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Health Sciences Group, Inc. (OTCBB:HESG), provider of innovative nutritional products and functional food ingredients derived from natural sources, announced today that a national retailer of nutritional supplements has placed an initial order for its Swiss Diet(R) Shugr(TM) product which will be sold in all of its stores nationwide. The company also reported its year-end results for fiscal year 2004 and provided an outlook for 2005.

One of the nation's largest retailers of quality vitamins and nutritional supplements, herbs, teas, and sports nutrition products placed an initial order for the 1 lb. size of Shugr(TM), which it expects to sell in all of its store locations nationwide. The name of the retailer will be released in the coming weeks in conjunction with a national media campaign.

"We are very pleased to have received this order from what we believe to be the first of many other national retailers", said Fred E. Tannous, Co-chairman and CEO of Health Sciences Group. "Since its introduction, Shugr(TM) has been receiving overwhelming interest from consumers, retailers and distributors worldwide. Because of its unique formulation and natural profile, we believe Shugr(TM) is a revolutionary new product in its category.

Not only does Shugr(TM) taste like cane sugar, but it also cooks like sugar and its ingredients are GRAS-certified by the FDA for safe consumption. Because of its low glycemic index, it is safe for diabetics.

"With consumers becoming more health conscious and seeking products that are natural, efficacious and good tasting, Shugr is the right product at the right time. In the coming weeks, we expect to have Shugr(TM) in many other retail outlets," concluded Tannous.

2004 Results

Revenues for the year ended December 31, 2004 were $8.2 million, or $3.2 million as reported for GAAP pro forma purposes, which accounts for the discontinued operations of the company's wholly-owned subsidiary Quality Botanical Ingredients, Inc. (QBI). The Company reported an operating loss of ($6.9) million, compared to an operating loss of ($3.8) million, for the 2003 fiscal year. Net loss attributable to common shareholders for 2004, which includes a charge of approximately $3.5 million for the discontinued operations of QBI and a $500,000 expense for preferred dividends, was ($10.9) million or ($0.78) per basic and diluted share which compares to a net loss of ($8.4) million or ($0.76) per basic and diluted share for 2003. Approximately $7.5 million of the $10.9 million net loss in 2004 was non-cash expenses. Included in the non-cash expenses is approximately $1.9 million related to common stock, options and warrants issued for services provided to the company; $1.6 million in depreciation and amortization; a one-time write-down of $2.1 million for discontinued operations; and a $1.9 million impairment charge to intangible assets.

"Health Sciences Group underwent a dramatic, yet positive, transformation during 2004," said Mr. Tannous. "We successfully redirected our business strategy, increased our focus on high-margin products, enhanced our sales and marketing efforts, forged strong partnerships with leading retailers and distributors, radically changed our cost structure and fundamentally strengthened our business model. As a result, the company has crossed a critical positive inflection point and is positioned for global leadership. Sales are ramping, with expectations to turn profitable by the end of this year; we have vastly improved our balance sheet and we are poised to take a pre-eminent position in the nutritional supplement market."

"Health Sciences Group achieved three major goals during 2004 which have transformed us into a fast growing company on the fast track to profitability:

-- First, we transformed our business model to launch differentiated, high-margin products across several market segments, primarily in the areas of weight management and heart health. As a result, we launched two new products: Shugr(TM) and Sequestrol(TM), with plans for several more by the end of the year;

-- Second, we radically restructured our sales efforts toward marketing and selling directly to consumers. As a result, in addition to our historical customer base, we have now launched or are planning product launches in 2005 with many of the largest specialty retail and food manufacturers in the country; and

-- Third, even while focusing on product introductions and sales growth, we radically changed our cost structure and business model and employed a strict discipline for use of our capital resources."

2004 Highlights

During 2004, management successfully achieved key fundamental milestones which are expected to establish a solid foundation for future growth. Some of these achievements include:

-- Completed a $750,000 private placement of a Series B convertible preferred stock;

-- Acquired exclusive worldwide rights, outside Korea, for Sequestrol, a non-prescription, natural nutritional supplement and functional ingredient clinically-proven to assist in the reduction of low-density lipoprotein (LDL) "bad" cholesterol and triglyceride levels;

-- Acquired exclusive worldwide rights for Aplevia, an all natural, disease-fighting super anti-oxidant derived from apple peels developed at Cornell University;

-- Commenced an out-sourced R&D collaboration with Cornell University;

-- Discontinued operations of Quality Botanical Ingredients, Inc. and out sourced its manufacturing and production for significant cost savings;

-- Received a patent on CoCare(TM) cold & flu product -- offering a proprietary combination of an over-the-counter (OTC) pharmaceutical drug and a complementary nutraceutical ingredient;

-- Signed purchase agreement for the assets of Swiss Research, Inc., maker of branded nutraceutical products addressing major wellness categories, including weight management, arthritis support, cholesterol reduction and diabetes management;

-- Loren Miles, founder of Swiss Research, joins Health Sciences Group as Director of Marketing -- brings over 25 years of experience in marketing and advertising while serving clients in the wellness, beauty and fashion industries; and

-- Introduced Shugr(TM), the world's first natural, zero-calorie sweetener that tastes and bakes like cane sugar.

