Capstone Companies Reports Second Quarter Record Revenues of $10.2 Million

Aug 15, 2017, CAPC

OTC Disclosure & News Service

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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 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.

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