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8-K - CURRENT REPORT - DS HEALTHCARE GROUP, INC.dskx_8k.htm

EXHIBIT 99.1


DS Healthcare Group Reports Fourth Quarter and Full Year 2014 Financial Results as Company Reports Its First Profitable Quarter


Revenue up 21% in Fourth Quarter From Same Period in 2013


POMPANO BEACH, Fla., April 15, 2015 (GLOBE NEWSWIRE) -- DS Healthcare Group, Inc. (DSKX), "DS Healthcare" or "the Company" a leading developer of personal care products has released financial results for the fourth quarter and full year for 2014.


Q4 2014 Highlights:


·

Net revenues were $ 3,706,761 up 21% over Q4 2013

·

Gross margins increase to 60.1% from 51.3% in Q4 2013

·

Gross profits increase to $2,244,930 up 43% over Q4 2013

·

Company reports net income of $227,662 compared to a loss of $(944,860) in Q4 2013

·

Adjusted EBITDAS, a non-GAAP financial measure resulted in a net gain of $1,007,847 from a loss of $(399,789) in Q4 2013


"The turn to profitability that we've achieved during the fourth quarter further demonstrates our continued efforts to provide our shareholders with solid performance. We have greatly improved our efficiency and fulfillment cycle with the expectation to realize the benefits from these recent changes and initiatives on an on-going basis. We are confident these implementations will significantly drive our domestic and international revenues. Sales within our Mexican subsidiary continue to be robust and growing, posting a 54.7 increase in the fourth quarter of 2014 over the fourth quarter of 2013. As we continue to receive international regulatory approvals, we remain very optimistic for continued revenue growth in key market segments," stated DS Healthcare President and CEO Daniel Khesin.


Net revenues were $3,706,761 for the three months ended December 31, 2014, an increase of 21% over revenues of $3,058,626 in the year-earlier period. Revenue growth in the fourth quarter was driven by higher sales from the Company's Mexican subsidiary, increased revenue from international markets and a resumption of growth in our domestic sales.


Gross margin increased to 60.6% in the fourth quarter of 2014 from 51.3% in the same quarter of the prior year. This notable increase was a result of several factors including production efficiencies, strategic cost cutting efforts, increased sales of higher margin products and lower returns due to improved product quality. Gross profits were up 43% to $2,244,930 in the fourth quarter of 2014, as compared to $1,570,423 in the year-earlier period. Selling and marketing costs increased by 12% to $1,022,814 in the recent quarter from $913,951 in the same period last year. General and administrative costs decreased by 44.4% to $958,493, as compared to $1,723,995 in the same period of 2013. DS Healthcare reported net loss narrowed by 125% to a net income of $227,662 in the fourth quarter of 2014 compared to a net loss $(944,859) in the same period of 2013.


On an adjusted EBITDAS basis, a non-GAAP financial measure, the fourth quarter of 2014 resulted in a gain of $1,007,847 compared to a loss of $(399,789) in the year-earlier period.


For the twelve months ended December 31, 2014 net revenues were $13,414,265, a 1.7% decline from revenues of $13,561,661 for the twelve months ended December 31, 2013. Net revenues decreased primarily due to a decrease in US net revenue which was offset by increases in net revenues generated through our Mexican subsidiary which grew by 31.7% that were slightly offset due to a stronger dollar compared to the Mexican peso and impacted by shipments from the fourth quarter that have rolled into the first quarter in 2015. The decrease in US net revenue was the result of a weaker-than-expected first quarter 2014 caused by product backorders and other operational challenges, while revenues from international sales experienced delays in international product registrations and a stronger dollar compared to international currencies.





Gross margin increased to 60.6% in the full year of 2014 from 49.1% in the prior year, as a result of improved production efficiencies, cost cutting efforts including payroll, improved forecasting which has led to decreased manufacturing costs and reduced product returns by improving product quality. Gross profits were up 21% to $8,133,356 in for the twelve months of 2014, as compared to $6,708,618 in 2013. Selling and marketing costs increased by 9.4% to $4,099,419 in 2014 from $3,747,213 in 2013 General and administrative costs decreased by 11% to $5,299,779 in 2014 as compared to $5,964,570 in 2013. DS Healthcare's net loss decreased by 59% to $(1,312,159) or $(0.08) per share in 2014 from $(3,225,290) or $(0.25) per share in 2013.


As of December 31, 2014 the Company had cash and cash equivalents of $1,128,556 and working capital of $3,767,179. Total stockholders' equity on December 31, 2014 was $5,138,208.


On an adjusted EBITDAS basis, a non-GAAP financial measure, 2014 resulted in a loss of $(406,271) share compared to a loss of $(1,169,338) in 2013.


"The operational challenges we were faced with in early 2014 have successfully been addressed as we made considerable changes to nearly every department. This has been a pivotal year with our resources committed to creating a platform of efficacy in preparation for significant topline growth in the near future. The early outcome was demonstrated in Q3 and Q4, and while we continue to make progress on a daily basis, we believe that we can still improve upon the potential in gross margins, profitability and sales. Our products have proven to serve as a solution to a growing number of personal care needs, and by adequately servicing our customers the opportunities are endless," Khesin started. "With the pipeline of new products expected to launch in the first half of 2015 that leverage our development expertise and innovation, we are very optimistic with the outlook for this year and beyond," Khesin concluded.


