Health Sciences Group, Inc. (OTCBB:HESG), an integrated provider of innovative, science-based products and ingredients to customers in the nutrition, skin care, and food and beverage industries, announced today that it acquired the exclusive worldwide license to a powerful antioxidant derived from the apple peel. Apple peels are high in antioxidants, compounds that counteract the damage caused by chemicals known as free radicals - believed to contribute to the proliferation of cancer and neurodegenerative disorders, such as Alzheimer's.
Developed at Cornell University, this technology utilizes a proprietary method of extracting and preserving the phytochemical content found in apple peels. Apple peels have very high phenolic and flavonoid content, which appear to protect brain cells against oxidative stress generated by sunlight, chemical reactions and the stresses of day-to-day living.
"We are very excited about the prospects for this incredibly powerful antioxidant," said Fred E. Tannous, Co-chairman and CEO of Health Sciences Group. "We believe apple peel powder represents a significant opportunity considering its versatile uses as an all natural nutraceutical or a value-added ingredient in foods and beverages. We envision applications of apple peel powder ranging from supplements offered in capsules and tablets to value-added ingredients in cereals, snack bars, sauces, breads, as well as juices, shakes and other beverages."
In studies conducted at Cornell University, researchers showed that brain cells treated with the apple antioxidants had significantly less damage than those treated with vitamin C or not exposed to antioxidants. These results add strength to the theory that the risk of developing Alzheimer's and similar diseases may be reduced by dietary intervention, particularly by increasing one's intake of antioxidant-rich foods. This study is scheduled to appear in the December 1st issue of the Journal of Agricultural and Food Chemistry.
Apple peels are a discarded waste product which are typically re-processed and sold as livestock feed or fertilizer. It is estimated that over 20 million pounds of waste peels are generated each year in New York State alone from applesauce and canned apple producers. "This fact presents another exciting aspect to this technology," continued Mr. Tannous. "Since our raw ingredient is the apple processors' waste product, we expect the cost of the raw materials used in making our products to be practically zero. With this advantage, we can offer consumers reasonably priced proprietary products while realizing notable profit margins."
Alzheimer's affects an estimated 4.5 million people in the United States, according to the National Institute on Aging. This figure is expected to rise dramatically as the population ages.
Third Quarter Results
Revenues for the third quarter and nine months ended September 30, 2004 totaled $1.81 million and $7.73 million, compared to $4.29 million and $13.9 million, reported in the same period last year, respectively. The reduction in revenues is primarily attributed to the discontinuation of the company's low-margin products and ceasing operations of its bulk, raw material manufacturer in New Jersey. Selling, general and administrative expenses for the third quarter were $1.61 million, down $150,000, or 9.0%, from $1.76 million for the same period a year ago. Operating loss for the third quarter 2004 was ($1.57) million compared to an operating loss of ($850,000) reported during the same period in 2003. Net loss attributable to common shareholders for the third quarter 2004 totaled ($2.22) million, or ($0.15) per share, as compared with a net loss of ($2.02) million, or ($0.18) per share, for the same period in 2003.
"When taking into consideration our strategic objectives and the long-term goal for the company, these results are in line with our expectations," commented Mr. Tannous. "The decline in revenues through Phase I of our strategy resulted from both the elimination of low-margin products and building our proprietary infrastructure. As we proceed with the implementation of Phase II of our value-enhancement strategy, we expect the launch of our new proprietary products and patented ingredients with a more solid foundation."
Management believes its continuing operations are positioned to produce a positive contribution to the company's consolidated operations next year. The discontinuation of its unprofitable manufacturing operations is expected to save approximately $3.5 million in debt service costs and add over $1.2 million to the company's bottom line. The deployment of aggressive strategies focused on increasing margins and improving future operating results include the introduction of innovative products and value-added ingredients based on the company's recent acquisitions of exclusive worldwide licenses for the apple peel powder and Polymann Technologies. Management expects to increase its marketing initiatives and broaden its distribution through direct marketing channels with plans to increase its investment sales and marketing activities over the next twelve to eighteen months.
"Bringing all natural, proprietary products to market is what we've set out to accomplish when we founded the company just three years ago," commented Bill Glaser, Co-Chairman and President of Health Sciences Group. "Today, after assembling a portfolio of several potentially revolutionary technologies, which we expect will power our new and innovative products, combined with a stellar management team and impending access to expansive distribution channels upon the close of the Swiss Research acquisition, we believe we will have assembled a solid infrastructure from which we expect to catapult the company to a higher level of revenues and profits in 2005."
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. 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.