Operator: Greetings and welcome to the Capstone Companies Inc. Fourth Quarter and Full Year 2016 Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Deborah Pawlowski. Thank you, Ms Pawlowski, you may begin.

Deborah Pawlowski: Thank you, Michelle, and good morning everyone. We appreciate your time today and everybody who joined us. As you are aware, we may make some forward-looking statements during today’s presentation. These statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause actual results to differ from what is stated here today. These factors are outlined in the earnings release as well as in the documents filed by the Company with the Securities and Exchange Commission. These can be found at capstonecompanies.com or at sec.gov. On our call today, I have Stewart Wallach, our President and Chief Executive Officer and Gerry McClinton, our Chief Financial Officer and Chief Operating Officer. Also joining us is Aimee Gaudet who is our Secretary and Investor Relations – Internal Investor Relations Contact. You should have seen the release that we put out yesterday afternoon after the market closed and if not you can find it on our website. So with that, let me turn it over to Stewart to begin. Stewart?

Stewart Wallach: Thank you, Deb, and good morning to everybody. I appreciate your time with us today. Before introducing Gerry McClinton to review the financial results, I’d like to take a few moments to discuss how our strategic planning has attributed to the company’s strong financial performance over the course of 2016. We remained committed to product line and brand expansion within both the North American region and international markets. Our core brand Capstone Lighting, and exclusively licensed brand Hoover HOME LED outperformed all expectations. The growth we are delivering to our retail partners has stimulated their interest in our newly expanded product lines, which is a key component to our sustained long-term revenue objectives in the growing global LED market. Gerry will review in detail our financial statements, however, I’d like to highlight our growth over 2015 of approximately 92%. We have remained consistent to our business strategy and our direct import model is working per its design. Our gross profits and margins continue to grow and the company has demonstrated its strong operating leverage which we expect to expand further as we continue to grow in 2017. At this point, I’d like to turn the call over to Gerry for a detailed review of the financials. I will then come back with few closing comments and a question and answer session. Gerry?