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


 

 

For Years Ended

 

 

 

December 31,

 

 

 

(unaudited)

 

 

 

2014

 

 

2013

 

GAAP Net Loss

 

$

(1,312,159

)

 

$

(3,225,290

)

Depreciation and amortization

 

 

299,983

 

 

 

607,018

 

Amortization of deferred issuance costs

 

 

 

 

 

75,891

 

Interest Expense

 

 

71,536

 

 

 

115,150

 

Loss on sale of fixed asset

 

 

 

 

 

21,637

 

Impairment of intangible assets

 

 

51,736

 

 

 

88,910

 

Bad debt allowance

 

 

(36,363

)

 

 

90,045

 

Inventory obsolescence allowance

 

 

(162,463

)

 

 

49,720

 

Stock issued for services

 

 

681,459

 

 

 

717,981

 

Loss on extinguishment of debt - shareholder

 

 

 

 

 

289,600

 

Adjusted EBITDAS

 

$

(406,271

)

 

$

(1,169,338

)


 

 

Three Months Ended

 

 

 

December 31,

 

 

 

(unaudited)

 

 

 

2014

 

 

2013

 

GAAP Net Income (loss)

 

$

227,661

 

 

$

(944,861

)

Depreciation and amortization

 

 

82,556

 

 

 

323,288

 

Amortization of deferred issuance costs

 

 

 

 

 

27,983

 

Interest

 

 

12,660

 

 

 

30,262

 

Loss on disposal of fixed asset

 

 

(7,305

)

 

 

16,511

 

Impairment of intangible assets

 

 

51,736

 

 

 

88,910

 

Bad debt allowance

 

 

23,940

 

 

 

(229,711

)

Inventory obsolescence allowance

 

 

52,312

 

 

 

37,193

 

Stock issued for services

 

 

564,285

 

 

 

250,636

 

Adjusted EBITDAS

 

$

1,007,847

 

 

$

(399,789

)





DS Healthcare Group, Inc. (dba DS Laboratories) and Subsidiaries

Consolidated Balance Sheets

(unaudited)


 

 

December 31,

 

 

 

2014

 

 

2013

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$

1,128,556

 

 

$

2,872,946

 

Accounts receivable, net

 

 

1,809,178

 

 

 

2,229,329

 

Inventories, net

 

 

3,984,528

 

 

 

2,702,579

 

Prepaid expenses and other current assets

 

 

278,714

 

 

 

289,885

 

Total Current Assets

 

 

7,200,976

 

 

 

8,094,739

 

 

 

 

 

 

 

 

 

 

Furniture and Equipment, net

 

 

206,406

 

 

 

206,958

 

Intangible Assets, net

 

 

1,101,373

 

 

 

1,346,389

 

Other Assets

 

 

88,247

 

 

 

66,506

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

8,597,002

 

 

$

9,714,592

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,229,863

 

 

$

2,230,723

 

Accrued expenses

 

 

967,112

 

 

 

945,949

 

Credit facility

 

 

350,000

 

 

 

582,383

 

Other current liabilities

 

 

886,822

 

 

 

286,282

 

Total Current Liabilities

 

 

3,433,797

 

 

 

4,045,337

 

 

 

 

 

 

 

 

 

 

Long Term Debt, net of current portion

 

 

24,997

 

 

 

36,425

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

3,458,794

 

 

 

4,081,762

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 30 million shares authorized:0 shares issued and outstanding at December 31, 2014 and 2013

 

 

 

 

 

 

Common stock, $0.001 par value, 300 million shares authorized: 16,202,268 and 15,843,005 shares issued and outstanding at December 31, 2014 and 2013, respectively

 

 

16,202

 

 

 

15,843

 

Additional paid-in-capital

 

 

14,839,695

 

 

 

14,163,595

 

Stock subscription

 

 

(2,500

)

 

 

(194,500

)

Accumulated deficit

 

 

(9,613,375

)

 

 

(8,307,420

)

Accumulated comprehensive income

 

 

(63,384

)

 

 

(12,462

)

Total Shareholders' Equity

 

 

5,176,638

 

 

 

5,665,056

 

Non-Controlling Interest

 

 

(38,430

)

 

 

(32,226

)

 

 

 

 

 

 

 

 

 

Total Shareholders' Equity

 

 

5,138,208

 

 

 

5,632,830

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

8,597,002

 

 

$

9,714,592

 





DS Healthcare Group, Inc. (dba DS Laboratories) and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss

(unaudited)


 

 

For the Year Ended
December 31,

 

 

 

2014

 

 

2013

 

 

 

 

 

 

 

 

Net Revenue

 

$

13,414,265

 

 

$

13,651,661

 

 

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

 

5,280,909

 

 

 

6,943,043

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

8,133,356

 

 

 

6,708,618

 

 

 

 

 

 

 

 

 

 

Operating Costs and Expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

 

 

 

 

 

 

 

Commissions and consulting

 

