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

FORM 10-QSB
(Mark one)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the quarterly period ended September 30, 2008
[ ]

TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
Commission File Number: 021-64091

NEPTUNE INDUSTRIES, INC.
(Exact name of small business issuer in its charter)
Florida
65-0838060
(State or other jurisdiction of
(IRS Employer Identification Number)
Incorporation or Organization)
21218 St. Andrews Boulevard
Suite 645
Boca Raton, FL 33433
(Address of principal executive offices)
(561)-482-6408)
(Issuer's telephone number)
Securities registered under Section 12(b) of the Act:
Securities registered under Section 12(g) of the Act:

NONE
COMMON STOCK

Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and(2) has been subject to such filing requirements for the past 90 days.
[x]Yes

[ ]

No

APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's common equity, as of
September 30, 2008 was 26,152,946 shares
Transitional Small Business Disclosure Format (check one):

Yes___; No_X_

 FORM 10-QSB
NEPTUNE INDUSTRIES, INC.
PERIOD ENDED SEPTEMBER 30, 2008
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS.....................................................F-1
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION................. 1
Item 3.
CONTROLS AND PROCEDURES................................................... 2
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS................................................. 3
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS....... 3
Item 3. DEFAULTS UPON SENIOR SECURITIES................................... 3
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............. 3
Item 5. OTHER INFORMATION ................................................ 3
Item 6. EXHIBITS ......................................................... 4
Signatures ............................................................... 4

-i

 Part I.
Item 1.

FINANCIAL INFORMATION
FINANCIAL STATEMENTS
NEPTUNE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30,
2008
(Unaudited)
----------

ASSETS
Current Assets
Cash and equivalents
$
Accounts receivable, less allowance for
doubtful accounts of $ 0
Inventory
Prepaid expenses
Deposits
Deferred costs
Security deposits
Total Current Assets
Property and equipment, net
Other assets
Total Assets

116,421
119,367
414,470
17,436
18,914
128,063
------------814,671
665,098
27,709
-----------$ 1,507,478
============

June 30
2008
(Audited)
----------

$

287,041

$

125,876
515,283
21,917
19,754
128,063
17,444
------------1,816,3550
693.907
27,709
------------2,163,616
=============

LIABILITIES AND DEFICIENCY IN ASSETS
Liabilities
Current Liabilities
Accounts payable
Accrued and other current liabilities
Convertible notes payable
Convertible debentures
Notes payable-officers
Total Current Liabilities
Long-term liabilities
Deferred compensation-stock options
Total Long-Term Liabilities
Total Liabilities

$

254,333
917,924
461,088
2,291,000
89,888
-----------4,014,233
194,293
-----------194,293
4,208,526

COMMITMENTS AND CONTINGENCIES

$

203,139
588,888
461,088
2,291,000
89,888
-----------3,631,003
194,293
-----------194,293
-----------3,825,296

-

Stockholders' Equity (Deficiency in assets)

F-1

 Preferred stock, $.001 par value,
5,000,0000 shares authorized, 582,500 issued
Common Stock, $.001 par value 100,000,000 shares
583
authorized, 26,152,946 and 25,351,631 shares
issued and outstanding at September 30, 2008
and June 30, 2008, respectively
26,153
Additional paid-In capital
7,156,069
Accumulated deficit
(9,772,216)
----------Total Deficiency in assets
(2,701,048)
Total Liabilities and Deficiency in assets

See accompanying notes.

F-2

$

583

25,352
7,005,339
(9,040,020)
-----------(2,046,844)
-----------1,507,478 $
2,163,616
============ ============

 NEPTUNE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
September 30,
2008
2007
---------------------Revenues:
Sales
Cost of sales

$

Gross loss
Expenses:
Advertising and marketing
Automobile and truck expense
Depreciation
Insurance
Office
Officers salary, related taxes and benefits
Other operating expenses
Outside services
Professional fees
Public relations
Salaries and wages
Utilities

Loss before income tax
Provision for income taxes
Net loss
Net loss per share(basic and diluted)
Weighted average number of
common shares outstanding
(basic and diluted)

F-3

111,193
111,189
---------4
----------

2,258
--------216,931
---------

(344,701)
(172,328)
--------(533,159)
--------$ (533,159)
=========

(216,931)
14,414
(201,299)
--------(403,813)
--------$ (403,813)
=========

$

$

(0.020)
=========
26,152,946
==========

See accompanying notes.