Recent Developments

From new product deployments and distribution agreements, to financing and market development efforts, we continue to hit our targets. Our enthusiasm and confidence in our proprietary products have never been higher. The following highlights some key developments over the past few months:

-- Added another outside member to its Board of Directors -- Mr. Sid Anderson brings 30 years of experience in securities law, mergers and acquisitions, corporate finance and all aspects of strategic and operational management;

-- Acquired exclusive, worldwide rights for Edible Sponges(TM); open-cell hydrocolloids which can function as excellent carriers for a wide range of compounds including vitamins, minerals, proteins and carbohydrates;

-- Completed a $3.0 million private placement of a Series C convertible preferred stock, earmarked capital for aggressive sales and marketing efforts as well as for general working capital;

-- Received two additional CoCare(TM) patents for integrative medicine formulations -- one for cough suppression and the other for pain relief;

-- Successfully debuted Shugr(TM) and Sequestrol(TM) at the Natural Products Expo West in Anaheim, CA

-- Received initial purchase order from national retail store for Shugr(TM); and

-- Signed agreement for Shugr(TM) with national distributor of nutritional supplements and ingredients.

2005 Outlook

During 2005, we are concentrating on strengthening and further expanding our proprietary product offerings in order to reach profitability. This will involve increasing our marketing efforts and distribution channels to specialty retail and commercial accounts. To further expand the exposure for our proprietary products, we also plan to launch several direct response marketing campaigns, starting with Sequestrol(TM). In addition, we will continue to explore complementary business acquisitions or the acquisition of proprietary products, intellectual properties or enter into synergistic joint venture arrangements.

We expect revenues to progressively grow during the year, particularly in the second half. First quarter results are expected to be lackluster since revenues from Shugr(TM) and Sequestrol(TM) sales will begin to be realized during the second quarter. Based on a very strong demand for our new product introductions and customer delivery schedules, we believe revenues for the full twelve months of 2005 should show range from $15 to $25 million in revenues. With a successful infomercial campaign for Sequestrol(TM) and other planned products launches, revenues could approach $40 million. In addition, as we scale up our production and increase our distribution outlets through increased marketing and broker arrangements, our profit margins should improve. We look forward to finishing 2005 with positive earnings from operations, even as we continue to build our sales and marketing infrastructure.

"We are excited about the future of Health Sciences Group based on the strong rise in demand for Shugr(TM) and the mounting interest in Sequestrol(TM)," commented Bill Glaser, Co-chairman and President of Health Sciences Group. "In the coming weeks, we plan to announce sales and distribution agreements with national specialty retail and food and beverage ingredient companies. In addition, we expect to enter into several distribution agreements with large international conglomerates for sales of Shugr(TM) throughout Europe, Asia and the Middle East."

"To date, we believe we have successfully transitioned the company into differentiated purveyor of high quality, high-margin, science-based nutritional products powered by cutting-edge nutritional technologies," said Mr. Glaser. "Health Sciences Group is quickly becoming a leading innovator in the areas of weight management and heart health. In the coming months we expect to expand our product offerings with unique and innovative products such as Aplevia(TM), an all natural, disease-fighting super anti-oxidant derived from apple peels developed at Cornell University; Edible Sponges(TM), open-cell hydrocolloids which can function as excellent carriers for a wide range of compounds including vitamins, minerals, proteins and carbohydrates; and CoCare,(TM) our patented line of integrative medicine products which uniquely combine over-the-counter mediations with their nutraceutical counterparts."

About Health Sciences Group, Inc.

Health Sciences Group identifies, develops and commercializes innovative nutritional products derived from natural sources to provide consumers and medical professionals with preventative healthcare alternatives. The company markets its own line of proprietary products based on novel technologies with clinically-supported, FDA-approved ingredients under its Swiss Research(TM) and Swiss Diet(TM) brand names. For more information, visit www.HSciences.com.

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 that are based upon current expectations or beliefs, as well as a number of assumptions about future events. Although the Company believes that the expectations reflected in the forward-looking statements and the assumptions upon which they are based are reasonable, it can give no assurance that such expectations and assumptions will prove to have been correct. The reader is cautioned not to put undue reliance on these forward-looking statements, as these statements are subject to numerous factors and uncertainties, including without limitation, the independent authority of the special committee to act on the matters discussed, the successful negotiation of the potential acquisition and disposal of transactions described above, successful implementation of the company's business strategy and competition, any of which may cause actual results to differ materially from those described in the statements. In addition, other factors that could cause actual results to differ materially are discussed in the Company's most recent Form 10-QSB and Form 10-KSB filings with the Securities and Exchange Commission.