 

1,490,172

 

 

 

1,473,194

 

Other selling and marketing expenses

 

 

2,609,247

 

 

 

2,274,019

 

 

 

 

4,099,419

 

 

 

3,747,213

 

General and administrative

 

 

 

 

 

 

 

 

Salary and personnel costs

 

 

2,327,482

 

 

 

2,351,953

 

Professional fees and consulting costs

 

 

1,667,788

 

 

 

1,744,250

 

Other general and administrative expenses

 

 

1,304,510

 

 

 

1,868,367

 

 

 

 

5,299,780

 

 

 

5,964,570

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

9,399,199

 

 

 

9,711,783

 

 

 

 

 

 

 

 

 

 

Operating Loss

 

 

(1,265,843

)

 

 

(3,003,165

)

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

Loss on conversion of debt

 

 

 

 

 

(289,600

)

Interest expense

 

 

(71,536

)

 

 

(115,150

)

Other

 

 

25,220

 

 

 

278,658

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

(46,316

)

 

 

(126,092

 

 

 

 

 

 

 

 

 

Loss Before Income Taxes

 

 

(1,312,159

)

 

 

(3,129,257

)

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

 

 

 

 

96,033

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(1,312,159

)

 

 

(3,225,290

)

 

 

 

 

 

 

 

 

 

Net Loss Attributable to Non-Controlling Interest

 

 

(6,204

)

 

 

(15,859

)

 

 

 

 

 

 

 

 

 

Net Loss Attributable to Common Shareholders

 

$

(1,305,955

)

 

$

(3,209,431

)

 

 

 

 

 

 

 

 

 

Basic and Diluted Earnings per Share:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

16,066,199

 

 

 

12,711,417

 

Net Loss per share

 

$

(0.08

)

 

$

(0.25

)

 

 

 

 

 

 

 

 

 

Other Comprehensive Income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(14,893

)

 

 

(13,167

)

Comprehensive loss

 

$

(1,320,848

)

 

$

(3,222,598

)





DS Healthcare Group, Inc. (dba DS Laboratories) and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss

(unaudited)


 

 

For the Year Ended

December 31,

 

 

 

2014

 

 

2013

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net Loss

 

$

(1,312,159

)

 

$

(3,225,290

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

299,983

 

 

 

607,018

 

Amortization of deferred issuance costs

 

 

 

 

 

75,891

 

Loss on sale of fixed assets

 

 

 

 

 

21,637

 

Impairment of intangible assets

 

 

51,736

 

 

 

88,910

 

(Recovery) provision for bad debts

 

 

(36,363

)

 

 

90,045

 

(Recovery) provision for obsolete inventory

 

 

(162,463

)

 

 

49,720

 

Stock issued for services

 

 

681,459

 

 

 

717,981

 

Loss on extinguishment of debt

 

 

 

 

 

289,600

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

456,513

 

 

 

(193,733

)

Inventories

 

 

(1,119,486

)

 

 

701,651

 

Prepaid expenses and other current assets

 

 

11,170

 

 

 

(206,612

)

Accounts payable

 

 

(1,000,858

)

 

 

(296,816

)

Accrued expenses

 

 

21,163

 

 

 

241,067

 

Other current liabilities

 

 

600,541

 

 

 

58,874

 

Net cash used in operating activities

 

 

(1,508,764

)

 

 

(980,057

)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchase of furniture and equipment

 

 

(130,079

)

 

 

(46,794

)

Purchase of injection molds

 

 

(5,750

)

 

 

(35,139

)

Proceeds from sale of fixed asset

 

 

24,822

 

 

 

 

Security deposits

 

 

(32,141

)

 

 

(25

)

Net cash used in investing activities

 

 

(143,148

)

 

 

(81,958

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Net (repayments) proceeds of credit facility

 

 

(582,383

)

 

 

133,725

 

Proceeds of short term credit facility

 

 

350,000

 

 

 

 

Proceeds of shareholders' loans

 

 

 

 

 

310,000

 

Repayment of loans and notes

 

 

(11,429

)

 

 

(117,752

)

Repayments to related parties

 

 

 

 

 

17,973

 

Proceeds from sale of stock subscription

 

 

 

 

 

10,000

 

Proceeds from sale of common stock

 

 

197,000

 

 

 

421,300

 

Less issuance cost

 

 

(10,000

)

 

 

(31,260

)

Proceeds from private placement

 

 

 

 

 

2,942,000

 

Less issuance cost

 

 

 

 

 

(151,051

)

Net cash (used) provided by financing activities

 

 

(56,812

)

 

 

3,534,935

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(35,666

)

 

 

(12,462

)

 

 

 

 

 

 

 

 

 

(Decrease) Increase in Cash

 

 

(1,744,390

)

 

 

2,460,458

 

Cash, Beginning of Period

 

 

2,872,946

 

 

 

412,488

 

 

 

 

 

 

 

 

 

 

Cash, End of Period

 

$

1,128,556

 

 

$

2,872,946

 





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, salons and pharmacies. 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.






Contact:


DS Healthcare Group, Inc.


Abner Silva

407.342.4112

Abner@DSHealthgroup.com