Health Sciences Group Reports 2003 Year-End Results; Net Sales Up 221% and Gross Profits Up 53%; Innovative New Products Expected to Drive 2004 Revenue Growth

LOS ANGELES, Apr 15, 2004 (BUSINESS WIRE) -- Health Sciences Group, Inc. (HESG) , an integrated provider of innovative, science-based products and bulk ingredients to customers in the nutrition, skin care, and food & beverage industries, announced its year-end results for fiscal year 2003.

Revenues for the year ended December 31, 2003 increased 221% to $17.8 million from $5.5 million reported in fiscal 2002. The Company generated 70% of its revenues from Quality Botanical Ingredients, Inc. (QBI), its latest acquisition completed in February 2003. In addition to over 20 years of industry experience and manufacturing know-how, QBI adds an extensive customer base which includes many leading nutraceutical and food and beverage companies to which the company expects to market its new line of proprietary products.

Gross profit for fiscal 2003 grew 53% to $2.3 million from $1.5 million reported last year. The Company reported an operating loss of $5.6 million, compared to an operating loss of $4.1 million, for the 2002 fiscal year.

The net loss for fiscal 2003 was $7.4 million compared to a net loss of $4.3 million for fiscal 2002. The net loss attributable to common shareholders for fiscal 2003, which includes a $1 million expense for preferred dividends, was $8.4 million, or $0.76 per share, compared to $4.3 million, or $0.73 per share, for the previous year. Approximately $5.5 million of the total loss in 2003 was non-cash expenses attributable to financing costs related to the issuance of stock, options, and warrants, including the change in fair value of the warrants issued in a financing transaction. Also included in the $5.5 million are non-cash expenses related to common stock, options and warrants issued for services provided to the company, depreciation and amortization, and a one-time inventory markdown.

"During 2003 we worked diligently to streamline our operations, develop exciting new products, and recruit top-notch industry veterans to our management team," said Fred E. Tannous, co-Chairman and CEO of Health Sciences Group, Inc. "We've also spent the better part of last year integrating QBI into our business and positioning ourselves to leverage our collective resources to expand our product offerings in 2004. We believe we're well positioned to take advantage of several new opportunities which are expected to increase revenues in all of our divisions."

Recent Highlights

During 2003, management successfully achieved key fundamental milestones which are expected to establish a solid foundation for future growth. Some of these achievements include:

-- Engaged UTEK Corporation
, an innovative technology
transfer company, for sourcing proprietary technology
acquisition opportunities in the areas nutraceuticals and
cosmeceuticals developed at renowned universities and
government research centers;

-- Introduced Tri-Xanthin(TM), a novel and proprietary,
ephedra-free weight-loss product;

-- Received a patent on our COCARE(TM) decongestant product --
offering a proprietary combination of an over-the-counter
(OTC) pharmaceutical drug and a complementary nutraceutical

-- Completed a $2.0 million private placement of a Series A
convertible preferred stock; and

-- Recruited seasoned industry executives to support operations
expansion and marketing efforts for new product initiatives.
These executives include:

-- Allan Himmelstein, President of QBI, who was previously
President of the US operations of Martin Bauer, GmbH, a
$300 million nutraceutical and tea company;

-- John Park, President and CEO of XCEL Healthcare and
BioSelect Innovations, who previously headed a $40 million
bioscience company; and

-- Jacob Engel, General Manager of Operations, who was
formally Chief Operating Officer of an international spice
company that he helped grow from $10 million to more than
$120 million.

Business Outlook

"To date, we have built a solid platform comprised of longstanding customer relationships, an experienced management team, and differentiated product technologies," said Mr. Tannous. "We expect to leverage this platform to become a recognized leader in providing scientifically-supported products and ingredients that promote positive health benefits for a wide variety of consumer needs in the dietary supplement, food and beverage, and personal care segments of the nutraceutical industry. To achieve our objective, we intend to:

1. Acquire and/or license patented products/technologies which are efficacious and have clinically supported results;

2. Leverage our current customer base and intra-company supply chain to accelerate market entry of our proprietary products; and

3. Form strategic alliances and partnerships to further accelerate the commercialization process of our intellectual property."

"In addition to meeting these objectives, we expect to penetrate new targeted growth markets, introduce a wholesale branding strategy for some of our key products, and attain profitability," commented Bill Glaser, President of Health Sciences Group. "We expect these efforts could culminate in achieving a listing on a national stock exchange."

About Health Sciences Group, Inc.

Health Sciences Group, Inc., is an integrated provider of innovative products and services in the nutraceutical, pharmaceutical, and cosmeceutical industries offering value-added ingredients, bioactive formulations, and proprietary technologies used in nutritional supplements, functional foods and beverages, and skin care products. Its largest division, Quality Botanical Ingredients, Inc. (QBI), processes more than 500 herbs, dried fruits and vegetables, and nutraceuticals using cryogenic (cold) processing at its New Jersey facility. Its XCEL Healthcare division is a fully licensed, specialty compounding pharmacy delivering full service pharmacology solutions to customers with chronic ailments that require long-term therapy; and its BioSelect Innovations division develops and sells innovative, science-based products based on proprietary technologies in the areas of topical/transdermal drug delivery, cosmeceuticals, and integrative medicine to a global network of customers who manufacture and distribute compounded pharmaceuticals, functional foods and beverages, skin care products and cosmetics. For more information, visit

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.

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