U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                -----------------

                                   FORM 10-QSB

                                -----------------


(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005


                                       OR

[_]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

                        Commission file number: 000-18980


                    HQ SUSTAINABLE MARITIME INDUSTRIES, INC.
                -------------------------------------------------
                 (Name of small business issuer in its charter)

           Delaware                           3550                   62-1407522
  (State or jurisdiction of         (Primary Std. Industrial       (IRS Employer
Incorporation or organization)     Classification Code Number)       ID Number)

        7305 Marie-Victorin, Suite 100, Brossard, Quebec, Canada, J4W 1A6
                               Tel. (450) 465 3474
                -------------------------------------------------
          (Address and telephone number of principal executive offices)

         Securities registered under Section 12(b) of the Exchange Act:
                                      None

         Securities registered under Section 12(g) of the Exchange Act:
                    Common Stock, $0.001 par value per share
                                (Title of Class)



Check whether the issuer:  (i) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (ii) has been
subject to such filing  requirements  for the past 90 days. Yes |X| No |_|

As of September  30, 2005,  there were  107,817,527  shares of the  registrant's
common stock outstanding.



<PAGE>

                        --------------------------------
                                TABLE OF CONTENTS
                        --------------------------------
                                                                    Page Numbers
                                                                    ------------

PART I - FINANCIAL INFORMATION

Item  1. Financial Statements.
            |_|  Condensed Consolidated Balance Sheets                   2-3
            |_|  Condensed Consolidated Statements of Income             4
            |_|  Condensed Consolidated Statements of Cash Flows         5
            |_|  Notes to Condensed Consolidated Financial Statements    6-11
Item  2. Management Discussions & Analysis of Financial Condition and
           Results of Operations.                                        13-19
Item 3.  Controls and Procedures                                         20

PART II - OTHER INFORMATION

Item  1. Legal Proceedings                                               21
Item  2. Unregistered Sales of Equity securities and Use of Proceeds     21
Item  3. Defaults Upon Senior Securities                                 21
Item  4. Submission of Matters to a Vote of  Security Holders            21
Item  5  Other Information                                               22
Item  6. Exhibits and Reports on Form 8-K                                22




















                                       1
<PAGE>
<TABLE>
<CAPTION>

            HQ SUSTAINABLE MARITIME INDUSTRIES, INC. AND SUBSIDIARIES
                     (INCORPORATED IN THE STATE OF DELAWARE
                             WITH LIMITED LIABILITY)

                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS
                                     ------



                                               September 30, 2005    December 31, 2004
                                                  (Unaudited)            (Audited)
                                               ------------------   ------------------
<S>                                            <C>                  <C>
CURRENT ASSETS
  Cash and cash equivalents                    $        4,265,370   $        4,551,505
  Trade receivables, net of provision                   8,845,415            5,406,172
  Inventory                                             1,033,826              228,564
  Prepayments                                              75,960                1,932
  Due from related parties, net of provision              456,874              388,506
  Advance to employees                                    130,304               27,918
  Tax recoverable                                          21,231               81,602
                                               ------------------   ------------------
  TOTAL CURRENT ASSETS                                 14,828,980           10,686,199
                                               ------------------   ------------------

OTHER ASSETS
  Deferred taxes                                        1,185,804            1,209,790
  Deferred cost                                           180,000                 --
                                               ------------------   ------------------
  TOTAL OTHER ASSETS                                    1,365,804            1,209,790
                                               ------------------   ------------------

PROPERTY, PLANT AND EQUIPMENT, NET                      8,310,039            9,029,673
                                               ------------------   ------------------

VESSELS HELD FOR SALE                                        --                   --
                                               ------------------   ------------------

TOTAL ASSETS                                   $       24,504,823   $       20,925,662
                                               ==================   ==================
</TABLE>











The  accompanying  notes  are in  integral  part of the  consolidated  financial
statements.


                                       2
<PAGE>
<TABLE>
<CAPTION>

            HQ SUSTAINABLE MARITIME INDUSTRIES, INC. AND SUBSIDIARIES
                     (INCORPORATED IN THE STATE OF DELAWARE
                             WITH LIMITED LIABILITY)

                      CONDENSED CONSOLIDATED BALANCE SHEETS


                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------



                                          September 30, 2005     December 31, 2004
                                             (Unaudited)             (Audited)
                                          ------------------    ------------------
<S>                                       <C>                   <C>
CURRENT LIABILITIES
  Accounts payable and accrued expenses   $        3,973,252    $        4,204,630
  Bank loans                                       4,562,269             4,457,831
  Tax payable                                        210,946                  --
  Due to related parties                             554,409                86,994
  Due to directors                                    98,606               209,361
  Convertible notes                                  255,422               255,422
                                          ------------------    ------------------
  TOTAL CURRENT LIABILITIES                        9,654,904             9,214,238
                                          ------------------    ------------------

OTHER LIABILITIES
  Promissory note                                    100,000               100,000
                                          ------------------    ------------------

TOTAL LIABILITIES                                  9,754,904             9,314,238
                                          ------------------    ------------------

SHAREHOLDERS' EQUITY
  Share capital                                      107,817                95,055
  Additional paid-in capital                      14,009,722            13,099,205
  Reserves                                         1,574,674             1,146,316
  Exchange difference                                234,296                  --
  Accumulated losses                              (1,176,590)           (2,729,152)
                                          ------------------    ------------------

TOTAL SHAREHOLDERS' EQUITY                        14,749,919            11,611,424
                                          ------------------    ------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
  EQUITY                                  $       24,504,823    $       20,925,662
                                          ==================    ==================
</TABLE>







The  accompanying  notes  are in  integral  part of the  consolidated  financial
statements.


