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HESG News Carlon Colker, M.D., Appointed to Head Scientific Advisory Board; Reports Second Quarter Results and Recaps Recent Developments

"We are ecstatic to have Dr. Colker head up our scientific advisory board," stated Fred E. Tannous, Co-Chairman and Chief Executive Officer of Health Sciences Group. "As one of the premier researchers in the field of heath and nutrition, Dr. Colker has researched and designed many of the popular dietary supplements available today. We look forward to working with Dr. Colker to enhance the scientific support for our proprietary products. For example, we expect Dr. Colker will be the driving force behind our cholesterol product, Sequestrol. We plan to feature Sequestrol in an infomercial slated to air later this year. We look forward to working with Dr. Colker to enhance the medical and scientific foundation underlying each and every one of our products."

Carlon M. Colker, M.D., FACN is an internationally recognized consultant in the area of health and fitness. Specializing in internal medicine, medical nutrition and sports medicine, he works with professional athletes and celebrities as well as large health systems, governments and private companies. In addition to running his company, Peak Wellness, Inc., in Greenwich, Conn., Colker is an attending physician at Beth Israel Medical Center in New York and Greenwich Hospital in Connecticut.

"I'm very pleased to be part of the Health Sciences organization," said Colker. "With its portfolio of innovative and proprietary products, Health Sciences Group has tremendous potential for becoming a leading provider of scientifically-based nutritional products. I look forward to drawing upon my experience and resources to help boost the company's position in the industry. I see tremendous sales opportunities ahead for Health Sciences Group and look forward to helping capture them."

Colker has authored and co-authored numerous scientific publications and has been featured in a variety of sports and fitness magazines. In addition to being a columnist and contributing editor in Muscular Development Magazine, he has appeared on such shows as ESPN Outside the Lines, NBC's Health Segment and ABC's World News Tonight. He has been a long-time guest correspondent on America's Health Network "Ask the Doctor" segment and Fox News Channel's "Fox & Friends." He has also written several books, including "The Greenwich Diet" and "Extreme Muscle Enhancement -- Bodybuilding's Most Powerful Techniques."

In addition to being a Fellow of the American College of Nutrition, Colker is a member of the American Medical Association, the American College of Physicians, the American College of Sports Medicine and the Connecticut State Medical Society. He also holds various certifications in the areas of cardiac and trauma life support issued by the American Heart Association and the American College of Surgeons. Dr. Colker received his medical degree from Sackler School of Medicine in New York and a bachelors degree in biology from Manhattanville College in Purchase New York.

"We are fortunate to have Dr. Colker as our medical advisor," said Bill Glaser, Co-Chairman and President of Health Sciences Group. "He is not only well published but also highly regarded one of the world's foremost nutrition and dietary supplement experts and brings a tremendous level of knowledge and scientific resources, which we expect to utilize as we continue launching our proprietary products. We look forward to working with Dr. Colker on scientific initiatives."

Highlights & Recent Developments

During the second quarter, management continued to achieve key incremental milestones which are expected to establish a solid foundation for future growth of its business plan. Some key developments to date include:

-- Shipped initial order of Shugr(TM) products to The Vitamin Shoppe for the sale of in all of its retail locations;

-- Signed agreement with DNP International, a national distributor nutritional supplements and ingredients, for commercial sales of Shugr(TM);

-- Retained a direct response production company to develop a thirty minute infomercial for Sequestrol;

-- Recruited retired General Merrill A. McPeak as an outside member to its Board of Directors -- a 37-year veteran and former Chief of Staff of the United States Air Force; extensive experience in mission-critical planning and execution, as well as a rich background in both domestic and international affairs;

-- Added Mr. Dean Blechman, founding family member of Twin Lab to its Advisory Board -- recognized leader in the nutritional product industry; brings 25 years of experience as former Executive Vice President of Sales at Twinlab; instrumental in growing Twinlab's annual revenues; and

-- Shipped an initial order of Shugr(TM) products to GNC.

During the past six months, management concentrated on strengthening Shugr's product positioning by (i) introducing additional packaging configurations, such as its single-serving packets and re-sealable baker's bag, (ii) developing more compelling graphic package design suited for the food and mass market channels and (iii) reducing its cost of goods in order to achieve a more competitive pricing structure. "We have been methodically introducing Shugr to selected specialty retail outlets with an eye toward gathering targeted consumer feedback," commented Bill Glaser. "As a result, we are introducing Shugr in single-serving packets as well as re-sealable bags designed for baking applications. We expect to make incremental improvements in packaging, pricing and formulation prior to a mass market roll-out expected in the coming months."

