Hq Sustainable Marit (GREY:HQSM)

On June 24, 2011, HQ Sustainable Maritime Industries, Inc. (the “Company”) received a notice from the NYSE Amex LLC (the “Exchange”) stating that the Exchange staff has determined that the Company’s previously submitted plan of compliance, as amended and supplemented, did not make a reasonable demonstration of the Company’s ability to regain compliance with Sections 134 and 1101 of the Exchange Company Guide.

The Company has determined not to appeal this Staff Determination and, consequently, notified the Exchange of its intent. Following the delisting from the Exchange, the Company's securities may be eligible to trade in the "grey market" where securities that are not listed, traded or quoted on any U.S. stock exchange, the OTC Bulletin Board or OTC Markets Group are found. Grey market trades are reported by broker-dealers to their Self Regulatory Organization ("SRO") and the SRO distributes the trade data to market data vendors and financial websites, so investors can track price and volume.

The Company does not believe that its common stock is currently eligible to be quoted on the OTC Markets Group after delisting from the Exchange. When, and if, the Company is able to file its delinquent reports and become current in its periodic filing obligations, the Company's common stock may become eligible for quotation; however, there can be no assurance that the Company's common stock will ever be, or be eligible to be, quoted.

On April 6, 2011, Andrew Intrater, the Chairman of the Audit Committee of the Board of Directors of HQ Sustainable Maritime Industries, Inc., tendered his resignation as an independent non-executive director and Chairman of the Audit Committee of the Company.

Dear Norbert,

I am writing today to tender my resignation as an Independent Non-Executive Director and Chairman of the Audit Committee of HQ Sustainable Maritime Industries, Inc. I am sending a copy of this letter to the board of directors, including the independent directors, out of respect for their roles. I have also sent a copy to Armando Valeri, head of the audit team at Schwartz Levitsky Feldman. The last few weeks have been demanding, but the events of the last several days have caused me to lose faith in the management of the company and the path it is charting. As a result, I feel have no choice but to make this difficult decision.

SEATTLE, WA--(Marketwire - March 16, 2011) - HQ Sustainable Maritime Industries, Inc. will postpone the release of their fourth quarter and fiscal year 2010 earnings. The Company will file a Notification of Late Filing on Form 12b-25 with the United States Securities and Exchange Commission for its Annual Report on Form 10-K for the year ended December 31, 2010. The Form 12b-25 will allow the Company an additional 15 calendar days to file the Form 10-K which is otherwise due on March 16, 2011. Details regarding the specific release date and conference call will be provided in a forthcoming news release.

The postponement in filing is due to delays in compiling information for the preparation of the financial statements. The Company fully expects to be able to file within the additional time allowed by the Form 12b-25 and plans to file as soon as possible following the completion of the audit of the financial statements.

• Third Quarter 2010 Results
  
  Sales increased 27% to $28.2 million, compared to $22.2 million for the third quarter of the prior year.

• Gross profit for the third quarter of 2010 decreased 3% to $9.5 million, compared to $9.8 million in the third quarter of the prior year. 

• Operating income increased by $2.9 million or 60% to $7.8 million compared to $4.9 million in the same period of the prior year. The operating income increase experienced in the third quarter of 2010 was primarily due to the recovery of bad debt, as the aging of receivables improved compared to the prior year period, which was slightly offset by lower gross profit.

• Net income for the third quarter of 2010 increased by 70% or $2.8 million to $6.9 million, or $0.40 per diluted share calculated on 16.6 million diluted shares compared to net income of $4.0 million, or $0.27 per diluted share calculated on 14.8 million diluted shares in the third quarter of 2009. Although the overall gross profit was less in the third quarter of 2010, the bad debt recovery had the most significant positive impact on the current quarterly results.

"We are extremely pleased with our third quarter financial performance. Our management team continues to execute on our operational and strategic initiatives for growth," said Norbert Sporns, HQ Sustainable Maritime's President and Chief Executive Officer. "We believe we have laid the groundwork for future financial and operational successes through our vertically integrated approach to all-natural Tilapia aquaculture bio-mass product development and distribution. We are very optimistic about our outlook for the remainder of 2010 and more importantly fiscal 2011 as we focus on long-term profitable growth and strong cash flow generation."

On September 13, 2010, HQ Sustainable Maritime Industries, Inc. issued a press release announcing that the Company will be participating in the Rodman & Renshaw Annual Global Investment Conference in New York City.

Excerpt from GeoBargain & Special Update - Performance Laggards Article

Hq Sustainable Maritime (NYSE Amex:HQS)

We are removing HQS from the GeoBargain list. The stock showed glimmers of hope, but it was unable sustain its momentum. The Company recently reported poor third quarter results, missing analyst estimates. Furthermore, analyst estimates indicate negative EPS growth for the next two quarters, which may inhibit short-term price gains. We will be quick to add HQS to the GeoBargain list once the 30%+ EPS growth resumes. Analysts expect this to occur in the Company’s fiscal 2010 second quarter ending in June.