                                       3
<PAGE>
<TABLE>
<CAPTION>

            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               Nine Months Ended
                                             September 30,   September 30,    September 30,   September 30,
                                                  2005            2004             2005            2004
                                             -------------   -------------    -------------   -------------
<S>                                          <C>             <C>              <C>             <C>

SALES                                        $   8,512,981   $   7,665,287    $  18,045,622   $   8,367,579

COST OF SALES                                    5,065,821       4,575,381       10,085,144       5,323,743
                                             -------------   -------------    -------------   -------------

GROSS PROFIT                                     3,447,160       3,089,906        7,960,478       3,043,836

SELLING AND DISTRIBUTION EXPENSES                   51,862         124,775          158,247         220,976

ADVERTISING                                        845,960         542,409        2,676,962         542,409

GENERAL AND ADMINISTRATIVE
   EXPENSES                                        497,576         848,254        1,654,630       2,218,258

DEPRECIATION                                       238,593         255,656          719,635         414,334

PROVISION FOR DOUBTFUL ACCOUNTS (RECOVERY)         197,226      (2,284,953)          26,594      (1,015,291)
                                             -------------   -------------    -------------   -------------

PROFIT  FROM OPERATIONS                          1,615,943       3,603,765        2,724,410         663,150

FINANCE COSTS                                       96,474         136,361          278,457         179,986



OTHER EXPENSES                                      25,268          68,551          145,147         251,646
                                             -------------   -------------    -------------   -------------

PROFIT BEFORE INCOME TAXES                       1,494,201       3,398,853        2,300,806         231,518

INCOME TAXES
  CURRENT                                          138,360            --            268,558            --

  DEFERRED                                          17,241         165,303           51,327         199,390
                                             -------------   -------------    -------------   -------------

NET PROFIT BEFORE MINORITY
   INTEREST                                      1,338,600       3,233,550        1,980,921          32,128

MINORITY INTEREST                                     --              --               --           337,944
                                             -------------   -------------    -------------   -------------

NET PROFIT ATTRIBUTABLE TO
   SHAREHOLDERS                              $   1,338,600   $   3,233,550    $   1,980,921   $     370,072
                                             =============   =============    =============   =============

NET PROFIT PER SHARE BASIC
   AND DILUTED                               $        0.01   $        0.05    $        0.02   $        0.01
                                             =============   =============    =============   =============

WEIGHTED AVERAGE COMMON SHARE
    OUTSTANDING - BASIC                        100,874,941      70,031,231       99,332,094      44,820,674
                                             =============   =============    =============   =============
WEIGHTED AVERAGE COMMON SHARE
   OUTSTANDING - DILUTED                       102,693,123      70,031,231      101,150,276      44,820,674
                                             =============   =============    =============   =============
</TABLE>


The  accompanying  notes  are in  integral  part of the  consolidated  financial
statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>

            HQ SUSTAINABLE MARITIME INDUSTRIES, INC. AND SUBSIDIARIES
                     (INCORPORATED IN THE STATE OF DELAWARE
                             WITH LIMITED LIABILITY)

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                                   (UNAUDITED)

                                                                      2005            2004
                                                                  ------------    ------------
<S>                                                               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                      $  1,980,921    $     32,128
  Adjustments to reconcile net income to net cash provided
     by operating activities:

  Depreciation                                                         719,634         414,334
  (Increase)/decrease in assets:
     Inventory                                                        (805,262)       (351,590)
     Trade receivables, net of provisions                           (3,439,243)      3,942,164
     Prepayment                                                        (74,028)          4,262
     Advance to employee                                              (102,386)         (9,308)
     Deferred taxes                                                     23,986         199,390
  Increase/(decrease) in liabilities:
     Accounts payables and accrued expenses                           (231,378)       (865,226)
     Deposit received from customers                                   271,317         (28,661)
     Taxes payable                                                        --              --
                                                                  ------------    ------------
Net cash from by operating activities                               (1,656,439)      3,337,493
                                                                  ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property, plant and equipment and construction
      in progress                                                         --        (1,062,149)
  Cash received from acquisition                                          --         1,205,193
                                                                  ------------    ------------
Net cash from by investing activities                                     --           143,044
                                                                  ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from common stock                                           923,278         415,000
  (Payment to)/received from directors                                (110,756)         14,334
  Receive from related parties                                         399,047         601,888
  Capital expenditure                                                     --        (3,771,623)
  Purchase of minority interest from shareholders                         --           397,910
  Deferred guarantee cost for future financing                        (180,000)           --
  Inception/(Repayment) of loans                                       104,438      (6,265,061)
                                                                  ------------    ------------
Net cash from by financing activities                                1,136,008      (8,607,552)
                                                                  ------------    ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                               (520,431)     (5,127,015)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
  CASH EQUIVALENTS                                                     234,296            --

  Cash and cash equivalents, beginning of period                     4,551,505      11,037,780
                                                                  ------------    ------------

  Cash and cash equivalents, end of period                        $  4,265,370    $  5,910,765
                                                                  ============    ============
SUPPLEMENTARY CASH FLOWS DISCLOSURES
  Interest paid                                                   $    256,578    $    850,799
                                                                  ============    ============

  Taxes paid                                                      $       --      $       --
                                                                  ============    ============
SUPPLEMENTARY DISCLOSURE OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES
  Note payable in connection with acquisition of Jiahua Marine    $    100,000    $    100,000
                                                                  ============    ============
</TABLE>

The accompanying notes are in integral part of the financial statements.


                                       5
<PAGE>

                     HQ SUSTAINABLE MARTIME INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    UNAUDITED
                               SEPTEMBER 30, 2005
                    -----------------------------------------

NOTE 1 - BASIS OF PRESENTATION

The unaudited  condensed  consolidated  financial  statements of HQ  Sustainable
Maritime  Industries,  Inc.,  or HQSM,  have been  prepared in  accordance  with
generally accepted accounting  principles for interim financial  information and
pursuant to the  requirements  for  reporting  on Form 10-QSB and Item 310(b) of
Regulation  S-B.  Accordingly,  they  do not  include  all the  information  and
footnotes required by accounting  principles generally accepted in United States
of America for complete financial statements. However, such information reflects
all adjustments (consisting solely of normal recurring adjustments),  which are,
in the opinion of management,  necessary for a fair statement of results for the
interim  periods.   Results  shown  for  interim  periods  are  not  necessarily
indicative  of the results to be obtained for a full fiscal year.  The condensed
consolidated  balance sheet information as of December 31, 2004 was derived from
the audited  consolidated  financial statements included in the Company's Annual
Report  Form  10-KSB.  These  interim  financial  statements  should  be read in
conjunction with that report.

