SOURCE: HQ Sustainable Maritime Industries, Inc

November 14, 2006 08:08 ET

HQ Quarter Revenues Up 24%; Nine Month Revenues Up 50%

Profit From Operations Increased by 40% for the Quarter and Rose 74% for the Nine Month Period

SEATTLE, WA -- (MARKET WIRE) -- November 14, 2006 -- HQ Sustainable Maritime Industries, Inc. (HQ) (OTCBB: HQSM), a leader in zero-toxin integrated aquaculture and aquatic product processing, announced today its financial results for the six months and nine months ended September 30th, 2006, as reported in its Form 10-QSB filed with the Securities and Exchange Commission on November 13th, 2006.

Sales of HQ products have achieved record levels for the third quarter. This has been achieved without the benefit of the full rollout of its branded "TiLoveYa"™ products. These revenues are a reflection of a combination of constant increased market demand for HQ's products and recognition of the superiority of its products. Record increases in health product sales have accompanied strong and continued growth in Tilapia products. The national rollout of HQ's "TiLoveYa"™ branded products is imminent which management believes will increase sales and profitability.

The attached extracts from the notes to the financial statements compare in more detail the segment growth for the year to date with the corresponding period for last year.

      Business segment for the nine months ended September 30, 2006

                                                Aquaculture    Health and
                                                   Products  Bio-products
                                               ------------  ------------
Sales to external customers                      16,731,652    10,256,765
Net income (loss) for the period                  1,236,559     4,719,097


      Business segment for the nine months ended September 30, 2005

                                                Aquaculture    Health and
                                                   Products  Bio-products
                                               ------------  ------------
Sales to external customers                      11,076,907     6,968,715
Income (Loss) for the period                        688,120     2,551,442
Results of Operations -- Three Months Ended September 30, 2006 as Compared to Three Months Ended September 30, 2005

Total sales for the three months ended September 30, 2006 increased by 24%, when compared to the same period of 2005. The profit from operations for the three months ended September 30, 2006 increased by 40%, when compared the corresponding period of 2005. Net income was affected in the three months period ending September 30, 2006 by financing cost of $1,337,395, an increase of $1,240,921 over the corresponding period of 2005. That significant increase in financing costs is mostly related to the warrants amortization costs (non-cash) related to the convertible secured promissory notes we issued in January 2006, added to amortization of the embedded conversion option related to the same notes (also non-cash), which must be recognized as such in accordance with FAS 123R and EITF 00-27. The net income that would have been realized during the three months period ended September 30, 2006, without those temporary and non-cash financing costs, would have grown by more than 37% compared to the corresponding period of 2005.

Results of Operations -- Nine Months Ended September 30, 2006 as Compared to Nine Months Ended September 30, 2005

Total sales for the nine months ended September 30, 2006 increased by 50%, when compared to the same period of 2005. Profit from operations for the nine months ended September 30, 2006 increased by 74%, when compared the corresponding period of 2005. Net income was affected in the nine months period ending September 30, 2006 by financing costs of $3,944,696, an increase of $3,666,239 over the corresponding period of 2005. That significant increase in financing costs is mostly related to the warrants amortization costs (non-cash) related to the convertible secured promissory notes issued in January 2006, added to amortization of the embedded conversion option related to the same notes (also non-cash), which must be recognized as such in accordance with FAS 123R and EITF 00-27. The net income that would have been realized during the nine months period ended September 30, 2006, without those temporary and non-cash financing costs, would have grown by more than 88% compared the corresponding period of 2005.

About HQ Sustainable Maritime Industries, Inc.

HQ Sustainable Maritime Industries, Inc. is an integrated aquaculture and aquatic product processing company, with operations based in the environmentally pristine island province of Hainan, in the South China Sea. HQ practices cooperative sustainable aquaculture, using nutraceutically enriched feeds and conducting fish processing and sales. The company is dedicated to sustainable toxin-free methods giving its customers the purest products possible. The Company holds HACCP certification from the U.S. FDA and the EU Code assignment of quality, permitting its products to be sold in these international markets. It owns a nutraceuticals and health products company, which is HACCP certified, and produces and sells products subject to stringent laboratory tests certified by the China Ministry of Health. This plant produces nutraceuticals, which enrich feed used by HQ's cooperative aquaculture operations. In addition to headquarters in Seattle and operational offices based in Haikou, Hainan, HQ has offices in Hong Kong, Beijing, and Shanghai. (http://www.hqfish.com).

