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
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