- Achieved record quarterly revenue of $8.9 million
- Gross margin expanded 5.5 points to 23.9% of sales
- Operating leverage drove operating income growth to $1.2 million
- Net income of $1.1 million increased $1.8 million over a net loss in
prior-year period - Raised third quarter 2016 revenue guidance to over $9.0 million
- Uplist to OTCQB Venture Market scheduled for August 22, 2016
DEERFIELD BEACH, Fla., Aug. 15, 2016 (GLOBE NEWSWIRE) -- Capstone Companies, Inc. (OTC:CAPC) (“Capstone” or the “Company”), a designer of innovative LED lighting solutions including power failure lighting, today reported its financial results for the second quarter 2016.
Stewart Wallach, Capstone’s CEO, commented, “Our strong results for the quarter, with record revenue and solid profitability, reflect the great execution of our growth strategy by the Capstone team. Momentum continues to build with a growing number of consumers purchasing and enjoying our products at record levels. The holiday shopping season is our strongest period in the year, and we are expecting third quarter revenue to meet or exceed what we reported today for the second quarter.
“Importantly, we are gaining more traction with our international presence as well. Sales to international markets have increased dramatically in the second quarter and more than quadrupled in the first half of 2016. We will continue to deepen our relationships with both domestic and international retailers, and take advantage of growing momentum to drive further sales growth.”
Second Quarter Financial Summary
($ 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 | ||||||