Florida | 84-1047159 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441 |
(Address of principal executive offices) |
(954) 570-8889 extension 313 |
(Issuer's Telephone Number) |
Large accelerated filer [_] | Accelerated filer [_] |
Non-accelerated filer [_] (Do not check if a smaller reporting company) | Smaller reporting company [x] |
Emerging Growth company [ ] |
PART 1 | FINANCIAL INFORMATION | 3 |
Item 1. | Financial Statements (Unaudited) | 3 |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operation | |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | |
Item 4. | Controls and Procedures | |
PART II | Other Information | |
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds | |
Item 3. | Defaults of Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Item 5. | Other Information | |
Item 6. | Exhibits | |
CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
Assets: | (Unaudited) | |||||||
Current Assets: | ||||||||
Cash | $ | 3,593,296 | $ | 3,668,196 | ||||
Accounts receivable, net | 2,387,590 | 4,367,721 | ||||||
Inventories | 8,316 | 140,634 | ||||||
Prepaid expenses | 164,345 | 239,150 | ||||||
Income tax refundable | 354,912 | - | ||||||
Total Current Assets | 6,508,459 | 8,415,701 | ||||||
Property and Equipment: | ||||||||
Computer equipment and software | 56,932 | 9,895 | ||||||
Machinery and equipment | 395,601 | 318,801 | ||||||
Furniture and fixtures | 12,493 | 5,665 | ||||||
Less: Accumulated depreciation | (299,454 | ) | (266,997 | ) | ||||
Total Property & Equipment | 165,572 | 67,364 | ||||||
Other Non-current Assets: | ||||||||
Deposit | 14,755 | 13,616 | ||||||
Goodwill | 1,936,020 | 1,936,020 | ||||||
Total Other Non-current Assets | 1,950,775 | 1,949,636 | ||||||
Total Assets | $ | 8,624,806 | $ | 10,432,701 | ||||
Liabilities and Stockholders' Equity: | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 1,801,248 | $ | 2,733,516 | ||||
Income tax payable | 11,694 | 624,782 | ||||||
Total Current Liabilities | 1,812,942 | 3,358,298 | ||||||
Long Term Liabilities: | ||||||||
Deferred tax liabilities | 283,000 | 251,000 | ||||||
Total Long Term Liabilities | 283,000 | 251,000 | ||||||
Total Liabilities | 2,095,942 | 3,609,298 | ||||||
Commitments and Contingencies (Note 4) | ||||||||
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 47,046,364 shares | 4,704 | 4,704 | ||||||
Additional paid-in capital | 7,081,194 | 7,005,553 | ||||||
Accumulated deficit | (557,034 | ) | (186,854 | ) | ||||
Total Stockholders' Equity | 6,528,864 | 6,823,403 | ||||||
Total Liabilities and Stockholders' Equity | $ | 8,624,806 | $ | 10,432,701 | ||||
The accompanying notes are an integral part of these consolidated financial statements. |
CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
Assets: | (Unaudited) | |||||||
Current Assets: | ||||||||
Cash | $ | 2,760,994 | $ | 3,668,196 | ||||
Accounts receivable, net | 2,023,474 | 4,367,721 | ||||||
Other receivables | 78,250 | - | ||||||
Inventories | 8,316 | 140,634 | ||||||
Prepaid expenses | 787,165 | 239,150 | ||||||
Income tax refundable | 346,912 | - | ||||||
Total Current Assets | 6,005,111 | 8,415,701 | ||||||
Property and Equipment: | ||||||||
Computer equipment and software | 52,649 | 9,895 | ||||||
Machinery and equipment | 395,600 | 318,801 | ||||||
Furniture and fixtures | 11,834 | 5,665 | ||||||
Less: Accumulated depreciation | (285,262 | ) | (266,997 | ) | ||||
Total Property & Equipment | 174,821 | 67,364 | ||||||
Other Non-current Assets: | ||||||||
Deposit | 14,312 | 13,616 | ||||||
Goodwill | 1,936,020 | 1,936,020 | ||||||
Total Other Non-current Assets | 1,950,332 | 1,949,636 | ||||||
Total Assets | $ | 8,130,264 | $ | 10,432,701 | ||||
Liabilities and Stockholders' Equity: | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 1,510,687 | $ | 2,733,516 | ||||
Income tax payable | 11,694 | 624,782 | ||||||
Total Current Liabilities | 1,522,381 | 3,358,298 | ||||||
Long Term Liabilities: | ||||||||
Deferred tax liabilities | 269,000 | 251,000 | ||||||
Total Long Term Liabilities | 269,000 | 251,000 | ||||||