Updated Valuation Scenarios Reflecting 2008 First Quarter Press Release.


Trailing EPS: $0.99
Forward EPS: $1.08
EPS past growth rate: 31%
EPS future growth rate: 40%

EPS numbers and growth rates have been adjusted to reflect a fully taxed scenario and any one time charges or gains. The GeoTeam feels that these adjustment are necessary for investors to make proper investment decisions.

Future EPS numbers have been obtained from public sources.

Short Term (NOW) Scenarios Based on:

P/E of 25 on four quarters trailing EPS: $24.75

P/E of 15 on four quarters forward EPS: $16.20

Long Term ( 12 Months Forward) Scenario Based on:

P/E of 25 on four quarters forward EPS: $27.00

Alternate Scenarios Based on P/E to EPS Growth Comparison:

Common rule of thumb that the P/E should equal the past EPS growth rate: $30.69
Common rule of thumb that the P/E should equal the future EPS growth rate: $36.63

These scenarios are not intended to be investment advice, but are scenarios based on some commonly used investment guidelines. They are provided to aid investors in making their own investment decisions.

HQS is considered a GeoBargain as it meets 7 out of ten of the following criteria:

X Recent 52 week High
X EPS growth at least 30%
X Revenue growth at least 10%
X Strong Balance Sheet
Return on Equity at least 15%
X Minimum Pre-tax operating margin of 8%
X Small Float
High insider ownership
Limited Institutional ownership
X Strives to Maximize Shareholder value

According to press releases, recent financials and published estimates HQS appears to be hitting on all cylinders. Revenues have steadily grown from just under 21 million in 2004 to 54 million in 2007. During this period the company has maintained profitability and in 2007 saw its second year of dramatic earnings growth. The company reported $.54 per share in earnings per share for 2007, up significantly from 2006 EPS of $.15. Keep in mind that these numbers include some non-cash charges. For valuation purposes we have added them back to earnings and applied a 36% tax rate to get a more meaningful financial picture. The result is an EPS figure of:

* $.91 for 2007
* $.74 for 2006
* $.53 for 2005

Various Tax Adjusted Published Analyst Estimates are calling for a continuation of healthy EPS growth in 2008 and 2009. The stock price has quietly risen over the past 18 months, yet still has a modest tax adjusted P/E multiple, of 15.

Current reasons for growth have been the result of increased customer penetration and a shift to a direct to customer distribution model, which is significantly enhancing margins. Via recent company commentary the company sees this trend continuing.

- 2007 Key ratios are also impressive:

*Operating Margin: 27%
*Current Ratio: 6.1/1
*Tax Adjusted Return On Equity: 12% (The GEO TEAM would prefer an ROE of at least 15%).
*Long-Term Debt To Equity: 5%

Also of note was the recent announcement of a new customer and associated large order. The GeoTeam is not sure if this recent development is embedded in published estimates.
( Source: Press, March 31, 2008 )

We also like that the company is actually U.S. based.

Industry Points Per 2007 10 K:

1. Aquaculture Industry

• Aquaculture, which is the farming of aquatic animals and plants, has been the world’s fastest growing segment in the food production system for the past two decades.
• The FAO reports that most of the new demand for fish will have to be met by aquaculture, which could account for approximately 39.0% of all fish production by 2015.

2. Tilapia Industry

• It is projected that tilapia will become the most important aquaculture crop in this century, potentially reaching $5.0 billion in global sales.
• PRC is the largest producer of tilapia.
• One of the major outlets for Chinese-produced tilapia has been, and should continue to be, the United States.
• It is expected that fresh and frozen fish products will account for a growing share of overall seafood consumption, with shrimp remaining at the top. By 2020, shrimp, salmon, tilapia, and catfish will be the top four seafood products consumed…
• Tilapia is one of the top five seafood imports in the world.
• The United States is the world’s largest consumer of tilapia.
• Health Benefits are a Driving Force for Growth in Tilapia Industry
• The marine Bio and healthcare products industry in China is also sizable, with approximately $6 billion in sales, which still constitutes only 3% of the world market. We believe that China, with 25% of the world’s population and its affinity for natural remedies and health products, has substantial potential for growth.

The GEO team holds stock in HQS. Sticking with the GEO discipline, we currently have good to cancel limits that range from $14 to $22.75. We may change these limits or liquidate our position if new developments arise. We may also change these limits or liquidate our position to meet firm capital needs or as our market outlook changes.

2008 Financial Update: HQS reported firsts quarter results today. Traditionally the first quarter is the firm's slowest. The company reported a loss, mainly due to finance charges, that will gradually decrease over time. The GeoTeam has removed this charge from the results. The end result is a fully taxed net income figure of 463k or $.04 EPS compared to an operating loss of 241k or $-.04 EPS. This is the first timet he company has reported a profit in their first quarter.