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Capstone Companies, Inc. Achieves Record Revenue in Third Quarter 2014

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November 14, 2014

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  • Record revenue of $7.7 million increased 40% in the third quarter
  • Generated over $1.4 million of cash from operations in the first nine months of 2014

DEERFIELD BEACH, FL, November 14, 2014Capstone Companies, Inc. (OTCQB: CAPC) (“Capstone” or the “Company”), a leader in the design and manufacture of specialty power failure lighting solutions and innovator of consumersafety and security products for the Hospitality, Retail and Institutional channels, reported unaudited financial results for the three- and nine-month periods ended September 30, 2014.

Stewart Wallach, Capstone’s CEO, commented, “Our top-line results for the third quarter and year-to-date periods are encouraging.  Our existing product lines have yielded strong sales as our retail partners continue to support the programs.  We anticipated completing numerous product launches incorporating new power failure technologies by the end of the third quarter; however those introductions were slightly delayed due to the complexities of integrating the technologies into our product designs.  Therefore it is important to note that the year-to-date results are independent of 2014 new product launches which further substantiates the strength of our existing lines and provides the catalyst for continued growth during 2015.  

“Having completed record shipments of an estimated $7.7 million in the third quarter, Capstone’s products have a very strong retail presence.  We have made considerable investments through promotional allowances to support retail sales during the fourth quarter holiday period, and these investments are reflected in our third quarter results.”

Record third quarter revenue of $7.7 million increased $2.1 million, or 36.9%, from the prior-year period.  Gross profit was $1.1 million compared to $1.5 million in the third quarter of 2013.  Gross margin was lower mainly as a result of promotional expenses totaling $728 thousand in the quarter compared with $113 thousand in the third quarter 2013.  This level of promotional support drove retailers to bring forward significant inventories in anticipation of the holiday season.  The Company also incurred a one-time $225 thousand atypical manufacturing expense in order to complete and expedite a $2.0 million purchase order to one of Capstone’s major customers.

Operating profit of $0.4 million represented 4.6% of sales and was down from operating income of $1.0 million, or 18.4% of sales, in the prior-year period.  Net income was $0.3 million compared with net income of $0.9 million in the third quarter of 2013. 

Stewart Wallach added, “I encourage you to join us on Monday morning’s teleconference in which Gerry McClinton and I will review these results and provide greater detail.”

First Nine Months 2014 Review

Year-to-date revenue as of September 30, 2014 was $13.0 million, an increase of $5.7 million over the prior-year period.  Gross profit increased to $2.8 million, or 21.3% of sales, from
$1.9 million or 26.5% of sales in the same period of 2013.  The combined effect on gross profit of promotional and manufacturing expenses for the first nine months of 2014 was
$960 thousand, reducing gross profit by 540 basis points.

Operating expense for the first nine months of 2014 was $2.4 million compared with $1.6 million in the prior-year period.  The $0.8 million increase was related to investments for the expansion of Capstone’s Hong Kong office, product advertising expenses and new product development.

Operating income was $0.4 million for the first nine months of 2014 compared with operating income of $0.3 million in the corresponding period of 2013.

Net income of $0.1 million improved from breakeven net income in the first nine months of 2013.   The expansion of the Company’s infrastructure, significant product promotions, advertising expenses and product development expenditures impacted net income for the first nine months of 2014 by a total of $1.7 million.  

Webcast and Teleconference to Review Results and Outlook

The Company will host a live webcast and conference call on Monday, November 17, 2014 at 10:30 a.m. ET.  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 dialling (201) 689-8470.  The listen-only audio webcast can be monitored at www.capstonecompaniesinc.com.

A telephonic replay will be available from 1:30 p.m. ET the day of the teleconference untilMonday, November 24, 2014.  To listen to the replay of the call, dial (858) 384-5517 and enter replay pin number 13594419.  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 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 URL’s 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.

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     

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

Revenues

 $    7,738,884

 $    5,653,873

 $  13,008,632

 $ 7,340,789

Cost of sales

     (6,621,599)

    (4,102,814)

  (10,231,965)

 (5,398,941)

Gross profit

        1,117,285

       1,551,059

       2,776,667

    1,941,848

Gross margin

14.4%

27.4%

21.3%

26.5%

Operating expenses:
Sales and marketing

             81,083

            43,609

          455,082

       210,219

Compensation

           375,807

          221,913

       1,045,937

       690,700

Professional fees

             38,656

            64,218

          144,681

       269,675

Product development

             95,410

            73,583

          312,341

       157,589

Other general and administrative

           168,260

          108,039

          455,243

       303,614

Total operating expenses

           759,216

          511,362

       2,413,284

    1,631,797

Net operating income

           358,069

       1,039,697

          363,383

       310,051

Operating margin

4.6%

18.4%

2.8%

4.2%

Other expense:
  Interest expense

          (69,448)

