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LOS ANGELES--(BUSINESS WIRE)--May 1, 2006--Health Sciences Group, Inc. (OTCBB:HESG), provider of innovative nutraceutical products and functional food ingredients derived from natural sources, addresses past performance and provides update on company progress.
As we look back at our 2005 performance and compare it with our expectations, it is very obvious that we are all disappointed with the results. However, we must keep in mind that the company went through a dramatic change in business from manufacturing commodity products to marketing proprietary products. In conjunction with this strategic shift, we assembled a portfolio of quality proprietary products, starting with the launch of Shugr and Sequesterol, which we believe have tremendous promise for delivering future results.
If you have tried Shugr, then you're likely one of the thousands of people who have expressed their surprise that a zero-calorie sweetener can taste so good! Since closing the acquisition of Swiss Research, maker of our Shugr zero-calorie sweetener, we have been working to expand distribution and sales of Shugr. While we commenced sales of Shugr through several specialty retail outlets including GNC, Vitamin Shoppe, Meijer, drugstore.com, LavazzaStore.com and Amazon.com, we have yet a ways to go in order to achieve critical mass. During the process, we recognize that its selling price may be a limiting factor in its widespread acceptance. Moving forward, we plan to recruit sales representatives and broker networks to sell Shugr. In addition to addressing our distribution shortfalls, we are making changes to product packaging in order to reduce cost and translate the savings into competitive retail pricing. We also expect to offer the packets in boxes of 50- and 100-count boxes and for office break rooms, we plan to offer Shugr in 500-count quantities.
While the packets have received notable acceptance, our 1.3 lb. baker's jar has garnered greater demand. This response confirms our belief that Shugr offers superior baking characteristics when compared to competing products, especially because Shugr measures identically to cane sugar, which allows cup-for-cup replacement, and it is not blended with cane sugar making its use safe for diabetics. We are currently working on introducing a new re-sealable baker's bag, which is expected to lower our materials and production costs thereby enabling a more competitive retail price.
Our distribution agreement with DNP International, Inc. is a positive step toward expanding exposure and sales of Shugr with food and beverage manufacturers. Last month, DNP featured Shugr at the recent Natural Products Show in Anaheim, CA and received positive feedback and numerous inquiries from manufacturers seeking a replacement for artificial sweeteners in their products. Based on feedback from DNP received so far, revenues from Shugr sales are expected to ramp up during the balance of this year.
On the international front, we are still in discussions with several interested distributors, including OGB in Japan, and working with the respective country's governing agencies on obtaining appropriate approvals to import Shugr as a food product.
Last year we had very optimistic expectations for the production and airing of an infomercial for Sequesterol. Originally slated to air during 2005, the Sequesterol infomercial was to feature a revolutionary new product designed to lower cholesterol based on a single ingredient known as low molecular weight polymannuronic acid ("Polymann"), a nutrient extracted from brown seaweed using a patented process. As we progressed in the commercialization and marketing process, it became apparent that marketing the virtues of the product without a structure function claim would have been difficult. Therefore, we made the decision to delay the infomercial and expand the scope of Sequesterol's focus beyond cholesterol to encompass cardiovascular disease and overall heart health.
We tasked our development team to formulate a unique, proprietary product which uses high quality, pharmaceutical-grade ingredients backed by substantial peer-reviewed, published scientific research supporting their positive health benefits and efficacy addressing the problems associated with heart disease. The result was Sequesterol Advanced Cardio Formula -- a unique combination of high-quality ingredients designed to maintain cardiovascular health and a free-flowing circulatory system.
Sequesterol(TM) Advance Cardio Formula contains a proprietary blend of natural ingredients formulated to take a multi-faceted approach to maintain and support ones coronary vascular system. This combination includes: cassia nomame, a natural fat-blocking lipase inhibitor; octacosanol, a natural phytochemical and a major constituent of policosanol and omega-3 fatty acids, which have been found to be helpful in reducing the risk of coronary artery disease. Sequesterol(TM) combines the benefits of these powerful nutrients with heart-healthy vitamins to produce our advanced cardio formula. At the appropriate time, we expect to commission a clinical study on Polymann in order to support a structure function claim for its cholesterol-reducing properties.
The Sequesterol infomercial production is currently underway. During the first quarter of this year, we began pre-production activities and starting filming in early April. We expect to finish filming by early May and complete the post-production work by the end of May. Shortly thereafter, we plan the test marketing phase with national airing slated for early June.
In advance of the infomercial, we decided to make Sequesterol available online at www.Sequesterol.com. To date, the response has been very positive. Based on preliminary feedback, we have implemented enhancements to our mini-site to include supporting scientific reports, frequently asked questions and testimonials.
Although we are much further along in our new strategy and operations today than we were a year ago, we still have a ways to go. We have begun to address this by making key management replacements. Most notably, the director of sales and marketing was released when marketing expenses incurred were not translating into sales. Moving forward, we expect to work with our Board of Directors to seek qualified, experienced management personnel that can effectuate a successful transition and execution of our re-aligned business model. While we have not made a final determination yet, it is our intention to keep you apprised of our efforts.
Despite these challenges, we continue to believe that the company is on a positive trajectory. The fundamental changes that are currently being undertaken will allow us to find a way to meet previously established expectations while dealing with financial and operational constraints. We do not intend to set limits on expectations. We do intend to work creatively to make the best use of what resources we have to enhance our products, services, and above all, our commitment to build shareholder value.
About Health Sciences Group, Inc.
Health Sciences Group identifies, develops and commercializes innovative nutraceutical 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, GRAS-certified ingredients. For more information, visit www.HSciences.com and www.Sequesterol.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.