NOTE 2 - NATURE OF COMPANY


HQ Sustainable Maritime Industries,  Inc. ("HQSM") was initially incorporated as
Sharon Capital  Corporation,  or Sharon, on September 21, 1989 under the laws of
the State of Nevada. Sharon was a "blind pool/blank check" corporation organized
for the purpose of  purchasing,  merging  with or acquiring a business or assets
from another company.  In July 1990,  Sharon was changed to PEI, Inc., which was
subsequently  changed to Process Equipment,  Inc. in November 1990. On March 17,
2004, Process  Equipment,  Inc., Process Equipment  Acquisition  Corporation,  a
Nevada corporation and wholly-owned  subsidiary of Process  Equipment,  Inc., or
PEAC,  and Jade Profit  Investment  Limited,  or Jade, a British  Virgin Islands
limited  liability  corporation,  entered into an agreement  and plan of merger.
Pursuant to that agreement,  Process  Equipment,  Inc.,  through PEAC,  acquired
Jade, and 84.42% ownership in Jade's  subsidiary Hainan Quebec Ocean Fishing Co.
Ltd, a People's Republic of China, limited liability corporation, which we refer
to as HQOF.  As a result of that  transaction,  HQOF  became our main  operating
subsidiary.  In April of  2004,  pursuant  to the  above  agreement  and plan of
merger, the board of directors of Process Equipment,  Inc. and a majority of the
stockholders  approved a name change and change of  domicile of that  company to
Delaware via a merger with the newly formed  wholly-owned  Delaware  subsidiary,
HQSM. The name change, change of domicile and merger became effective on May 19,
2004,  with HQSM being the surviving  entity in the merger and acquiring all the
assets and  liabilities of Process  Equipment,  Inc. On August 17, 2004, we have
entered into a Purchase  Agreement with Sino-Sult  Canada  (S.S.C.)  Limited,  a
Canadian  limited  liability  corporation  ("SSC"),  whereby we acquired Sealink
Wealth Limited  ("Sealink"),  SSC's wholly owned subsidiary  incorporated in the
British Virgin Islands.  That purchase agreement has been filed as an exhibit to
our  current  report on Form 8K filed with the  Commission  on August 18,  2004.
Sealink is the sole owner of Hainan  Jiahua  Marine  Bio-Products  Co.  Ltd.,  a
limited liability company existing in China ("Jiahua Marine") which is primarily
engaged  in the  production  and sales of  marine  bio-products  and  healthcare
products in the PRC, as  described in more detail in the above  current  report.
Also as previously disclosed,  in the same current report, SSC is owned by three
of our current directors and executive officers who are also, together, indirect
beneficial owners of the majority of our capital stock.



                                       6
<PAGE>

Further, as previously  disclosed in the above current report,  effective August
17,  2004,  HQSM  caused  Jade  Profit  Investment  Limited,   its  wholly-owned
subsidiary,  to acquire the minority  equity  interest equal to 15.58% that Jade
did not  already  own in  HQOF,  HQSM's  principal  operating  subsidiary.  This
purchase was effected by Jade  pursuant to the Purchase  Agreement,  dated as of
August 17, 2004, between Jade and Hainan Fuyuan Investment Company Limited,  the
holder of the minority  equity interest of HQOF being acquired by Jade. Jade has
previously obtained all requisite  governmental approvals in the PRC in order to
consummate this transaction.

The Group is  principally  engaged  in the  vertically  integrated  business  of
aquaculture through  co-operative  supply agreements,  ocean product harvesting,
and processing and sales of farm-bred and ocean harvested aquatic products.  The
principal  products of HQOF are  cross-bred  hybrid of tilapia and  white-legged
shrimp exporting,  directly and indirectly,  to the United States, Canada, Japan
and European countries. The major market is for export.

The Group has also engaged in the  production  and sales of marine  bio-products
and  healthcare  products in the PRC. The  principal  products of Hainan  Jiahua
Marine  Bio-Product  Company Limited (100% hold subsidiary of Sealink) are Shark
Cartilage Capsule,  Shark Liver Oil and Shark Liver (Soft gel). The major market
is domestic in the PRC.

NOTE 3 - USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent assets and liabilities at the date of the financial  statements,  and
the reported amounts of revenue and expenses during the reporting period. Actual
results when ultimately realized could differ from those estimates.

NOTE 4 - EARNINGS PER SHARE

Basic  earnings  per share are computed by dividing  income  available to common
shareholders by the weighted-average  number of common shares outstanding during
the period.  Diluted  earnings per share are computed  similar to basic earnings
per share  except that the  denominator  is  increased  to include the number of
additional  common  shares  that would have been  outstanding  if the  potential
common shares had been issued and if the additional common shares were dilutive.

NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of financial instruments including cash and cash equivalents,
receivables,  accounts payable and accrued expenses and debt, approximates their
fair value at September  30, 2005 and  December  31, 2004 due to the  relatively
short-term nature of these instruments.



                                       7
<PAGE>

NOTE 6 - FOREIGN CURRENCY CONVERSION

The Company's financial  information is presented in US dollars.  The Group uses
the average  exchange  rate for the period and the exchange  rate at the balance
sheet  date  to  translate   its  operating   results  and  financial   position
respectively.  Any translation gains and losses are recorded in exchange reserve
as a component of shareholders' equity.

NOTE 7 - INCOME TAXES

Taxes are calculated in accordance  with taxation rates  currently  effective in
the PRC.  The Company  accounts  for income  taxes using the  liability  method.
Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized as income in the
period that includes the enactment  date. A valuation  allowance is provided for
the amount of deferred tax assets that,  based on  available  evidence,  are not
expected to be realized.

The Company's subsidiaries  registered in the PRC are subject to state and local
income taxes within the PRC at the applicable tax rates on the taxable income as
reported in their PRC statutory  financial  statements  in  accordance  with the
relevant  income tax laws  applicable  to foreign  enterprises.  HQOF and Jiahua
Marine were subject to a tax rate of 7.5% during this  quarter.  HQOF and Jiahua
Marine were  entitled to a two-year tax exempted  and  three-year  half tax rate
holiday  from  2001  and 2002  commencing  with the  first  profit-making  year,
respectively.

The  reconciliation  of the  effective  income  tax rate of the  Company  to the
statutory income tax rate in the PRC for this quarter is as follows:

         Statutory tax rate                        15.0%
         Tax holidays and concessions              (7.5%)
                                              ----------
         Effective tax rate                         7.5%
                                              ==========

Income taxes are calculated on a separate  entity basis.  Currently  there is no
tax benefit or burden recorded for the United States.



