Aug 15, 2017, CAPC
OTC Disclosure & News Service
–
Capstone Companies, Inc. (OTC: CAPC) (“Capstone” or the “Company”), a designer of innovative LED lighting solutions including power failure lighting, today reported its financial results for the second quarter 2017.
Stewart Wallach, Capstone’s CEO, commented, “Our record revenue and solid profitability delivered in the quarter, further demonstrates Capstone’s abilities to execute its growth strategy. The Company’s momentum continues to strengthen as our product placements continue to expand.”
| Second Quarter Financial Summary | ||||||||||||
| ($ in thousands, except per share data) | ||||||||||||
| Q2 2017 | Q2 2016 | Change | % Change | |||||||||
| Revenue | $ | 10,220 | $ | 8,902 | 1,318 | 14.8 | % | |||||
| Gross profit | 2,643 | 2,129 | 514 | 24.1 | % | |||||||
| Gross margin | 25.9% | 23.9% | ||||||||||
| Operating income | 1,339 | 1,161 | 178 | 15.3 | ||||||||
| Operating margin | 13.1% | 13.0% | ||||||||||
| Net income before tax | $ | 1,303 | 1,094 | 209 | 19.1 | % | ||||||
| Net income | 901 | 1,082 | (181 | ) | (16.7 | %) | ||||||
| Earnings per diluted share | $ | 0.019 | ($0.022) | NM | NM | |||||||
Revenue growth in the second quarter of 2017 was the result of strong demand for the Company’s branded products including Capstone Lighting®, Hoover® Home LED and Duracell®.
Gross profit was 25.9% of revenue up 2% from the prior year period, resulting from the improved blended margin with the launch of the new products. Total operating expenses increased to $1.3 million from $967 thousand in the prior year period, due to the higher revenue volume and increased investment in promoting our licensed brands.
Diluted earnings per share was $0.019 in the second quarter of 2017.
| 2017 First Half Financial Summary | ||||||||
| ($ in thousands, except per share data) | ||||||||
| 1H 2017 | 1H 2016 | Change | % Change | |||||
| Total revenue | $16,972 | $10,980 | 5,992 | 54.6% | ||||
| Gross profit | 4,222 | 2,742 | 1,480 | 54.0% | ||||
| Gross margin | 24.9% | 25.0% | ||||||
| Operating income | 1,726 | 1,120 | 606 | 54.1% | ||||
| Operating margin | 10.2% | 10.2% | ||||||
Net income before tax | $ 1,682 | 996 | 686 | 68.9% | ||||
| Net income | 1152 | 983 | 169 | 17.2% | ||||
| Earnings (loss) per diluted share | $ 0.024 | $0.020 | NM | NM |
Financial results for the first half of 2017 improved significantly over the prior-year period, reflecting the successful introduction of new products and the consumer acceptances of Hoover® Home LED and Duracell® brands. Compared to the same period 2016, revenue increased by nearly $6 million or 54.6%, Gross profit increased by $1.480 million or 54% up to $4.2 million and Net income before tax increased by $68 thousand or 68.9% up to $1.682 million.
Diluted earnings per share was $.024 up from $.020 in the same period last year.
Mr. Wallach added, “Our expanded product portfolio and related branding strategy drove record setting revenues and strong gross profit year to date. We are particularly pleased to report stable gross margins as our growth strategy is executed. Moreover, management is encouraged by the backlog buildup and look forward to maintaining momentum thru Q3. This is an exciting time for Capstone as the challenge of delivering growth, profitability continues to be met.”
Webcast and Teleconference to Review Results and Outlook
The Company will host a live webcast and conference call on Tuesday, August 15, 2017 at 10:30 a.m. Eastern Time. During the call, management will review the financial and operating results and discuss the Company’s corporate strategy and outlook. The conference call can be accessed by dialing (201) 689-8562. The listen-only audio webcast can be monitored at www.capstonecompaniesinc.com.
A telephonic replay will be available from 1:30 p.m. Eastern Time the day of the teleconference until Tuesday, August 22, 2017. To listen to the replay of the call, dial (412) 317-6671 and enter replay pin number 13664215. Alternatively, the archive of the webcast will be available on the Company’s website at www.capstonecompaniesinc.com. A transcript will also be posted to the website, once available.
About Capstone Companies, Inc.
