DS Healthcare Group Reports Third Quarter 2014 Financial Results As Company Reaches EBITDAS Profitability

Gross margins increase to 75%

Pompano Beach, Fla., Nov. 17, 2014 — DS Healthcare Group, Inc. (DSKX), a leading developer of personal care products, today announced financial results for the three and nine months ended September 30, 2014.

Q3 2014 Highlights:

• Net revenues were $3,278,000, up 2.4% over Q3 2013

• Gross margins increase to 75.1% from 55.1% in Q3 2013

• Gross profits increase to $2,464,000 up 39.8% over Q3 2013

• Net loss narrows 94.8% to $(54,000) from Q3 2013

• Adjusted EBITDAS, a non-GAAP financial measure resulted in a net gain of $94,000 from a loss of $777,865 in Q3 2013

“The 20 points improvement in gross margin that we’ve achieved during the quarter reflects our solid execution on the goals we set in an effort to focus on and improve our profitability. As we continue to effectively address our operating efficiencies, the filling and shipping of open orders will experience a quicker turn around, and we believe this will significantly increase our domestic revenues. Our international sales growth is currently driven by our Mexican subsidiary which posted a 24% increase in the third quarter of 2014 over the third quarter of 2013. As more regulatory licenses are granted for our products in other international markets, we expect a greater increase in international sales. We look forward to closing out a strong year and have over $2.9 million in orders so far this quarter and are on track to deliver on our revenue target for 2014 that is in-line with our 6-year historical yearly revenue increase, thereby establishing strong momentum to carry us into 2015,” stated DS Healthcare President and CEO Daniel Khesin.

“Our efforts to become profitable are paying off and we believe that we have turned an important corner and are positioned to continue to show improved profitability in the coming quarters,” Khesin concluded.

Net revenues were $3,278,117 for the three months ended September 30, 2014, an increase of 2.4% over revenues of $3,200,189 in the year-earlier period. Revenue growth in the third quarter was driven by higher sales from the Company’s Mexican subsidiary. This growth was partially offset by a reduction in domestic sales due to $1 million in open orders that are scheduled for delivery during the fourth quarter.

Gross margin increased to 75.1% in the third quarter of 2014 from 55.1% in the same quarter of the prior year. This dramatic increase was a result of several factors including production efficiencies, improved pricing from suppliers, and strategic cost cutting efforts. Gross profits were up 39.8% to $2,464,446 in the third quarter of 2014, as compared to $1,762,426 in the year-earlier period. Selling and marketing costs decreased by 22.8% to $912,345 in the recent quarter from $1,181,897 in the same period last year. General and administrative costs increased by 22.5% to $1,668,807, as compared to $1,362,341 in the same period of 2013. DS Healthcare’s net loss narrowed by 94.8% to $54,496 or $0.00 per share in the third quarter of 2014 from $1,053,406 or $0.08 in the same period of 2013. On an adjusted EBITDAS basis, a non-GAAP financial measure, the third quarter of 2014 resulted in a gain of $94,018 compared to a loss of $777,865 in the year-earlier period.

For the nine months ended September 30, 2014 net revenues were $9,707,504, a 8.4% decline from revenues of $10,593,035 for the nine months ended September 30, 2013. Net revenue growth by the Company’s Mexican subsidiary was offset by a decrease in sell-through in foreign markets due to pending regulatory licensing and a decline in recorded domestic sales due to backorders that were pending completion and shipments.

Gross margin increased to 60.7% in the first nine months of 2014 from 48.5% in the same period of the prior year, as a result of improved production efficiencies, improved cost from suppliers, and cost cutting efforts including payroll. Gross profits were up 12% to $5,888,426 in the first nine months of 2014, as compared to $5,138,195 in the first nine months of 2013. Selling and marketing costs increased by 8.6% to $3,076,605 in the nine months ended September 30, 2014 from $2,833,262 in the same period last year. General and administrative costs increased by 2.4% to $4,341,287 in the first nine months of 2014, as compared to $4,240,575 in the same period of 2013. DS Healthcare’s net loss decreased by 32.4% to $1,533,617 or $0.10 per share in the first nine months of 2014 from $2,268,463 or $0.19 per share in the same period of 2013.

On September 30, 2014 the Company had cash and cash equivalents of $493,947 and working capital of $3,306,741. Total stockholders’ equity on September 30, 2014 was $4,863,008.

Adjusted EBITDAS

We believe Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-Based Compensation (“Adjusted EBITDAS”), a non-GAAP financial measure, is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary for different companies for reasons unrelated to overall operating performance. We believe that:

• Adjusted EBITDAS provides investors and other users of our financial information consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and

• Adjusted EBITDAS is useful because it excludes non-cash charges, such as depreciation and amortization, stock-based compensation and one-time charges, which the amount of such expense in any specific period may not directly correlate to the underlying performance of our business operations and these expenses can vary significantly between periods

We use Adjusted EBITDAS in conjunction with traditional GAAP measures as part of our overall assessment of our performance, to evaluate the effectiveness of our business strategies and to communicate with our lenders, stockholders and board of directors concerning our financial performance.

Adjusted EBITDAS should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies may calculate these measures differently than we do. We compensate for the inherent limitations associated with using Adjusted EBITDAS through disclosure of these limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDAS to the most directly comparable GAAP measure, specifically net loss.

The following provides a reconciliation of net loss to Adjusted EBITDAS:

        30-Sep-14 30-Sep-14  
        3 mos 9 mos  
Net Loss       (54,496) (1,539,821)  
Non-GAAP adjustments:          
Interest expense, net     8,888 58,876  
Taxes       (13,332) 18,194  
Depreciation and amortization     67,006 192,081  
Stock-based compensation     85,952 492,805  
Adjusted EBITDAS     94,018 (777,865)  

About DS Healthcare Group

DS Healthcare Group Inc. leads in the development of biotechnology for topical therapies. It markets through online and specialty retailers, distributors, cosmetics wholesalers, and salons. Its research has led to a highly innovative portfolio of personal care products and additional innovations in pharmaceutical projects.

For more information on DS Health Group’s flagship brand, visit www.dslaboratories.com

Forward-looking statements

Except for statements of historical fact, the matters discussed in this press release are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. “Forward-looking statements” describe future expectations, plans, results, or strategies, and are generally preceded by words such as “future,” “plan” or “planned,” “expects,” or “projected.” These forward-looking statements reflect numerous assumptions and involve a variety of risks and uncertainties, many of which are beyond the company’s control that may cause actual results to differ materially from stated expectations. These risk factors include, among others, limited operating history, difficulty in developing and marketing products, intense competition, and additional risks factors as discussed in reports filed by the company with the Securities and Exchange Commission, which are available at http://www.sec.gov

For more information, contact:
Laurel Moody Corporate Profile, 1.646.810.0608

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