change in depreciation method is treated as a change in estimate.  The effect of the change in depreciation method will be reflected on a prospective basis beginning September 1, 2006, and prior period results will not be restated.  As the results of management’s evaluation indicated the current estimated useful lives of our assets were appropriate, the depreciable lives of property, plant and equipment will not be changed.  We believe that the change from the declining balance depreciation method to the straight-line method will better reflect the pattern of consumption of the future benefits to be derived from those assets being 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, 2008 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 over the period of the license.

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.

F-9

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 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 collectability 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, accounts payable and accrued liabilities, short term debt, shareholder debt, and long term debt, approximate fair value based on either i) the short-term nature of the instrument or ii) the reasonableness of the interest rate as compared to market rates for the long-term instruments. 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.

F-10

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 we held as of August 31, 2008, 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.

F-11

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, 2008, five customers, Sea World Fisheries, Turning Point, Organic Ocean Seafood, Inc., TriStar Seafood Supply Ltd. And Port Hardy Seafood Ltd., individually accounted for 12%, 12%, 10%, 9% and 5% or our revenues respectively, and we therefore are materially dependent upon such customers. 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.

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. 

F-12

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations:

	Year ending August 31, 2008			Year ending August 31, 2007
Numerator:
Net income (loss) applicable to common    shareholders	$	(4,575,010	)	$	3,538,559
Denominator:		--			--
Denominator for basic net income per share:		23,993,935			22,228,633
Weighted average dilutive potential common shares
Series A Preferred Stock		-			7,752,699
Series B Preferred Stock		-			1,114,574
Series C Preferred Stock		-			-
Series D Preferred Stock		-			-
Options and warrants		-			1,177,982
Denominator for diluted net income per share		23,993,935			32,273,888
Basic net income (loss) per share	$	(0.19	)	$	0.16
Diluted net income (loss) per share	$	(0.19	)	$	0.11

The treasury stock effect of options and warrants to purchase shares of common stock outstanding at August 31, 2008 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, 2008 presented are identical.

Recent accounting pronouncements

In December 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin 110 (“SAB 110”). SAB 110 states that the staff will continue to accept, under certain circumstances, the use of the simplified method for estimating the expected term of “plain vanilla” share options in accordance with SFAS 123(R) beyond December 31, 2007. The Company believes there will be no material impact on the Company’s financial statements upon adoption of this standard.

F-13

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements, and an amendment of ARB Statement No. 51.” SFAS No. 160 amends Accounting Research Bulletin (ARB) No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary.  SFAS No. 160 clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as a minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements.  Among other requirements, SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest.  It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and the non-controlling interest. SFAS No. 160 will be effective for the Company on August 31, 2009, and is not expected to have a significant impact on the Company’s financial condition or results of operations.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations (Revised)”, to replace SFAS No. 141, “Business Combinations. SFAS No. 141(R) requires the use of the acquisition method of accounting, defines the acquirer, establishes the acquisition date and broadens the scope to all transactions and other events in which one entity obtains control over one or more other businesses. This statement is effective for business combinations or transactions entered into for fiscal years beginning on or after December 15, 2008. The Company is evaluating the impact of SFAS No. 141 (R).

Management has evaluated other recent accounting pronouncements and does 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, 2008, consisted of the following:

	Cost		Accumulated Amortization			Net Book Value
Land	$	236,731	$	-		$	236,731
Buildings		1,161,108		(294,883	)		866,225
Seawater piping and tanks		641,535		(339,478	)		302,057
Boats and barge		620,431		(187,385	)		433,046
Field equipment		3,496,702		(1,444,566	)		2,052,136
Office equipment		24,348		(14,960	)		9,388
Vehicles		100,523		(49,520	)		51,003
Computer equipment		55,924		(24,174	)		31,750
	$	6,337,302	$	(2,354,966	)	$	3,982,336

Depreciation expense for the years ended August 31, 2008 was approximately $563,000.

F-14

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

	Cost		Accumulated Amortization			Net Book 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 year ended August 31, 2007 was approximately $351,000.

Note 4.  Related Party Transactions

At August 31, 2008, we have five 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  non-interest bearing notes in the combined amount of $81,982 which are secured by all assets of RKS, were originally due on or before various dates between June 15, 2007 and August 31, 2008, but were recently extended to August 31, 2009.  The second non-interest bearing note in the amount of $5,328, which is also secured by all assets of RKS, is due on or before November 30, 2008.  The fourth non-interest bearing note in the amount of $19,486, which is also secured by all assets of RKS, is due on or before February 28, 2009.  The fourth non-interest bearing note in the amount of $2,257, which is also secured by all assets of RKS, is due on or before May 31, 2009.  The fifth non-interest bearing note in the amount of $5,026, which is also secured by all assets of RKS, is due on or before August 31, 2009. These amounts are included in assets as loans receivable.

F-15

Note 5.  Investments in Tenures

Edgewater carries its Investment in Tenures at $3,758 and $3,770 at August 31, 2008 and 2007, respectively.  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 Edgewater and our subsidiaries have expiration dates ranging from 2021 to 2024.

These tenures are considered to have an indefinite useful life because renewal on expiration is anticipated, and 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 $33,292 and $25,578 at August 31, 2008 and 2007, respectively.  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, 2008, is an amount of $131,859 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, 2008 and 2007, is $95,065 and $87,869 of principal due and interest accrued in respect to the loan from the National Research Council of Canada Industrial Research Assistance Program (see Note 9 – Long Term Debt for additional information).

Note 7.  Short Term Debt

Included in short-term debt at August 31, 2008, are estimated royalties of $62,522 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 $328,793 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 $62,522 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, 2008, is an unsecured non-interest bearing demand loan payable to an individual with a face value of $47,126 and no specific terms of repayment.  However, the lender had previously informally requested that the loan be repaid in full by October 6, 2008.

F-16

Note 8.  Line of Credit

Included in line of credit at August 31, 2008 are two bank lines of credit.  The first line is a $78,000 bank line of credit for Island Scallops.  The interest rate on the line of credit is 7.5% as of August 31, 2008.  At August 31, 2008, the balance due is $77,795. The second line is a $50,000 bank line of credit for Island Scallops.  The interest rate on the line of credit is 6.5% as of August 31, 2008.  At August 31, 2008, the balance due is $46,971.  This second line of credit is subject to a personal guarantee by our Chairman and CEO, Robert Saunders.

Note 9. Long Term Debt

These consolidated financial statements include a Western Diversification Program non-interest bearing loan to Island Scallops that requires repayment equal to 12% of gross revenues from our scallop sales, payable semi-annually, with no specified due date.  The repayment terms have been formally amended several times.  Most recently, in June 2008, the Western Diversification Program agreed to allow Island Scallops to suspend repayment of the roughly $402,000 loan until October 2008.  Starting in October 2008, Island Scallops began repaying the loan at a rate of $9,394 per month for five months.   Once Island Scallops has completed these five months of loan payments are completed, the Western Diversification Program has  agreed to base quarterly repayments on 3% of the gross scallop sales (as opposed to the originally agreed upon 4%) or $23,485 whichever is greater.    The company is currently seeking to renegotiate this new agreement to further extend the repayment terms.  At August 31, 2008, the balance due is $381,286, of which $117,426 is reflected in the current portion of long term debt and the remaining balance of $284,970 is reflected as long term debt.

