CAPC Capstone Companies Inc (QB)

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 2016.

Stewart Wallach, Capstone’s CEO, commented, “Our strong results for the quarter, with record revenue and solid profitability, reflect the great execution of our growth strategy by the Capstone team.  Momentum continues to build with a growing number of consumers purchasing and enjoying our products at record levels.  The holiday shopping season is our strongest period in the year, and we are expecting third quarter revenue to meet or exceed what we reported today for the second quarter. 

“Importantly, we are gaining more traction with our international presence as well.  Sales to international markets have increased dramatically in the second quarter and more than quadrupled in the first half of 2016.  We will continue to deepen our relationships with both domestic and international retailers, and take advantage of growing momentum to drive further sales growth.”   

Second Quarter Financial Summary ($ in thousands, except per share data)

		Q2 2016				Q2 2015				Change		% Change
U.S. revenue		$	8,401			$	279			8,123			2,914	%
International revenue			501				11			489			4,342	%
Total revenue			8,902				290			8,612			2,696	%
Gross profit			2,129				53			2,075			3,897	%
Gross margin			23.9	%			18.4	%
Operating income (loss)			1,161				(648	)		1,809			NM
Operating margin			13.0	%			(223.4	)%
Net income (loss)		$	1,082				(705	)		1,787			NM
Earnings (loss) per diluted share		$	0.02			$	(0.02	)		0.04			NM

Revenue growth in the second quarter of 2016 was primarily the result of strong demand for the Company’s battery powered portable lighting products.  Products sold under both the Capstone Lighting and Hoover® Home LED brands experienced significantly improved revenue.  International sales also contributed to sales growth, with an incremental $489 thousand of revenue. 

Increased gross profit was driven by leverage of fixed costs on improved sales volume.  Gross margin as a percent of revenue improved significantly over the prior-year period, despite the occurrence of a $0.7 million marketing allowance in the second quarter 2016, which resulted in a 580 basis point negative impact on gross margin.  This marketing allowance was related to our 2016 holiday shopping season marketing campaign.

Selling, general and administrative expenses (SG&A) increased to $1.0 million, from $0.7 million in the prior-year period, due to higher revenue.  SG&A as a percent of revenue decreased significantly to 10.9%, from 241.8% in the prior-year period, reflecting strong leverage opportunity as sales volume increases.  As a result, income from operations improved significantly, from a second quarter 2015 operating loss.

Diluted earnings per share was $0.02 in the second quarter of 2016.  The 2015 period’s loss per diluted share of $0.02 reflects the impact of the Company’s 1-for-15 reverse stock split which became effective on July 25, 2015, reducing the weighted average number of shares outstanding in that quarter to 46,439,403, from the pre-reverse-split count of 696,591,051.

2016 First Half Financial Summary ($ in thousands, except per share data)

		1H 2016				1H 2015				Change		% Change
U.S. revenue		$	9,403			$	621			8,809			1,418	%
International revenue			1,551				382			1,168			306	%
Total revenue			10,980				1,004			9,977			994	%
Gross profit			2,742				361			2,382			660	%
Gross margin			25.0	%			35.9	%
Operating income (loss)			1,120				(1,002	)		2,122			NM
Operating margin			10.2	%			(99.8	)%
Net income (loss)		$	983				(1,096	)		2,079			NM
Earnings (loss) per diluted share		$	0.02			$	(0.02	)		0.04			NM

Financial results for the first half of 2016 improved significantly over the prior-year period, reflecting the successful introduction of new products and the Hoover Home LED® brand.  Increased gross margin as a percent of revenue, operating margin as a percent of revenue and net margin as a percent of revenue reflect the scalability of Capstone’s business model and associated operating leverage.

Mr. Wallach added, “We believe that given the great progress we are making and the strong momentum we have going forward, this was an ideal time to bolster our investor relations strategy.  The reverse split that became effective on July 25th and the up-listing to the OTCQB Venture Market planned for August 22nd are important steps toward ensuring that investors are willing to consider Capstone as an investment opportunity.  We believe that our story will resonate with a growing number of investors as they discover the great value proposition we offer our customers and the strong financial performance we are able to deliver.  This is an exciting time for Capstone, and we are focused on executing both our operational strategy and investor relations strategy for the benefit of all of our shareholders.”

Webcast and Teleconference to Review Results and Outlook

The Company will host a live webcast and conference call on Tuesday, August 16, 2016 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, followed by a question-and-answer session.  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 23, 2016.  To listen to the replay of the call, dial (858) 384-5517 and enter replay pin number 13640937.  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.