$

8,065
122
9,774
1,290
129,296
22,967
50,488
5,504
1,940
12,115
1,206
--------242,767
---------

Total expenses from operations
Loss before interest, other income,
expenses and income taxes
Other income
Interest expense

236,501
354,565
---------(118,064)
----------

1,090
5,047
101
7,169
792
93,339
18,860
22,455
8,669
57,151

(0.020)
=========

20,595,329
==========

 NEPTUNE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended
September 30,
2008
2007
----------- ----------CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ (533,159) $ (403,813)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization
22,620
30,244
Issue of common stock for services
50,000
(Increase) decrease in assets:
Accounts receivable
22,060
22,060
Deferred costs
(9,561)
Inventory
97,814
(214,791)
Deposits
5,753)
Prepaid expenses
4,482
(3,057)
Increase (decrease) in liabilities:
Accounts payable
51,465
39,560)
Accrued and other current liabilities
128,536
223,991
----------- ---------Net cash used by operating activities
(244,354)
(259,614)
----------- ---------CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment
Net cash provided (used) by investing
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of common stock for interest
Net cash provided by financing activities
Net decrease in cash and equivalents
Cash and equivalents-beginning

(77,797)
-----------

----------

(77,797)
-----------

----------

151,531
---------151,531
----------

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

(170,620)
(259,614)
287,041
1,480,590
---------- ---------116,421
$1,220,976
============
==========

Cash and equivalents-ending
SUPPLEMENTAL DISCLOSURES
Cash paid during quarter for:
Interest
Income taxes

$
$

See accompanying notes.

F-4

4,602
==========

$
4,492
$
==========

 NEPTUNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 2008
(Unaudited)
NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Organization and nature of operations
Neptune Industries, Inc. (the Company) is a Florida corporation which conducts
business from its headquarters in Boca Raton, Florida. The Company was
incorporated on May 8, 1998 and in February 2004, changed its name from Neptune
Aquaculture, Inc. to Neptune Industries, Inc. Since that time, the Company‟s
main activities have been devoted to raising capital; implementing its business
plan; commencing operations through subsidiaries; and developing and testing new
technologies, either through license arrangements or directly.
In June 2001, the Company acquired the operating rights to a 48 acre
established fish farm in Florida City, Florida, now operated as Blue Heron
Aqua Farms through a subsidiary, Blue Heron Aquaculture, Inc. The farm maintains
a 47,000,000 gallon per day water usage permit and a twenty year lease from
South Florida Water Management District, with 7 years remaining. The lease is
held by South Florida Aquaculture, Inc., and Blue Heron Aquaculture, Inc.
operates the farm under a management contract with South Florida Aquaculture,
Inc.
Common shares of the Company, are listed on the OTC Bulletin Board and on the
OTC Pink Sheets under the trading symbol NPDI.
Basis of Presentation
The consolidated financial statements include the accounts of Neptune
Industries, Inc. and its wholly-owned subsidiaries, Aqua Biologics, Inc.,
and BH Holdings, Inc., which in turn has two operating subsidiaries whose
accounts are also consolidated, Blue Heron Aquaculture, Inc. and Florida
Aquaponics, Inc. The results of operations of Blue Heron Aqua Farm, LLC, in
which the Company holds a 99+ percent interest, are consolidated through the
period ended December 31, 2007, when it ceased all further operations and
transferred its assets and liabilities to Blue Heron Aquaculture, Inc.
All inter-company balances and transactions have been eliminated at
consolidation.
The accompanying consolidated financial statements are un-audited and have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the instructions
to Form 10-QSB. Accordingly, certain information and footnote disclosures
normally included in audited financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have
been omitted pursuant to such rules and regulations. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Interim
results are not necessarily indicative of the results that may be expected for
a full year. These interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements that were
included in the Form 10-KSB filed by the Company for the year ended June 30,
2008 with the Securities and Exchange Commission.