                                       8
<PAGE>
<TABLE>
<CAPTION>

NOTE 8 - SEGMENTS

No geographical segment analysis is provided for the nine months ended September
30, 2005 and 2004, as less than 10% of  consolidated  revenues and less than 10%
of consolidated income from operations is attributable to the segment other than
the Mainland China.

Business segment for the three months ended September 30, 2005

                                      Aquaculture    Health and   Unallocated
                                        Product     Bio-product      Items       Consolidation
                                      -----------   -----------   -----------    -------------
<S>                                   <C>           <C>           <C>            <C>

Sales to external customers             5,919,597     2,593,384          --          8,512,981
                                      ========================================================

General and administrative expenses        71,702        21,228       404,646          497,576
Depreciation                              161,026        76,161         1,406          238,593
Selling expenses                           36,449        15,413          --             51,862
Advertising                                  --         845,960          --            845,960
Provision for doubtful accounts              --         197,226          --            197,226
Finance costs                              65,463        30,673           338           96,474
Profit before taxation                    860,607     1,023,963      (390,369)       1,494,201
Taxation                                   78,802        76,799          --            155,601
Profit for the period                     781,805       947,164      (390,369)       1,338,600
                                      ========================================================

Segment assets                         14,360,429     9,566,388       578,006       24,504,823
                                      =========================================================

Segment liabilities                     5,711,106     2,527,907     1,555,891        9,794,904
                                      ========================================================

Business segment for the nine months ended September 30, 2005


                                      Aquaculture    Health and   Unallocated
                                        Product     Bio-product      Items       Consolidation
                                      -----------   -----------   -----------    -------------

Sales to external customers            11,076,907     6,968,715          --         18,045,622
                                      ========================================================

General and administrative expenses       318,368        74,010     1,262,252        1,654,630
Depreciation                              488,674       226,783         4,178          719,635
Selling expenses                          105,566        52,681          --            158,247
Advertising                                  --       2,676,962          --          2,676,962
Provision for doubtful accounts              --          26,594          --             26,594
Finance costs                             181,947        92,703         3,807          278,457
Profit/(Loss) before taxation             801,008     2,758,439    (1,258,641)       2,300,806
Taxation                                  112,888       206,997          --            319,885
Profit/(Loss) for the period              688,120     2,551,442    (1,258,641)       1,980,921
                                      ========================================================

Segment assets                         14,360,429     9,566,388       578,006       24,504,823
                                      ========================================================

Segment liabilities                     5,711,106     2,527,907     1,555,891        9,794,904
                                      ========================================================




                                       9
<PAGE>

Business segment for the three months ended September 30, 2004

                                      Aquaculture   Health and     Unallocated
                                        Product     Bio-product       Items       Consolidation
                                      -----------   -----------    -----------    -------------

Sales to external customers             6,477,639     1,187,648           --          7,665,287
                                      =========================================================

General and administrative expenses       189,191       (45,685)       704,748          848,254
Depreciation                              205,543        48,680          1,433          255,656
Selling expenses                          112,834        11,941           --            124,775
Advertising                                  --         542,409           --            542,409
Provision for doubtful accounts        (2,284,953)         --             --         (2,284,953)
Finance costs                              61,055         8,233         67,073          136,361
Profit/(Loss) before taxation           3,682,011       499,429       (782,587)       3,398,853
Taxation                                  165,303          --             --            165,303
Profit/(Loss) for the period            3,516,708       499,429       (782,587)       3,233,550
                                      =========================================================

Segment assets                         13,116,228     7,966,945      2,088,577       23,171,750
                                      =========================================================

Segment liabilities                     5,588,320     2,435,113     11,747,361       19,770,794
                                      =========================================================


Business segment for the nine months ended September 30, 2004

                                      Aquaculture   Health and     Unallocated
                                        Product     Bio-product       Items       Consolidation
                                      -----------   -----------    -----------    -------------

Sales to external customers             7,179,931     1,187,648           --          8,367,579
                                      =========================================================

General and administrative expenses       902,274       (45,685)     1,361,669        2,218,258
Depreciation                              363,266        48,680          2,388          414,334
Selling expenses                          209,035        11,941           --            220,976
Advertising                                  --         542,409           --            542,409
Provision for doubtful accounts        (1,015,291)         --             --         (1,015,291)
Finance costs                              66,690         8,233        105,063          179,986
Profit/(Loss) before taxation           1,201,209       499,429     (1,469,120)         231,518
Taxation                                  199,390          --             --            199,390
Profit/(Loss) for the period            1,001,819       499,429     (1,469,120)          32,128
                                      =========================================================

Segment assets                         13,116,228     7,966,945      2,088,577       23,171,750
                                      =========================================================

Segment liabilities                     5,588,320     2,435,113     11,747,361       19,770,794
                                      =========================================================
</TABLE>




                                       10
<PAGE>
<TABLE>
<CAPTION>

NOTE 9 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On August 17, 2004,  HQSM and Sealink,  as the parent and management  company of
Jiahua Marine, consummated a Purchase Agreement whereby HQSM acquired all of the
issued and outstanding capital stock of Sealink at consideration payable by HQSM
in the following  manner:  $8,888,655 in the form of 12,698,078 shares of HQSM's
common stock,  $0.001 par value per share,  up to but not exceeding 19.9% of the
outstanding  shares of HQSM's  common stock,  on a  fully-diluted  basis,  to be
delivered to SSC at closing, and (ii) the remaining balance of $11,111,345 to be
payable in the form of a convertible promissory note (the "Note") issued by HQSM
to SSC.  This  Note is  included  as  Exhibit  B to the  Nutraceutical  Purchase
Agreement.  The Note  will  accrue  interest  at the rate of 5% per annum and is
convertible  into: (1) one hundred thousand US Dollars  (US$100,000) for 100,000
shares of HQSM's Series A preferred  stock,  $0.001 par value per share, (2) the
remaining  principal amount of the Note equal to  US$11,011,345  into 15,730,493
shares of HQSM's common stock.  The Note is convertible  only upon completion of
an audit of HQSM's  acquisition of Sealink and Jiahua  Marine,  performed to the
satisfaction  of HQSM and  receipt of all  necessary  shareholder  consents  and
approvals.