Capstone Companies, Inc. is a public holding company that engages, through its wholly-owned subsidiaries, Capstone Industries, Inc., Capstone Lighting Technologies, LLC, and Capstone International HK, Ltd., in the development, manufacturing, logistics, and distribution of consumer and institutional products, including the Hoover® HOME LED lighting product line, to accounts throughout North America and in international markets. See www.capstonecompaniesinc.com for more information about the Company and www.capstoneindustries.com for information on our current product offerings.
The Hoover trademark and logo are registered trademarks of Techtronic Floor Care Technology Limited and are used under license by Capstone Industries, Inc. All rights reserved.
© 2017 DURACELL Bethel, CT 06801. DURACELL is a registered trademark of Duracell U.S. Operations, Inc., used under license. All rights reserved.
FORWARD-LOOKING STATEMENTS:
This news release contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995, as amended. Such statements consist of words like “anticipate,” “expect,” “project,” “continue” and similar words. These statements are based on the Company’s and its subsidiaries’ current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include consumer acceptance of the Company’s products, its ability to deliver new products, the success of its strategy to broaden market channels and the relationships it has with retailers and distributors. Prior success in operations does not necessarily mean success in future operations. The ability of the Company to adequately and affordably fund operations and any growth will be critical to achieving and sustaining any expansion of markets and revenue. The introduction of new products or the expanded availability of products does not mean that the Company will enjoy better financial or business performance. The risks associated with any investment in Capstone Companies, Inc., which is a small business concern and a “penny-stock Company” and, as such, a highly risky investment suitable for only those who can afford to lose such investment, should be evaluated together with the risks and uncertainties more fully described in the Company’s Annual and Quarterly Reports filed with the Securities and Exchange Commission. Capstone Companies, Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Contents of referenced URLs are not incorporated into this press release.
FINANCIAL TABLES FOLLOW. THE FOLLOWING SUMMARY FINANCIAL STATEMENT SHOULD BE READ ALONG WITH THE FORM 10-K FINANCIAL STATEMENT FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION.
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | |||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||
| Revenues, net | $ | 10,219,548 | $ | 8,902,189 | $ | 16,971,744 | $ | 10,980,403 | |||||||||
| Cost of sales | (7,576,685 | ) | (6,773,465 | ) | (12,749,413 | ) | (8,238,123 | ) | |||||||||
| Gross Profit | 2,642,863 | 2,128,724 | 4,222,331 | 2,742,280 | |||||||||||||
| Operating Expenses: | |||||||||||||||||
| Sales and marketing | 564,519 | 352,854 | 941,275 | 415,833 | |||||||||||||
| Compensation | 353,904 | 316,011 | 713,706 | 624,469 | |||||||||||||
| Professional fees | 115,381 | 71,057 | 320,183 | 175,342 | |||||||||||||
| Product development | 66,447 | 63,908 | 138,473 | 100,182 | |||||||||||||
| Other general and administrative | 204,063 | 163,656 | 382,681 | 306,411 | |||||||||||||
| Total Operating Expenses | 1,304,314 | 967,486 | 2,496,318 | 1,622,237 | |||||||||||||
| Net Operating Income | 1,338,549 | 1,161,238 | 1,726,013 | 1,120,043 | |||||||||||||
| Other Income (Expense): | |||||||||||||||||
| Interest Income | – | – | 12,945 | – | |||||||||||||
| Interest expense | (35,186 | ) | (66,424 | ) | (56,917 | ) | (124,159 | ) | |||||||||
| Total Other Income (Expense) | (35,186 | ) | (66,424 | ) | (43,972 | ) | (124,159 | ) | |||||||||
| Income Before Tax Provision | 1,303,363 | 1,094,814 | 1,682,041 | 995,884 | |||||||||||||
| Provision for Income Tax | (402,000 | ) | (12,600 | ) | (530,000 | ) | (12,600 | ) | |||||||||
| Net Income | $ | 901,363 | $ | 1,082,214 | $ | 1,152,041 | $ | 983,284 | |||||||||
| Net Income per Common Share | |||||||||||||||||
| Basic | $ | 0.019 | $ | 0.022 | $ | 0.024 | $ | 0.020 | |||||||||
| Diluted | $ | 0.019 | $ | 0.022 | $ | 0.024 | $ | 0.020 | |||||||||
| Weighted Average Common Shares Outstanding | |||||||||||||||||