These consolidated financial statements include Island Scallops’ unsecured 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.  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, 2008, bear interest at a rate of 1% per month.  At August 31, 2008, Island Scallops is in arrears in respect to the payment of these amounts.  The National Council of Canada Industrial Research Assistance Program has requested payment of the $95,065 that they claim is owed under this loan agreement.  As such, at August 31, 2008, $95,065 is included in accounts payable and accrued liabilities and the remaining full principal balance of $279,459 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 $2,677 per month (currently interest only calculated at 10.5% per annum).  The loan is secured by a second charge on the real property of Island Scallops. At August 31, 2008, the principal due is $263,034.

F-17

As a result, at August 31, 2008, we had $944,889 of long-term debt less a current portion of $396,885 for a balance of $548,004.  Principal payments due within each of the next five fiscal years and subsequently, in respect to long term debt are approximately as follows:

2009	$	396,885
2010		187,882
2011		93,941
2012		3,147
2013		-
2014 and beyond	$	263,034
	$	944,889

Note 10.  Series C Preferred Stock Financing

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 this 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 influence over until the registration statement has been effective for nine months.    In connection with the financing, a deemed dividend was recorded for $163,386 based on the relative fair values of the preferred shares and warrants.

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.

F-18

Note 11.  Series D Preferred Stock Financing

On May 29, 2008, we signed a Series D Convertible Preferred Stock Purchase Agreement with one accredited investor whereby such investor was committed, subject to the satisfaction of certain closing conditions, to purchase $1,500,000 of our Series D Preferred Shares.  As part of this financing, we also entered into an Exchange Agreement with the investor and certain other holders of our outstanding warrants, whereby the Series J Warrant that the investor received pursuant to the financing we closed on November 5, 2007, as disclosed in the Form 8-K filed on November 7, 2007, was cancelled, and the investor and certain other holders of our outstanding warrants returned to us warrants to purchase an aggregate of 24,941,605 shares of our common stock, which the investor and such other warrant holders received pursuant to the financings we closed on: (i) April 12, 2006, as disclosed in our Form 8-K filed on April 14, 2007; (ii) May 30, 2006, as disclosed in our Form 8-K filed on May 30, 2006; and (iii) November 5, 2007, as disclosed in our Form 8-K filed on November 7, 2007, in exchange for an aggregate of 267,059 Series D Preferred Shares. The net proceeds from the financing are to be used for supplies, processing plant upgrades, working capital and general corporate purposes.  All of the closing conditions were satisfied and accordingly we completed the private equity financing and received net proceeds of approximately $1.46 million on June 11, 2008. In connection with the financing, a deemed dividend was recorded for $100,360 based on the relative fair values of the preferred shares and exchanged warrants.

Pursuant to the financing, we filed a Certificate of Designation of the Relative Rights and Preferences of our Series D Convertible Preferred Stock on May 29, 2008.  The Certificate of Designation designates 380,000 shares of our authorized preferred stock as Series D Convertible Preferred Stock, which ranks junior to our Series A, Series B and Series C Convertible Preferred Stock, but senior to our common stock.  Except with respect to specified transactions that may affect the rights, preferences, privileges or voting power of the Series D Preferred Shares and except as otherwise required by Nevada law, the Series D Preferred Shares have no voting rights.  At any time on or after the issuance date, the holder of any Series D Preferred Shares may, at the holder's option, elect to convert all or any portion of the Series D Preferred Shares held by such person into a number of fully paid and nonassessable shares of common stock equal to the quotient of (i) the stated value ($40.00 per share) of the Series D Preferred Shares being converted divided by (ii) the conversion price, which initially is $0.80 per share, subject to certain adjustments.  In the event of our liquidation, dissolution or winding up, the holders shall receive a liquidation preference equal to 120% of the stated value per Series D Preferred Share.

Note 12.  Preferred Stock Dividends

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.

F-19

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 approximately $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 value of the transaction was recorded as a preferred stock dividend.

On December 31, 2007, we issued 172,750 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 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 approximately $233,500 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

On December 31, 2007, we issued 45,999 shares of common stock to the investors of our January 16, 2007 financing as payment of the semi-annual dividend per the terms of the Certificate of Designation of the Relative Rights and Preferences of 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 $63,000 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

On December 31, 2007, we issued 17,883 shares of common stock to the investors of our November 5, 2007 financing as payment of the semi-annual dividend per the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series C 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 (approximately $897,000) 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 $24,000 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

F-20

On June 30, 2008, we issued 325,575 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 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 approximately $233,500 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

On June 30, 2008, we issued 86,691 shares of common stock to the investors of our January 16, 2007 financing as payment of the semi-annual dividend per the terms of the Certificate of Designation of the Relative Rights and Preferences of 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 $62,500 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

On June 30, 2008, we issued 33,704 shares of common stock to the investors of our November 5, 2007 financing as payment of the semi-annual dividend per the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series C Convertible Preferred Stock.  (See Note10 – Series C Preferred Shares Financing for additional information on the Series C 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 (approximately $897,000) 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 $24,000 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

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 2002 of approximately $64,140 and recognized related revenue of $43,705 in respect to seed delivered in 2002. The balance of the deposits received (advance payments), net of sales, totaling $131,859, 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 $35,228.

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.

F-21

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, 2008 and 2007 are as follows:

	August 31,			August 31,
	2008			2007
Deferred tax asset attributable to:
Net operating loss carryover	$	4,386,000		$	3,541,000
Less, valuation allowance		(4,386,000	)		(3,541,000	)
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 $4,386,000 and $3,541,000 at August 31, 2008 and 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 2008 and 2007 was approximately $845,000 and $1,117,000 respectively.

At August 31, 2008, and 2007 we had net operating loss carryforwards amounting to approximately $2,336,000 and $6,960,000 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 2008 and 2007 are as follows:

	2008			2007
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	%

F-22

Note 15.  Stock-Compensation and Option Expense

Stock Compensation

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 issue 15,000 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 October 31, 2007, 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 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.  The 25,000 shares issued were valued at $1.28 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 was $32,000. Going forward the cost of these shares will be expense at current market price as they are issued.

On November 30, 2007 we issued 5,000 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 30,000 shares will be issued in equal monthly installments of 5,000 shares during the remaining 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.  The 5,000 shares issued were valued at $1.25 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 was $6,250. Going forward the cost of these shares will be expense at current market price as they are issued.

On January 1, 2008 we issued 5,000 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 25,000 shares will be issued in equal monthly installments of 5,000 shares during the remaining 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.  The 5,000 shares issued were valued at $1.35 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 was $6,750. Going forward the cost of these shares will be expense at current market price as they are issued.

F-23

On February 1, 2008 we issued 5,000 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 20,000 shares will be issued in equal monthly installments of 5,000 shares during the remaining 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.  The 5,000 shares issued were valued at $0.98 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 was $4,900. Going forward the cost of these shares will be expense at current market price as they are issued.