F-5

 NEPTUNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 2008
(Unaudited)
NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)

Cash and Cash Equivalents
The company considers all highly liquid investments with a maturity date of
three months or less at the time of purchase to be cash equivalents.
Property and Equipment
Property and equipment consists of equipment, leasehold improvements, office
furniture and vehicles which are stated at cost. Depreciation is based on the
estimated useful lives of the assets, ranging from five years to fifteen
years, using the straight-line method. Expenditures for maintenance and
repairs are charged to expense as incurred. Major improvements are
capitalized. Gains and losses on disposition of property and equipment are
included in income as realized.
Revenue Recognition
Sales revenue is recognized upon the shipment of merchandise to customers
or when customers pick up merchandise at the operating premises.
Allowances for sales returns are recorded as a component of net sales in the
period the allowances are recognized.
Income Taxes
Income taxes are computed under the provisions of the Financial Accounting
Standards Board (FASB) Statement No. 109 (SFAS 109), Accounting for Income
Taxes. SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of the difference in events that have been recognized in the
financial statements of the Company compared to the tax returns.
As of September 30, 2008, the Company has approximately $9 million of net
operating loss carry-forwards available to affect taxable income and has
established a valuation allowance equal to the tax benefit of the net
operating loss carry-forwards as realization of the asset is not assured.
The net operating loss carry-forwards may be limited under the change of
Control provisions of the Internal Revenue Code, Section 382.
Advertising and marketing costs
Advertising and marketing costs are expensed as incurred.
Fair Value of Financial Instruments
Financial instruments, including cash, receivables, accounts payable, and
notes payable are carried at amounts which reasonably approximate their fair
value due to the short-term nature of these amounts or due to variable rates
of interest which are consistent with market rates.

F-6

 NEPTUNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 2008
(Unaudited)
NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)

Concentrations of Credit Risk and Economic Dependence
Financial instruments, which potentially subject the Company to a concentration
of credit risk, are cash and cash equivalents and accounts receivable. The
Company currently maintains its day-to-day operating cash balances at a single
financial institution. At times, cash balances may be in excess of the FDIC
insurance limits. The Company has not experienced any losses on such accounts
and does not believe it is exposed to any significant risk on cash and
equivalents. The Company operates both domestically and internationally.
Consequently, the ability of the Company to collect the amounts due from
customers may be affected by economic fluctuations in each geographic location
of the customers of the Company.
Net Loss Per Share
Basic net loss per share is computed by dividing net loss attributable to
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted net loss per share takes into account
shares of common stock outstanding (computed under basic loss per share) and
potentially dilutive shares of common stock. In periods where losses are
reported, the weighted average number of common shares outstanding excludes
common stock equivalents, because their inclusion would be anti-dilutive.
Long-Lived and Disposal of Assets
The Company follows FASB Statement No. 144 (SFAS 144), Accounting for the
Impairment of Long-Lived Assets. SFAS 144 requires that long-lived assets
to be held and used be reviewed for impairment whenever events or changes in
circumstances indicate that the related carrying amount may not be
recoverable. When required, impairment losses on assets to be held and used
are recognized based on the fair value of the asset. Long-lived assets to be
disposed of, if any, are reported at the lower of carrying amount or fair
value less cost to sell.
Stock Compensation for Services Rendered
The Company has issued restricted shares of common stock to non-employees in
exchange for services rendered. Common stock issued to non-employees for
services received are based upon the fair value of the services or equity
instruments issued, whichever is more reliably determined.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or
market. The inventory consists of raw materials, such as salt, oxygen and
feed, and work in process, represented by the pounds of fish growing in
the separate tanks and raceways on the farm property.
Inventory as reported on the June 30, 2008 audited financial statements
was $420,926, exclusive of raw materials, and there were 135,931 pounds of