Gerry McClinton: Hi, thank you, Stewart, and good morning everyone. This year’s record-breaking financial performance resulted from the effective execution of the company’s strategic plan. The company’s 2016 record year is a combination of these strategic decisions and the efficient management of company funds and resources. Now net revenues for the year ended December 31, 2016 were approximately $30.6 million, a record. An increase of $14.7 million or 92.4% from the $15.9 million in 2015. In 2016, the company had very strong revenue performance in the accent light category and both the Capstone Lighting and Hoover HOME LED brands. We also continued to strongly invest in retail support programs. The revenue increase was achieved after the company provided retailers $2.5 million of marketing funds for consumer-focused promotion allowances, compared to $833,000 in 2015. These allowances are a reduction to grow sales and ultimately reduce the net income accordingly. Such significant investments in retail support programs have proven very effective in product placement and in developing consumer brand loyalty and company plan of maintaining this investment strategy in 2017. For the year ended December 31, 2016, International sales were approximately $2.4 million or 8% of revenue as compared to $1.2 million or 8% of revenue in 2015. This represents an increase of $1.2 million or a 100% in International sales. Cost of sales for the year ended December 31, 2016 and 2015 were approximately $23.2 million and $12.1 million respectively, an increase of $11.1 million or 92% from 2015. Now the cost of sales increase is directly related to the increase in sales volume. As a percent of revenue, the cost was 75.8% and 76% respectively, slightly lower than in 2015. Despite rising labor cost in China, the combined impact of the lower cost of oil and the appreciation of the US dollar against Chinese currency has resulted in overall material and product cost remaining steady during the year. Gross profit for the year ended December 31, 2016 was approximately $7.4 million, another record. An increase of $3.6 million or 93.5% from the $3.8 million in 2015. Gross profit as a percentage of revenue for 2016 and 2015 were 24.2% and 24% respectively. The gross profit increase is attributed to the $14.7 million revenue increase during the year. Total operating expenses were $4.1 million in 2016, as compared to $2.8 million in 2015, which is a $1.3 million or 44.9% increase compared to last year. As a percent of sales, operating expenses were actually reduced from 17.6% in 2015 compared to 13.2% in 2016. This expense reduction which equates to 4.4% or approximately $1.3 million contributed significantly to the operating income improvement in 2016. To support future revenue growth, we have continued to incur strategic expenditures in infrastructure, product development and in sales marketing. The following is a brief summary of the major expenses incurred by category. Sales and marketing expenses for the year ended December 31, 2016 and 2015 were approximately $1.2 million and $300,000 respectively, an increase of $900,000 or 290%. During 2016, with the success of the Hoover North American license agreement, which was the first full year of marketing the Hoover HOME LED brand royalty payments were $496,000, an increase of approximately $443,000 from 2015 royalty payments. Accordingly, sales agent expense was $313,000, an increase of $253,000 from 2015. We also incurred $150,000 in advertising and trade show expense an increase of $49,000 compared to $2015. Domestic US warehousing costs were up approximately $96,000, an increase of $54,000 from 2015, as we increased domestic inventory in our Anaheim California warehouse to support specific retailer sales events. Compensation expenses were approximately $1.4 million in 2016, an increase of $100,000 from $1.3 million in 2015. This was a result of salary increases and some employee bonuses paid out in 2016. Professional fees for 2016 were approximately $365,000, compared to $270,000 in 2015, an increase of $95,000. In 2016, sales operations consulting fees were approximately $166,000, an increase of $46,000 as compared with 2015. Professional service fees also increased by $49,000 as compared to 2015 as we increased investor relations services during 2016. Product development expenses for 2016 were approximately $327,000, compared to $295,000, an increase of $32,000 from 2015. Expense increased as we expanded the number of new products being developed for release in 2017. We have invested in product design, electrical engineering product prototyping, testing and regulatory certification by outside third-party testing labs. The company also incurred additional testing expense and having specific products certified for global markets. Other general and admin for 2016 and 2015 were approximately $705,000 and $588,000 respectively, an increase of $117,000. Now with the higher sales volume during 2016, product line billed insurance was approximately $96,000, an increase of $35,000 from 2015. The increased sales volume also resulted in an increase of our Sterling Bank fees which were $169,000, an increase of $89,000 from 2015. Operating income for the year December 31, 2016 was approximately $3.3 million compared to $1 million from 2015. This is an improved performance of approximately $2.3 million or 226% over the same period in 2015. Operating margin was 10.9% of revenue, compared to 6.4% in 2015, an operating margin improvement of 4.5%. Interest expense for the year December 31, 2016 was approximately $255,000, a reduction of $62,000 compared to $317,000 in 2015. In 2016, part of the expense reduction resulted from company earning approximately $27,000 of interest income associated with an outstanding note receivable. Now despite the substantial revenue growth in 2016, we were able to curtail the need for increased borrowing and through a combination of efficient cash flow management and negotiating favorable payment terms with our overseas suppliers, the company has substantially reduced the need for purchase order funding to complete order fulfillment resulting in reduced interest expense for the year. Provision for income tax for the years ended December 31, 2016 and 2015, the provision for income tax was approximately $267,000 and $7.5,000 respectively. Net income for the year ended December 31, 2016 and 2015 was approximately $2.1 million and $699,000 respectively. The net income improvement of approximately

Stewart Wallach: Gerry, it is $2.8 million.