On March 4, 2008 we issued 5,000 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 15,000 shares will be issued in equal monthly installments of 5,000 shares during the remaining 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.  The 5,000 shares issued were valued at $0.95 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 was $4,750. Going forward the cost of these shares will be expense at current market price as they are issued.

On April 1, 2008, we issued 5,000 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 10,000 shares will be issued in equal monthly installments of 5,000 shares during the remaining 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.  The 5,000 shares issued were valued at $0.95 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 was $4,750. Going forward the cost of these shares will be expense at current market price as they are issued.

On April 1, 2008, we issued 25,000 shares of common stock to Consulting for Strategic Growth, Inc. as part of the 25,000 shares of our common stock that our Board of Directors previously approved for the consulting and investor relations services that they will provide to us.  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.  The 25,000 shares issued were valued at $0.95 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 was $23,750. Going forward the cost of these shares will be expense at current market price as they are issued.

On May 19, 2008, we issued 5,000 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 5,000 shares will be issued in equal monthly installments of 5,000 shares during the remaining 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.  The 5,000 shares issued were valued at $0.80 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 was $4,000. Going forward the cost of these shares will be expense at current market price as they are issued.

On June 20, 2008, we issued the final 5,000 share installment 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 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.  The 5,000 shares issued were valued at $0.80 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 was $4,000. Going forward the cost of these shares will be expense at current market price as they are issued.

F-24

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, 2008, our Board of Directors had authorized the issuance of 2,962,000 options to employees.

During the years ended August 31, 2008 and 2007, $1,780,882 and $486,118 in stock option expenses were recognized respectively.  An additional, $6,789 will be recognized in the three month period ending November 30, 2009.

Stock option activity during the period ending August 31, 2008 and 2007, was as follows:

	Number of Shares			Weighted Average Exercise Price
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
Granted		30,000			1.21
Exercised		--			--
Forfeited		(400,000	)		1.50
Expired		--			--
Outstanding, August 31, 2008		2,592,000		$	1.23
Exercisable, August 31, 2008		2,592,000		$	1.23

At August 31, 2008, 62,000 of the exercisable options expire in August 2010, 190,000 of exercisable options expire in April of 2012, 2,120,000 of the exercisable options expire in August 2012 with the remaining balance of 220,000 having an expiration date of August 2015.

F-25

Warrant activity during the period ending August 31, 2008 and 2007, was as follows:

	Number of Warrants			Weighted Average Exercise Price
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
Granted		3,028,873			2.00
Exercised		--			--
Forfeited		--			--
Returned and exchanged		(29,428,826	)		1.75
Expired		(304,347	)		1.30
Outstanding, August 31, 2008		1,381,952		$	1.33
Exercisable, August 31, 2008		1,381,952		$	1.33

At August 31, 2008, if all options and warrants were exercised and all shares of preferred stock were converted, the company would have 65,526,278 shares of common stock outstanding.

Note 16. Commitments and Contingencies

Corporate Offices

For the fiscal year ended August 31, 2008, 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, we 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 Directors.  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 Series A Preferred Stock Financing, Mr. Saunders was due the signing bonus of $150,000 and a monthly salary 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, 2008 we had paid Mr. Saunders $100,000 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  $190,000 as of August 31, 2008 until such time that we become significantly cash flow positive for its operations.  As of August 31, 2008, the term of the initial employment agreement had expired and we are currently discussing finalizing a new employment agreement.  Until a new agreement is completed, we will continue to operate under the terms of this agreement.

F-26

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).  This agreement expired in June 2008 and we are currently operating without a new marketing consulting agreement.

Note 17.  Subsequent Events

On September 8, 2008, our board of directors authorized the issuance of an aggregate of 100,000 options to purchase our common stock to one of our directors pursuant to the “Edgewater Foods International 2005 Equity Incentive Plan.”  The options vest in two equal installments over the next two years (on September 8, 2009 and 2010).  Each option is exercisable for a period of five years from the issuance date and has an exercise price of $0.45 respectively.  Pursuant to this option, we  will incur approximately an additional $43,000 through August 31, 2010. We used the Black Scholes option-pricing model with the following assumptions: an expected life equal to the contractual term of the options (five), underlying stock price of $0.45 per share, no dividends; a risk free rate of 2.96%, which equals the one, three and six-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 175%. However, at the date of this Report, we have not yet issued this option.

In November 2008, our wholly owned subsidiary – Island Scallops, Ltd., entered into a Share Exchange Agreement with Granscal Sea Farms Ltd., a Kanish Bay Company and Granscal’s sole shareholder.  Pursuant to the Agreement, Granscal’s sole shareholder shall assign and transfer all of his Granscal shares to Island Scallop in exchange for: (i) 400,000 restricted shares of our common stock; (ii) a sum equal to 50% of the gross revenue Island Scallops earns on account of the sale of Granscal’s 2004, 2005 and 2006 brood year inventory currently in the water – to be paid out as and when Island Scallops receives it; and (iii) an aggregate cash fee of $30,000.  Pursuant to the Agreement; Island Scallops also agreed to pay the $35,000 that Granscal owes to the Bank of Montreal.

The $30,000 cash fee shall be paid in $5,000 monthly installments beginning on September 30, 2008 and continuing until the cash fee is fully paid.  The cash fee is secured by a Promissory Note between Island Scallop and Granscal’s sole shareholder, who is also Granscal’s Chief Executive Officer.  The Promissory Note does not contain any interest, but is immediately due and payable if Island Scallop remains in default of the Promissory Note after a10 day cure period.  Pursuant to the Promissory Note, Granscal shall have a security interest in one of Island Scallops commercial vessels until the Promissory Note is fully repaid.

Note 18.  Going Concern

Prior to the completion of our initial 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, 2008, we had a cash balance of approximately $712,000.  After the completion of the recent Series D preferred financing (see Note 11 – Series D Preferred Stock Financing for additional information), management believed that we had adequate funds to maintain our business operations into our 2009 fiscal year and/or until we become cash flow positive, but we continued to suffer operational losses in our 2008 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.  In fact,   based on our current estimates of future sales and capital costs of expanding our farms in order to increase future crop yields, we will require additional financings to continue expand our operations.  Based on these factors, there is substantial doubt about our ability to continue as a going concern.

F-27

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 19.  Foreign Operations

Our share of net assets held outside the United States totaled approximately $6,653,000 and $5,007,000 at August 31, 2008 and 2007, respectively.

