Dear friends, Starting with the most obvious and illustrious news, no doubt our shareholders noticed a recent rally in our stock price. The last time I wrote to you, there was confusion and panic among our shareholders as our stock made its decline to record lows. At that time I indicated that I believed our stock is “spectacularly undervalued” since our market capitalization has declined below our annual revenue levels. Naturally stocks are driven by forces that cause their short term movements to be erratic and even more so for development stage companies of our size. And we think that a clear and open communication strategy with shareholders can help shed more light on the issue. As we clearly cannot control the stock price in the short term, we can share our thoughts about market mechanics and how we perceive them from the standpoint of looking from the inside. And then we can indicate how we believe the stock price can move over time, as it surely must reflect the intrinsic value of our business in the long run. Today we are also faced with confusion, although this time on more positive news. The question on everyone’s mind is “what is going on with the stock” and “why is it going up so fast”? Before I was fielding calls from shareholders asking if the company was headed for disaster and now I am being asked what is happening with the stock with a very excited tone. Indeed, DSKX has nearly tripled in price in about 6 weeks. How many other stocks on the Nasdaq had this performance? Many of you are probably wondering why this is happening and what is likely to keep happening moving forward. Without going into any details of our business operations, let’s look at the fundamentals behind the stock itself as we perceive it. First, going back to the very beginning, DS Healthcare did not go public and list on the Nasdaq the typical way that most companies do via a traditional IPO. We went public with a small group of angel investors who provided early capital and we internally filed all of the documentation with the SEC. There was no investment bank behind us and no retail or institutional investors who knew that DS Healthcare even existed. Even though this structure allowed us to go public and achieve our goals; one of the unfortunate disadvantages was that there was no trading market for our stock. For a long time liquidity was almost zero and our press releases were not read by anyone. It was like putting a billboard in the middle of the forest. With very few shareholders and no trading market for the stock, any selling would create tremendous pressure on the price. We believe that part of the decline that we have seen last year is related to these mechanisms. But it is only a matter of time before more and more people discover DS Healthcare and as our shareholder base gets bigger and bigger. As evidenced by roughly a 500% increase in liquidity recently, we are on the radar with many more retail investors and institutional investors alike. As research coverage ensues and relationships within the financial community mature and strengthen, our liquidity is only likely to increase further. Because our capitalization structure is rather small and there are just not that many shares available, rapid price movements are possible especially when the increased liquidity is combined with exciting developments in our business. In my humble opinion, what we are seeing now is actually not a huge jump in the price of our stock, although on a percentage basis any security that nearly triples in price is considered a huge move. Rather, all that has happened is that the stock is returning to its previous levels and is currently still well below its all-time high of $4.60 of March 2011 when our company was quite a bit smaller than it is today. And as I indicated before, we feel no different about it today and we believe that at current levels seen this week our stock is still significantly underpriced. Among all the excitement I hope our shareholders don’t miss the big picture – we have a long way to go and this is just the beginning. How much higher can it go from current levels? I certainly don’t have a crystal ball nor do we have any way of controlling the price of the stock but we would not think it has done well until we see prices that surpass the $4.60 level of 2011 and given the current increase in awareness, liquidity that has increased almost exponentially (in the last 30 days we had two trading days where volume has exceeded 1 million shares which has never happened in the history of the company), and the value of our business operations both present and future, I believe that we are nowhere near where this might go. Another way to look at your investment in DS Healthcare is that you are holding an option that never expires in an exciting and dynamic company with a real business and products that set new boundaries. It should be easy to see the incredible upside potential as these products gain awareness and more people discover the benefits. You might pay $4 for an option in a $100 stock which will expire in 3 months on a chance that the stock might go up. Today, with DS Healthcare you can own our stock for just over $2 and keep it as long as you like and be part of this exciting journey. This year we continue to optimize every facet of our infrastructure to increase efficiency, improve management, streamline integration with our distributors, and to extract value from the extensive pipeline of product innovation. Some of the projects that we are working on include: - - - - - - - We have introduced Integra, which is the first tablet ever to contain the Astressin-B peptide. It is expected to have a very high level of clinical acceptance in markets where our products are recommended and sold by physicians. Unlike other supplements on the market which are based on vitamins and minerals and have no physiological mechanism to produce any results, the composition of Integra is based on completely novel compounds from leading edge biotech research. We have launched and started shipping Continuum, a completely new technology that completely prevents damage to hair during professional chemical services. This is such an exciting product that it was recently endorsed by Jen Atkin, a legendary celebrity stylist with a massive following. The bottom line is this; if you own a salon and do color and other chemical services once you use Continuum there is no way to stop using Continuum. We are introducing the industry’s most sophisticated rewards program in partnership with Blackhawk. This solution that took us almost a year to set-up and customize will enable us to engage everyone within our distribution network, all the way through to the retail floor. More on this will be revealed in an upcoming press release. On existing products, we have now achieved complete stability and batch to batch consistency. In previous years, we have lost a lot of business due to variations in product batches. We can now regain some of these lost customers. Our Spectral.Lash eyelash stimulator has been further refined under the research development efforts of Dr. Brijesh Patel. I have been using the product in one eye, leaving the other as control, and my right eye has way longer and thicker lashes that now can be had in half the time of previous version. (Anyone who wants to see proof, send me an email and I will send you a picture). We continue to have the most comprehensive product portfolio within the hair loss/thinning hair category. Our products keep advancing the science of personal care and deliver much greater efficacy than our competitors. If you have doubts and haven’t yet tried our products, now is the time. Every shareholder should at least be using our Revita shampoo, a product that is ideal for anyone. We continue to strengthen our brand awareness in certain foreign markets. In Mexico, our team of medical reps has established a valuable business model that will allows us to capitalize on other product categories in the near future. Overall we are very optimistic about the future and wholeheartedly believe that our diversified approach within the clinical and personal care segments will deliver big gains for our shareholders. As always, I am personally available to each of you. You can call me directly on 347-276-2598 or email me at [email protected]. We thank you all for your continuing support. We believe the best is yet to come. Sincerely, Daniel Khesin Chief Executive Officer