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 OPERATIONS
	(Unaudited)
				For the Three Months Ended								For the Six Months Ended
				June 30,								June 30,
					2016				2015				2016				2015
	Revenues, net			$	8,902,189			$	289,984			$	10,980,403			$	1,003,501
	Cost of sales				(6,773,465	)			(236,725	)			(8,238,123	)			(642,892	)
	Gross Profit				2,128,724				53,259				2,742,280				360,609
	Gross margin				23.9	%			18.4	%			25.0	%			35.9	%
	Operating Expenses:
	Sales and marketing				352,854				131,841				415,833				168,512
	Compensation				316,011				332,281				624,469				693,390
	Professional fees				71,057				49,389				175,342				145,562
	Product development				63,908				60,752				100,182				106,409
	Other general and administrative				163,656				126,963				306,411				248,319
	Total Operating Expenses				967,486				701,226				1,622,237				1,362,192
	Net Operating Income (Loss)				1,161,238				(647,967	)			1,120,043				(1,001,583	)
	Operating margin				13.0	%			(223.4	)%			10.2	%			(99.8	)%
	Other Income (Expense):
	Interest expense				(66,424	)			(57,123	)			(124,159	)			(94,279	)
	Total Other Income (Expense)				(66,424	)			(57,123	)			(124,159	)			(94,279	)
	Income (Loss) Before Tax Provision				1,094,814				(705,090	)			995,884				(1,095,862	)
	Provision for Income Tax				(12,600	)			-				(12,600	)			-
	Net Income (Loss)			$	1,082,214			$	(705,090	)		$	983,284			$	(1,095,862	)
	Net Income per Common Share
	Basic			$	0.02			$	(0.02	)		$	0.02			$	(0.02	)
	Diluted			$	0.02			$	(0.02	)		$	0.02			$	(0.02	)
	Weighted Average Shares Outstanding
	Basic				48,132,664				46,439,403				48,132,664				45,002,856
	Diluted				48,290,373				46,439,403				48,290,373				45,002,856

	CAPSTONE COMPANIES, INC. AND SUBSIDIARIES
	CONSOLIDATED BALANCE SHEETS
			June 30,				December 31,
				2016				2015
			(Unaudited)
	Assets:
	Current Assets:
	Cash		$	340,419			$	364,714
	Accounts receivable, net			7,396,696				5,077,182
	Inventory			618,995				205,708
	Prepaid expenses			708,460				566,459
	Total Current Assets			9,064,570				6,214,063
	Fixed Assets:
	Computer equipment and software			19,767				19,767
	Machinery and equipment			385,333				380,633
	Furniture and fixtures			5,665				5,665
	Less: Accumulated depreciation			(323,468	)			(295,180	)
	Total Fixed Assets			87,297				110,885
	Other Non-current Assets:
	Deposit			12,193				12,193
	Investment (AC Kinetics)			-				500,000
	Note receivable			500,000				-
	Goodwill			1,936,020				1,936,020
	Total Other Non-current Assets			2,448,213				2,448,213
	Total Assets		$	11,600,080			$	8,773,161
	Liabilities and Stockholders’ Equity:
	Current Liabilities:
	Accounts payable and accrued liabilities		$	2,304,599			$	2,164,283
	Income tax payable			12,600				7,500
	Note payable - Sterling National Bank			3,993,587				2,275,534
	Notes and loans payable to related parties			2,015,699				2,064,034
	Total Current Liabilities			8,326,485				6,511,351
	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 at June 30, 2016 and at December 31, 2015			-				-
	Common Stock, par value $.0001 per share, authorized 56,666,667 shares, issued 48,132,664 shares			72,199				72,199
	Additional paid-in capital			7,305,230				7,276,729
	Accumulated deficit			(4,103,834	)			(5,087,118	)
	Total Stockholders' Equity			3,273,595				2,261,810
	Total Liabilities and Stockholders’ Equity		$	11,600,080			$	8,773,161

	CAPSTONE COMPANIES, INC. AND SUBSIDIARIES
	CONSOLIDATED STATEMENTS OF CASH FLOWS
	(Unaudited)
			For the  Six Months Ended
			June 30,
				2016				2015
	CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Income (Loss)		$	983,284			$	(1,095,862	)
	Adjustments necessary to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization			28,289				29,239
	Stocked based compensation expense			28,500				58,866
	Accrued sales allowance			65,630				(196,977	)
	(Increase) decrease in accounts receivable			(2,406,176	)			988,091
	(Increase) decrease in inventory			(413,287	)			(65,990	)
	(Increase) decrease in prepaid expenses			(142,000	)			(1,251,586	)
	(Increase) decrease in other assets			-				14,456
	Increase (decrease) in accounts payable and accrued liabilities			166,447				(228,262	)
	Increase (decrease) in accrued interest on notes payable			70,511				81,500
	Net cash (used in)  operating activities			(1,618,802	)			(1,666,525	)
	CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property and equipment			(4,701	)			(37,036	)
	Net cash provided by investing activities			(4,701	)			(37,036	)
	CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from notes payable			9,860,252				1,588,827
	Repayments of notes payable			(8,142,198	)			(1,691,656	)
	Proceeds from notes and loans payable to related parties			860,000				2,500,000
	Repayments of notes and loans payable to related parties			(978,846	)			(200,000	)
	Net cash (used in) financing activities			1,599,208				2,197,171
	Net Increase (Decrease) in Cash and Cash Equivalents			(24,295	)			493,610
	Cash and Cash Equivalents at Beginning of Period			364,714				313,856
	Cash and Cash Equivalents at End of Period		$	340,419			$	807,466

For more information, contact

Company:                                
Aimee Gaudet                            
Corporate Secretary                     
(954) 252-3440, ext. 313                

Investor Relations: 
Garett Gough, Kei Advisors LLC
(716) 846-1352
ggough@keiadvisors.com