F-28

Interim Financial Statements

OCEAN SMART, INC.
(FORMERLY EDGEWATER FOODS INTERNATIONAL, INC.)
CONSOLIDATED BALANCE SHEETS
	February 28,			August 31,
	2009			2008
	(unaudited)
ASSETS
Current assets:
Cash	$	93,993		$	712,298
Accounts receivable, net		193,342			195,402
Inventory		840,199			1,290,702
Other current assets		57,427			80,011
Total current assets		1,184,961			2,278,413
Property, plant and equipment, net		3,211,435			3,982,336
Long-term inventory		791,022			986,327
Loans receivable, related party		155,165			114,079
Other assets		8,647			3,758
Total assets	$	5,351,230		$	7,364,913
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term debt	$	153,776		$	109,648
Line of credit		80,837			124,766
Current portion of long term debt		329,713			396,885
Accounts payable and accrued liabilities		897,412			991,061
Total current liabilities		1,461,738			1,622,360
Long term debt, net current portion		439,167			548,004
Total liabilities		1,900,905			2,170,364
Stockholders' equity
Series A Preferred  stock, par $0.001, 10,000,000
authorized, 7,773,998 issued and outstanding
at February 28, 2009 and August 31, 2008, respectively		7,774			7,774
Series B Preferred  stock, par $0.001, 100 authorized,
207 issued and outstanding   at		-			-
February 28, 2009 and August 31, 2008, respectively
Series C Preferred  stock, par $0.001, 1,000,000
authorized, 747,870 issued and outstanding
at February 28, 2009 and August 31, 2008, respectively		748			748
Series D Preferred  stock, par $0.001, 380,000
authorized, 304,558 issued and outstanding
at February 28, 2009  and August 31, 2008, respectively		305			305
Common stock, par $0.0001, 100,000,000 authorized,
25,327,777  and 24,479,150 issued and outstanding at
February 28, 2009 and August 31, 2008, respectively		2,533			2,448
Additional paid in capital		27,862,817			27,497,781
Accumulated deficit		(23,501,360	)		(22,103,314	)
Accumulated other comprehensive income (loss) -
foreign exchange adjustment		(922,492	)		(211,193	)
Total stockholders' equity		3,450,325			5,194,549
Total liabilities and stockholders' equity	$	5,351,230		$	7,364,913

See accompanying notes to consolidated financial statements

F-29

OCEAN SMART, INC.
(FORMERLY EDGEWATER FOODS INTERNATIONAL, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED FEBRUARY 28, 2009 and FEBRUARY 29, 2008
(unaudited)
	THREE MONTHS ENDED						SIX MONTHS ENDED
	FEBRUARY 28,			FEBRUARY 29,			FEBRUARY 28,			FEBRUARY 29,
	2009			2008			2009			2008
Revenue	$	432,977		$	365,763		$	1,010,082		$	794,965
Cost of goods sold		728,919			493,421			1,369,238			1,028,271
Gross profit (loss)		(295,942	)		(127,658	)		(359,156	)		(233,306	)
Expenses:
General and administrative expenses		337,966			760,772			525,533			1,484,699
Salaries and benefits		83,009			93,258			167,934			188,492
Total operating expenses		(420,975	)		(854,030	)		(693,467	)		(1,673,191	)
Loss from operations		(716,917	)		(981,688	)		(1,052,623	)		(1,906,497	)
Other income (expense):
Interest income (expense), net		(11,788	)		2,693			(23,028	)		6,699
Other income (expense)		-			(35,798	)		-			28,310
Total other income (expense), net		(11,788	)		(33,105	)		(23,028	)		35,009
Net loss		(728,705	)		(1,014,793	)		(1,075,651	)		(1,871,488	)
Dividend on preferred stock		(322,395	)		(310,476	)		(322,395	)		(310,476	)
Deemed dividend for beneficial
conversion feature		-			-			-			(163,386	)
Net loss applicable to
common shareholders		(1,051,100	)		(1,325,269	)		(1,398,046	)		(2,345,350	)
Foreign currency translation		(13,220	)		50,279			(711,299	)		298,335
Comprehensive loss	$	(1,064,320	)	$	(1,274,990	)	$	(2,109,345	)	$	(2,047,015	)
Net loss applicable to common shareholder per share
Basic and diluted	$	(0.04	)	$	(0.06	)	$	(0.06	)	$	(0.10	)
Weighted average shares outstanding
Basic and diluted		25,173,250			23,903,501			24,890,581			23,811,678

See accompanying notes to consolidated financial statements

F-30

OCEAN SMART, INC.
(FORMERLY EDGEWATER FOODS INTERNATIONAL, INC.)
CONSOLIDATED STATEMENTS OF CASHFLOWS
SIX MONTHS ENDED FEBRUARY 28, 2009 and FEBRUARY 29, 2008
(unaudited)
	2009			2008
Cash flows from operating activities:
Net loss	$	(1,075,651	)	$	(1,871,488	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		240,858			286,956
Stock option expense		10,726			1,032,845
Common stock issued for services		-			49,900
Inventory impairment		75,000			-
Changes in current assets and liabilities:
Accounts receivable		2,060			(24,187	)
Prepaid expenses		22,584			-
Other current assets		-			(16,587	)
Loan receivable		(62,153	)		(33,887	)
Inventory		282,564			(321,797	)
Accounts payable		(98,049	)		172,304
Net cash used in operating activities		(602,061	)		(725,941	)
Cash flows from investing activities:
Other assets		(5,473	)		-
Purchase of property, plant and equipment		(89,268	)		(813,761	)
Net cash used in investing activities		(94,741	)		(813,761	)
Cash flows from financing activities:
Net proceeds (payments) from line of credit		(25,978	)		32,877
Proceeds from short term debt		40,813			-
Payment of short term debt		(30,713	)		(829	)
Proceeds from long term debt		-			30,082
Payment of long term debt		-			(96,713	)
Preferred stock issued for cash		-			800,648
Net cash provided (used in) by financing activities		(15,878	)		766,065
Foreign currency translation effect		94,375			141,031
Net decrease in cash		(618,305	)		(632,606	)
Cash, beginning of period		712,298			1,656,868
Cash, end of period	$	93,993		$	1,024,262
Supplemental disclosure of cash flow information
Non cash transactions
Issuance of stock for dividends	$	322,395		$	310,476
Acqusition of Granscal assets for debt and common stock	$	85,759		$	-
Net cash paid
Interest	$	-		$	-
Income taxes	$	-		$	-

See accompanying notes to consolidated financial statements

F-31

OCEAN SMART, INC.

(FORMERLY EDGEWATER FOODS INTERNATIONAL, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Ocean Smart, Inc. (formerly 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 20 years has 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).

On January 12, 2009, we held our annual shareholder meeting where our shareholders voted by proxy to approved changing our corporate name to Ocean Smart, Inc.  The name change became effective on March 3, 2009 however we were not notified by the state of Nevada until March 30, 2009.  Accordingly, we reported the name change on a Current Report on Form 8-K with the Securities and Exchange Commission and filed it on March 30, 2009.

Note 2.  Significant Accounting Policies

Basis of Presentation

Our unaudited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America for reporting interim financial information and the rules and regulations of the Securities and Exchange Commission. In management’s opinion, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. All such adjustments are of a normal recurring nature. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended August 31, 2008. Results of operations for the three and six months ended February 28, 2009, are not necessarily indicative of the operating results for the full accounting year or any future period.

Inventory

Ocean Smart maintains inventories of raw materials for its aquaculture products, of biomass (inventory of live aquaculture product being actively cultivated), and of finished goods (aquaculture product ready for sale). Inventories are reported at the lesser of cost or estimated net realizable value.  Biomass and finished goods includes direct and reasonably attributable indirect production costs related to hatchery, cultivation, harvesting, and processing activities.  Carrying costs per unit are determined on a weighted average basis.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company evaluates the carrying value of its inventory for impairment whenever events or changes in circumstances indicate that such carrying values may not be recoverable.  The Company uses its best judgment based on the current facts and circumstances relating to its business when determining whether any significant impairment factors exist.  The Company’s management performs an undiscounted cash flow analysis to determine if impairment exists. If impairment exists, the Company measures the impairment based on the difference between the inventory’s carrying amount and its fair value, and the impairment is charged to operations in the period in which the inventory impairment is determined by management. Based on its analysis, the Company believes that impairment of $75,000 of the carrying value of its current inventory assets existed at February 28, 2009. There can be no assurance, however, that market conditions will not change or demand for the Company’s products will continue or allow the Company to realize the value of its long-lived assets and prevent future impairment.

