DS Healthcare Calls For Federal Government to Take Action to Protect Shareholders

Terminated President Violated Federal Securities Laws and Unlawfully
Seized Control of the Company; Chief Financial Officer Steps Down

POMPANO BEACH, Fla.–(BUSINESS WIRE)–The board and management of DS Healthcare Group (NASDAQ:DSKX) (“DS
Healthcare” or “the Company”) calling for Federal Government to take
action to protect shareholders after the former President of the
Company, who was terminated for cause, violated Federal securities laws
and unlawfully seized control of the Company.

The Company responded today to a series of press releases distributed by
Accesswire and GlobeNewswire by Daniel Khesin, after the Board learned
that he, among other things, had engaged self-dealing and acting against
his fiduciary responsibilities as an officer of the Company

On March 17, 2016, the independent members of the Board of Directors,
consisting of all of the members of the Board other than Daniel Khesin,
among other things, unanimously terminated Mr. Khesin as President of
the Company for cause.

Such action was based on documentary evidence obtained by the audit
committee and through a series of employee interviews conducted by a
third party, investigative team. Action for termination for cause was
provided at the recommendation of independent legal counsel that
specializes in SEC investigative work, which had been engaged by the
audit committee, that demonstrated that Mr. Khesin engaged in a series
of questionable stock transactions without board authorization, engaged
in self-dealing and potentially engaged in transactions designed to
artificially inflate the price of DSKX common stock. Evidence was
disclosed to The U.S. Securities and Exchange Commission (“SEC”), which
has requested more information and documents from the Company and has
requested that all evidence be preserved at this time. In addition to
the evidence disclosed to the SEC, the board also determined that there
were other significant findings and documentation that demonstrated that
Mr. Khesin acted against his fiduciary responsibilities as an officer of
the company.

Both prior and subsequent to his dismissal, Mr. Khesin engaged in
totally inappropriate conduct, including an illegal campaign of
self-help, additional violations of the federal securities laws, as well
as intimidation and defamation against Board members, management and
outside professionals.

The Company noted that in what appears to be an aggressive and harmful
attempt to impair the health of the Company and all associates, Mr.
Kehsin’s recent actions included the following:

  • On March 31, 2016 Mr. Khesin advised the Company and filed a press
    release, announcing that he had solicited and obtained so-called
    “voting agreements,” allegedly from individuals who, together with
    him, own a majority of the outstanding common stock of the Company.
    Mr. Khesin claimed that these voting agreements authorized him to vote
    their shares and that he did so to dismiss the entire Board of
    Directors. Mr. Khesin claimed that he would be selecting a new Board
    as the majority shareholder. Mr. Khesin took these actions in order to
    forcibly take over the Company. But in taking this action, Mr. Khesin
    violated federal securities law. First, he failed to comply with Rule
    14A of the Securities Exchange Act, which required full disclosure of
    all of the relevant facts and circumstances (including the alleged
    basis for his removal from the Company). By failing to comply with
    federal disclosure law, the so called “voting agreements” that Mr.
    Khesin relied upon to claim majority ownership of the company shares
    were invalid;
  • Mr. Khesin violated federal securities law by failing to properly
    notice and conduct a shareholder’s meeting prior to his purported
    action to terminate the Board. Pursuant to Section 14f of the
    Securities Exchange Act, Mr. Khesin was required to either notice and
    conduct a shareholder’s meeting or, in the alternative, file an
    information statement with the SEC and only after the expiration of 10
    days after the filing of a proper statement, could action be taken
    without a shareholder’s meeting to change the majority of the
    composition of the Board. Mr. Khesin and his counsel have been placed
    on notice of their violation of federal securities law and of the fact
    that the Board has not been terminated nor does he have the right to
    install a new Board at this time. These events have also been reported
    to the SEC.
  • During the afternoon of March 31, 2016, Mr. Khesin instructed the
    Company’s IT consultant to lock access to Company’s file server for
    Ms. Barch-Niles and Mark Brockelman, Chief Financial Officer. In
    addition, Mr. Khesin, without any authorization, broke into their
    emails. Mr. Khesin and his consultant took these actions even after
    Mr. Khesin confirmed that no action had been taken to terminate
    management. Thus, Mr. Khesin interfered with management’s ability to
    perform its functions at a most critical time. Despite repeated
    demands that management be given full access to the computer network
    so that they can perform their work, Mr. Khesin has refused to give up
    his total and exclusive control of the Company’s information system.
  • After seizing control of the Company’s information system, Mr. Khesin
    began searching for, taking and using highly confidential and
    privileged emails and other documents to continue his attack on the
    Board, and its outside advisers. Mr. Khesin conducted a meeting of the
    employees of the Company on April 1, 2016, at which time he referred
    to the allegations made against him and the evidence that he had seen.
    He claimed the allegations were false. However, to date, he has
    refused to subject himself to an interview under oath to explain his
    conduct and he has failed to report his actions to the SEC. Instead,
    he has hidden behind his campaign of sending out false emails and
    press releases;
  • On April 2, 2016, Mr. Khesin issued a press release that defamed the
    head of the Company’s audit committee and Chief Executive Officer.
    After hacking the Company’s email, Mr. Khesin used a privileged and
    confidential email from outside counsel which had included a
    preliminary suggestion of future actions from one of the independent
    legal advisors of the Company that could be submitted to the
    shareholders for approval of incentive compensation in light of the
    work that would be required to repair the serious damage caused to the
    Company by Mr. Khesin’s illegal conduct. Mr. Khesin falsely
    characterized counsel’s preliminary suggestion as some type of
    “conspiracy” to issue substantial shares of Company stock. Indeed,
    counsel’s, preliminary suggestion was never pursued or even verbally
    discussed nor was it presented to the board or shareholders in any
    form or fashion. However, Mr. Khesin made no effort to inquire about
    the suggestion; rather he decided that it would be in his best
    interest to publish a false and misleading press release clearly
    designed to obtain support for his ongoing improper activities. It is
    also well noted that Management already has been promised substantial
    shares over a four year period that are publicly recorded in their
    employment agreements that Mr. Khesin himself signed on behalf of the
    Company. It is also noted that share issuances duly owed and earned
    have not been issued to management, however properly accrued, because
    the Company’s total focus has been on how to protect the Company and
    its shareholders from the serious damages caused by Mr. Khesin. As
    part of the Company’s annual and ongoing process, outside counsel, the
    Board and Management will continue to review and revisit all incentive
    and benefit packages for management and all associates. For example,
    after substantial work and research, the Company employed a new
    benefit package for all associates based on the annual required
    insurance renewal dates.

The Company further reports that on April 2, 2016, Mark Brockelman has
tendered his resignation as the Company’s Chief Financial Officer. That
event will be separately disclosed in a Form 8-K.

The Company, through its independent counsel, has requested an immediate
meeting with the SEC so that the federal regulators fully understand the
illegality of Mr. Khesin’s actions and the need for the federal
government to take action to protect the shareholders.

The Company also intends to file an action in U.S. District Court to,
among other things, restrain Mr. Khesin from continuing his unauthorized
conduct pending the results of the SEC’s investigation.

About DS Healthcare Group

DS Healthcare Group Inc. is engaged in the development of biotechnology
for topical therapies. It markets through online channels, specialty
retailers, distributors, pharmacies, 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 www.sec.gov

Contacts

For DS Healthcare Group Inc.
ICR
Phil Denning, Anton Nicholas,
Alecia Pulman
203-682-8200
Phil.Denning@icrinc.com
Anton.Nicholas@icrinc.com
Alecia.Pulman@icrinc.com

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