Total Liabilities | 1,791,381 | 3,609,298 | ||||||
Commitments and Contingencies (Note 4) | ||||||||
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 47,046,364 shares | 4,704 | 4,704 | ||||||
Additional paid-in capital | 7,063,302 | 7,005,553 | ||||||
Accumulated deficit | (729,123 | ) | (186,854 | ) | ||||
Total Stockholders' Equity | 6,338,883 | 6,823,403 | ||||||
Total Liabilities and Stockholders' Equity | $ | 8,130,264 | $ | 10,432,701 | ||||
The accompanying notes are an integral part of these consolidated financial statements. |
CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | CONSOLIDATED STATEMENTS OF OPERATIONS | CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||
June 30, | June 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||
Revenues, net | $ | 2,103,206 | $ | 10,219,548 | $ | 6,163,374 | $ | 16,971,744 | $ | 5,726,145 | $ | 13,817,909 | $ | 11,889,520 | $ | 30,789,653 | ||||||||||||||||
Cost of sales | 1,742,486 | 7,576,685 | 4,783,384 | 12,749,413 | (4,395,761 | ) | (10,707,657 | ) | (9,179,145 | ) | (23,457,070 | ) | ||||||||||||||||||||
Gross Profit | 360,720 | 2,642,863 | 1,379,990 | 4,222,331 | 1,330,384 | 3,110,252 | 2,710,375 | 7,332,583 | ||||||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
Sales and marketing | 115,547 | 564,519 | 478,608 | 941,275 | 359,715 | 928,321 | 838,323 | 1,869,596 | ||||||||||||||||||||||||
Compensation | 369,749 | 353,904 | 744,858 | 713,706 | 359,539 | 351,915 | 1,104,396 | 1,065,621 | ||||||||||||||||||||||||
Professional fees | 142,900 | 115,381 | 291,786 | 320,183 | 102,532 | 109,257 | 394,320 | 429,440 | ||||||||||||||||||||||||
Product development | 123,766 | 66,447 | 290,332 | 138,473 | 95,661 | 80,991 | 385,994 | 219,464 | ||||||||||||||||||||||||
Other general and administrative | 166,676 | 204,063 | 340,965 | 382,681 | 232,888 | 189,780 | 573,852 | 572,461 | ||||||||||||||||||||||||
Total Operating Expenses | 918,638 | 1,304,314 | 2,146,549 | 2,496,318 | 1,150,335 | 1,660,264 | 3,296,885 | 4,156,582 | ||||||||||||||||||||||||
Operating Income (Loss) | (557,918 | ) | 1,338,549 | (766,559 | ) | 1,726,013 | 180,049 | 1,449,988 | (586,510 | ) | 3,176,001 | |||||||||||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||||||||||
Miscellaneous income | 147,290 | - | 147,290 | - | ||||||||||||||||||||||||||||
Interest income | - | - | - | 12,945 | ||||||||||||||||||||||||||||
Miscellaneous income (expense) | (1,960 | ) | - | 145,330 | - | |||||||||||||||||||||||||||
Interest expense | - | (35,186 | ) | - | (56,917 | ) | - | (69,459 | ) | - | (113,431 | ) | ||||||||||||||||||||
Total Other (Expense) | 147,290 | (35,186 | ) | 147,290 | (43,972 | ) | ||||||||||||||||||||||||||
Total Other Income (Expense) | (1,960 | ) | (69,459 | ) | 145,330 | (113,431 | ) | |||||||||||||||||||||||||
Income (Loss) Before Tax Provision (Benefit) | (410,628 | ) | 1,303,363 | (619,269 | ) | 1,682,041 | 178,089 | 1,380,529 | (441,180 | ) | 3,062,570 | |||||||||||||||||||||
Provision (Benefit) for Income Tax | (59,000 | ) | 402,000 | (77,000 | ) | 530,000 | 6,000 | 390,000 | (71,000 | ) | 920,000 | |||||||||||||||||||||
Net Income (Loss) | $ | (351,628 | ) | $ | 901,363 | $ | (542,269 | ) | $ | 1,152,041 | $ | 172,089 | $ | 990,529 | $ | (370,180 | ) | $ | 2,142,570 | |||||||||||||
Net Income (Loss) per Common Share | ||||||||||||||||||||||||||||||||
Basic | $ | (0.007 | ) | $ | 0.019 | $ | (0.012 | ) | $ | 0.024 | $ | 0.004 | $ | 0.021 | $ | (0.008 | ) | $ | 0.046 | |||||||||||||
Diluted | $ | (0.007 | ) | $ | 0.019 | $ | (0.012 | ) | $ | 0.024 | $ | 0.004 | $ | 0.021 | $ | (0.008 | ) | $ | 0.045 | |||||||||||||
Weighted Average Shares Outstanding | ||||||||||||||||||||||||||||||||
Basic | 47,046,364 | 46,694,058 | 47,046,364 | 47,155,592 | 47,046,364 | 46,660,456 | 47,046,364 | 46,989,940 | ||||||||||||||||||||||||
Diluted | 47,046,364 | 47,055,446 | 47,046,364 | 47,473,829 | 47,046,364 | 47,152,574 | 47,046,364 | 47,462,664 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements. | The accompanying notes are an integral part of these consolidated financial statements. | The accompanying notes are an integral part of these consolidated financial statements. |
CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
For the Six Months Ended | For the Nine Months Ended | |||||||||||||||
June 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income (loss) | $ | (542,269 | ) | $ | 1,152,041 | $ | (370,180 | ) | $ | 2,142,570 | ||||||
Adjustments necessary to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||
Depreciation and amortization | 18,266 | 35,551 | 32,457 | 55,725 | ||||||||||||
Accrued interest on note receivable | - | (12,945 | ) | - | 26,887 | |||||||||||
Stock based compensation expense | 57,750 | 40,950 | 75,641 | 66,594 | ||||||||||||
Provision for deferred income tax | 18,000 | 138,000 | 32,000 | 146,000 | ||||||||||||
Increase (decrease) in accrued sales allowance | 41,645 | (20,848 | ) | 153,025 | (831,731 | ) | ||||||||||
(Increase) decrease in accounts receivable, net | 2,302,602 | (450,713 | ) | |||||||||||||
(Increase) other receivables | (78,250 | ) | - | |||||||||||||
Decrease in accounts receivable, net | 1,827,100 | 731,532 | ||||||||||||||
Decrease in inventories | 132,318 | 99,064 | 132,318 | 224,265 | ||||||||||||
(Increase) in prepaid expenses | (548,017 | ) | (1,032,565 | ) | ||||||||||||
(Increase) decrease in prepaid expenses | 74,805 | (20,813 | ) | |||||||||||||
(Increase) in deposits | (696 | ) | - | (1,139 | ) | - | ||||||||||
Increase (decrease) in accounts payable and accrued liabilities | (1,222,828 | ) | 111,954 | |||||||||||||
(Decrease) in accounts payable and accrued liabilities | (932,262 | ) | (263,912 | ) | ||||||||||||
(Decrease) in income tax payable | (613,088 | ) | - | (613,088 | ) | - | ||||||||||
(Increase) in income tax refundable | (346,912 | ) | - | (354,912 | ) | - | ||||||||||
(Decrease) in accrued interest on notes payable | - | (44,837 | ) | - | (135,337 | ) | ||||||||||
Net cash provided by (used in) operating activities | (781,479 | ) | 15,652 | |||||||||||||
Net cash provided by operating activities | 55,765 | 2,141,780 | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Purchase of property and equipment | (125,723 | ) | (14,784 | ) | (130,665 | ) | (47,587 | ) | ||||||||
Net cash (used in) investing activities | (125,723 | ) | (14,784 | ) | (130,665 | ) | (47,587 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from notes payable | 11,347,367 | 16,566,081 | 18,352,018 | 30,559,312 | ||||||||||||
Repayments of notes payable | (11,347,367 | ) | (16,566,081 | ) | (18,352,018 | ) | (30,559,312 | ) | ||||||||
Repurchase of shares from Involve, LLC | - | (250,000 | ) | - | (250,000 | ) | ||||||||||
Warrant issued | - | 7,500 | ||||||||||||||
Repayments of notes and loans payable to related parties | - | (223,000 | ) | - | (257,100 | ) | ||||||||||
Net cash (used in) financing activities | - | (473,000 | ) | - | (499,600 | ) | ||||||||||
Net (Decrease) in Cash and Cash Equivalents | (907,202 | ) | (472,132 | ) | ||||||||||||
Net Increase (decrease) in Cash and Cash Equivalents | (74,900 | ) | 1,594,593 | |||||||||||||
Cash and Cash Equivalents at Beginning of Period | 3,668,196 | 1,646,128 | 3,668,196 | 1,646,128 | ||||||||||||
Cash and Cash Equivalents at End of Period | $ | 2,760,994 | $ | 1,173,996 | $ | 3,593,296 | $ | 3,240,721 | ||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Interest | $ | - | $ | 101,755 | $ | - | $ | 221,881 | ||||||||
Income taxes | $ | 865,000 | $ | 371,500 | $ | 865,000 | $ | 371,500 | ||||||||
Non-cash financing and investing activities: | ||||||||||||||||
Shares issued in satisfaction of loan payable to related party | $ | - | $ | 240,900 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
June 30, | December 31, | September 30, | December 31, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Trade Accounts Receivables at period end | $ | 2,259,180 | $ | 4,561,782 | ||||||||||||
Trade accounts receivables at period end | $ | 2,734,676 | $ | 4,561,782 | ||||||||||||