Management has classified the costs of crops expected to be sold beyond a 12-month cycle from the date of the financial statements as noncurrent.

At February 28, 2009 and February 29, 2008, inventory consisted of the Biomass (Scallops).

Reclassifications

Certain amounts in the 2008 financial statements have been reclassified to conform to the 2009 financial statement presentation.

Note 3.  Acquisition of Granscal

Granscal Tenure

On October 31, 2008, our wholly owned subsidiary – Island Scallops, Ltd., finalized a Share Exchange Agreement with Granscal Sea Farms Ltd., a Kanish Bay Company and Granscal’s sole shareholder.  Pursuant to the Agreement, Granscal’s sole shareholder assigned and transferred all of his Granscal shares to Island Scallop in exchange for: (i) 400,000 restricted shares of our common stock; (ii) a sum equal to 50% of the gross revenue Island Scallops earns on account of the sale of Granscal’s 2004, 2005 and 2006 brood year inventory currently in the water – to be paid when Island Scallops consummates the sale of inventory; and (iii) an aggregate cash fee of CDN$30,000.  Pursuant to the Agreement; Island Scallops also agreed to pay the CDN$35,000 that Granscal owes to the Bank of Montreal.  The 400,000 shares issued were valued at $0.08 per share, the closing bid of our common stock on the date the merger closed.  Therefore, total aggregate value of the shares recognized by the company was $32,000.

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The CDN$30,000 cash fee shall be paid in CDN$5,000 monthly installments beginning on September 30, 2008 and continuing until the cash fee is fully paid.  The cash fee is secured by a Promissory Note between Island Scallop and Granscal’s sole shareholder, who is also Granscal’s Chief Executive Officer.  The Promissory Note does not contain any interest, but is immediately due and payable if Island Scallop remains in default of the Promissory Note after a 10 day cure period.

Note 4.  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 $49,217 and $33,292 at February 28, 2009 and August 31, 2008, respectively.  We used these credit cards as a means of short term financing and incur interest charges on such unpaid balances.

Included in accounts payable and accrued liabilities at February 28, 2009, is an amount of $104,650 in respect to an agreement to purchase geoduck seed from us (for additional information see Note 7 – Contingent Liabilities).

Included in accounts payable and accrued liabilities at February 28, 2009 and August 31, 2008 is $104,955 and $95,065 of principal due and interest accrued in respect to the loan from the National Research Council of Canada Industrial Research Assistance Program (see Note 6 – Long Term Debt for additional information).

Note 5.  Line of Credit

Included in line of credit at February 28, 2009, are two bank lines of credit.  The first line is a $67,000 bank line of credit for Island Scallops.  The interest rate on the line of credit is 7.5% as of February 28, 2009.  At February 28, 2009, the balance due is $65,027. The second line is a $40,000 bank line of credit for Island Scallops.  The interest rate on the line of credit is 6.5% as of February 28, 2009 and  February 28, 2009, the balance due is $15,810.  This second line of credit is subject to a personal guarantee by our Chairman and CEO, Robert Saunders.

Note 6. 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.  The repayment terms have been formally amended several times.  Most recently, in June 2008, the Western Diversification Program agreed to allow Island Scallops to suspend repayment of the roughly $340,000 loan until October 2008.  Starting in October 2008, Island Scallops was to begin repaying the loan at a rate of $7,937 per month for five months.   Once these five months of loan payments were completed, the Western Diversification Program had  agreed to base quarterly repayments on 3% of the gross scallop sales (as opposed to the originally agreed upon 4%) or $19,841 whichever is greater.    As of February 28, 2009, we reached an agreement with the Western Diversification Program to revise the repayment terms of the remaining balance of $339,167 (representing $122,222 overdue and a balance of $216,945).  Beginning February 28, 2009, we began repaying the overdue amount at rate of $794 per month through December 31, 2010.  Commencing January 31, 2011, we will begin paying $3,968 per month towards the overdue balance.  Starting January 31, 2011, our monthly repayment amount will be the greater of 4% of Island Scallops’ gross monthly revenues or $7,937 per month.  Under the terms of the modified agreement, the overdue amount will also bear interest at an annual rate of 3%.  Starting January 31, 2012, we will begin repaying the balance of $216,945 at the greater of 4% of Island Scallops gross monthly revenues or $7,937 per month.  At February 28, 2009, the balance due is $339,167, of which $122,222 is reflected in the current portion of long term debt and the remaining balance of $216,945 is reflected as long term debt.

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These consolidated financial statements include Island Scallops’ unsecured 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.  If at December 1, 2012, Island Scallops has not earned sufficient revenues to repay the original loan amount, the remaining portion of the loan is to be forgiven.  Amounts currently due at August 31, 2008, bear interest at a rate of 1% per month.  At February 28, 2009, Island Scallops is in arrears in respect to the payment of these amounts.  The National Council of Canada Industrial Research Assistance Program has requested payment of the $104,955 that they claim is owed under this loan agreement.  As such, at February 28, 2009, $104,955 is included in accounts payable and accrued liabilities and the remaining full principal balance of $207,491 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 $2,262 per month (currently interest only calculated at 10.5% per annum).  The loan is secured by a first charge on the real property of Island Scallops. At February 28, 2009, the principal due is $222,222.

Note 7.  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 2002 of approximately $64,140 and recognized related revenue of $43,705 in respect to seed delivered in 2002. The balance of the deposits received (advance payments), net of sales, totaling $104,650, 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 $29,762.

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

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

Note 8.  Stock Option and Warrants

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, 2008, our Board of Directors had authorized the issuance of 3,062,000 options to employees.

On September 8, 2008, our board of directors authorized the issuance of an aggregate of 100,000 options to purchase our common stock to one of our directors pursuant to the “Edgewater Foods International 2005 Equity Incentive Plan.”  The options vest in two equal installments over the next two years (on September 8, 2009 and 2010).  Each option is exercisable for a period of five years from the issuance date and has an exercise price of $0.45 respectively.  Pursuant to these options, we will incur approximately an additional $43,000 through August 31, 2010. We used the Black Scholes option-pricing model with the following assumptions: an expected life equal to the contractual term of the options (five), underlying stock price of $0.45 per share, no dividends; a risk free rate of 2.96%, which equals the one, three and six-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 175%. During the first six months ended February 28, 2009, the company recognized approximately $10,700 of option expense.