F-7

 NEPTUNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 2007
(Unaudited)
NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)

growing fish on hand.
Inventory at September 30, 2008 consisted of the following:
Work in process
Raw materials
Total

$
$

388,871
25,599
414,470

Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts in
the financial statements. Actual results could differ from those estimates and
assumptions. For the Company, the accounting estimates requiring the most
difficult and sensitive judgments of management including inventory valuation,
recognition and measurement of income tax assets and liabilities, and
accounting for stock=based compensation.
Recent Accounting Pronouncement
In May, 2008, the Financial Accounting Standards Board (FASB) issued SFAS No.
163, Accounting for Financial Guarantee Insurance Contracts „An interpretation
of FASB Statement No. 60. SFAS No. 163 by its terms applies to insurance
companies and financial guarantee insurance contracts. SFAS No. 163 does
not apply to the Company and will not have any effect on the Company‟s
financial statements.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of non-governmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. It is effective 60 days following the SEC‟s approval of the
Public Company Accounting Oversight Board‟s amendments to AU Section 411,
The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. The adoption of this statement is not expected to have
a material effect on the Company‟s financial statements.
Reclassifications.
Certain prior period amounts have been reclassified to conform to the
current period presentation.

F-8

 NEPTUNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 2007
(Unaudited)
NOTE 2.

GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company‟s financial
position and operating results raise substantial doubt about the Company‟s
ability to continue as a going concern, as reflected by the accumulated
deficit of $9,772,216 and recurring gross and net losses. The ability of the
Company to continue as a going concern is dependent upon expanding operations,
increasing sales and obtaining additional capital and financing. Management‟s
plan in this regard is to secure additional funds through future equity
financings. To date, management has been working to secure additional funding to
pay the convertible debentures and other notes as they come due over the next
six months, a total in excess of $2.5 million, and to secure working capital,
but the current credit crisis, the terms of the convertible debentures, and
other factors have resulted in no success. The financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
NOTE 3.

ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other liabilities consisted of the following at September 30, 2008:
Accrued
Accrued
Accrued
Accrued
Accrued

NOTE 4.

payroll - officers
interest - officers
interest - others
consulting
license fee

$

279,276
142,823
186,821
109,004
200,000
-----------$
917,924
============

ACCRUED OFFICERS AND CONSULTING COMPENSATION AND INTEREST

On October 1, 2007, the independent members of the Board of Directors approved
new employment agreements for Papadoyianis and Cherch providing for salaries of
$250,000 each, plus a continuing of the existing bonus structure. However, the
officers agreed to defer approximately 40 percent of the salaries due until the
Company resources improved. Subsequently, the officers met in March, 2008 and
voluntarily agreed to defer an additional 40% of their salaries to help the
Company until further funding could be raised. The officers are actually
receiving salaries substantially less than those they received in 2006 and 2007.
During the quarter beginning October 1, 2008 and to the date of this report, the
officers have received no compensation due to the financial condition of the
Company and its lack of funds.
Pursuant to these employment agreements, the Company accrued a total of
$279,276 through the quarter ended September 30, 2008. The Agreements also
provide for accrued interest of twelve percent (12%) per annum until the
employee‟s salary, bonuses and benefits are paid in full.
The Company contracted with CF Consulting LLC to provide principal financial
officer services beginning April 1, 2006, in return for monthly compensation

F-9

 NEPTUNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 2007
(Unaudited)
NOTE 4.

ACCRUED OFFICERS AND CONSULTING COMPENSATION AND INTEREST

of $5,500 for six months commencing April 1, 2006, $6,000 for the next six
months and $6,500 for the next six months of the 18 month term of the
agreement, ending September 30, 2007. On October 1, 2007, the Board of
Directors approved a new consulting contract with CF Consulting, LLC
providing formonthly consulting fees of $16,667. CF Consulting also agreed
to receive less than the full consulting fee due as a result of the financial
condition of the Company at the request of management. As a result, a total
of $78,503 in consulting fees were accrued and not paid for the fiscal year
ended June 30, 2008. For the quarter ended September 30, 2008, CF Consulting
was entitled to consulting fees of $50,000, but received only $19,500, or
approximately 39 percent of the amount due, and currently is receiving no
consulting fees for its services, although it continues to provide the
consulting services called for under the consulting agreement. A total of
$109,004 has been accrued as due under the agreement with CF Consulting, LLC
as of September 30, 2008. The agreement also provide for accrued interest of
twelve percent (12%) per annum until the amount due is paid in full.
NOTE 5.