Reserve for estimated marketing allowances, cash discounts and other incentives | (235,706 | ) | (194,061 | ) | (347,086 | ) | (194,061 | ) | ||||||||
Total Accounts Receivable, net | $ | 2,023,474 | $ | 4,367,721 | $ | 2,387,590 | $ | 4,367,721 |
June 30, | December 31, | September 30, | December 31, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Balance at beginning of the period | $ | (194,061 | ) | $ | (1,200,792 | ) | $ | (194,061 | ) | $ | (1,200,792 | ) | ||||
Accrued allowances | (62,280 | ) | (921,833 | ) | (173,660 | ) | (921,833 | ) | ||||||||
Reversal of prior year accrued allowances | 1,749 | 58,867 | 1,749 | 58,867 | ||||||||||||
Expenditures | 18,886 | 1,869,697 | 18,886 | 1,869,697 | ||||||||||||
Balance at period-end | $ | (235,706 | ) | $ | (194,061 | ) | $ | (347,086 | ) | $ | (194,061 | ) |
3 months ended | 3 months ended | 3 months ended | 3 months ended | |||||||
June 30, 2018 | June 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||
Basic weighted average shares outstanding | 47,046,364 | 46,694,058 | 47,046,364 | 46,660,456 | ||||||
Dilutive warrants | - | 361,388 | - | 313,211 | ||||||
Dilutive options | - | 178,907 | ||||||||
Diluted weighted average shares outstanding | 47,046,364 | 47,055,446 | 47,046,364 | 47,152,574 |
6 months ended | 6 months ended | 9 months ended | 9 months ended | |||||||
June 30, 2018 | June 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||
Basic weighted average shares outstanding | 47,046,364 | 47,155,592 | 47,046,364 | 46,989,940 | ||||||
Dilutive warrants | - | 318,237 | - | 308,219 | ||||||
Dilutive options | - | 164,505 | ||||||||
Diluted weighted average shares outstanding | 47,046,364 | 47,473,829 | 47,046,364 | 47,462,664 |
For the 3 Months Ended June 30, 2018 | For the 3 Months Ended June 30, 2017 | For the 3 Months Ended September 30, 2018 | For the 3 Months Ended September 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||
Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | |||||||||||||||||||||||||||||||||||||
Lighting Products- U.S. | $ | 1,693,480 | $ | 264,472 | $ | 1,957,952 | $ | 2,597,529 | $ | 7,125,295 | $ | 9,722,824 | $ | 2,697,694 | $ | 2,939,613 | $ | 5,637,307 | $ | 562,606 | $ | 13,038,136 | $ | 13,600,742 | ||||||||||||||||||||||||
Lighting Products-International | 31,080 | 114,174 | 145,254 | 496,724 | - | 496,724 | 65,009 | 23,829 | 88,838 | 217,167 | - | 217,167 | ||||||||||||||||||||||||||||||||||||
Total Revenue | $ | 1,724,560 | $ | 378,646 | $ | 2,103,206 | $ | 3,094,253 | $ | 7,125,295 | $ | 10,219,548 | $ | 2,762,703 | $ | 2,963,442 | $ | 5,726,145 | $ | 779,773 | $ | 13,038,136 | $ | 13,817,909 |
For the 6 Months Ended June 30, 2018 | For the 6 Months Ended June 30, 2017 | For the 9 Months Ended September 30, 2018 | For the 9 Months Ended September 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||
Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | |||||||||||||||||||||||||||||||||||||
Lighting Products- U.S. | $ | 1,841,781 | $ | 3,859,253 | $ | 5,701,034 | $ | 3,304,724 | $ | 12,586,213 | $ | 15,890,937 | $ | 4,539,476 | $ | 6,798,866 | $ | 11,338,342 | $ | 3,855,504 | $ | 25,624,349 | $ | 29,479,853 | ||||||||||||||||||||||||
Lighting Products-International | 196,974 | 265,366 | 462,340 | 1,080,807 | - | 1,080,807 | 261,983 | 289,195 | 551,178 | 1,309,800 | - | 1,309,800 | ||||||||||||||||||||||||||||||||||||
Total Revenue | $ | 2,038,755 | $ | 4,124,619 | $ | 6,163,374 | $ | 4,385,531 | $ | 12,586,213 | $ | 16,971,744 | $ | 4,801,459 | $ | 7,088,061 | $ | 11,889,520 | $ | 5,165,304 | $ | 25,624,349 | $ | 30,789,653 |
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
Balance at the beginning of the period | $ | 328,279 | $ | 294,122 | ||||
Amount accrued | 41,871 | 940,291 | ||||||
Amount expensed | (175,765 | ) | (906,134 | ) | ||||
Balance at period-end | $ | 194,385 | $ | 328,279 |
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
Balance at the beginning of the period | $ | 328,279 | $ | 294,122 | ||||
Amount accrued | 64,060 | 940,291 | ||||||
Expenditures | (182,156 | ) | (906,134 | ) | ||||
