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Record Third Quarter Revenues for HQ Sustainable Maritime Industries, Inc.

HQSM at Growth Crossroads

November 8, 2006


Record Third Quarter Revenues for HQ Sustainable Maritime Industries, Inc.

 

Dear Shareholders:

HQ Sustainable Maritime Industries, Inc. has achieved record sales for the third quarter 2006. Management expects the best HQ third quarter results in its history will be revealed next week. The company has positioned itself to benefit from its current strategic position as the only publicly listed, vertically integrated producer of quality Tilapia. HQ is now at a growth crossroads:

 

Record Revenues

Sales of HQ products have achieved record sales for the third quarter. This current situation has been achieved without the benefit of its full rollout of its branded "TiLoveYa"™ products. Our management believes that these revenues are a reflection of a combination of constantly increasing market demand for HQ's products and recognition of their superiority.

 

"TiLoveYa"™ Sales

The national rollout of HQ's "TiLoveYa"™ branded products is imminent, which management believes should increase sales and profitability. The time of such a rollout is subject to HQ including its products into existing retail and service industry networks. Such national networks typically must complete extensive due diligence and position HQ's products in their networks replacing or adding HQ's products to current suppliers. Management believes that it will be implementing this rollout before year end.

 

The "TiLoveYa" era

Amongst farmed fish, Tilapia is a herbivore thriving on vegetal feed, unlike farmed predators such as salmon and trout. The fish population in the world's oceans is being depleted. (See Washington Post November 3rd article at http://www.washingtonpost.com/wp-dyn/content/article/2006/11/02/AR2006110200913.html) (See National Fisheries Institute at: http://www.aboutseafood.com/media/top_10.cfm; H.M. Johnson and Associates at: http://www.hmj.com.)

 

We believe that aquaculture is the only lasting solution. Tilapia does not require ocean sourced fishmeal as feed. The American public has embraced Tilapia making it one of the top seafood imports in the United States. National retail and service industry leaders recognize the importance of this freshwater herbivore and the importance of imposing quality standards in relation to Tilapia. This is why industry leaders, including the CEO of HQ and various non-governmental organizations, are expected to roll out new Tilapia standards this week at the Global Aquaculture Alliance meetings. HQ management believes that only toxin-free vertically integrated production can provide the consumer quality standards for the future. This makes the HQ "TiLoveYa"™ vertically integrated toxin-free approach so important for today's consumers.

 

HQ Applied to List its Common Stock on The American Stock Exchange

HQ has applied to list its common stock on the American Stock Exchange, or the "Amex." Such listing is subject to the approval of the Amex and, in our management's view, requires that HQ undertake at least the following:

--  Reverse split to bring share price higher

--  Completion of extensive due diligence by Amex on the company since HQ

    became public

--  Restatement of HQ's financial results for the first and second quarter

    of 2006 to best reflect new SEC derivatives accounting guidelines. This

    restatement has been completed and has no impact on cash-flow or on

    "EBITDA."

   

--  Ensuring that HQ's board of directors has a majority of independent

    non-executive directors, and that audit and compensation committees

    consisting exclusively of independent non-executive directors are created,

    which has already been implemented by HQ.

   

If the company's stock is listed on Amex, such listing is expected by us to attract more institutional investment, less costly financing, the possibility of research and a broader shareholder base. Many institutions have policies not allowing them to purchase OTC Bulletin Board stock, which is where HQ's stock is currently quoted. Management believes that this process will be completed before the end of the first quarter next year.

 

Funding Growth

HQ management expects to commence construction of its new Tilapia Organic Feedmill later on this year with funding to be announced shortly. Construction of a new processing plant will commence next year in line with expected extensive sales of HQ's branded toxin-free "TiLoveYa"™ products.

 

We thank you, our shareholders and customers, and welcome any questions that you might have concerning our plans for growth and our partnership with you. Please contact us at Lillian@hqfish.com.

Lillian Wang, Chairman

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.

 

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