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Capstone Companies, Inc. Reports Sales Growth Of 20% In 2012 Fourth Quarter

Capstone Companies, Inc. (OTCQB: CAPC) (“Capstone” or the “Company”), a leader in the design and manufacture of specialty power failure lighting solutions and innovator of consumer safety and security products for the Hospitality, Retail and Institutional channels, reported fourth quarter and full year unaudited 2012 financial results.

Stewart Wallach, Capstone’s CEO, commented, “Earlier in 2012, we made the strategic decision to change how we did business. We initiated a domestic distribution model in addition to our direct import programming, increased our investment in advertising and promotional activities, rebranded our products and increased our product development efforts. Our fourth quarter performance demonstrates the beginning success of these initiatives as we have been able to capture additional national retailers and create opportunities for our products to be merchandised with smaller inventory commitments being required.”

Revenue was $2.512 million in the fourth quarter of 2012, an increase of 19.6% from $2.100 million in the prior-year period, reflecting improved sales from the domestic distribution model and the commencement of shipments for promotional programs.

Gross profit for the fourth quarter decreased $62,600 to $462,000, or 18.4% of revenue, from $524,600, or 25.0% of revenue, the prior-year period. The gross margin contraction was the result of higher allowances to retailers in support of increased promotional activity.

Total operating expenses increased to $606,100 in the fourth quarter of 2012, from $443,900 in the 2011 fourth quarter, an increase of $162,200, a reflection of the Company’s investments in growth initiatives.

During the fourth quarter 2012, interest expense increased $38,100 to $91,700, due to additional financing required to fund expanded inventories to support the fourth quarter holiday season. Net loss for the fourth quarter of 2012 was $235,700 compared with net income of $27,100 in the fourth quarter 2011.

Full Year Review

Total revenue for the year ended December 31, 2012 was $8.363 million, a decrease of 18.4%, or $1.886 million, from $10.249 million for 2011. The decline is mainly due to several retailers shifting from the Direct Import program to the domestic distribution program where orders are now placed closer to the retail sales cycle. Also contributing to the decline was the delay in some of the store merchandising programs in 2012. The Company expects any delayed sales will be recovered in 2013 and sales order pattern is expected to become more normalized going forward.

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