The Purchase Agreement is being accounted for as a  recapitalization  of Sealink
whereby the historical  financial  information of Sealink becomes the historical
financial information of the Registrant.

The accompanying  Unaudited Pro Forma Condensed Consolidated Statement of Income
for the quarter  ended  September  30,  2004,  has been  prepared to reflect the
acquisition as if it had occurred as of January 1, 2004.

The  accompanying pro forma  information is presented for illustrative  purposes
only and is not necessarily  indicative of the financial  position or results of
operations which would actually have been reported had the merger been in effect
during the periods presented, or which may be reported in the future.

                                                Three months ended   Nine months ended
                                                September 30, 2004   September 30, 2004
                                                ------------------   ------------------
                                                    USD (`000)           USD (`000)
<S>                                             <C>                  <C>
Turnover                                                    10,203               13,302
Profit / (Loss) from operations                                402                 (502)
Net income attributable to shareholder                       2,420                1,530
                                                =======================================

Weighted average outstanding number of shares
     as at December 31, 2004                            69,770,366           69,770,366

Earnings per share                                            0.03                 0.02
</TABLE>






                                       11
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following is  management's  discussion  and analysis of certain  significant
factors which have affected our financial  position and operating results during
the periods included in the accompanying  consolidated financial statements,  as
well as information relating to the plans of our current management. This report
includes   forward-looking   statements.   Generally,   the  words   "believes,"
"anticipates,"   "may,"  "will,"  "should,"  "expect,"   "intend,"   "estimate,"
"continue,"  and  similar  expressions  or the  negative  thereof or  comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties,  including the matters set forth
in this report or other  reports or  documents we file with the  Securities  and
Exchange  Commission  from time to time,  which  could cause  actual  results or
outcomes to differ materially from those projected. Undue reliance should not be
placed  on these  forward-looking  statements  which  speak  only as of the date
hereof. We undertake no obligation to update these forward-looking statements.

The following  discussion and analysis  should be read in  conjunction  with our
consolidated  financial  statements  and the  related  notes  thereto  and other
financial information contained elsewhere in this Form 10-QSB.

GENERAL OVERVIEW
----------------

The following Management's  Discussion and Analysis ("MD&A") is intended to help
the reader understand our group. MD&A is provided as a supplement to, and should
be read in conjunction with, our financial statements and the accompanying notes
("Notes").

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
-----------------------------------------------------

You  should  read  the  following  discussion  of our  financial  condition  and
operations in conjunction  with the  consolidated  financial  statements and the
related notes included elsewhere in this quarterly report. This quarterly report
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These include  statements about our expectations,
beliefs,  intentions or strategies for the future, which we indicate by words or
phrases such as "anticipate,"  "expect," "intend," "plan," "will," "we believe,"
"our  company  believes,"   "management  believes"  and  similar  language.  The
forward-looking statements are based on our current expectations and are subject
to certain risks,  uncertainties  and assumptions,  including our ability to (1)
obtain  sufficient  capital  or a  strategic  business  arrangement  to fund our
expansion  plans;  (2) build the management and human  resources  infrastructure
necessary to support the growth of our  business;  (3)  competitive  factors and
developments beyond our control; and (4) those other risk factors, uncertainties
and  assumptions  that  are set  forth  in the  discussion  under  the  headings
captioned   "Business,"  "Risk  Factors,"  and   "Management's   Discussion  and
Analysis".  Our actual results may differ materially from results anticipated in
these  forward-looking  statements.  We base the  forward-looking  statements on
information  currently available to us, and we assume no obligation to update or
revise them, whether as a result of new information, future events or otherwise.
In addition,  our historical financial performance is not necessarily indicative
of the  results  that may be  expected  in the future  and we believe  that such
comparisons cannot be relied upon as indicators of future performance.




                                       12
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
------------------------------------------

The Company  prepares its consolidated  financial  statements in accordance with
accounting  principles  generally accepted in the United States of America.  The
preparation  of these  financial  statements  requires the use of estimates  and
assumptions  that affect the reported  amounts of assets and liabilities and the
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period.  Management  periodically  evaluates the  estimates and judgments  made.
Management  bases its estimates and  judgments on historical  experience  and on
various  factors that are  believed to be  reasonable  under the  circumstances.
Actual  results  may  differ  from  these  estimates  as a result  of  different
assumptions or conditions.

The following critical accounting policies affect the more significant judgments
and estimates used in the  preparation of the Company's  consolidated  financial
statements.

Inventories
-----------

Inventories  are stated at the lower of cost and net realizable  value.  Cost is
calculated  on the weighted  average basis and includes all costs to acquire and
other costs incurred in bringing the  inventories to their present  location and
condition.  The Company evaluates the net realizable value of its inventories on
a regular basis and records a provision for loss to reduce the computed weighted
average cost if it exceeds the net realizable value.

Income Taxes
------------

Taxes are calculated in accordance with taxation principles  currently effective
in the PRC. The Company  accounts for income taxes using the  liability  method.
Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized as income in the
period that includes the enactment  date. A valuation  allowance is provided for
the amount of deferred tax assets that,  based on  available  evidence,  are not
expected to be realized.

Related Parties
---------------

Parties are  considered to be related if one party has the ability,  directly or
indirectly,  to control the other party or exercise  significant  influence over
the other party in making financial and operational decisions.  Parties are also
considered  to be  related  if they are  subject  to  common  control  or common
significant influence. Related parties may be individuals or corporate entities.

Revenue Recognition
-------------------

In accordance with the provisions of Staff Accounting  Bulletin No. 103, revenue
is recognized  when  merchandise is shipped and title passes to the customer and
collectibility is reasonably assured.



                                       13
<PAGE>

Concentration of Credit Risk
----------------------------

Financial  instruments  that  potentially  subject  the  Company to  significant
concentrations  of credit risk consist  primarily of trade accounts  receivable.
The Company  performs  ongoing credit  evaluations with respect to the financial
condition  of its  creditors,  but  does  not  require  collateral.  In order to
determine the value of the Company's accounts receivable,  the Company records a
provision for doubtful  accounts to cover  probable  credit  losses.  Management
reviews and adjusts this allowance  periodically based on historical  experience
and its evaluation of the collectibility of outstanding accounts receivable.