       (110,625)

       (223,018)

    (265,710)

  Estimated income tax paid current

            (2,129)

                     –

           (6,387)

                   –

     Total other expense

          (71,577)

       (110,625)

       (229,405)

    (265,710)

Net income

 $        286,492

 $       929,072

 $       133,978

 $      44,341

Income per common share
Basic

 $                   –

 $                   –

 $                   –

 $                –

Diluted

 $                   –

 $                   –

 $                   –

 $                –

Weighted average shares outstanding
Basic

   654,010,532

  657,760,532

   655,046,444

657,417,125

Diluted

 809,072,109

813,707,109

809,758,922

813,363,702

 

 

CAPSTONE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30,

December 31,

2014

2013

Assets:
Current assets:
   Cash

 $               317,735

 $           436,592

   Accounts receivable – net

               7,599,116

           6,927,238

   Inventory

                  213,184

              298,099

   Deposit

                    12,193

                        –

   Prepaid expense

                  402,478

           1,082,784

     Total current assets

               8,544,706

           8,744,713

Fixed assets:
   Computer equipment & software

                    12,272

                66,448

   Machinery and equipment

                  266,823

              667,096

   Furniture and fixtures

                      5,665

                  5,665

   Less: accumulated depreciation

               (207,851)

            (661,210)

     Total fixed assets

                    76,909

                77,999

Other non-current assets:
   Product development costs – net

                      4,916

                19,664

   Investment (AC Kinetics)

                  500,000

              500,000

   Goodwill

               1,936,020

           1,936,020

      Total other non-current assets

               2,440,936

           2,455,684

         Total assets

 $          11,062,551

 $      11,278,396

Liabilities and Stockholders’ Equity:
Current liabilities:
   Accounts payable and accrued expenses

 $            2,900,271

 $        1,931,527

   Note payable – Sterling Factors

               4,090,093

4,237,144

   Notes and loans payable to related parties – current maturities

               2,033,934

           3,220,074

     Total current liabilities

9,024,298

9,388,745

Long-term liabilities
   Notes and loans payable to related parties – long term

                            –

                          –

     Total liabilities

9,024,298

9,388,745

Commitments and Contingent Liabilities
Stockholders’ Equity:
   Preferred Stock, Series A, par value $.001 per share, authorized 100,000,000
shares, issued -0- shares

                            –

                        –

   Preferred Stock, Series B-1, par value $.0001 per share, authorized 50,000,000
shares, issued -0- shares

                            –

                        –

   Preferred Stock, Series C, par value $1.00 per share, authorized 1,000 shares,
issued 1,000 shares

1,000

1,000

   Common Stock, par value $.0001 per share, authorized 850,000,000 shares,
654,010,532 & 657,760,532 shares issued at  September 30, 2014 & December 31, 2013

65,401

65,777

   Additional paid-in capital

7,187,058

7,172,059

   Accumulated deficit

(5,215,206)

(5,349,185)

     Total stockholders’ equity

               2,038,253

           1,889,651

     Total Liabilities and Stockholders’ Equity

 $          11,062,551

 $      11,278,396

  

CAPSTONE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended

September 30,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:
Continuing operations:
   Net income

$          133,978

$            44,341

  Adjustments necessary to reconcile net loss to net cash used inoperating activities:
      Stock issued for expenses

(28,876)

14,064

      Depreciation and amortization

60,566

70,581

      Compensation expense from stock options

43,500

20,250

     (Increase) decrease in accounts receivable

(671,878)

(618,766)

     (Increase) decrease in inventory

84,915

37,264

     (Increase) decrease in prepaid expenses

680,306

(1,059,660)

     (Increase) decrease in other assets

(12,193)

(23,972)

      Increase (decrease) in accounts payable and accrued expenses

968,744

376,590

      Increase (decrease) in accrued interest on notes payable

151,842

129,446

  Net cash provided by (used in) operating activities

1,410,904

(1,009,862)

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment

(500,000)

Purchase of property and equipment

(44,728)

(12,695)

Net cash used in investing activities

(44,728)

(512,695)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable

11,686,401

6,199,453

Repayments of notes payable

(11,833,452)

(6,368,449)

Proceeds from notes and loans payable to related parties

950,000

3,918,000

Repayments of notes and loans payable to related parties

(2,287,982)

(2,330,000)

Net cash (used in) provided by financing activities

(1,485,033)

1,419,004

Net (Decrease) in Cash and Cash Equivalents

(118,857)

(103,553)

Cash and Cash Equivalents at Beginning of Period

436,592

411,259

Cash and Cash Equivalents at End of Period

$          317,735

$          307,706

 

 

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