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Stock option activity during the period ending February 28, 2009, was as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding, August 31, 2008		2,592,000		1.23
Granted		100,000		0.45
Exercised		--		--
Forfeited		--		--
Expired		--		--
Outstanding, February 28, 2009		2,692,000	$	1.20
Exercisable, February 28, 2009		2,592,000	$	1.23

At February 28, 2009, 62,000 of the exercisable options expire in August 2010, 190,000 of exercisable options expire in April of 2012, 2,120,000 of the exercisable options expire in August 2012 with the remaining balance of 220,000 having an expiration date of August 2015.

Warrant activity during the period ending February 28, 2009, was as follows:

	Number of Warrants		Weighted Average Exercise Price
Outstanding, August 31, 2008		1,381,952	$	1.33
Granted		--		--
Exercised		--		--
Forfeited		--		--
Expired		--		--
Outstanding, February 28, 2009		1,381,952	$	1.33
Exercisable, February 28, 2009		1,381,952	$	1.33

At February 28, 2009, if all options and warrants were exercised and all shares of preferred stock were converted, we would have 58,851,970 shares of common stock outstanding.

Note 9.  Common Stock

On December 31, 2008, we issued 324,691 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 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 approximately $233,500 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

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On December 31, 2008, we issued 86,454 shares of common stock to the investors of our January 16, 2007 financing as payment of the semi-annual dividend per the terms of the Certificate of Designation of the Relative Rights and Preferences of 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 $62,500 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

On December 31, 2008, we issued 37,482 shares of common stock to the investors of our November 5, 2007 financing as payment of the semi-annual dividend per the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series C 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 (approximately $897,000) 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 $24,000 and the total aggregate value of the transaction was recorded as a preferred stock dividend.

In January, 2009, we issued 400,000 restricted shares of our common stock to Leslie Rombough  as  part of the purchase of Granscal Sea Farms Ltd., a Kanish Bay Company, by our wholly owned subsidiary – Island Scallops, Ltd.  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.  The 400,000 shares issued were valued at $0.08 per share, the closing bid of our common stock on the date the merger was closed.  Therefore, total aggregate value of the transaction recognized by the company was $32,000.

Note 10.  Subsequent Events

In March 2009, we engaged International Investment Consulting Company S.A (“IICC”) to provide international investor relations services. The initial term of the agreement is for two years.  Pursuant to the consulting agreement, after 120 days if certain terms and conditions are met, we will begin paying IICC $10,000 per month for the term of the agreement.  As additional compensation, we agreed to issue IICC 200,000 shares of restricted stock that vest 50,000 per quarter. 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 also agreed to immediately issue IICC options to purchase 3,200,000 shares of our common stock at various exercise prices between $0.15 and $1.20.  The pricing and vesting schedule of these options is as follows:

Amount		Strike Price	Vesting Schedule
50,000	$	0.15	Vests immediately
50,000	$	0.20	Vests immediately
50,000	$	0.25	Vests immediately
50,000	$	0.30	Vests immediately
75,000	$	0.35	Vests immediately
75,000	$	0.40	Vests immediately
75,000	$	0.45	Vests immediately
75,000	$	0.50	Vests immediately
200,000	$	0.55	Vests immediately
200,000	$	0.60	Vests immediately
500,000	$	0.80	Vests immediately
800,000	$	1.00	Vests immediately
1,000,000	$	1.20	Vests immediately

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The shares underlying the options have registration rights that require us to register the shares in our next 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.  We will incur stock option expense of approximately $220,000 in the quarter ending May 31, 2009. We used the Black Scholes option-pricing model with the following assumptions: an expected life equal to the contractual term of the options (three years), underlying stock price of $0.10 per share, no dividends; a risk free rate of 1.28%, which equals the three-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 175%.  In the event of termination of unexercised vested options expire 45 days from termination.

On March 23, 2009 we issued 100,000 shares of common stock to Gallatin Consulting, Inc. that our Board of Directors previously approved for the investor relations and marketing services that they will provide to us.  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.  The 100,000 shares issued were valued at $0.08 per share, the closing bid of our common stock on the date of issue.  Therefore, total aggregate value of the transaction that we will recognize is $8,000. Going forward the cost of these shares will be expensed at current market price as they are issued.

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You should rely only on the information contained in this prospectus.  We have not authorized anyone to provide you with information different from that contained in this prospectus or any prospectus supplement.  This prospectus is not an offer of these securities in any jurisdiction where an offer and sale is not permitted.  The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock.             19,215,679 Shares Common Stock                                 OCEAN SMART, INC.   Prospectus   ________________ ____, 2008                            

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, to be paid by the Registrant in connection with the issuance and distribution of the common stock being registered. All amounts other than the SEC registration fee are estimates.

SEC Registration Fee	$	5,580.29
Printing and Engraving Expenses
Legal Fees and Expenses	$	7,500.00
Accounting Fees and Expenses	$	2,000.00
Miscellaneous	$	5,000.00
Total	$	20,080.29

Item 14. 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 Ocean Smart 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 Ocean Smart  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 or our s Ocean Smart hareholders, 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 Ocean Smart  or our shareholders, or that show a reckless disregard for duty to or our  Ocean Smart 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 r or our  Ocean Smart hareholders, or (iii) based on transactions between Ocean Smart 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 Ocean Smart ’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.

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Item 15. 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.

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 Ocean Smart.  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.

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               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 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 involving any public offering.

On April 12, 2007, we issued 88,000 shares of common stock to an investor of our April 12th financing in connection with the exercise of 88,000 Series J warrants received by such investor as part of the financing.  We received net proceeds of approximately $45,600 pursuant to the exercise of these warrants.  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 12th financing in connection with such investor’s exercise of 1,266,667 Series J warrants he received as part of the April 12th financing.  We received net proceeds of approximately $655,500 pursuant to the exercise of these warrants.  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 our 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.

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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.

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.

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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 January 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.

On December 31, 2007, we issued an aggregate of 236,632 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, Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Preferred Stock and the Certificate of Designation of the Relative Rights and Preferences of the Series C 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 March 4, April 1, and May 19, 2008, we issued 5,000 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 5,000 shares were issued in June.  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 April 1, 2008, we issued 25,000 restricted shares to Consulting for Strategic Growth 1, Ltd. for the investor relation/ media relations services they will provide to us.  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 11, 2008, we issued 304,558 shares of our Series D Preferred Stock to 12 accredited investors.  Each share of the Series D Preferred Stock is convertible into convertible into a number of fully paid and nonassessable shares of our common stock equal to the quotient of the stated value of the Series D Preferred Stock ($40) divided by the conversion price, which initially is $0.80 per share, subject to certain adjustments.  The investors that received these securities returned warrants to purchase an aggregate of 24,941,605 shares of common stock that it received pursuant to our 2006 and 2007 financings.  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 30, 2008, we issued 322,228 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.

On June 30 2008, we issued 85,515 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 an 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.

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On June 30, 2008, we issued 37,075 shares of common stock to the investors of our November 5, 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 C 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, 2008, we issued 324,691 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 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, 2008, we issued 86,454 shares of common stock to the investors of our January 16, 2007 financing as payment of the semi-annual dividend per the terms of the 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 December 31, 2008, we issued 37,482 shares of common stock to the investors of our November 5, 2007 financing as payment of the semi-annual dividend per the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series C 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.

