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Capstone Companies, Inc. Achieves Significant Gross Margin Expansion in Second Quarter 2014

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August 12, 2014

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Company News

  • Revenue of $1.2 million increased 15% in the second quarter; Record first-half revenue of $5.3 million exceeded expectations
  • Second quarter gross margin expanded 1,070 basis points to 29.9%
  • Record backlog level entering second half of 2014
  • Partnership with Light Engine Ltd. to accelerate product line expansion efforts, bringing new innovations to market faster

DEERFIELD BEACH, FL, August 12, 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 six-month period ended June 30, 2014.

Stewart Wallach, Capstone’s CEO, commented, “The second quarter results came in above our expectations, driving our record top-line results for the first half with $5.3 million in revenue.  Our strategic investments, including the enhancements to our distribution model, continuous product development and geographic diversification of our sales base, have driven consistent revenue improvement.”

Increases in Volume and Efficiencies Driving Margin Expansion

Capstone’s financial performance continues to align with the strategic initiatives that have been adopted over the past several years.  Revenue of $1.2 million increased $0.2 million, or 15%, from the prior-year period.  Gross profit improved 79% to $0.4 million and gross margin as a percent of sales increased measurably to 29.9% from 19.2% in the second quarter of 2013.  Operating loss was $0.4 million for the second quarter.  Net loss was $0.4 million and improved by $0.1 million from the prior year’s second quarter.

Gerry McClinton, Capstone’s CFO noted, “Our improved distribution strategy and operations, and the associated production efficiencies have driven significant margin improvement.  We expect to see greater leverage as we continue to grow our top-line.” 

First Half 2014 Review

For the first six months of 2014, revenue more than tripled to a record $5.3 million, an increase of $3.6 million over the prior-year period.  Gross profit increased to $1.7 million, or 31.5% of sales, reflecting productivity improvements associated with product development, manufacturing efficiencies, and distribution channel efforts as well as leverage on higher revenue. 

Operating income was breakeven for the first half of 2014 compared with an operating loss of $0.7 million in the prior-year period.  Net loss of $0.2 million improved significantly from a loss of $0.9 million in the first half of 2013, and included $596 thousand of investments for growth consisting of $240 thousand for the establishment of the Company’s new office in Hong Kong,
$224 thousand in product marketing expenses and $132 thousand in new product development costs.     

Mr. Wallach added, “We have been making consistent strides toward our strategic plan and this quarter was no different.  In addition to financial results for the first half that exceeded the expectations we provided during our last financial report, we have made another important strategic alliance with Light Engine Ltd. in China, a recognized global leader in the development, engineering and manufacturing of LED technology.  This alliance will help Capstone bring new innovative products from concept design to the store shelves much faster.

“During the second half of 2014 we will be introducing the transformational new power failure lighting products that we have developed with AC Kinetics, and expect shipments to commence in early 2015.  Additionally, as we enter the 2014 holiday season we are prepared to continue to deliver revenue growth as we have a record level of backlog in place for shipment during the third and fourth quarters.”       

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

CAPSTONE COMPANIES, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

 

For the Three Months Ended

For the Six Months Ended

 

June 30,

June 30,

 

2014

2013

2014

2013

 
 
Revenues

$     1,181,379

$   1,027,121

$    5,269,748

$ 1,686,916

 
Cost of sales

(828,537)

(830,174)

(3,610,366)

(1,296,127)

 
Gross profit

352,842

196,947

1,659,382

390,789

 
Gross margin

29.9%

19.2%

31.5%

23.2%

 
 
Operating expenses:  
Sales and marketing

73,327

109,297

373,999

166,610

 
Compensation

374,803

238,693

670,130

468,787

 
Professional fees

32,244

113,733

106,025

205,457

 
Product development

84,601

60,387

216,931

84,006

 
Other general and administrative

144,443

92,207

286,983

195,575

 
Total operating expenses

709,418

614,317

1,654,068

1,120,435

 
 
Net operating (loss) income

(356,576)

(417,370)

5,314

(729,646)

