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Capstone Companies Reports Second Quarter Record Revenues of $10.2 Million

DEERFIELD BEACH, Fla.--(BUSINESS WIRE)--

Capstone Companies, Inc. (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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