HQSM Breaks Ground on Organic Feed Mill Hainan, China

100,000 ton organic extruded feed mill to produce for own and local farmers
December 20, 2006

HQSM Breaks Ground on Organic Feed Mill Hainan, China

HQ Sustainable Maritime Industries, Inc.  today broke ground on an organic feed mill and processing plant in Hainan, China, with members of the business and financial communities in attendance.

The feed mill, which is the first organic-extruded feed mill in Hainan, is expected to be completed in the Fourth Quarter of 2007 and is expected to produce approximately 100,000 tons of organic floating feed per year.

The feed mill will serve HQSM's large cooperative farm operations, which were recently doubled in size through HQSM's agreement, announced August 8, 2006 and extended by an additional agreement signed on December 18th, with the Government of Tayang Town, Qionghai City, Hainan Province, which brought HQSM's total cooperative farming capacity to 3,294 acres. Each farm will be required to acquire feed from HQSM's mill to meet the Company's strict organic standards The arrangement is expected to reduce risks for the farmer and to increase HQSM's percentage of profits from feed to processing.

There is no floating or organic feed production in Hainan currently. Production is expected to satisfy not only HQSM's expanded demand for its combined aquaculture farms in Wenchang and Qionghai. It will also provide feed for such other aquaculture operations in Hainan as shrimp and other farmed species. The plant is expected to manufacture approximately 100,000 tons annually of feed and will source organic non-GMP corn and soy from China and abroad.

HQSM is a leader in developing Hainan's aquaculture industry to global standards, recognized as a "Dragon Head" company by the Government of China.

Norbert Sporns, CEO of HQSM, stated, "We are very excited about today's event, which breaks ground not only for our state-of-the-art feed mill but also for our Company's growth potential. Coupled with the expansion of our cooperative farming operations, this project will allow HQSM to become, to our knowledge, the world leader in organic tilapia production, enabling us to meet the ever-expanding demands from large retailers in the U.S., Europe and elsewhere.

"The USDA is expected to finalize its U.S. standards for organically raised Tilapia later this year. HQSM is committed to advancing quality industry-wide and to educating the public to the importance of reliable toxin-free food standards, monitored and regulated by influential groups like the ACC, as the world grows more dependent on aquaculture for safe food supply. We are proud to be selected to assist the Aquaculture Certification Council in vetting and rolling out the Best Aquaculture Practices and we are excited about the steady success our Company has experienced over the past years."

In 2005, tilapia production was second in volume only to carps, and it is projected that tilapia will become the most important aquaculture crop in this century, potentially reaching $5.0 billion in global sales. HQSM also produces marine bio and healthcare products addressing large markets in China.
The processing plant for these products also produces tilapia feed additives. The Company anticipates that the new large-scale organic feed mill and processing plant will increase profit margin, guarantee product quality and further vertically integrate the Company's operations.

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 HQ has operational offices in Haikou, Hainan.