 
Operating margin

-30.2%

-40.6%

0.1%

-43.3%

 
 
Other expense:  
Interest expense

(52,445)

(81,381)

(153,570)

(155,085)

 
Estimated income tax paid current

(4,258)

(4,258)

 
Total other expense

(56,703)

(81,381)

(157,828)

(155,085)

 
 
Net loss

$      (413,279)

$    (498,751)

$     (152,514)

$ (884,731)

 
 
Loss per common share

$                    –

$                  –

$                   –

$               –

 
 
Weighted average shares outstanding  
Basic

654,010,532

657,760,532

655,046,444

657,242,576

 

 

CAPSTONE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

June  30,

December 31,

2014

2013

Assets:
Current assets:
   Cash

 $            455,964

 $        436,592

   Accounts receivable – net

               846,429

        6,927,238

   Inventory

               279,773

           298,099

   Deposit

                 97,910

                       –

   Prepaid expense

               738,666

        1,082,784

     Total current assets

            2,418,742

        8,744,713

Fixed assets:
   Computer equipment & software

                 12,272

             66,448

   Machinery and equipment

               245,123

           667,096

   Furniture and fixtures

                   5,665

               5,665

   Less: accumulated depreciation

            (192,111)

         (661,210)

     Total fixed assets

                 70,949

             77,999

Other non-current assets:
   Product development costs – net

                   9,832

             19,664

   Investment (AC Kinetics)

               500,000

           500,000

   Goodwill

            1,936,020

        1,936,020

      Total other non-current assets

            2,445,852

        2,455,684

         Total assets

 $         4,935,543

 $   11,278,396

Liabilities and stockholders’ equity:
Current liabilities:
   Accounts payable and accrued expenses

 $            363,189

 $     1,931,527

   Note payable – Sterling Factors

                          –

4,237,144

   Notes and loans payable to related parties – current maturities

            2,828,749

        3,220,074

     Total current liabilities

3,191,938

9,388,745

Long term liabilities
   Notes and loans payable to related parties – Long Term

                          –

                       –

     Total liabilities

3,191,938

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 June 30 , 2014 & December 31, 2013

65,401

65,777

   Additional paid-in capital

7,178,902

7,172,059

   Accumulated deficit

(5,501,698)

(5,349,185)

     Total stockholders’ equity

            1,743,605

        1,889,651

     Total liabilities and stockholders’ equity

 $         4,935,543

 $   11,278,396

CAPSTONE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the  Six Months Ended

June 30,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:
Continuing operations:
   Net loss

 $  (152,514)

 $   (884,731)

  Adjustments necessary to reconcile net loss to net cash used in
operating activities:
      Stock issued for Director’s Compensation

       (28,876)

           14,064

      Depreciation and amortization

         39,910

           45,407

      Compensation expense from stock options

         35,344

           20,250

      Decrease in accounts receivable

    6,080,809

      1,626,275

      Decrease in inventory

         18,326

           37,665

      Decrease (increase) in prepaid expenses

       344,118

      (614,655)

     (Increase) in other assets

       (97,910)

        (23,372)

      Decrease in accounts payable and accrued expenses

  (1,568,338)

      (598,114)

      Increase in accrued interest on notes payable

         98,035

           96,333

  Net cash provided by (used in) operating activities

4,768,904

(280,878)

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment

                   –

      (500,000)

Purchase of property and equipment

(23,028)

(7,195)

Net cash used in investing activities

(23,028)

(507,195)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable

    6,385,914

      2,203,298

Repayments of notes payable

(10,623,058)

   (3,151,222)

Proceeds from notes and loans payable to related parties

       950,000

      2,528,000

Repayments of notes and loans payable to related parties

  (1,439,360)

      (575,000)

Net cash (used in) provided by financing activities

(4,726,504)

1,005,076

Net increase in cash and cash equivalents

19,372

217,003

Cash and cash equivalents at beginning of period

436,592

411,259

Cash and cash equivalents at end of period

 $    455,964

 $      628,262

 

 

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