Response to NY Post Article Concerning Victor Cosmeceuticals

Friday, October 3, 2008 General News
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NEW YORK, Oct. 2 The following is a statement issued by Victor Cosmeceuticals:

Dear Shareholder and Friend,

RE: NY Post Article "Celeb Doc in Hock"

Many of the facts included in the article that appeared in The New York Post September 15, 2008 about Victor Cosmeceuticals (VCI), Dr Steven Victor and Anna Rhodes are completely false and not founded on facts. The writer NEVER spoke to anyone at the company.

Please review the following for the facts as they stand legally with the company, Victor Cosmeceuticals.

-- The article states that Dr Victor has "been sued in both federal and state court by a group of Texas investors who gave him a $2.5 million cash injection."

Answer: This is untrue in that the loan was made into an illegal Public Company that is Victor Cosmeceuticals, Nevada and not Victor Cosmeceuticals, New York. The Company has settled with Don Sanders et al (who is now a shareholder) and the only lawsuit remaining is with regard to a $1.3M SBA loan to VCI, Nevada which is a different company than the operating company, VCI, New York. This was a reverse merger that went bad and had to be unwound.

-- In the article it states that "Virtually as soon as the ink was dry" on the deal, the Manhattan federal suit claims, Victor and his socialite wife, Anna Rhodes, used $43,000 of the proceeds on a trip to Paris, staying at "one of Europe's most expensive resorts."

Answer: Dr. Victor and Ms. Rhodes traveled to Paris and London to open up the retail accounts of Harvey Nichols, London and Harvey Nichols, Dubai, and to generate press for the products; the results of this PR were that The Company acquired the additional retail accounts of Fenwick's and Selfridges, both in London as well as various websites. They also met with Sephora and numerous distributors in Paris and London. These accounts still actively sell products as do several of the websites. The Company also opened up accounts in Greece as a result of this trip. Furthermore, The Company did not spent $43,000 on this trip. Dr. Victor and Ms. Rhodes used their personal American Express since the company does not have a corporate AMEX. All expenses were documented by the company's accounting firm.

-- In the article it states that the Victors "allegedly used another $49,000 to pay off their personal American Express bill."

Answer: This is not true since Dr. Victor and Ms. Rhodes used a personal American Express account for the business. The corporate accounting firm of RSSM has verified all as true business expenses.

-- In the article it states that "in the first three months after the deal closed, the Victors -- operating at the time as Victor Cosmeceuticals, Inc. -- racked up $600,000 in unauthorized personal expenses, according to the suit."

Answer: This is not true. All expenses have been verified as true business related expenditures and were verified by the corporation's accounting firm of RSSM. All business receipts were supplied.

-- In the article it states that "at the time, Rahr had a judgment against Victor for an unpaid loan."

Answer: This was not a loan, but an investment that he wanted to retract weeks later. He was repaid in full.

-- In the article it states that "the Victors defaulted on $1.3 million of their debt in July 2006 and the balance in January 2007."

Answer: Not true at all. The Victors do not have $1.3M in debt. There is only the SBA loan to VCI, Nevada that is in question in court.

-- In the article it states that "in May that year, the Victors shuttered VCI and re-invented it as Victor Products Inc., the state suit claims."

Answer: VCI was sold to VPI under an asset purchase agreement as Victor Products, Inc. was supporting VCI. Victor Products also owns new acne technology, a home microdermabrasion unit and is producing two infomercials. VCI is a small part of Victor Products.

Following are the details of the company's transactions with regard to the public reverse merger:

The Company bought a proposed public shell, HiTech Zonal (Public Co) and merged Victor Cosmeceuticals, NY into this shell at the legal and banking advice of Gusrae Kaplan et al and Sanders, Morris and Harris. As our council and advisers, they approved the deal and compiled the documents accordingly. As things progressed, The Company found out that this was not a public company at all; it was a private company with over 2000 shareholders, and The Company would have had to go through pink sheet registration and other filings for the OTC bulletin board. The company hired a Nevada lawyer to register the company to be on pink sheets and other filings and, as a result, learned that taking this company public was not possible. Since Zonal was a spin-off of one of Moe Diamond's companies, and Moe Diamond had pending problems with the SEC and Attorney General, the company could not be taken public. Thus, The Company legally unwound the shell deal with the council of Reed Smith Law Firm and took VCI, NY private again.

The Company raised money via a Private Placement done by Sanders, Morris and Harris. The planned raise was in the amount of $3M and would go into the shell company (now renamed Victor Cosmeceuticals, Nevada), but Sanders, Morris and Harris could only raise $1.2M in equity. They advised The Company to take on an SBA loan with Trident Growth Fund in the amount of $1.3M for Victor Cosmeceuticals, Nevada. The Company was charged enormous fees for this transaction: SMH $200,000; GK $340,000; Advisors $90,000; and repayment of a loan to the corporate lawyer in the amount of $100,000. After the exorbitant fees were paid, The Company only netted $1.77M.

The Trident Growth Fund initiated a lawsuit against VCI, Nevada claiming misappropriation of funds for personal use by the Victors. The Company and the Victors never used these funds for personal use, and has counter sued Trident for a fraudulent loan as The Company's corporate attorney was on the Board of Directors of the Public Company that owns 21% of Trident. This conflict of interest was never revealed to The Company, and Gusrae Kaplan, and Sanders and Morris Harris approved the transaction, even though The Company should never have had an SBA loan.

The Company has continued raising money for VCI, NY and has moved the business forward in sales and distribution. The rejuvenation center has been funding any cash flow shortages of VCI, NY. Victor Products Inc., was formed to acquire the assets of Victor Cosmeceuticals, New York and other product assets (such as the Clear Skin Acne Treatment line, LaserScuplt Infomercials and a Home Microdermabrasion Unit). The rejuvenation center will be rolled up into VPI pending the completion of the next round of funding. These efforts continue to create more shareholder equity.

SOURCE Victor Cosmeceuticals

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