Balance at period-end | $ | 210,183 | $ | 328,279 |
June 30, | December 31, | September30, | December 31, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Accounts payable | $ | 1,186,462 | $ | 2,132,894 | $ | 1,363,333 | $ | 2,132,894 | ||||||||
Accrued warranty reserve | 194,385 | 328,279 | 210,183 | 328,279 | ||||||||||||
Accrued compensation, benefits, commissions and other expenses | 129,840 | 272,343 | 227,732 | 272,343 | ||||||||||||
Total accrued liabilities | 324,225 | 600,622 | 437,915 | 600,622 | ||||||||||||
Total | $ | 1,510,687 | $ | 2,733,516 | $ | 1,801,248 | $ | 2,733,516 |
Net Revenue % | Net Accounts Receivable | |||||||||||||||
For the Six Months ended | As of | As of | ||||||||||||||
June 30, | June 30, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Customer A | 51.6 | % | 50.2 | % | $ | 2,232,854 | $ | 2,259,769 | ||||||||
Customer B | 44.5 | % | 49.1 | % | - | 2,268,426 | ||||||||||
Total | 96.1 | % | 99.3 | % | $ | 2,232,854 | $ | 4,528,195 |
Net Revenue % | Net Accounts Receivable | |||||||||||||||
For the Nine Months ended | As of | As of | ||||||||||||||
September 30, | September 30, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Customer A | 61.1 | % | 55.5 | % | $ | 1,895,862 | $ | 2,259,769 | ||||||||
Customer B | 36.0 | % | 43.7 | % | 839,808 | 2,268,426 | ||||||||||
Total | 97.1 | % | 99.2 | % | $ | 2,735,670 | $ | 4,528,195 |
Purchases % | Accounts Payable | |||||||||||||||
For the Nine Months ended | As of | As of | ||||||||||||||
September 30, | September 30, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Vendor A | 59.8 | % | 90.8 | % | $ | 140,677 | $ | 922,310 | ||||||||
Vendor B | 17.6 | % | 7.3 | % | 112,825 | 768,164 | ||||||||||
Total | 77.4 | % | 98.1 | % | $ | 253,202 | $ | 1,690,474 |
Purchases % | Accounts Payable | |||||||||||||||
For the Six Months ended | As of | As of | ||||||||||||||
June 30, | June 30, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Vendor A | 92.3 | % | 97.1 | % | $ | 1,115,720 | $ | 922,310 | ||||||||
Vendor B | - | % | - | % | - | 768,164 | ||||||||||
Total | 92.3 | % | 97.1 | % | $ | 1,115,720 | $ | 1,690,474 |
2018 | 2017 | 2018 | 2017 | |||||||||||||
Current: | ||||||||||||||||
Federal | $ | (53,000 | ) | $ | 392,000 | $ | (19,000 | ) | $ | 382,000 | ||||||
State | (15,000 | ) | - | 11,000 | - | |||||||||||
Deferred: | ||||||||||||||||
Federal | 8,500 | 10,000 | 13,000 | 8,000 | ||||||||||||
State | 500 | - | 1,000 | - | ||||||||||||
Income Tax Provision (Benefit) | $ | (59,000 | ) | $ | 402,000 | |||||||||||
Income Tax Provision | $ | 6,000 | $ | 390,000 |
2018 | 2017 | 2018 | 2017 | |||||||||||||
Current: | ||||||||||||||||
Federal | $ | (74,000 | ) | $ | 392,000 | $ | (93,000 | ) | $ | 774,000 | ||||||
State | (21,000 | ) | - | (10,000 | ) | - | ||||||||||
Deferred: | ||||||||||||||||
Federal | 17,000 | 138,000 | 30,000 | 146,000 | ||||||||||||
State | 1,000 | - | 2,000 | - | ||||||||||||
Income Tax Provision (Benefit) | $ | (77,000 | ) | $ | 530,000 | $ | (71,000 | ) | $ | 920,000 |
(1) | "Capstone Lighting Technologies, L.L.C." or "CLTL" is a Florida limited liability company and a wholly owned subsidiary of Capstone Companies, Inc. |
(2) | "Capstone International Hong Kong Ltd" or "CIHK" is a company organized under Hong Kong SAR laws and a wholly owned subsidiary of Capstone Companies, Inc. and a Hong Kong SAR registered Company. |
(3) | "Capstone Industries, Inc.", a Florida corporation and a wholly owned subsidiary of CAPC, may also be referred to as "CAPI" or "Capstone". |
(4) | "Capstone Companies, Inc.," a Florida corporation, may also be referred to as "we," "us" "our," "Company," or "CAPC." Unless the context indicates otherwise, "Company" includes in its meaning all of Capstone Companies, Inc.'s |
(5) | "China" or "PRC" means People's Republic of China. |
(6) | "Commission" or "SEC" means the U.S. Securities and Exchange Commission. |
(7) | References to "33 Act" or "Securities Act" means the Securities Act of 1933, as amended. |
