During 2005 Health Sciences Group successfully executed on our strategic initiatives of discontinuing our unprofitable legacy businesses and curtailing sales of non-strategic product lines, establishing distribution for Shugr(R), our zero-calorie, low glycemic sweetener that tastes and measures like table sugar, planning and positioning the upcoming launch of Sequestrol(R). We are currently working on acquiring more strategic assets towards positioning us as a leading innovator in the areas of weight management and heart health.
Early in 2005 we had anticipated major commercial rollouts for our two flagship products, Shugr(R) and Sequestrol(R). Admittedly, there were delays in both products. However, as we turn the corner into 2006, we believe we now have both products positioned for major commercial sales in 2006.
With regard to Shugr(R):
During 2005, Shugr(R) appeared in Newsweek, Los Angeles Business Journal, the Soy Daily, Diabetic Gourmet Magazine, First for Women magazine among several other noteworthy publications. As part of an awareness campaign, we sent out tens of thousands of free samples of Shugr to the general public and have received numerous accolades touting Shugr's great taste and superior baking qualities. In fact, we've even tracked search engine rankings on Google, Yahoo, MSN and AltaVista and seen steady improvement in Shugr's online awareness. The positive reception that Shugr(R) has received to date gives us confidence that we will be able to continue our growth in fiscal 2006 both domestically and abroad.
Shugr(R) is now being sold by specialty retail outlets including GNC, Vitamin Shoppe, Meijer, drugstore.com and Amazon.com, among others.
Looking out to 2006, our ingredient distributor, DNP International, has been working with numerous companies who have tested Shugr(R) in their products and the feedback has been overwhelmingly favorable. Under the terms of the contemplated new agreement, DNP will maintain a sales volume in accordance with established annual sales targets totaling $2.0 million in 2006, $4.3 million in 2007 and $5.6 million in 2008.
In the international arena, we have been working with several distributors in Europe, Asia and the Middle East. We are currently working on an exclusive distribution agreement for Shugr(R) with one of the largest distributors in Japan having reach into 50,000 retail outlets. This agreement calls for a minimum annual sales requirement of $1.1 million in 2006, $3.5 million in 2007 and $7.5 million in 2008.
The final versions of the DNP Distribution agreement and the Japanese distribution agreement are expected to be signed within the next few weeks.
We expect sales of Shugr(R) to ramp up dramatically in 2006 and based on preliminary indications of interest could approach the $10 million level.
With regard to Sequestrol(R):
We have been working diligently, with the help of Carlon Colker, M.D., an internationally recognized medical expert in the area of sports nutrition, to formulate a new, more advanced formula for Sequestrol(R). We plan to offer a more comprehensive cardiovascular health benefit than our originally formulated version. Our new advanced Sequestrol(R) is a proprietary blend of carefully selected and scientifically studied nutrients designed to improve cardiovascular health, circulatory function and lipid levels. Our formula includes all natural ingredients that are backed by published scientific data and medical research.
We expect to market and sell Sequestrol direct to consumers through a 30-minute infomercial, which is currently in production with expectations for airing during the first or second quarter 2006. In conjunction with the infomercial, we plan to debut the Sequestrol(R) website which will offer an e-commerce portal and detailed information on the product, testimonials, and research data supporting its efficacy. We are excited about the infomercial and believe it is not only the best medium for presenting the benefits of Sequestrol(R) but also presents Health Sciences Group with the greatest return on investment. Preliminary projections prepared by our direct response marketing agency estimate revenues from the Sequestrol(R) infomercial to range between $5 million and $11 million during 2006.
Assuming we can achieve our targets for Sequestrol(R) and Shugr(R) in 2006, Health Sciences Group should become profitable during the year.
We are also starting the process of bringing other exciting new products to market. With today's educated consumer calling for natural alternatives to synthetic drugs and products that are efficacious, we believe our opportunities for growth will continue to expand. We are currently in product development on Aplevia(R), a disease-fighting super antioxidant developed at Cornell University; Edible Sponges(R) open-cell hydrocolloids which can function as excellent carriers for a wide range of compounds including vitamins, minerals, proteins and carbohydrates; and our internally-developed CoCare(R) line of patented integrative medicine products which precisely combine over-the-counter medications with their nutraceutical counterparts.
As you know, HESG currently trades in the OTCBB, where valuations are often not indicative of the true value of the companies' future prospects. We know that many of you are long time shareholders and have been very patient with your investment. We are very committed to executing a managed growth strategy and creating a company of substance and value -- but this doesn't happen overnight. We are currently working with our investment bank to identify several strategic and synergistic acquisition opportunities which can create a transformational platform from which we would catapult our growth and achieve multitudes of benefits including transitioning our listing from the OTCBB to a senior Stock Exchange. We plan to start effectively telling our story, not only to the general public but to funds and money managers as we position ourselves for this transformation.
Fiscal 2005 was a transitional year for Health Sciences Group and a year of many firsts. Preliminary indications lead us to believe that 2005's delays will transform into 2006's achievements. Achieving our goals will position us to deliver increasing returns to our shareholders. We look forward to reporting to you on our progress.
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 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.