In January, 2009, we issued 400,000 restricted shares of our common stock to Leslie Rombough’s part of the purchase of Granscal Sea Farms Ltd., a Kanish Bay Company, by our wholly owned subsidiary – Island Scallops, Ltd.  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.

In March 2009, we issued 200,000 restricted shares of our common stock to International Investment Consulting Company S.A. (“IICC”) in accordance with a consulting agreement we entered into with them at that time. The full 200,000 shares shall be deemed earned by IICC upon issuance, however they will vest 50,000 per quarter.  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

In March 2009 we issued 100,000 shares of common stock to Gallatin Consulting, Inc. that our Board of Directors previously approved for the investor relations and marketing services that they will provide to us.  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 16. Exhibits and Financial Statement Schedules

EXHIBITS

The following exhibits are filed as part of this registration statement:

EXHIBIT NUMBER	DESCRIPTION
3.1	Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on April 14, 2009).
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).

II-7

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).
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).
4.17	Form of Series D Convertible Preferred Stock Purchase Agreement, dated May 29, 2008, 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 May 30, 2008).
4.18	Form of Certificate of Designation of Rights and Preferences of Series D Convertible Preferred Stock (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 30, 2008).
4.19	Form of Management 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 May 30, 2008)

II-8

4.20	Form of Investor Lock-Up Agreement by and between the Company and each of the Purchasers (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on May 30, 2008)
4.21	Form of Exchange Agreement by and between the Company and each of the parties listed therein (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 30, 2008)
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)
10.3+	Consulting Agreement with International Investment Consulting Company S.A.
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
23.2+	Opinion and Consent of Leser, Hunter, Taubman & Taubman

+  Filed herewith.

Item 17. Undertakings

The undersigned registrant hereby undertakes:

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

(i)           to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.

(ii)           to reflect in the prospectus any facts or events arising after the effective date of the 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 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 Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

(iii)           to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement.

(2)           That, for the purpose of determining any liability under the Securities Act of 1933, each such 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 that 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)           The undersigned Registrant hereby 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.

(5)           Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions described in Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-9

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in City of Vancouver , State of British Columbia, on April 27, 2009 the City of Gaithersburg, State of Maryland on April 27, 2009

OCEAN SMART, INC. 

By:  /s/  Robert Saunders 

Name:   Robert Saunders 

Title:  CEO, President and Director 

By:  /s/  Michael Boswell 

Name:    Michael Boswell

Title:  Acting Chief Financial Officer, Acting

Principal Accounting and Principal

Financial Officer, Director 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

/s/  Robert Saunders Robert Saunders President and Chief Executive Officer and Director	Dated:  April 27, 2009
/s/  Michael Boswell Michael Boswell Director & Acting Chief Financial Officer & Acting Principal Accounting and Principal Financial Officer	Dated:  April 27, 2009
Douglas C. MacLellan Vice-chairman of the Board	Dated:
/s/  Mark H. Elenowitz Mark H. Elenowitz Director	Dated:  April 27, 2009
/s/  Javier Idrovo Javier Idrovo Director	Dated:  April 27, 2009
Victor Bolton Director	Dated:
/s/  Darryl Horton Darryl Horton Director	Dated:  April 27, 2009

II-10

EX-10.3

Consulting Agreement

This is an agreement dated and effective this ______th day of March 2009 by and between International Investment Consulting Company S.A. (hereinafter referred to as The Company), whose address is 30, rue Dernier Sol, L-2543 Luxembourg and Edgewater Foods International, Inc. (OTCBB: EDWT), whose address is 400 Professional Drive, Suite 310, Gaithersburg, MD 20879 (hereinafter referred to as The Client).

Recitals

I. The Client desires to obtain consulting services from The Company as more particularly described herein (“Scope of Services and Manner of Performance”).

II. The Company is in the business of providing such consulting services and has agreed to provide the services on the terms and conditions set forth in this agreement.

Now, therefore, in consideration of the faithful performance of the obligations set forth herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, The Company and The Client hereby agree as follows.

Terms

1. Scope of Services.  The Company will perform consulting for and on behalf of The Client in relation to interactions with the press, institutions, broker-dealers, shareholders and members of the public, subject to the covenants set forth in Section 8 herein, and will consult with The Client on matters pertaining to public relations, corporate exposure/investor awareness, business modeling and development and can perform services in Canada and Europe including:

A. Telephone marketing/advertising campaigns

B. web based dissemination of Corporate Profile, business idea and corporate news to target groups

C. Newspaper and media interviews

D. Road-show presentations

E. Investor conference calls

Subject to the covenants set forth in Section 8 herein, it is intended that The Company will distribute company material to institutions, portfolio managers, broker-dealers, financial advisors and other persons whom The Company determines in its sole discretion, are capable of disseminating such information to the general public.  The Company will also advise The Client concerning marketing and promotional matters relating to its business.  Subject to the covenants set forth in Section 8 herein, The Company will act upon The Client’s behalf in the investment community, with existing shareholders, and the public.  It is expressly agreed and acknowledged that The Company will not be expected to provide investment advice or recommendations regarding EDWT to anyone.  The Company will focus on contacting persons, generally through conventional communications in order to familiarize them with information concerning EDWT.  Additionally, The Company shall be available for advice and counsel to the officers and directors of EDWT at such reasonable and convenient times and places as may be mutually agreed upon.  Except as aforesaid, the time, place and manner of performance of the services hereunder, including the amount of time allocated by The Company, shall be determined at the sole discretion of The Company.

2. Compensation.  As compensation for The Company’s services, EDWT shall issue options to purchase common stock of EDWT exercisable at the following strike prices and vesting schedule.

Amount                                      Strike Price                                                      Vesting Schedule

50,000	$    0.15	Vests immediately
50,000	$    0.20	Vests immediately
50,000	$    0.25	Vests immediately
50,000	$    0.30	Vests immediately
75,000	$    0.35	Vests immediately
75,000	$    0.40	Vests immediately
75,000	$    0.45	Vests immediately
75,000	$    0.50	Vests immediately
200,000	$    0.55	Vests immediately
200,000	$    0.60	Vests immediately
500,000	$    0.80	Vests immediately
800,000	$   1.00	Vests immediately
1,000,000	$   1.20	Vests immediately

EDWT agrees to grant piggy back registration rights on the underlying share of common stock for the warrants.  The options shall be exerciseable for a period of three years from the date of vesting.

In the event of termination of unexercised vested options expire 45 days from termination.

Upon execution of this agreement, EDWT shall immediately issue the Company 200,000 restricted shares of common stock.  The full 200,000 shares shall be deemed earned by the Company upon issuance, however will vest 50,000 per quarter.  EDWT agrees to grant piggy back registration rights on the shares of common stock.  The filing of the registration statement shall have no bearing on the Vesting Period requirements hereunder for the shares.

Beginning 120 days from the date of this agreement and the exercise of  at least 175,000 of the $.55 options, EDWT will pay $10,000 per month on the first day of the month to The Company until the end of the term of the agreement or until the agreement is otherwise terminated pursuant to Section 12.