(8) | References to "34 Act" or "Exchange Act" means the Securities Exchange Act of 1934, as amended. |
(9) | "Subsidiaries" means the above wholly owned subsidiaries of the Company. |
(10) | "LED" or "LED's" means a light-emitting diode component(s) which can be assembled into light bulbs or can be used in lighting fixtures. |
· | As the LED lighting market begins to show signs of stabilizing and moderate growth, the Company plans to continue to strengthen its relationships and expand into other departments and other channels of distribution through its relationships and product line expansions. |
· | We plan to continue to refine and improve our products portfolio and expand into other product segments through focused investment into the Company's research and development efforts. |
· | By introducing new products and expanding sales of existing products and continuing to increase our sales volumes, we believe that we can continue to improve operational efficiency by further reducing cost of materials, components and manufacturing costs, allowing us to maintain very competitive price points in the market place. |
· | Designed to make everyday tasks or usage simpler and more enjoyable for consumers; |
· | While continuing to focus on increased profit margins, the products must be affordable to win at the point of sale and deliver increased revenues for retail partners; |
· | The products must represent significant value when compared with items produced or marketed by competitive consumer product companies; and |
· | Wherever feasible, the products must be unique to the market whether this be accomplished though design techniques, added functionality or some proprietary innovation. |
· | Wireless Remote-Controlled LED Accent Lights |
· | LED Under Cabinet Lights |
· | LED Vanity Mirror |
· | LED Gooseneck Lantern |
· | LED Dual Mode Security Light |
· | LED Solar Patio Lights |
· | LED Motion Sensor Lights |
· | LED Motion Sensor Light with Air Purifier |
· | LED Wall Utility Lights |
· | CPC Power Failure Bulbs |
· | Wireless Remote-Control Outlets |
· | Raw Materials – Components and supplies are subject to sample inspections upon arrival at the contract manufacturer, to ensure the correct specified components are being used in production. |
· | Work in Process – Our quality control team conducts quality control tests at different points during the product stages of our manufacturing process to ensure that quality integrity is maintained. |
· | Finished Goods – Our team performs tests on finished and packaged products to assess product safety, integrity and package compliance. |
· | hurricanes, fire, flood and other natural disasters; |
· | power outages; and |
· | internet, telecommunications or data network failure. |
Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017 | ||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2018 Compared to the Three Months Ended September 30, 2017 | Three Months Ended September 30, 2018 Compared to the Three Months Ended September 30, 2017 | |||||||||||||||||||||||||||||||
(In Thousands) | (In Thousands) | (In Thousands) | ||||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | % of Revenue | Dollars | % of Revenue | |||||||||||||||||||||||||
Revenue, net | $ | 2,103.2 | 100.0 | % | $ | 10,219.5 | 100.0 | % | $ | 5,726.1 | 100.0 | % | $ | 13,818.0 | 100.0 | % | ||||||||||||||||
Cost of sales | 1,742.5 | 82.8 | % | 7,576.6 | 74.1 | % | 4,395.7 | 76.8 | % | 10,707.7 | 77.5 | % | ||||||||||||||||||||
Gross Profit | 360.7 | 17.2 | % | 2,642.9 | 25.9 | % | 1,330.4 | 23.2 | % | 3,110.3 | 22.5 | % | ||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
Sales and marketing | 115.5 | 5.5 | % | 564.5 | 5.5 | % | 359.7 | 6.3 | % | 928.3 | 6.7 | % | ||||||||||||||||||||
Compensation | 369.7 | 17.6 | % | 353.9 | 3.5 | % | 359.5 | 6.3 | % | 351.9 | 2.5 | % | ||||||||||||||||||||
Professional fees | 142.9 | 6.8 | % | 115.4 | 1.1 | % | 102.5 | 1.8 | % | 109.3 | .8 | % | ||||||||||||||||||||
Product development | 123.8 | 5.9 | % | 66.4 | .6 | % | 95.7 | 1.6 | % | 81.0 | .6 | % | ||||||||||||||||||||
