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It was a great week, and there are
five new BLOG postings to go with it. Bad Toys (BTYH) is
the rage, up nearly 30% this past week alone. Teleplus (TLPE) finally
broke out to the upside. HyperDynamics (HDY) is behaving very well.
BrandPartners (BPTR) announced $5.5 million in new contract signings
and and the stock started moving up. Even beleaguered NeWave (NWWV)
had great news this past week, but the stock did not respond in kind. NWWV
is so blown up it will need a new audience to get rolling. The next generation
of shareholders will probably make a lot of money from these levels.
For the first time in many months
microcap stocks traded very well, and it was a welcome relief. It was as
if someone turned on the microcap spigot. Since the usual 4th quarter rally
was replaced with a 4th quarter sell off we may be poised for an out of
the norm 1st quarter rally. Gets my vote.
Read all five of them. The BLOG
is an important component of the OTC Journal service, and I strongly
recommend you read not only the postings, but the comments and questions
as well. There is as much information in the comment section as there is
in the individual editions, and more free wheeling opinions about the pros
and cons of each idea. Please visit the BLOG every few days for
the most current updates.
To use the BLOG, simply go
to the home page at www.otcjournal.com
- the BLOG will scroll down automatically on the right side of your
screen. The most current journal entries appear in the middle of your screen.
Check back frequently for updates particularly when stocks are moving to
overbought or oversold levels or in volatile markets. Your questions and
postings do not automatically appear, so don't bother posting the same
question multiple times. I personally go through to moderate and respond
to every reasonable question.
There was one problem child in and
otherwise outstanding week. They were out with news after the close on
Friday. It's time to review where we stand with this temporary and hopefully
not permanent disaster.
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Beaten Down
Health Sciences (OTC BB: HESG) Sets Stage for '06 |
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You are looking at an image which
represents the technical picture for shares of Health Sciences Group.
Yes - this stock has been flushed down the proverbial toilet.
This past summer I tried their flagship
product: Shugr®- the best sugar substitute on the planet in
my view. 3,000 of you ordered free samples, and many agreed with my assessment
of the product.
In late summer and early Fall Shugr®
started
selling in a couple of nationwide chains, and investors believed from the
rhetoric in the press releases that the product was off and running. When
the company announced Q3 sales of $19,000 and a massive loss, the stock
started selling off and hasn't seemed to find its bottom yet.
As many have pointed out, promised
revenues in '05 did not materialize. The market is clearly casting its
no vote on the credibility of this management team.
On Friday, after the close, HESG
put out a press release titled "Strategic Initiatives for 2006".
This should help to allay the market's concerns about the future of the
company, and bring everyone up to speed on where they stand with their
product roll outs.
The press release is below in its
entirety. Here's a summary:
-
Shugr®: Shugr® is now
being sold by specialty retail outlets including GNC, Vitamin Shoppe, Meijer,
drugstore.com and Amazon.com, among others. Two distribution agreements
are close to being inked- DNP has been working with numerous OEM food and
beverage manufacturers and is close to signing an agreement with annual
sales target minimums totaling $2.0 million in 2006, $4.3 million in 2007
and $5.6 million in 2008. The company claims it is also closing in on an
distribution agreement in Japan with minimum annual sales requirement of
$1.1 million in 2006, $3.5 million in 2007 and $7.5 million in 2008. In
all, early indications of interest have HESG feeling it can achieve
$10 million in sales of Shugr® this year.
-
Sequestrol®: This is their
natural cholesterol reducing product. They have reformulated Sequestrol®,
and are preparing to start the marketing campaign. They 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. Their direct response marketing
agency estimates revenues from the Sequestrol® infomercial to
range between $5 million and $11 million during 2006.
According to the press release, HESG
will turn profitable in 2006 if they can achieve these forecasts. Their
margins on these products are outstanding, so I have no trouble believing
they will deliver profits if they can get it done.
So- here's the $64,000 question-
Is the stock finally a buy? Or would you just be putting good money after
bad? I could argue both sides.
There are two clear arguments for
a buy.
-
1. In my view Shugr® is an
excellent product- far superior to anything else available on the market.
You can bake with it on a 1 to 1 basis, unlike Splenda. It is ideal for
diabetics, and Type II diabetes has become a nationwide epidemic. You could
argue it is just a question of time before the product gets broader market
acceptance.
-
2. Technically, it looks like the stock
might have achieved "capitulation". This is the final massive sell off
that freaks out the market. It is where everyone finally throws in the
towel. I believed the stock might have capitulated because of the high
volume and steepening of the downtrend. With few or no sellers left, the
stock is now positioned to begin a rebound phase.
There is one clear argument for not
buying or a sale. This year's strategic initiatives sound pretty much exactly
like last year's, and they failed to deliver on last year's promises. Credibility
is lacking. In addition, based on Q3 numbers, the company clearly has to
raise more money to get into a more robust sales cycle.
There is one reason I am leaning
more favorably towards a buy - simply because Shugr® is such
a good product. One announcement could turn the tide. Suppose a major food
manufacturer decides to use Shugr® as its sugar substitute?
Another possibility- sign the da## distribution agreements-
this would give investors comfort that 2006 will not be 2005 deja vu all
over again. If there more delays between now and the end of March my favorable
bias will turn to a sell recommendation.
The majority of shareholders who
are still stuck in this disaster will probably do nothing. Just hold their
nose and pray for a turn back up. The stock probably is not worth selling
now for a tax loss- you can always do that later in the year.
A few intrepid souls will wade in
and buy when the rest of the market has written the company off. They stand
a chance to make the most money because they are not afraid to buy at the
point of maximum pessimism.
Here's the complete text of Friday's
news. Read it, and decide for yourself. You have the facts:
| Press Release Source:
Health Sciences Group, Inc.
Health Sciences Group
Announces Strategic Initiatives for 2006
Friday January 6, 4:00
pm ET
LOS ANGELES--(BUSINESS
WIRE)--Jan. 6, 2006--Health Sciences Group, Inc. (OTCBB:HESG - News), provider
of innovative nutraceutical products and functional food ingredients derived
from natural sources, announced today its strategic initiatives for 2006.
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®, our zero-calorie,
low glycemic sweetener that tastes and measures like table sugar, planning
and positioning the upcoming launch of Sequestrol®. 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®
and Sequestrol®. 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®:
During 2005, Shugr®
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® has received to date gives us confidence
that we will be able to continue our growth in fiscal 2006 both domestically
and abroad.
Shugr® 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® 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® 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®
to ramp up dramatically in 2006 and based on preliminary indications of
interest could approach the $10 million level.
With regard to Sequestrol®:
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®. We plan to offer a more comprehensive
cardiovascular health benefit than our originally formulated version. Our
new advanced Sequestrol® 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® 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®
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® infomercial to range between
$5 million and $11 million during 2006.
Assuming we can achieve
our targets for Sequestrol® and Shugr® 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®,
a disease-fighting super antioxidant developed at Cornell University; Edible
Sponges® 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® 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.
Contact:
Health Sciences Group,
Inc.
Duke Best, 310-242-6700
Source: Health Sciences
Group, Inc. |
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