If the Client receives financing, whether debt, equity or otherwise, from a funding source introduced to it by the Company in consultation with the Company, the Company agrees to pay a Finder’s Fee to the Company  as follows:  five (5%) percent of the first $2,000,000, four (4%) of the next $2,000,000three (3%) percent of the next $2,000,000, two (2%) percent of the next two million and one (1%) percent of the balance of such financing over $8,000,000, assuming such financing occurs within twenty four (24) months of the introduction.  Payment of the Finder’s Fee is due and payable at the time of closing of any such funding transaction.

3. Expenses. EDWT shall pay all reasonable costs and expenses incurred by The Company, its officers, employees and agents, in carrying out its duties and obligations pursuant to the provision of this Agreement, excluding The Company’s general and administrative expenses and costs, but including and not limited to the following costs and expenses; provided all costs and expense items in excess of $100.00 (One Hundred U.S. Dollars) must be approved by the Company in writing prior to the Company’s incurrence of the same

4. Status of Consultant.  The Company shall act as an independent Consultant and not as an agent or employee of The Client and The Company shall make no representation as an agent or employee of The Client.  The Company shall furnish insurance and be responsible for all taxes as an independent Consultant.  The Company shall have no authority to bind The Client or incur other obligations on behalf of The Client.  Likewise, The Client shall have no authority to bind or incur obligations on behalf of The Company.

5. Sub Contractors.  The Company shall hire sub contractors to assist in the completion of the performance of this agreement. The Company shall be responsible for all payments to any sub contractors.  The Company will provide a written list of sub contractors in advance of any hiring for Client approval.  An initial list of sub contractors is indicated in Schedule A

6. Disclosure of Material Events.  The Client agrees to promptly disclose to The Company those events/discoveries which are known and/or anticipated that may or conceivably may have an impact on the stock, business operations, future business, or public perception of EDWT, as this has material impact on the ability and effectiveness of The Company and service rendered.  It shall be understood that excluded from this disclosure shall be information deemed to be non-public or “inside” information.

7. Confidentiality Agreement.  In the event The Client discloses information to The Company that The Client considers to be secret, proprietary or non-public and so notifies The Company, The Company agrees to hold said information in confidence.  Proprietary information shall be used by The Company only in connection with services rendered under this Agreement.  Proprietary information shall not be deemed to include information that a) is in or becomes in the public domain without violation of this Agreement by The Client, or b) is rightfully received from a third entity having no obligation to The Client and without violation of the Agreement.  In reciprocal, The Client agrees to hold confidential all trade secrets of and methods employed by The Company in fulfillment of services rendered.

8. Indemnification.  The Client agrees to indemnify and hold harmless The Company against any losses, claims, damages, liabilities and/or expenses (including any legal or other expenses reasonably incurred in investigating or defending any action or claim in respect thereof) to which The Company may become subject, because of the actions of The Client or its agents.  Likewise, The Company agrees to indemnify and hold harmless The Client against any losses, claims, damages, liabilities and/or expenses (including any legal or other expenses reasonably incurred in investigating or defending any action or claim in respect thereof) to which The Client may become subject, because of the actions of The Company or its agents (including the subcontractors listed on Schedule A, as amended from time to time).  The Company is willing and capable of providing services of a “Best Efforts” basis.  Payment by The Client to The Company is irrevocable and irreversible.

9. The Company’s Responsibilities, Representations and Warranties.  The Company agrees that it will only communicate regarding The Client to licensed brokerage professionals and will not engage in any solicitation of the public with regard to The Client or its securities.  Notwithstanding the foregoing, The Company may provide approved information regarding The Client (i) in response to unsolicited inquiries by The Client’s shareholders; (ii) to valid trade and industry publications, newspapers and periodicals; and (iii) otherwise engage in communications which are normal and customary for an investor relations firm and which do not involve solicitation of investors in connection with its role as an investor relations firm for The Client.  The Company further agrees that it will only disclose information specifically provided to it by The Client regarding The Client for dissemination and will keep confidential any information marked as such by The Client.  The Company agrees that it will not make any undisclosed payments to brokers or others and will generally act within the letter and the spirit of U.S. securities laws, rules and regulations at all times.

Neither The Company nor any of its principals is subject to any sanction or restriction imposed by the SEC, FINRA, any state securities commission or department, or any other regulatory or governmental body or agency, which would prohibit, limit or curtail The Company’s execution of this Agreement or the performance of its obligations hereunder.  Likewise, neither The Company nor any of its principals is aware of any action or contemplated action by any regulatory or governmental body or agency that may in the future limit or curtail The Company’s execution of this Agreement or the performance of its obligations hereunder.

The Company shall provide a detailed written report regarding its activities to The Client on a quarterly basis.  Such written report shall contain a written affirmation from The Company that it is in compliance with the terms of this Agreement on the date of such report.

10. Conflict of Interest. The Company shall be free to perform services for other persons.  The Company will notify The Client of its performance of consulting services for any other Client that could conflict with its obligations under this agreement.

11. Severability.  This agreement may be dissolved at any time at the express consent of both parties subject to Section 12.  In the event any part of this agreement shall be held to be invalid by any competent court or arbitration panel, this agreement shall be interpreted as if only that part is invalid and that the parties to this agreement will continue to execute the rest of this agreement to the best of their abilities unless both parties mutually consent to the dissolution of this agreement.

This agreement shall be interpreted in accordance with the laws of the State of New York.  This agreement and attached schedules constitutes the entire contract of the parties with respect to the matters addressed herein and no modifications of this agreement shall be enforceable unless in writing signed by both The Company and The Client.  This agreement is not assignable by either party without the consent of the other.

In witness whereof The Company and The Client have caused this agreement to be executed on the date.

12.  Term.  The term of this agreement is twenty four months. Either party hereto may terminate this engagement as follows:

Either party hereto may terminate this agreement at the conclusion of initial three months from the execution date of the agreement by providing the other party a 30-day written notification.

Edgewater Foods International, Inc..

Authorized person  x­­­­­­­­­­­­­­­­­­­­­­­­­­­­­__________________________  Title­­­­­­__________________ Date________

I hereby certify that I agree to the terms of the contract above and am authorized to enter into a binding contract.

Gale Capital

Authorized person  x­­­­­­­­­­­­­­­­­­­­­­­­­­­­­__________________________  Title­­­­­­__________________ Date________

I hereby certify that I agree to the terms of the contract above and am authorized to enter into a binding contract.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use of our report dated November 21, 2008, in this Form S-1 Registration Statement of Ocean Smart, Inc., (f.k.a. Edgewater Foods International, Inc.) for the registration of shares of its common stock. We also consent to the reference to our firm under the heading “Experts” in such Registration Statement.

/s/  LBB & Associates Ltd., LLP

LBB & Associates Ltd., LLP

Houston, Texas

April 24, 2009

EX-23.2

Exhibit 23.2

Leser hunter taubman & taubman

17 State Street, 20th Floor

New York, New York 10004

(212) 732-7184Fax:  (212) 202-6380

E-mail: lou@lhttlaw.com

April 27, 2009

Ocean Smart, Inc.

5552 West Island Highway

Qualicum Beach, British Columbia

Canada V9K2C8

Ladies and Gentlemen:

  We have acted as cousel to Ocean Smart, 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 S-1 (the "Registration Statement"), relating to the proposed sale by the selling shareholders listed therein (the "Selling shareholders") of 19,215,679 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