Aquaculture for all

Ocean Smart Remain Positive in Tough Market


GENERAL - Despite the increased revenues for the first nine months of our 2009 fiscal year (as compared to 2008), Ocean Smart Inc. were not able to achieve positive operational cash flows during this period.

According to Ocean Smart, since they were unable to meet certain performance targets, Series D Preferred Stockholders invoked their right to demand the Board of Directors be reduced from seven members to five members and their right to appoint a majority of such directors.

"As a result of our new sales agreements, improved processing plant and increasing shellfish seed sales, Management expects our sales and margins to improve and hopes to achieve positive cash flows in the near future," says the report.

"Management initially expected to achieve positive cash flows in the second half of 2009, but now hopes to achieve them at some point in our 2010 fiscal year. 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."

During the first nine months of our 2009 fiscal year, Ocean Smart continued the harvesting, processing and sale of their 2005 and 2006 year classes of scallops 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.

They also began the spawning of their 2009 scallop class and the initial grow-out in onshore nursery ponds. "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," say Ocean Smart.

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