| Basic | 46,694,058 | 48,132,664 | 47,155,592 | 48,132,664 | |||||||||||||
| Diluted | 47,055,446 | 48,290,373 | 47,473,829 | 48,290,373 | |||||||||||||
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| June 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 1,173,996 | $ | 1,646,128 | ||||
| Accounts receivable, net | 4,856,621 | 4,449,179 | ||||||
| Inventory | 267,266 | 366,330 | ||||||
| Prepaid expenses | 1,361,162 | 330,020 | ||||||
| Total Current Assets | 7,659,045 | 6,791,657 | ||||||
| Property and Equipment: | ||||||||
| Computer equipment and software | 19,767 | 19,767 | ||||||
| Machinery and equipment | 340,534 | 325,750 | ||||||
| Furniture and fixtures | 5,665 | 5,665 | ||||||
| Less: Accumulated depreciation | (286,016 | ) | (250,465 | ) | ||||
| Total Property & Equipment | 79,950 | 100,717 | ||||||
| Other Non-current Assets: | ||||||||
| Deposit | 13,616 | 12,193 | ||||||
| Note receivable | 539,832 | 526,887 | ||||||
| Goodwill | 1,936,020 | 1,936,020 | ||||||
| Total Other Non-current Assets | 2,489,468 | 2,475,100 | ||||||
| Total Assets | $ | 10,228,463 | $ | 9,367,474 | ||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 2,705,144 | $ | 2,678,210 | ||||
| Income tax payable | 22,088 | 1,588 | ||||||
| Notes and loans payable to related parties | 1,053,883 | 1,321,721 | ||||||
| Total Current Liabilities | 3,781,115 | 4,001,519 | ||||||
| Long Term Liabilities: | ||||||||
| Deferred tax liabilities | 354,000 | 216,000 | ||||||
| Total Long Term Liabilities | 354,000 | 216,000 | ||||||
| Total Liabilities | 4,135,115 | 4,217,519 | ||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares | – | – | ||||||
| Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares | – | – | ||||||
| Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | – | – | ||||||
| Common Stock, par value $.0001 per share, authorized 56,666,667 shares, issued 46,466,952 shares and 48,132,664 shares | 4,646 | 4,813 | ||||||
| Additional paid-in capital | 7,202,691 | 7,411,172 | ||||||
| Accumulated deficit | (1,113,989 | ) | (2,266,030 | ) | ||||
| Total Stockholders’ Equity | 6,093,348 | 5,149,955 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 10,228,463 | $ | 9,367,474 | ||||
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited) | ||||||||
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2017 | 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 1,152,041 | $ | 983,284 | ||||
| Adjustments necessary to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 35,551 | 28,289 | ||||||
| Accrued interest on note receivable | (12,945 | ) | – | |||||
| Stock based compensation expense | 40,950 | 28,500 | ||||||
| Provision for deferred income tax | 138,000 | – | ||||||
| Accrued sales allowance | (20,848 | ) | 65,630 | |||||
| (Increase) decrease in accounts receivable | (450,713 | ) | (2,406,176 | ) | ||||
| (Increase) decrease in inventory | 99,064 | (413,287 | ) | |||||
| (Increase) in prepaid expenses | (1,032,565 | ) | (142,000 | ) | ||||
| Increase (decrease) in accounts payable and accrued liabilities | 111,954 | 166,447 | ||||||
| Increase (decrease) in accrued interest on notes payable | (44,837 | ) | 70,511 | |||||
| Net cash provided by (used in) operating activities | 15,652 | (1,618,802 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (14,784 | ) | (4,701 | ) | ||||
| Net cash (used in) investing activities | (14,784 | ) | (4,701 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from notes payable | 16,566,081 | 9,860,252 | ||||||
| Repayments of notes payable | (16,566,081 | ) | (8,142,198 | ) | ||||
| Repurchase of shares from Involve, LLC | (250,000 | ) | – | |||||
| Proceeds from notes and loans payable to related parties | – | 860,000 | ||||||
| Repayments of notes and loans payable to related parties | (223,000 | ) | (978,846 | ) | ||||
| Net cash provided by (used in) financing activities | (473,000 | ) | 1,599,208 | |||||
| Net (Decrease) in Cash and Cash Equivalents | (472,132 | ) | (24,295 | ) | ||||
| Cash and Cash Equivalents at Beginning of Period | 1,646,128 | 364,714 | ||||||
| Cash and Cash Equivalents at End of Period | $ | 1,173,996 | $ | 340,419 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 101,755 | $ | 97,494 | ||||
| Income taxes | $ | 371,500 | $ | 7,500 | ||||
| Non-cash financing and investing activities: | ||||||||
| Sale of Investment for Note receivable | $ | – | $ | 500,000 | ||||
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