Capstone Companies, Inc. Revenue Increased 50% to a Record $11.7 Million

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/UCW/ DEERFIELD BEACH, FL – Capstone Companies, Inc. (OTC: CAPC: 0.510 +0.010 (2.00%) ) (“Capstone” or the “Company”), a designer of innovative LED lighting solutions including power failure lighting, today reported its financial results for the third quarter 2016.

Stewart Wallach, Capstone’s Chairman and CEO, commented, “We believe our performance this year has clearly substantiated that we have the right strategy, have successfully established a distinct niche in the home LED lighting space and have the talent and experience to execute well. We have once again broken our quarterly revenue record on the back of our successful introduction of accent lighting products through the warehouse club channels. Our product innovation, responsive and reliable customer service and strong brands have gained traction resulting in substantial revenue and earnings growth in the first nine months of 2016.

“We will continue to drive growth by developing new lighting products that incorporate previously unmet functionality while utilizing the efficiency of LED lighting. We are starting to see a preliminary picture of what the first part of 2017 may look like for Capstone, and all indications at this point are for a first half of 2017 that outperforms our strong performance in the first half of 2016.”

 

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

Q3 2016 Q3 2015 Change % Change
U.S. revenue $ 11,396 $ 7,425 3,971 53 %
International revenue 297 323 (26 ) -8 %
Total revenue 11,692 7,747 3,945 51 %
Gross profit 2,851 1,980 871 44 %
Gross margin 24.4 % 25.6 %
Operating income 1,604 1,359 245 18 %
Operating margin 13.7 % 17.5 %
Net income $ 1,490 $ 1,247 242 19 %
Earnings per diluted share $ 0.03 $ 0.03 NM

Revenue growth in the third quarter of 2016 was primarily the result of strong demand for the Company’s battery powered portable lighting products and wireless remote control products. Products sold under both the Capstone Lighting and Hoover® Home LED brands experienced significantly improved revenue.

Increased gross profit was driven by strong revenue growth. Gross margin as a percent of revenue declined due to significantly higher levels of promotional spending in the 2016 quarter, to support the introduction of new products, which reduced gross margin by approximately 5 percentage points when compared with the prior-year period.

Selling, general and administrative expenses (SG&A) increased to $1.2 million, from $0.6 million in the prior-year period on higher revenue. SG&A as a percent of revenue increased to 10.7%, primarily due to higher sales and marketing expenses reflecting $221 thousand of royalty payments related to the Company’s licensing of the Hoover® brand name that did not occur in the third quarter of 2015. As a result of these factors, operating income increased by 18% over the prior-year period to a record $1.6 million.

Net income increased to a record $1.5 million, or $0.03 per diluted share, in the third quarter of 2016.

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

Q3 2016 YTD Q3 2015 YTD Change % Change
U.S. revenue $ 20,826 $ 7,962 12,864 162 %
International revenue 1,847 789 1,058 134 %
Total revenue 22,673 8,751 13,922 159 %
Gross profit 5,594 2,341 3,253 139 %
Gross margin 24.7 % 26.7 %
Operating income (loss) 2,724 357 2,367 663 %
Operating margin 12.0 % 4.1 %
Net income (loss) $ 2,473 $ 151 2,322 1538 %
Earnings (loss) per diluted share $ 0.05 $ NM  

 

Financial results for the first nine months 2016 improved significantly over the prior-year period, reflecting the successful introduction of new Capstone lighting products and the Hoover Home LED® brand. Improved operating and net margins are reflected in the operating leverage that the Company realized on higher sales levels.

Webcast and Teleconference to Review Results and Outlook

The Company will host a live webcast and conference call on Tuesday, November 15, 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, November 22, 2016. To listen to the replay of the call, dial (858) 384-5517 and enter replay pin number 13645717. 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 Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Revenues, net $ 11,692,146 $ 7,747,450 $ 22,672,551 $ 8,750,951
Cost of sales (8,841,148 ) (5,767,306 ) (17,079,271 ) (6,410,197 )
Gross Profit 2,850,998 1,980,144 5,593,280 2,340,754
Gross margin 24.4 % 25.6 % 24.7 % 26.7 %
Operating Expenses:
Sales and marketing 488,057 16,716 903,888 185,229
Compensation 325,283 313,953 949,753 1,007,341
Professional fees 111,339 56,947 286,681 202,511
Product development 127,367 74,747 227,552 181,157
Other general and administrative 195,046 158,796 501,458 407,114
Total Operating Expenses 1,247,092 621,159 2,869,332 1,983,352
Net Operating Income 1,603,906 1,358,985 2,723,948 357,402
Operating margin 13.7 % 17.5 % 12.0 % 4.1 %
Other Income (Expense):
Interest income 13,664 13,664
Interest expense (103,363 ) (111,654 ) (227,522 ) (205,933 )
Total Other Income (Expense) (89,699 ) (111,654 ) (213,858 ) (205,933 )
Income Before Tax Provision 1,514,207 1,247,331 2,510,090 151,469
Provision for Income Tax (24,412 ) (37,012 )
Net Income $ 1,489,795 $ 1,247,331 $ 2,473,078 $ 151,469
Net Income per Common Share
Basic $ 0.031 $ 0.026 $ 0.051 $ 0.003
Diluted $ 0.031 $ 0.026 $ 0.051 $ 0.003
Weighted Average Common Shares Outstanding
Basic 48,132,664 48,132,664 48,132,664 46,057,590
Diluted 48,371,158 48,132,664 48,320,017 46,057,590