RELATED PARTY TRANSACTIONS

Notes Payable Officers
On February 7, 2006, the Board of Directors resolved to repay certain notes
outstanding to Messrs. Papadoyianis and Cherch through the issuance of new
notes, which were made retroactive to January 1, 2006, bear interest at the
rate of 15% per annum, and included one warrant for every dollar outstanding,
or 70,000 total warrants. Each warrant to purchase one share of common stock
is at a price of $0.30 per share for a period of three years. The new notes
were in the amount of $44,944 each, and included repayment of principal of
$35,000 and accrued interest of $9,944 each. A total of $11,779 interest
has been accrued on each of these notes as of September 30, 2008 and is
included in accrued current liabilities.
NOTE 6.

NOTES PAYABLE

During the quarter ended June 30, 2008, the Company renewed three outstanding
promissory notes due to unrelated parties, by executing new notes in the
original principal amounts of the prior notes, plus accrued interest. The
notes were all one year notes, and bear interest at 12 percent per annum. A
total of $261,088 in principal amount is due on these notes. In addition, the
Company borrowed a total of $200,000 from an unrelated lender for one year at
12 percent on April 9, 2008 and issued 200,000 warrants to purchase common
shares of the Company for three years at $0.30 per share.
A total of $2,291,000 in convertible debentures remain outstanding after the
conversions of certain debentures into common stock during the fiscal year
ended June 30, 2008. In May, 2008, four of the debentures, totaling $500,000
came due. Three of the debenture holders agreed to extend the due date for one
year, and the fourth, in the amount of $250,000, agreed to extend the due date
until December 15, 2008.

F-10

 NEPTUNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 2007
(Unaudited)
NOTE 7.

STOCKHOLDERS' EQUITY

A total of 801,315 common shares of the Company were issued during the
quarter ended September 30, 2008, all of which were issued in payment of
interest accrued on the convertible debentures and other debt.
As a result of these changes, a total of 26,152,946 common shares were
outstanding at the end of the quarter ended September 30, 2008.
NOTE 8.

TECHNOLOGY LICENSE.

In June 1998, the Company entered into a limited license agreement with Mr.
Cherch and Mr. Papadoyianis, our management, for the right to use and further
develop the closed containment system, developed by them prior to the formation
of the Company, in North America. A total of $200,000 in royalties due under
that license agreement accrued as of June 30, 2008, but were not paid.
In July, 2008, the Company entered into a new license and acquired the
exclusive rights to the closed containment system, now known as the AquaSphere®, through a Worldwide Licensing Agreement with the inventors. That
agreement would have enabled the Company to develop, market, manufacture,
re-design, or license others to use the technology, and to develop and
market products using the technology, in the worldwide aquaculture industry.
Although the new license was signed on July 3, 2008, and then transferred to
Aqua Biologics, Inc, the Company was unable to pay the initial advance
royalties required, and has now defaulted under the license. Notice of
default was given as required on September 1, 2008 and the thirty day cure
period for the default also has expired. The license royalties due under
the old license, which were incorporated into the new license agreement,
remain outstanding and are included in accrued current liabilities.

F-11

 Item 2.

Management Discussion and Analysis or Plan of Operation.