Results of  Operations - Three Months  Ended  September  30, 2005 as Compared to
Three Months Ended September 30, 2004

One of our  subsidiaries,  Jiahua Marine (which was acquired in August 2004) was
engaged in manufacturing and selling of health and bio-product. During the three
months ended  September 30, 2005 and 2004,  Jiahua Marine  contributed  sales of
$2,593,384 and $1,187,648 to the Group respectively.  The gross profit ratio for
this  segment  was  about  85% for  both  periods  and  the  major  expense  was
advertising,  corresponding to about 33% and 46% of revenue for the three months
ended September 30, 2005 and 2004  respectively.  The net income  contributed by
this segment was $947,164 and $499,429 for the three months ended  September 30,
2005 and 2004 respectively.

The other principal  activity of the Group was the  manufacturing and selling of
aquatic  products.  The revenue  contributed  by this segment was $5,919,597 and
$6,477,639 for the three months ended September 30, 2005 and 2004, respectively.
The gross  profit  ratio of this segment was at 21% and 28% for the three months
ended  September  30,  2005 and 2004,  respectively.  This  segment  contributed
$781,805 and  $3,516,708 to net income for the three months ended  September 30,
2005 and 2004, respectively;  in 2004, there was a non-recurring recovery of bad
debt which affected results materially.

For the three months ended  September 30, 2005 revenue  increased by $847,694 or
11% to $8,512,981.  This compares to $7,665,287 for the corresponding  period of
prior year.  The increase  resulted from improved  performance by the health and
bio-product  segment in 2005; the sales in the aquatic product segment decreased
by $0.6 million  compared to the third quarter of 2004 but it was covered by the
increase in sales of health and bio-product at $1.4 million. In third quarter of
2004,  the  production in the  aquaculture  product  segment  resumed from major
renovations of our factory during the first half of 2004, as customers  required
more products after the long renovations  period of 2004. . The 2005 increase of
revenue from the health and bio-product  segment was due to the fact that in the
current  quarter,  sales  included  three months of operating  results of Jiahua
Marine,  compared to one and a half month of operating results in 2004 as Jiahua
Marine was acquired in August 17, 2004.

Cost of sales increased by $490,440 or 11% to $5,065,821 from $4,575,381 for the
three months ended September 30, 2005, as compared to the  corresponding  period
of the prior year.  Approximately  78% of the increase was due to the  increased
activities in the health and bio-product  segment as that segment operated since
the  acquisition  of Jiahua Marine from August 2004.  The overall  percentage of
increase  in cost of sale is almost the same as that of  revenue,  supporting  a
stable gross profit ratio in our company.



                                       14
<PAGE>

Selling and distribution expenses decreased by $72,913 or 58% to $51,862 for the
three months ended September 30, 2005, as compared to the  corresponding  period
of the prior year.  The  decrease  was the result of better cost  control in the
current quarter.

Advertising  expenses  increased by $303,551 or 56% from $542,409 as compared to
the corresponding  period of prior year. The primary factor  responsible for the
increase was that HQSM  acquired  Jiahua Marine (as part of its  acquisition  of
Sealink)  in  August  2004,  representing  one and a half  month of  advertising
expenses  for last year  compared  to three  months of  advertising  expenses in
current quarter.

General and administrative  expenses decreased by $350,678 or 41% to $497,576 as
compared to the  corresponding  period of the prior year.  In 2004,  our company
went public  which  required a high level of  resources  to be allocated to that
activity. In 2005, management improved their cost control to reduce the expenses
to current level.

Depreciation  decreased  by  $17,063  or 7%  to  $238,593  as  compared  to  the
corresponding  period of prior year.  The decrease was caused by several  assets
being fully  depreciated in last quarter,  thus requiring less  depreciation  in
2005 compared to the corresponding period of the 2004.

Provision  for doubtful  accounts  increased to $197,226 in the current  quarter
from a recovery of $2,284,953  for the  corresponding  quarter of previous year.
The 2004  expense  was the result of  providing  conservatively  the slow paying
customers as application of our Group policy.

Profit from  operations,  before  considering  the bad debt recovery of the 2004
third quarter,  improved from  $1,318,812 in 2004 to $1,615,943,  an increase of
22% or $297,131. The improvement is related to higher volume and gross profit in
2005 compared to 2004, added to better control of our costs.

Finance  costs  decreased  to $96,474  from  $136,361 for the three months ended
September 30, 2005 as compared to the corresponding  period of the prior year, a
29% or  $39,887  decrease.  The  decrease  was  mainly  due to the  interest  on
debenture  issued at  acquisition  of Jiahua  Marine in August  2004,  which was
almost totally paid since.

Other expenses  decreased from $68,551 for the three months ended  September 30,
2004 to $25,268 for the three months ended  September 30, 2005, a 63% or $43,283
decrease. The main reason of the decrease was the reduction of the insurance for
the vessels and some sailors being released since the first quarter of 2005.

Profit before  income taxes  decreased to $1,494,201 in the current 2005 quarter
from $3,398,853 in the comparative 2004 quarter, a 56% reduction over 2004. That
decrease was the result of a bad debt recovery in 2004 which was not repeated in
2005. Without  considering that unusual bad debt recovery,  profit before income
taxes would be higher in the current 2005 quarter by approximately $380,000 over
the same quarter of 2004. That  improvement of $380,000 in 2005 is the result of
an overall  higher volume and gross profit in the 2005 quarter,  added to better
controls of our costs.

Current income taxes increased from zero to $138,360 in the current period. Such
increase was due to the fact that Jiahua Marine and HQOF earned  taxable  income
for the three months ended  September 30, 2005 while Jiahua Marine was under two
years  tax-free  holiday  and HQOF  suffered a loss for the three  months  ended
September 30, 2004.



                                       15
<PAGE>

Deferred income tax decreased by $148,062 from $165,303 to $17,241 for the three
months  ended  September  30,  2005.  The  decrease  was  due to  the  temporary
differences  arising  from  provision  for bad debts and the bad debts  recovery
recorded in 2004.

The net income  attributable to  shareholders  decreased by $1,894,950 or 59% to
$1,338,600.  The decrease was due to the non-recurring bad debt recovery of 2004
of approximately $2.3 million.



