 

CAPSTONE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2016 2015
(Unaudited)
Assets:
Current Assets:
Cash $ 359,587 $ 364,714
Accounts receivable, net 11,832,358 5,077,182
Inventory 480,758 205,708
Prepaid expenses 522,694 566,459
Total Current Assets  13,195,397  6,214,063
Fixed Assets:
Computer equipment and software 19,767 19,767
Machinery and equipment 396,133 380,633
Furniture and fixtures 5,665 5,665
Less: Accumulated depreciation (339,579 ) (295,180 )
Total Fixed Assets   81,986   110,885
Other Non-current Assets:
Deposit 12,193 12,193
Investment (AC Kinetics) 500,000
Note receivable 513,654
Goodwill 1,936,020 1,936,020
Total Other Non-current Assets 2,461,867 2,448,213
Total Assets $   15,739,250 $   8,773,161
Liabilities and Stockholders’ Equity:
Current Liabilities:
Accounts payable and accrued liabilities $ 3,023,561 $ 2,164,283
Income tax payable 12,600 7,500
Note payable – Sterling National Bank 6,620,023 2,275,534
Notes and loans payable to related parties 1,301,596 2,064,034
Total Current Liabilities 10,957,780 6,511,351
Commitments and Contingent Liabilities (Note 5):
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 48,132,664 shares 4,813 4,813
Additional paid-in capital 7,390,697 7,344,115
Accumulated deficit (2,614,040 ) (5,087,118 )
Total Stockholders’ Equity 4,781,470 2,261,810
Total Liabilities and Stockholders’ Equity $   15,739,250 $   8,773,161

 

CAPSTONE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Unaudited)
For the Nine Months Ended
September 30,
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,473,078 $ 151,469
Adjustments necessary to reconcile net income to net cash (used in)  operating activities:
Depreciation and amortization 44,400 49,311
Accrued interest on note receivable (13,654 )
Stock based compensation expense 46,581 81,219
Accrued sales allowance (94,203 ) (196,978 )
(Increase) decrease in accounts receivable (6,755,174 ) (6,376,672 )
(Increase) decrease in inventory (275,049 ) 38,337
(Increase) decrease in prepaid expenses 43,764 (371,317 )
(Increase) decrease in other assets 14,456
Increase (decrease) in accounts payable and accrued liabilities 958,580 1,167,729
Increase (decrease) in accrued interest on notes payable (168,492 ) 148,385
Net cash (used in) operating activities (3,740,169 ) (5,294,061 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (15,501 ) (58,194 )
Net cash (used in) investing activities   (15,501 )   (58,194 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 19,393,834 5,791,914
Repayments of notes payable (15,049,345 ) (1,895,194 )
Proceeds from notes and loans payable to related parties 860,000 2,500,000
Repayments of notes and loans payable to related parties (1,453,946 ) (1,100,000 )
Net cash provided by financing activities 3,750,543 5,296,720
Net (Decrease) in Cash and Cash Equivalents (5,127 ) (55,535 )
Cash and Cash Equivalents at Beginning of Period 364,714 313,856
Cash and Cash Equivalents at End of Period $    359,587 $    258,321
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 396,014 $ 57,549
Income taxes $ 31,912 $
$    427,926 $    57,549
Non-cash financing and investing activities:
Conversion of Series C Preferred Stock to Common Stock $ $ 1,000
Sale of Investment for Note receivable $ 500,000 $

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

Investor Relations:
Kei Advisors LLC
Deborah K. Pawlowski / Garett K. Gough
(716) 843-3908 / (716) 846-1352
dpawlowski@keiadvisors.com / ggough@keiadvisors.com

Source: Capstone Companies, Inc.

 

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