Other general and administrative | 166.7 | 7.9 | % | 204.1 | 2.0 | % | 232.9 | 4.1 | % | 189.8 | 1.4 | % | ||||||||||||||||||||
Total Operating Expenses | 918.6 | 43.7 | % | 1,304.3 | 12.8 | % | 1,150.3 | 20.1 | % | 1,660.3 | 12.0 | % | ||||||||||||||||||||
Operating Income (Loss) | (557.9 | ) | (26.5 | )% | 1,338.6 | 13.1 | % | |||||||||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||||||
Miscellaneous income | 147.3 | 7.0 | % | - | - | % | ||||||||||||||||||||||||||
Operating Income | 180.1 | 3.1 | % | 1,450.0 | 10.5 | % | ||||||||||||||||||||||||||
Other (Expense) | ||||||||||||||||||||||||||||||||
Miscellaneous expense | (2.0 | ) | - | % | (12.9 | ) | (.1 | )% | ||||||||||||||||||||||||
Interest expense | - | - | (35.2 | ) | (.3 | )% | - | - | % | (56.6 | ) | (.4 | )% | |||||||||||||||||||
Total Other Income (Expense) | 147.3 | 7.0 | % | (35.2 | ) | (.3 | )% | |||||||||||||||||||||||||
Income (Loss) Before Tax Provision (Benefit) | (410.6 | ) | (19.5 | )% | 1,303.4 | 12.8 | % | |||||||||||||||||||||||||
Provision (Benefit) for Income Tax | (59.0 | ) | (2.8 | )% | 402.0 | 3.9 | % | |||||||||||||||||||||||||
Net Income (Loss) | $ | (351.6 | ) | (16.7 | )% | $ | 901.4 | 8.8 | % | |||||||||||||||||||||||
Total Other (Expense) | (2.0 | ) | - | % | (69.5 | ) | (.5 | )% | ||||||||||||||||||||||||
Income Before Tax Provision | 178.1 | 3.1 | % | 1,380.5 | 10.0 | % | ||||||||||||||||||||||||||
Provision for Income Tax | 6.0 | 0.1 | % | 390.0 | 2.8 | % | ||||||||||||||||||||||||||
Net Income | $ | 172.1 | 3.0 | % | $ | 990.5 | 7.2 | % |
Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017 | ||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September30, 2017 | Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September30, 2017 | |||||||||||||||||||||||||||||||
(In Thousands) | (In Thousands) | (In Thousands) | ||||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | % of Revenue | Dollars | % of Revenue | |||||||||||||||||||||||||
Revenue, net | $ | 6,163.4 | 100.0 | % | $ | 16,971.7 | 100.0 | % | $ | 11,889.5 | 100.0 | % | $ | 30,789.7 | 100.0 | % | ||||||||||||||||
Cost of sales | 4,783.4 | 77.6 | % | 12,749.4 | 75.1 | % | 9,179.1 | 77.2 | % | 23,457.1 | 76.2 | % | ||||||||||||||||||||
Gross Profit | 1,380.0 | 22.4 | % | 4,222.3 | 24.9 | % | 2,710.4 | 22.8 | % | 7,332.6 | 23.8 | % | ||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
Sales and marketing | 478.6 | 7.8 | % | 941.3 | 5.5 | % | 838.3 | 7.1 | % | 1,869.6 | 6.1 | % | ||||||||||||||||||||
Compensation | 744.9 | 12.1 | % | 713.7 | 4.2 | % | 1,104.4 | 9.3 | % | 1,065.6 | 3.4 | % | ||||||||||||||||||||
Professional fees | 291.8 | 4.7 | % | 320.2 | 1.9 | % | 394.3 | 3.3 | % | 429.4 | 1.4 | % | ||||||||||||||||||||
Product development | 290.3 | 4.7 | % | 138.4 | .8 | % | 386.0 | 3.2 | % | 219.5 | .7 | % | ||||||||||||||||||||
Other general and administrative | 341.0 | 5.5 | % | 382.7 | 2.3 | % | 573.9 | 4.8 | % | 572.5 | 1.9 | % | ||||||||||||||||||||
Total Operating Expenses | 2,146.6 | 34.8 | % | 2,496.3 | 14.7 | % | 3,296.9 | 27.7 | % | 4,156.6 | 13.5 | % | ||||||||||||||||||||
Operating Income (Loss) | (766.6 | ) | (12.4 | )% | 1,726.0 | 10.2 | % | (586.5 | ) | (4.9 | )% | 3,176.0 | 10.3 | % | ||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||||||
Miscellaneous income | 147.3 | 2.4 | % | - | - | % | 145.3 | 1.2 | % | - | - | % | ||||||||||||||||||||
Interest income | - | - | % | 12.9 | .01 | % | ||||||||||||||||||||||||||
Interest expense | - | - | % | (56.9 | ) | (.3 | )% | - | - | % | (113.4 | ) | (.4 | )% | ||||||||||||||||||
Total Other Income (Expense) | 147.3 | 2.4 | % | (44.0 | ) | (.3 | )% | 145.3 | 1.2 | % | (113.4 | ) | (.4 | )% | ||||||||||||||||||
Income (Loss) Before Tax Provision (Benefit) | (619.3 | ) | (10.0 | ) % | 1,682.0 | 9.9 | % | (441.2 | ) | (3.7 | )% | 3,062.6 | 9.9 | % | ||||||||||||||||||
Provision (Benefit) for Income Tax | (77.0 | ) | (1.2 | ) % | 530.0 | 3.1 | % | (71.0 | ) | (.6 | ) % | 920.0 | 3.0 | % | ||||||||||||||||||
