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Capstone Companies, Inc. Reports Record Revenue of $8.9 million

  •  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    
             
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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