                                       16
<PAGE>

Results of Operations - Nine Months Ended September 30, 2005 as Compared to Nine
Months Ended September 30, 2004

One of our subsidiaries,  Jiahua Marine was engaged in manufacturing and selling
of health and bio-products.  During the nine months ended September 30, 2005 and
2004, Jiahua Marine contributed $6,968,715 and $ 1,187,648 to the revenue of the
Group, respectively.  The increase in volume is due to the integration of Jiahua
Marine from  acquisition  date of August  2004.  The gross profit ratio for this
segment was around 85% for both  periods and the major  expense for this segment
was advertising, corresponding to about 38% and 46% of sales for the nine months
ended September 30, 2005 and 2004, respectively.  The net profit of this segment
was  $2,551,442  and $499,249 for the nine months ended  September  30, 2005 and
2004  respectively.  The  increase was due to Jiahua  Marine  being  acquired in
August 2004.

The other  principal  activity  of the Group  remained to be  manufacturing  and
selling of  aquatic  products.  The  revenue  contributed  by this  segment  was
$11,076,907  and  $7,179,931  for the nine months ended  September  30, 2005 and
2004, respectively.  The gross profit ratio of this segment was 18% for the nine
months ended  September  30, 2005  compared to gross profit ratio of 28% for the
nine months ended September 30, 2004. This segment's  contribution to net income
was $688,120 for the current  period while it showed a net profit of  $1,001,819
for the  corresponding  period of 2004.  Since the production was stopped in the
first half of 2004 because of major  renovations  in the factory in that period,
the  profit  of 2004 was due  essentially  to the  recovery  of bad debt in that
period.

For the nine months ended September 30, 2005 revenue  increased by $9,678,043 or
116% to $18,045,622  from $8,367,579 for the  corresponding  period of the prior
year. The increase  resulted from a better  performance  by both  segments:  the
aquatic product  segment saw its sales increase by $3.9 million  compared to the
corresponding  period of 2004 as its  activities  resumed normal levels in 2005.
The  production of the first half of 2004 was almost  stopped due to renovations
experienced in that period. Furthermore, for the health and bio-product segment,
since its  operations  were  acquired in August  2004,  there was one and a half
month of  activities  in our Group for that  segment  in 2004  compared  to nine
months for 2005. This segment saw its sales  increasing by $5.8 million compared
to the corresponding period of 2004.

Cost of sales increased by $4,761,401 or 89% to $10,085,144  from $5,323,743 for
the nine months  ended  September  30,  2005,  as compared to the  corresponding
period of the  prior  year.  Approximately  78% of the  increase  was due to the
increased  activities  in the aquatic  products  segment as the company was in a
reconstruction  process in 2004 while  balance  of the  increase  was due to the
acquisition of Jiahua Marine in August 2004.

Selling and  distribution  expenses  decreased by $62,729 or 28% to $158,247 for
the nine months  ended  September  30,  2005,  as compared to the  corresponding
period of the prior year.  The decrease was the result of better cost control in
current period.

Advertising  expenses  increased by $2,134,553  from $542,409 as compared to the
corresponding  period of prior year.  The  primary  factor  responsible  for the
increase was that HQSM  acquired  Jiahua Marine (as part of its  acquisition  of
Sealink) in August  2004,  as Jiahua  Marine  requires  significant  advertising
expenditures  for  the  promotion  of its  neutraceutical  products  to  achieve
customer recognition which is consistent with industry practices.



                                       17
<PAGE>

General and  administrative  expenses decreased by $563,628 or 25% to $1,654,630
as compared to the corresponding  period of the prior year. In 2004, our Company
went public which  required a high level of financial  resources to be allocated
to that activity.  Also, in 2005,  management  improved  costs  resulting in the
decrease in such expenses in 2005.

Depreciation  increased by $305,301 to $719,635 as compared to the corresponding
period to the previous  year.  The increase was due to the effect in the current
period of  improvements in plant and machinery which were made in the first half
of 2004 by HQOF,  and additional  assets  purchased  through the  acquisition of
Jiahua Marine in mid-August 2004.

Provision for doubtful accounts  increased to $26,594 for the 9 months period of
2005 from a recovery of $1,015,291  for the  corresponding  period of 2004.  The
increase was the result of providing conservatively the slow paying customers as
application of our Group policy.

Profit from  operations,  before  considering  the bad debt recovery of the 2004
nine  months  period,  improved  from a loss of  $352,141 in 2004 to a profit of
$2,724,410 in 2005, an  improvement  of  $3,076,551.  The  improvement is mostly
related to higher  volume and gross profit in 2005  compared to 2004,  resulting
from the  acquisition of Hainan Jiahua in August 2004 and to HQOF having resumed
its normal level of activities in the third quarter of 2004.

Finance  costs  increased  to $278,457  from  $179,986 for the nine months ended
September 30, 2005 as compared to the corresponding  period of the prior year, a
55% or $98,471 increase. The increase was due to financing costs incurred in the
health and  bio-product  segment in 2005,  which were inexistent in the Group in
2004 as Jiahua Marine was acquired in August 2004.

Other expenses  decreased from $251,646 for the nine months ended  September 30,
2004 to $145,147 for the nine months ended September 30, 2005, a 42% or $106,499
decrease. The main reason of the decrease was the reduction of the insurance for
the vessels and some sailors being released since the first quarter of 2005.

Profit  before  income taxes  increased to  $2,300,806  for the 9 months  period
ending  September 30th,  2005,  from a profit of $231,518 for the  corresponding
period of 2004.  That  improvement  is the result of higher  sales  volume  with
better margins in 2005 resulting from the acquisition of Hainan Jiahua having an
effect for 9 months in 2005,  and also to the  activities of HQOF having resumed
its normal levels after the renovation period of 2004.

Current  income taxes  increased  from zero to $268,558 in the current period as
compared to the corresponding  period of 2004. Such increase was due to the fact
that Jiahua  Marine and HQOF earned  taxable  income for the nine months  period
ended  September  30, 2005 while Jiahua Marine was under a two years tax holiday
in 2004 and HQOF suffered a loss for the nine months period ended  September 30,
2004.

Deferred  income tax decreased by $148,063 from $199,390 to $51,327 for the nine
months  ended  September  30,  2005.  The  decrease  was  due to  the  temporary
differences  arising  from  provision  for bad debts and the bad debts  recovery
recorded in 2004.




