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HQSM Reports First Quarter Revenues Double First Quarter Sales in Excess of USD 6.8 Million May 15, 2006 3:33:00 PM SEATTLE, WA -- (MARKET WIRE) -- 05/15/06 -- HQ Sustainable Maritime Industries, Inc. (HQ) (OTC BB: HQSM), a leader in zero-toxin integrated aquaculture and aquatic product processing, announced today its financial results for the first quarter ended March 31, 2006, as reported in its Form 10-QSB filed with the Securities and Exchange Commission on May 15, 2006.
Revenues for the quarter were $6,885,340, an increase of $3,868,454, over the $3,001,886 reported for the first quarter in 2005. In addition, gross profits increased by more than $2.5 million.
One-time financing costs from the sale of convertible debentures completed January 25, 2006, contributed approximately $445,000 to a net loss for the quarter of ($832,180).
Said Norbert Sporns, CEO of HQ, "We are pleased with the results of this quarter. The roll out of our marketing and branding initiative from our recently established Head Office in Seattle, and strong interest expressed during the recent European Seafood show in Brussels for our new 'TiLoveYa' ? zero-toxin Tilapia brand, positions our company well for the future."
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 zero-toxin 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 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 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 MONTHS ENDED MARCH 31, 2006 AND 2005 FOLLOWS
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 March 31, 2006 March 31, 2005 ----------- -----------
SALES $ 6,885,340 $ 3,016,886
COST OF SALES 4,353,455 1,299,166 ----------- -----------
GROSS PROFIT 2,531,885 1,717,720
SELLING AND DISTRIBUTION EXPENSES 69,168 40,608
ADVERTISING 1,112,735 1,000,819
GENERAL AND ADMINISTRATIVE 1,003,470 626,941 EXPENSES
DEPRECIATION 234,448 240,272
(RECOVERY) / PROVISION FOR DOUBTFUL ACCOUNTS 183,930 38,352 ----------- -----------
PROFIT / (LOSS) FROM OPERATIONS (71,866) (229,272)
FINANCE COSTS (*) 605,877 91,708
OTHER EXPENSES 36,167 67,126
PROFIT / (LOSS) BEFORE INCOME TAXES (713,910) (388,106)
INCOME TAXES CURRENT 83,385 32,819
DEFERRED 34,885 17,043 ----------- -----------
NET LOSS ATTRIBUTABLE TO SHAREHOLDERS $ (832,180) $ (437,968) =========== ===========
NET PROFIT PER SHARE $ (0.01) $ (0.00) =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 116,803,336 96,194,971 =========== ===========
(*) Financing costs increased to $605,877 from $91,708 for the three months ended March 31, 2006 as compared to the corresponding period of the previous year, an increase of $514,169. The increase was due to a combination of additional financing costs arising from the notes of $5,250,000 issued during the current quarter, and a reduction in interest costs on bank loans reimbursed in the period from April 1, 2005 to March 31, 2006. In accordance with US GAAP, the company recognized the financing cost related to the future conversion of warrants attributed in the first quarter of 2006 to the new investors in the Company; that financing cost amounted to approximately $445,000.
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