Management also concentrated on further expanding the distribution channels and developing national media campaigns designed to increase market awareness for Shugr in the specialty retail channel, and then expanding to the mass market channel. "To date, Shugr has been receiving a tremendous positive response from our current retailers," commented Bill Glaser. "In fact, Shugr has been ranked the number one selling sugar substitute at The Vitamin Shoppe. Although we have initially launched Shugr in the specialty retail channel, such as Vitamin Shoppe and GNC, we expect to make Shugr available at national supermarkets and other mass market outlets. We believe that Shugr's superior attributes (natural, zero calories, great taste, diabetic friendly and bakes like cane sugar) combined with more competitive pricing will translate to blockbuster sales in mass market channels."

Second Quarter 2005 Results

The Company reported no revenue for the second quarter compared to approximately $27,000(a) ((a)adjusted to reflect the discontinued operations of XCEL Medical Pharmacy) for the same period last year and $4,000(a) for the six months ended June 30, 2005 compared to $40,000(a) during the same period in 2004. Revenues generated by sales of Swiss Research products, including sales of Shugr products, were not recognized during the six months ended June 30, 2005 as reported for GAAP purposes due to timing conditions of the Swiss Research acquisition. The company expects to report previous quarter revenues during the third quarter this year.

General and administrative expenses during the three and six months ended June 30, 2005 were $1,660,000 and $3,577,000, respectively, compared with $858,000 and $1,760,000 during the same periods in 2004, respectively. The increase in general and administrative expenses is due primarily to the increase in operations also attributable to the acquisition of Swiss Research and the assumption of its operations which included advertising and marketing expenses, the hiring of new personnel including employees, consultants and advisory fees to directors. Also included are depreciation and amortization expense, penalty fees related to financing registration statements and professional fees for legal, accounting and other consulting services.

Total interest expense was $454,000 and $623,000 for the three and six months ended June 30, 2005, respectively, compared with $146,000 and $449,000 during the same periods in 2004, respectively. The increase is mostly due to the amortization of the remaining discount under the beneficial conversion feature of the company's convertible preferred stock and the accrued interest on the convertible debentures that were converted into shares of common stock.

For the three months and six months ended June 30, 2005, the company reported an operating income from continuing operations of $609,000 and an operating loss from continuing operations of ($3,550,000), respectively, which included a pick up of approximately $2,720,000 and $646,000 for the fair value of warrant liability related to its financing activities, compared to an operating loss of ($99,000) and ($789,000) for the same periods in 2004, respectively.

The company reported a net income (loss) attributable to shareholders for the three and six months ended June 30, 2005 of $244,000 and ($3,994,000) or $0.01 and ($0.19) per share (basic and diluted), respectively, compared with a net loss of ($610,000) and ($1,792,000) or (0.04) or ($0.14) per share (basic and diluted) for the same periods in 2004, respectively.

2005 Outlook & Beyond

Management continues to focus on progressively growing revenues during the year, primarily driven by sales of Shugr(TM) and expected sales of Sequestrol(TM). Although actual revenues during the first half of the year have been lackluster, management expects revenues to increase in the balance of the year as the strong demand for Shugr translates into sales and the Sequestrol infomercial airs.

"We are continuing to work on securing distribution agreements with national retail chains, a large coffee house and several food and beverage companies," commented Fred E. Tannous. "We have extended our timeline expectations since large institutional customers typically conduct exhaustive product testing prior to placing a significant order. We are excited about the prospect of closing such deals in the coming months. In addition, we are in the process of negotiating several distribution agreements with large international conglomerates for sales of Shugr(TM) throughout Europe and Asia."

The company is still on track to launching the direct response marketing campaigns for Sequestrol(TM) with expectations for airing a 30-minute infomercial later this year. "We are excited about the progress we have made on the Sequestrol campaign. We believe that, if successful, this infomercial campaign can generate revenues in excess of $40 million," concluded Bill Glaser.

The company expects to continue exploring complementary business acquisitions or the acquisition of proprietary products, intellectual properties or enter into synergistic joint venture arrangements.

About Health Sciences Group, Inc.

Health Sciences Group identifies, develops and commercializes innovative nutritional products and functional ingredients 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, www.SwissDiet.com and www.Shugr.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.