Ds Healthcare Group Reports Fourth Quarter And Full Year 2014 Financial Results As Company Reports Its First Profitable Quarter

The following excerpt is from the company's SEC filing.

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

Adj usted 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.

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

(unaudited)

GAAP Net Loss

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

Three Months Ended

GAAP Net Income (loss)

227,661

(944,861

82,556

323,288

27,983

12,660

30,262

Loss on disposal of fixed asset

(7,305

16,511

23,940

(229,711

52,312

37,193

564,285

250,636

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

Consolidated Balance Sheets

ASSETS

Current Assets

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

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

5,632,830

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

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

Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

For the Year Ended

December 31,

Net Revenue

13,651,661

Cost of Goods Sold

5,280,909

6,943,043

Gross Profit

Operating Costs and Expenses:

Commissions and consulting

1,490,172

1,473,194

Other selling and marketing expenses

2,609,247

2,274,019

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

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

25,220

278,658

Total other income (expense)

(46,316

(126,092

Loss Before Income Taxes

(3,129,257

Income Tax Expense

96,033

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

Other Comprehensive Income:

Foreign currency translation adjustment

(14,893

(13,167

Comprehensive loss

(1,320,848

(3,222,598

Cash Flows from Operating Activities:

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

Loss on sale of fixed assets

(Recovery) provision for bad debts

(Recovery) provision for obsolete inventory

Changes in operating assets and liabilities:

456,513

(193,733

(1,119,486

701,651

11,170

(206,612

(1,000,858

(296,816

21,163

241,067

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

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

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

Proceeds from sale of common stock

197,000

421,300

Less issuance cost

(10,000

(31,260

Proceeds from private placement

2,942,000

(151,051

Net cash (used) provided by financing activities

(56,812

3,534,935

Effect of exchange rate changes on cash

(35,666

(Decrease) Increase in Cash

(1,744,390

2,460,458

Cash, Beginning of Period

412,488

Cash, End of Period

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:

Abner Silva

407.342.4112

Abner@DSHealthgroup.com

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.

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