SOURCE: HQ Sustainable Maritime Industries, Inc.

March 20, 2007 08:24 ET

HQ Reports Sales Increase by 42% for FY 2006; Income From Operations Increased by 54%

Total Sales Increased to More Than $39.1 Million, Income From Operations Reached More Than $7.0 Million, and EBITDA More Than $8.0 Million

SEATTLE, WA -- (MARKET WIRE) -- March 20, 2007 -- HQ Sustainable Maritime Industries, Inc. (HQ) (OTCBB: HQSB), a leader in toxin-free integrated aquaculture and aquatic product processing, announced today financial results for the Fiscal Year ended December 31, 2006, as reported in its Form 10-KSB filed with the Securities and Exchange Commission today.

Total sales of HQ products achieved record levels for the year, rising to $39,095,403 for the year ended December 31, 2006, compared to $27,553,030 for the same period in 2005. This represents an increase in sales of $11,542,373, or 42%, year-over-year. Both of the Company's business segments -- integrated aquaculture and aquatic product processing, and marine bio and healthcare products -- contributed significantly to that increase, as demand rose throughout the year.

Income from operations for the year ended December 31, 2006 rose to $7,042,230 for FY 2006, an increase of $2,459,297 or 54%, over $4,582,933 for the corresponding period of 2005. This major improvement was due to a higher volume of sales with overall similar percentage of gross profit from both of the business segments.

The Company reported a net income of $873,964 for 2006, down from $3,254,098 in 2005. That reduction in 2006 is due essentially to non-cash financing costs of $4,822,785 million which did not occur in 2005. That significant increase in non-cash financing costs is mostly attributable to the warrants amortization costs related to the convertible secured promissory notes issued in January and November 2006, added to the embedded conversion option related to the same notes, which must be recognized in accordance with FAS 123R and EITF 00-27. Had those significant non-cash financing costs not been absorbed in 2006, net income would have improved by $2,441,651 to $5,696,749 or 75% for the year ended December 31, 2006, compared to the same period of 2005.

Norbert Sporns, CEO, HQ Sustainable Maritime, said, "We are extremely pleased with the results of 2006. Our company is financially strong and growing. It is worth noting that our increased sales results began prior to the full rollout of our zero-toxin 'TiloveYa'™ brand and reflect a steadily growing recognition and demand for HQ's superior products. In fact, as announced in November 2006, HQ is the first company to be selected to assist the Aquaculture Certification Council in vetting and rolling out the Best Aquaculture Practices (BAP) proposed standards developed by the Global Aquaculture Alliance (GAA) for tilapia aquaculture operations."

Also in 2006, the Company:

--  Doubled the size of its cooperative farm operations.
--  Rolled out its toxin-free "TiLoveYa"™ branded consumer products.
--  Hired two seasoned seafood sales executives.
--  Broke ground on an organic feed mill in Hainan, China, which, upon
    completion in Q4 2007, will produce 100,000 tons per year of organic feed
    for HQ's aquaculture operations.
--  Applied for listing on the American Stock Exchange, which is expected
    in first half 2007.
    
Thus far in 2007, HQ:
--  Completed a 1-for-20 reverse stock split.
--  Began direct sales of its "TiloveYa"™ brand through the Internet
    via "Ultimate Entrée," a leader in direct Internet marketing of superior
    seafood and meat products.
--  Agreed to work with the Beijing division of Newly Wed® Foods Inc. to
    introduce an exclusive innovative line of battered and breaded flavored
    "TiloveYa"™ fillet products to Chinese consumers.
--  Introduced seven new "TiloveYa"™ products at the International
    Boston Seafood Show.
    
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.



          HQ SUSTAINABLE MARITIME INDUSTRIES, INC. AND SUBSIDIARIES
                (INCORPORATED IN THE STATE OF DELAWARE
                      WITH LIMITED LIABILITY)
                  CONSOLIDATED STATEMENTS OF INCOME
             FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

                                                    2006          2005
                                                ------------  ------------
SALES                                           $ 39,095,403  $ 27,553,030
COST OF SALES                                     21,917,345    16,002,911
                                                ------------  ------------
GROSS PROFIT                                      17,178,058    11,550,119
SELLING AND DISTRIBUTION EXPENSES                    591,376       301,630
MARKETING AND ADVERTISING                          4,547,615     3,623,107
GENERAL AND ADMINISTRATIVE EXPENSES                4,673,679     2,421,781
DEPRECIATION AND AMORTIZATION                      1,029,672       961,295
(RECOVERY OF) PROVISION FOR DOUBTFUL ACCOUNTS       (706,514)     (340,627)
                                                ------------  ------------
INCOME FROM OPERATIONS                             7,042,230     4,582,933
FINANCE COSTS                                      5,183,567       360,782
OTHER EXPENSES                                        16,731       327,059
                                                ------------  ------------
INCOME BEFORE INCOME TAXES                         1,841,932     3,895,092
INCOME TAXES
CURRENT                                              825,418       333,092
DEFERRED                                             142,550       307,902
                                                ------------  ------------
NET INCOME ATTRIBUTABLE TO SHAREHOLDERS         $    873,964  $  3,254,098
                                                ------------  ------------
NET INCOME PER SHARE
- BASIC (AFTER REVERSE SPLIT)                   $      0.145  $      0.633
- DILUTED (AFTER REVERSE SPLIT)                 $      0.145  $      0.630
                                                ------------  ------------
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING -
 BASIC (AFTER REVERSE SPLIT)                       6,009,682     5,138,218
                                                ------------  ------------
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING -
 DILUTED (AFTER REVERSE SPLIT)                     6,038,123     5,165,613
                                                ------------  ------------

Contact Information

  • Contact:

    Norbert Sporns
    Chief Executive Officer
    HQ Sustainable Maritime Industries Inc.
    Toll free: 866-907-1757
    Fax: 206-621-0318
    Email Contact

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