                                       18
<PAGE>

Minority  interest  decreased  from $337,944 to zero.  The change  resulted from
HQSM's acquisition of the 15.58% minority interest of HQOF in August 2004.

The net income  attributable to shareholders  was $1,980,921 for the nine months
ended  September  30,  2005,   compared  with  a  net  profit   attributable  to
shareholders of $370,072, a $1,610,849 or 4 times increase. The increase was due
to higher sales and related  margins in the aquatic  segment in 2005 compared to
2004, and the newly acquired bio-product segment having taken its full effect in
2005.



























                                       19
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

In 2005,  we have funded our capital  requirements  through cash flow  generated
from operations and issuance of share capital. As of September 30, 2005 we had a
cash balance of $ 4,265,370 and a working  capital  surplus of $5,174,076.  This
compares  with a cash balance of  $4,551,505  and a working  capital  surplus of
$1,471,961 as of December 31, 2004.

Management  believes that,  from time to time, we may attempt to raise financing
through some  combination of commercial bank borrowings or the private or public
sale of equity or debt securities, in an effort to ensure that we have access to
sufficient  funds to meet our needs.  However,  future equity or debt financings
may not be  available to us at all,  or, if  available,  may not be on favorable
terms.  We cannot assure you that these efforts,  together with items  described
above,  will be sufficient to fund our growth,  or that external funding will be
available  to us at  favorable  interest  rates or at all.  If we are  unable to
obtain  financing in the future,  we will  continue to develop our business on a
reduced scale based on our existing capital resources.


SUBSEQUENT EVENT

In  October  2005,  our  Company  entered  into an  agreement  with  Amalgamated
Resources Holdings Inc (Alps), a Florida based  corporation,  in order to obtain
from Alps loan guarantees of up to $70 millions. Our Company, only upon exercise
of those  guarantees,  committed to appoint two  representatives  of Alps to our
Board of Directors;  also, upon exercise of those guarantees,  Alps will receive
as  collateral a block of control  shares from the  founders of our Company.  No
assurances  can be given that our Company  will  exercise  their  rights in that
respect.  The funds are  intended to be used to execute  the  roadmap  announced
earlier this year by our Company.
























                                       20
<PAGE>

ITEM 3. CONTROL AND PROCEDURES.

We maintain  disclosure controls and procedures that are designed to ensure that
information  that is required to be disclosed in the Securities  Exchange Act of
1934 reports are recorded,  processed,  summarized and reported  within the time
periods  specified in the SEC's rules and forms,  and that such  information  is
accumulated  and  communicated  to our  management  to  allow  timely  decisions
regarding required disclosure.

At the end of the period  covered by this report,  we carried out an evaluation,
under the supervision and with the  participation  of our management,  including
our Chief Executive  Officer and President and our Chief Financial  Officer,  of
the  effectiveness  of the design and operation of our  disclosure  controls and
procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as
amended.  Based upon this evaluation,  our Chief Executive Officer and our Chief
Financial  Officer  concluded  that, as of the end of the period covered by this
report, our disclosure controls and procedures were effective under Rule 13a-15.

There were no significant  changes in our internal  controls or in other factors
that could  significantly  affect these  controls  subsequent  to the end of the
period  covered  by this  report,  including  any  significant  deficiencies  or
material weaknesses of internal controls that would require corrective action.
























                                       21
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

We are  currently  not involved in any  litigation  that we believe could have a
materially  adverse effect on our financial  condition or results of operations.
There is no action, suit, proceeding,  inquiry or investigation before or by any
court,  public board,  government agency,  self-regulatory  organization or body
pending or, to the knowledge of the executive  officers of our company or any of
our subsidiaries, threatened against or affecting our company, our common stock,
any of our  subsidiaries  or of our  company's  or our  company's  subsidiaries'
officers or directors in their  capacities as such, in which an adverse decision
could have a material adverse effect.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the period covered by this report,  we have sold  securities  pursuant to
the  following  transactions,  all of which were  exempt  from the  registration
requirements of the Securities Act of 1933, as amended (the  "Securities  Act").
We plan to use the  proceeds  of all such  issuances  for  working  capital  and
general corporate purposes.

In July 2005, we issued  1,000,000  Class A shares of our common stock to Andrea
Cortellazi  and Proactive  Computer  Services Inc as  consideration  of services
related to obtaining the financial guarantees recently provided to us.

In August 2005 we issued  1,200,000 shares of our common stock to Lucky Ventures
Resources Limited in consideration of financial  consulting services provided to
us by that firm.  Those  securities  were issued in reliance  upon the exemption
from registration provided in Section 4(2) of the Securities Act.

In  September  2005,  we issued  3,300,000  shares of our  common  stock to Wang
Guoliang,  Shui Hong Enterprises Limited and Wu Zhi Quan in consideration of the
consulting  services  rendered to us by those  parties.  Those  securities  were
issued in reliance upon the exemption from registration provided in Section 4(2)
of the Securities Act.

During  the third  quarter  of 2005,  we issued  2,056,004  shares of our common
stock, pursuant to Regulation S promulgated under the Securities Act, to several
parties for a gross consideration of $344,128 and net proceeds of $123,854 after
payment of escrow, finders' and other fees.

ITEM 3 - DEFAULTS UPON SENIOR SECURITES

There have been no material defaults.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters have been  submitted to a vote of security  holders during the period
covered by this report.

ITEM 5 - OTHER INFORMATION

None.




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<PAGE>

ITEM 6 - EXHIBITS

31.1     Certification of Chief Executive Officer Pursuant to Section 302 of the
         Sarbanes-Oxley Act.

31.2     Certification of Principal Financial and Accounting Officer Pursuant to
         Section 302 of the Sarbanes-Oxley Act.

32.1     Certification of Chief Executive Officer Pursuant to Section 906 of the
         Sarbanes-Oxley Act.

32.2     Certification of Principal Financial and Accounting Officer Pursuant to
         Section 906 of the Sarbanes-Oxley Act.




















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<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(b) of the Securities  Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned,  thereunto duly  authorized,  in the City of New York, New York, on
November 14, 2005.

Dated: November 14, 2005


                    HQ SUSTAINABLE MARITIME INDUSTRIES, INC.


                    By: /s/ Norbert Sporns
                       -------------------------------------
                       Name: Norbert Sporns
                       Title: Chief Executive Officer and  President

























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