Net Income (Loss) | $ | (542.3 | ) | (8.8 | )% | $ | 1,152.0 | 6.8 | % | $ | (370.2 | ) | (3.1 | )% | $ | 2,142.6 | 6.9 | % |
For the 3 Months Ended June 30, 2018 | For the 3 Months Ended June 30, 2017 | For the 3 Months Ended September 30, 2018 | For the 3 Months Ended September 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||
Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | |||||||||||||||||||||||||||||||||||||
Lighting Products- U.S. | $ | 1,693,480 | $ | 264,472 | $ | 1,957,952 | $ | 2,597,529 | $ | 7,125,295 | $ | 9,722,824 | $ | 2,697,694 | $ | 2,939,613 | $ | 5,637,307 | $ | 562,606 | $ | 13,038,136 | $ | 13,600,742 | ||||||||||||||||||||||||
Lighting Products-International | 31,080 | 114,174 | 145,254 | 496,724 | - | 496,724 | 65,009 | 23,289 | 88,838 | 217,167 | - | 217,167 | ||||||||||||||||||||||||||||||||||||
Total Revenue | $ | 1,724,560 | $ | 378,646 | $ | 2,103,206 | $ | 3,094,253 | $ | 7,125,295 | $ | 10,219,548 | $ | 2,762,703 | $ | 2,963,442 | $ | 5,726,145 | $ | 779,773 | $ | 13,038,136 | $ | 13,817,909 |
For the 6 Months Ended June 30, 2018 | For the 6 Months Ended June 30, 2017 | |||||||||||||||||||||||
Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | |||||||||||||||||||
Lighting Products- U.S. | $ | 1,841,781 | $ | 3,859,253 | $ | 5,701,034 | $ | 3,304,724 | $ | 12,586,213 | $ | 15,890,937 | ||||||||||||
Lighting Products-International | 196,974 | 265,366 | 462,340 | 1,080,807 | - | 1,080,807 | ||||||||||||||||||
Total Revenue | $ | 2,038,755 | $ | 4,124,619 | $ | 6,163,374 | $ | 4,385,531 | $ | 12,586,213 | $ | 16,971,744 |
For the 9 Months Ended September 30, 2018 | For the 9 Months Ended September 30, 2017 | |||||||||||||||||||||||
Capstone Brand | License Brands | Total Consolidated | Capstone Brand | License Brands | Total Consolidated | |||||||||||||||||||
Lighting Products- U.S. | $ | 4,539,476 | $ | 6,798,866 | $ | 11,338,342 | $ | 3,855,504 | $ | 25,624,349 | $ | 29,479,853, | ||||||||||||
Lighting Products-International | 261,983 | 289,195 | 551,178 | 1,309,800 | - | 1,309,800 | ||||||||||||||||||
Total Revenue | $ | 4,801,459 | $ | 7,088,061 | $ | 11,889,520 | $ | 5,165,304 | $ | 25,624,349 | $ | 30,789,653 |
For the Six Months ended June 30, | ||||||||
Summary of Cash Flows | 2018 | 2017 | ||||||
(In thousands) | ||||||||
Net cash provided by (used in): | ||||||||
Operating Activities | $ | (781 | ) | $ | 16 | |||
Investing Activities | (126 | ) | (15 | ) | ||||
Financing Activities | - | (473 | ) | |||||
Net increase (decrease) in cash and cash equivalents | $ | (907 | ) | $ | (472 | ) |
For the Nine Months ended September 30, | ||||||||
Summary of Cash Flows | 2018 | 2017 | ||||||
(In thousands) | ||||||||
Net cash provided by (used in): | ||||||||
Operating Activities | $ | 56 | $ | 2,142 | ||||
Investing Activities | (131 | ) | (48 | ) | ||||
Financing Activities | - | (499 | ) | |||||
Net increase (decrease) in cash and cash equivalents | $ | (75 | ) | $ | 1,595 |
· | The possibility of expropriation, confiscatory taxation or price controls; |
· | Adverse changes in local investment or exchange control regulations; |
· | Political or economic instability, government nationalization of business or industries, government corruption, and civil unrest; |
· | Legal and regulatory constraints; |
· | Tariffs and other trade barriers, including trade disputes between the U.S. and China; |
· | Political or military conflict between the U.S. and China, or between U.S. and North Korea, resulting in adverse or restricted access by U.S.-based companies to Chinese manufacturing and markets. |
· | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company. |
· | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
· | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. |
· | Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. |
EXHIBIT # | EXHIBIT TITLE |
/s/ Stewart Wallach | |
Stewart Wallach | Chief Executive Officer |
Principal Executive Officer | |
/s/James G. McClinton | |
James G. McClinton | Chief Financial Officer and Chief Operating Officer |
Principal Financial Executive and Accounting Officer |