SOURCE: HQ Sustainable Maritime Industries Inc.

August 02, 2005 18:35 ET

HQSM Roadmap for Acquisition and Expansion Strategy

NEW YORK, NY -- (MARKET WIRE) -- August 2, 2005 -- HQ Sustainable Maritime Industries, Inc. (HQ) (OTC BB: HQSM),

Dear Shareholders:

HQ Sustainable Maritime Industries Inc. has made another important step in the completion of its growth plan. The expansion of plant capacity and acquisitions in 2004 provide the foundation for additional growth in the coming months, pursuant to the agreement to secure a bank guarantee from a Standard and Poor's A+ rated Bank (See 8k filed August 1st 2005). In fact the Company's current position is as follows;

--  Vigers Hong Kong appraisal of assets dated August 2004 of USD 68
    million
--  2005 run rate will increase by more than 50% from 2004
    
In this letter, I want to reconfirm how HQSM is shaping the future of aquaculture and aquatic products.

Growth leading to Growth

After an important expansion of our production facilities, HQ resumed production with expanded vigour in June 2004 with a view to increasing our profile and our reputation for quality among our clientele. HQSM is in a position to expand based on its unique business model moving forward.

Zero Toxin Aquaculture

All Tilapia are not created equal. Consumers want superior product, like coffee consumers are prepared to pay a premium for branded differentiated products, Tilapia consumers deserve and want the best. HQSM zero-toxin farmed Tilapia products point the way to a consumer friendly, sustainable, healthy, replacement for Ocean sourced products... the best Tilapia products available. Ocean production levels are capped at around 100 million metric tonnes in spite of new fishing technology improvements. (See "State of the World Fisheries and Aquaculture" December 2004 the Food and Agriculture Organisation (FAO) at http://www.fao.org/sof/sofia/index_en.htm) In order to meet demand, the world must pass from "ocean hunter-gatherers" to "farmed product consumers" or suffer from shortages and unacceptable levels of toxicity. The technology is there. HQSM is seizing the opportunity by;

--  Avoiding hormones during production (no hormones in Tilapia fry
    sexing)
--  Natural food additives reducing reliance on antibiotics to maintain
    farmed fish health;
--  Elimination of fishmeal in feed to avoid the concentration of Ocean
    pollutants such as heavy metals;
--  Farming using bottom feeding and predator fish which manage naturally
    the pond environment without the need for chemical additives;
--  Toxin free waste water from ponds becomes a quality nutrient rich
    fertilizer for neighbouring plants;
--  Toxin free Tilapia byproducts after filleting operations becomes a
    toxin free quality additive for other fish farming operations for shrimp
    and other species.
    
Investing in Zero Toxicity

The change outlined above requires investment in the following components;

--  Feed Mill
     --  HQSM has completed its feasibility study for a China based feed
         mill which will manufacture patented feed formulations meeting its
         exacting standards of zero toxin feed;
     --  This feed mill will use supplements manufactured by its own
         nutraceutical processing facility (acquired last August for the
         price of USD 20 million) able to produce the nutrients which are
         essential additives;
     --  The technology partnership with American River Nutrition gives
         HQSM access to the latest American technologies in the formulation
         and manufacture of feed additives;
--  Marketing and Distribution
     --  HQSM intends to acquire the distribution capabilities in the
         United States and Europe  enabling the sale of products to major
         customers usually reliant on intermediaries to source its
         products;
     --  HQSM intends to sensitize the public through a multi-pronged
         marketing campaign highlighting the importance of zero-toxicity
         and sustainability;
--  Organic Fish Farming
     --  HQSM intends to establish segregated certified organic farming and
         processing facilities in response to strong US and European demand
         for organic products;
--  Nutraceutical products development
     --  Nutraceutical manufacturing in China currently produces four
         products which are sold through a direct sales and other networks
         in China. In 2004, management estimates sales were in excess of
         USD 7 million;
     --  Management intends to expand this sales network as follows:
           --  The current manufacturing facility will be upgraded to GMP
               pharmaceutical standards (certified manufacturer of
               pharmaceutical grade products) in China;
           --  Current direct sales in China will be expanded through a
               strategic partnership with a western direct sales health
               product company;
           --  HQSM has the foreign owned status, the manufacturing
               facilities and the track record to easily certify new
               products in China for direct marketing and is negotiating
               with several western direct sales; companies to exchange
               access to their respective marketing networks
           --  HQSM will certify and sell its products through its western
               direct marketing partner into the countries in which its
               partner operates.
Sustainable, Fair Trade production, and Vertical Integration

HQ stands for Highest Quality. To achieve the Highest Quality, we are committed to responsible stewardship of our resources, human and natural; this is key to our business success. We are vertically integrated in order to control all aspects of our operations -- from the technologies that we share and monitor with our cooperative farmers to our state-of-the-art processing plant, to direct international marketing and branding. This model has hit a nerve with our partners and consumers who recognize that where food products are concerned we can never compromise on quality. Vertical integration is what allows us to assure to our consumers the quality that they deserve.

We welcome any questions or concerns that you, our investors, might have concerning our plans for growth and our partnership with you. Please contact us at hq@hqfish.com.

Lillian Wang, Chairman
HQ Sustainable Maritime Industries, Inc.

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's activities include using renewable ocean resources, practicing cooperative sustainable aquaculture, using nutraceutically enriched feeds and conducting fish processing and sales. Its variety of farmed and ocean-harvested products -- ranging from tilapia and shrimp to squid and red snapper -- are sold around the world. 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 has recently acquired 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 operational offices based in Haikou, Hainan, HQ has offices in Montreal, Hong Kong, New York City, Beijing, and Shanghai. (http://www.hqfish.com)

Except for historical information contained herein, the statements in this letter are forward-looking statements that are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. The above information does not guarantee any increase in net profits or a change in the valuation of your shares of common stock. No assurances can be given that any projections or any fulfillment of our business plans described herein (such as distribution capabilities) will be realized. Forward-looking statements involve known and unknown risks and uncertainties that may cause the companies' actual results in future periods to differ materially from forecasted results. Such risks and uncertainties include, but are not limited to, market conditions, competitive factors, the ability to successfully complete additional financings and other risks.

Contact Information

  • CONTACT:
    Norbert Sporns
    Chief Executive Officer
    HQ Sustainable Maritime Industries, Inc.
    Tel. 212-618-1712
    Fax: 212-618-1713
    Sporns@hqfish.com