FORWARD LOOKING STATEMENTS
In connection with, and because we desire to take advantage of, the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, we caution
readers regarding certain forward looking statements in the previous discussion
and elsewhere in this report and in any other statement made by, or on behalf
of our Company, whether or not in future filings with the Securities and
Exchange Commission. Forward looking statements are statements not based on
Historical information and which relate to future operations, strategies,
financial results or other developments. Forward looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control and many of which, with respect to future
business decisions, are subject to change. These uncertainties and
contingencies can affect actual results and could cause actual results to
differ materially from those expressed in any forward looking statements made
by, or on behalf of, our Company. We disclaim any obligation to update forward
looking statements.
Neptune Industries, Inc. was incorporated in the State of Florida on May 8,
1998. We operate on a June 30 fiscal year. Our common shares are traded on
the OTC Bulletin Board under the symbol NPDI. Since our inception, we have
been engaged in aquaculture (fish farming)and in the development of new
technologies, systems and products that directly address some of the key
challenges faced by the aquaculture industry today.
Neptune Industries has been a fish-farming and technology company which has
been committed to achieving sustainable eco-friendly aquaculture by innovating
and pioneering a total and comprehensive integrated systems solution approach
to the mission critical challenges facing the aquaculture industry today.
Dwindling supplies of wild caught stocks used for fishmeal, and the continued
environmental damage, escapism, and disease caused by self-polluting net pen
systems, have severely restricted industry growth on a global basis.
The Company had either licensed or developed itself certain ground-breaking
technologies in the aquaculture industry, which were at the heart of its
business development model. The Company licensed what is now known as
Aqua-Sphere™, a state-of-the-art, scalable, modular, floating closed
containment system that is capable of concentrating and removing solid waste,
eliminating predation and escapement, utilizing alternative energy for remote
applications, and isolating crops from the environment, in 1998, and entered
into a new license in July, 2008. The system was first designed by our
founders, Ernest Papadoyianis and Sal Cherch, before the Company was founded
in 1998. In June 1998, the technology was first licensed to Neptune in a
10 year license granting Neptune the right to use and develop the technology
for the North American market, and with a right of first refusal for all other
markets. As part of the license agreement, the Company agreed to pursue patent
protection for the technology in the names of the two inventors, which the
Company has done. Although the license agreement provided for annual minimum
royalties to Papadoyianis and Cherch after the first five years of the license
term, no royalties were ever paid by the Company on the license, and the
Company still owes $200,000 in unpaid royalties under that agreement.
In July, 2008, the Company entered into a new license and acquired the
exclusive rights to the Aqua-Sphere® technology through a Worldwide Licensing

1

 Agreement with the founders. That agreement would have enabled the Company to
develop, market, manufacture, re-design, or license others to use the
technology, and to develop and market products using the technology, in the
worldwide aquaculture industry. Although the new license was signed on July 3,
2008, and then transferred to Aqua Biologics, Inc, the Company was unable to
pay the initial advance royalties required, and has defaulted under the
license. Notice of default was given as required on September 1, 2008 and the
thirty day cure period for the default also has expired.
Ento-Protein® is a truly revolutionary development pioneered by Neptune as
a high quality, sustainable protein derived from insects which is intended to
be a replacement for the rapidly depleting fishmeal made from wild caught
feedstock species, which is currently a $7 billion global market. If the
Company is able to raise sufficient funds, this technology remains
Available for further development.
The Company‟s wholly-owned subsidiary, Blue Heron Aquaculture, Inc., operates
a sustainable fish farming facility in Florida City, Florida called Blue Heron
Aqua Farms. Blue Heron Aqua Farms currently is one of the leading producers
of hybrid striped bass, which it markets nationally and internationally as
Everglades Striped Bass™. Unfortunately, due to the size of the production
facility at Blue Heron, the farm operation has never been profitable. The
Company plans to expand the Blue Heron farming operation have now been put on
hold until further funds can be raised to complete the expansion.
Risk Factors.
The Company has identified certain risk factors connected with its operations
and an investment in the Company, which are listed in detail under Risk Factors
in the Form 10-KSB filed by the Company for the fiscal year ended June 30,
2008. As noted there, the Company is currently out of working capital and
has been unable to date to raise additional capital due to the state of the
economy and the toxic convertible terms of the convertible debentures issued
by the Company in 2005 and 2006 through Dawson James Securities.
Comparison of Operating Results
Gross revenues for the quarters ended September 30, 2008 and 2007 were
$236,501 and $111,193, respectively. Cost of sales for the same periods were
$354,565 and $111,189,respectively, resulting in a gross loss of $(118,064) and
a gross profit of $4, respectively. Operating expenses for the quarters ended
September 30, 2008 and 2007 were $242,767 and $216,931, respectively, resulting
in net losses of $(533,159) for the quarter ended September 30, 2008 compared to
$(403,813) for the quarter ended September 30, 2007.
Item 3.

Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer (the Certifying
Officers) are responsible for establishing and maintaining disclosure controls
and procedures and internal controls and procedures for financial reporting for
the Company. The Certifying Officers have designed such disclosure controls and
procedures and internal controls and procedures for financial reporting to
ensure that material information is made known to them, particularly during the
period in which this report was prepared. The Certifying Officers have
evaluated the effectiveness of our disclosure controls and procedures and
internal controls and procedures for financial reporting as of September 30,
2008 and believe that our disclosure controls and procedures and internal

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 controls and procedures for financial reporting are effective based on the
required evaluation. There have been no significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II -- OTHER INFORMATION
ITEM 1.

LEGAL PROCEEDINGS

There are no legal proceedings against the Company and the Company is
unaware of such proceedings contemplated against it.
ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

A total of 801,315 common shares of the Company were issued during the
quarter ended September 30, 2008, all of which were issued in payment of
interest accrued on the convertible debentures and other debt.
As a result of these changes, a total of 26,152,946 common shares were
outstanding at the end of the quarter ended September 30, 2008.
ITEM 3.

DEFAULTS UPON SENIOR SECURITIES
Not applicable.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.

ITEM 5.

OTHER INFORMATION

During December, 2008, three of the total outstanding convertible debentures,
with principal due of $311,000, will mature. The remainder of the total of
$2,291,000 in convertible debentures begin to mature in January, 2009, and the
balance by March 31, 2009. If the Company is unable to make any principal
payment when due, then it will be in default on all of the debentures and
holders may declare the notes in default. The debenture notes provide that on
default, the holders may pursue such remedies as are available to them under
Florida law, as unsecured, subordinated creditors of the Company.
The Company to date has been unable to raise additional capital for
operations or to retire the convertible debentures, due in part to the adverse
provisions of the convertible notes and in part to the credit crisis in the
financial markets and the unavailability of investment capital. Management has
been in discussions with a number of potential investment sources and continues
to work on a daily basis to raise the necessary capital for the Company. There
can be no assurance that the Company will be successful in its fund-raising
efforts and our audited financial statements for the fiscal year ended June 30,
2008 contained a going concern warning from our independent auditors.
The Company has been approached by a “representative” of several of the holders
of the convertible debentures indicating a willingness to consider conversion
of the debentures into common stock on certain conditions. The actual authority
of this purported representative has not yet been established, although
management has requested that information, as well as the identities of the

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 specific holders represented, on numerous occasions. The exact terms of any
such proposal, the number of holders involved and other details, are not yet
known, and it is not known if the contact is even authorized at this time;
however, one of the conditions being suggested to accomplish any conversion
and additional funding is that the Company sell or otherwise dispose of the
entire Blue Heron farm operation, and concentrate its efforts on its
remaining technology business. No action has been taken on this matter since
no actual proposal has yet been made, and any action on such a proposal would
require approval of both the Board of Directors and the shareholders of the
Company.
ITEM 6.

EXHIBITS
(a)

31.1
31.2
32.1
32.2

Exhibits required by Item 601 of Regulation S-B

Certification of Chief
Sarbanes-Oxley Act
Certification of Chief
Sarbanes-Oxley Act
Certification of Chief
Sarbanes-Oxley Act
Certification of Chief
Sarbanes-Oxley Act

(b)

Executive Officer Pursuant to Section 302 of the
Financial Officer Pursuant to Section 302 of the
Executive Officer Pursuant to Section 906 of the
Financial Officer Pursuant to Section 906 of the

Reports on Form 8-K

None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: November 19, 2008
NEPTUNE INDUSTRIES, INC.
By: /s/ Ernest Papadoyianis
-----------------------------------Ernest Papadoyianis
CEO, President and Director

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