Certain statements in this press release that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by the use of words such as "anticipate," "believe," "expect," "future," "may," "will," "would," "should," "plan," "projected," "intend," and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of HQ Sustainable Maritime Industries, Inc. (the Company) to be materially different from those expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to the Company's ability to: (i) obtain sufficient capital or a strategic business arrangement to fund its expansion plans; (ii) build the management and human resources and infrastructure necessary to support the growth of its business; (iii) competitive factors and developments beyond the Company's control; and (iv) other risk factors discussed in the Company's periodic filings with the Securities and Exchange Commission, which are available for review at www.sec.gov under "Search for Company Filings." Consulting For Strategic Growth I, Ltd. ("CFSG") provides HQ Sustainable Maritime Industries, Inc. (HQ) with consulting, business advisory, investor relations, public relations and corporate development services, for which CFSG receives a fixed monthly fee for the duration of the agreement. Independent of CFSG's receipt of cash compensation from HQ, CFSG may choose to purchase the common stock of the company and thereafter sell those shares at any time it deems appropriate to do so.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 FOLLOW

         HQ SUSTAINABLE MARITIME INDUSTRIES, INC. AND SUBSIDIARIES
                  (INCORPORATED IN THE STATE OF DELAWARE
                          WITH LIMITED LIABILITY)
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                               (Unaudited)

                        Three Months Ended          Nine Months Ended
                    --------------------------- ---------------------------
                    September 30, September 30, September 30, September 30,
                        2006          2005          2006          2005
                    ------------- ------------- ------------- -------------
SALES               $  10,528,996 $   8,512,981 $  26,988,417 $  18,045,622

COST OF SALES           5,910,484     5,065,821    15,193,573    10,085,144
                    ------------- ------------- ------------- -------------
GROSS PROFIT            4,618,512     3,447,160    11,794,844     7,960,478

SELLING AND
 DISTRIBUTION
 EXPENSES                 183,004        51,862       391,832       158,247

MARKETING AND
 ADVERTISING            1,190,813       845,960     3,371,238     2,676,962

GENERAL AND
 ADMINISTRATIVE
 EXPENSES                 881,708       497,576     2,788,945     1,654,630

DEPRECIATION AND
 AMORTIZATION             262,882       238,593       736,278       719,635

(RECOVERY)/PROVISI-
 ON FOR DOUBTFUL
 ACCOUNTS               (154,869)       197,226     (236,844)        26,594
                    ------------- ------------- ------------- -------------
PROFIT FROM
 OPERATIONS             2,254,974     1,615,943     4,743,395     2,724,410

FINANCE COSTS           1,337,395        96,474     3,944,696       278,457

OTHER
 (INCOME)/EXPENSES        (1,262)        25,268        41,627       145,147
                    ------------- ------------- ------------- -------------
INCOME BEFORE
 INCOME TAXES             918,841     1,494,201       757,072     2,300,806

INCOME TAXES
    CURRENT               290,712       138,360       660,595       268,558
    DEFERRED               35,773        17,241       106,056        51,327
                    ------------- ------------- ------------- -------------
NET INCOME/(LOSS)
 ATTRIBUTABLE TO
 SHAREHOLDERS       $     592,356 $   1,338,600 $     (9,579) $   1,980,921
                    ------------- ------------- ------------- -------------
NET INCOME PER
 SHARE
    BASIC AND
     DILUTED        $       0.005 $       0.010 $    (0.0001) $       0.020
                    ============= ============= ============= =============
WEIGHTED AVERAGE
 COMMON SHARE
 OUTSTANDING
    BASIC             120,578,697   100,874,941   118,527,618    99,332,094
                    ============= ============= ============= =============
    DILUTED           120,746,493   102,693,123   118,426,253   101,150,276
                    ============= ============= ============= =============

Contact Information

  • Contact:

    Norbert Sporns
    Chief Executive Officer
    HQ Sustainable Maritime Industries Inc.
    Tel: 206-621-9888
    Fax: 206-621-0318
    Email Contact

    Daniel Stepanek
    Media Relations
    CFSG1
    Tel: 212-896-1202
    Fax: 212-697-0910
    Email Contact