Gerry McClinton: 2., what’s that? Sorry $2.8 million and $700,000 respectively. The net income improvement of approximately $2.1 million or 303% compared to 2015 resulted from the $14.7 million increase in net revenue, gross profit increased slightly to 24.2% of sales, which combined with the revenue increase resulted in gross profit improvement of $3.6 million and total operating expenses as a percent of revenue dropped from 17.6% in 2015 to 13.2%. Now let’s talk about liquidity and capital resources. To support revenue growth, funding must always be available for product expansion, product research and development and to invest in strategic marketing initiatives. Our principal sources of liquidity, our cash on hand, cash generated from operations, availability under our bank line and director funding when required. We believe that our borrowing capacity provides the company with the financial resources needed to run operations and reinvest in our business. In reviewing the 2016 balance sheet, you will note that the Sterling Bank debt was reduced from $2.3 million in 2015, down to zero in 2016 and the related party notes were reduced from $2 million, down to $1.3 million. Now this is reflective of our previously stated goal to reduce outstanding debt. So let’s review some of the funding activities. Operating activities, cash provided by operating activities was approximately $4.2 million in 2016, compared with approximately $1.8 million used in our operating activity in 2015. The net income of $2.8 million combined with the timely collection of accounts receivable, substantially improved the company’s cash position. From a cash balance of $365,000 at December 31, 2015 to $1.6 million at December 31, 2016. We also negotiated improved payment terms from our main overseas manufacturer resulting in an increased cash flow of about $509,000. We did increased inventory slightly by approximately $161,000 at December 2016 to have additional inventories available to support customer special sales events in the first quarter 2017. Investing activities, cash used for investing activities in 2016 was $53,000 compared to $88,000 in 2015. The company has continued to invest in new product moulds and tooling with the product expansion into LED HOME lighting categories, the company’s future capital requirements may increase. However, we believe that our Hong Kong management team will be able to negotiate favorable payment terms with factories that may reduce the amounts of upfront cash who will need when initiating a new project. Management believes that our cash flow from operations and additional borrowing as needed will provide these necessary capital expenditure funds. For financing activities, net cash used in financing activities for the year December 31, 2016 was approximately $2.9 million compared to $2 million provided by financing activities in 2015. As of December 31, 2016, we fully paid down the Sterling National Bank note from approximately $2.3 million at December 2015. The company also reduced related party debts by approximately $800,000 from $2.1 million in December 2015 to $1.3 million at December 31, 2016. At December 31, 2016 the company complied with all covenants pursuant to existing credit facility. Management believes our cash flow from operations continued support from Sterling National Bank and support of our directors when needed will provide sufficient financial resources for the company in 2017. This concludes my financial summary for 2016. I’ll now turn the call back to you, Stewart.

Stewart Wallach: Thank you, Gerry. I appreciate it. Further into Gerry’s detailed review, I’d like to reiterate and emphasize some of our full year 2016 highlights. As a result of our disciplined focus on our business initiatives, and ongoing efforts to driving stronger financial results, Capstone has exceeded expectations. 2016 was an excellent year for our company. Our compound annual growth rate was approximately 50% over two years and Capstone through its proven ability to execute well anticipates its growth trajectory to continue. Recapping 2016. Revenue surged 90 plus percent. International revenues grew 100 plus percent. Gross profit increased by 90 plus percent. Operating income climbed 220 plus percent and net income increased four times our record 2015 performance of $700,000. These results by any one standard are exceptional and indicative of the company’s strong operating leverage. In 2016, our revenue per employee in fact was $2.2 million. Periodically, our long time shareholders particularly have expressed their concerns regarding our share value. We have always operated on the premise that delivering strong performance with sound business fundamentals would result in strong share value. At this point, we are taking additional steps towards building share value more reflective of our performance. Firstly, in keeping with our approved stock repurchase program that we announced in Q3 of 2016, the company acquired 1 million shares of common stock from Involve LLC in a private transaction on February 13. The stock repurchase plan was Board approved and also extended through 2017 allowing for additional purchases when operating capital permits. On March 1, I made an announcement that the company had engaged the assistance of a financial advisor to explore various potential opportunities to further enhance shareholder value. Having an independent advisor to assist in these measures enables management to continue its focus on the growth of the company with minimal distractions. This is simply one aspect of our overall strategic planning and we are also evaluating our Investor Relations strategy moving forward. Before we address some questions that come in by email, I would also like to share with you that our Q1 is shaping up well and expected to generate record results. In fact, we are anticipating more than twice that of the same period in 2016. I cannot provide more definitive guidance at this time as shipping dates could fluctuate at month’s end. But suffice it to say, the momentum continues. Once again, to our long time shareholders, I’d like to personally thank you for your continued support and to our new and potential shareholders, I’d like to welcome you to this exciting time in our company’s history. I think we are ready to take some questions.

Q - Deborah Pawlowski: Okay. We did had a few questions that came in via email. I’ll address this first, Stewart. Congratulations on the great success. I know you don’t like to discuss new products until they are on the shelf because of competitive reasons and/or vendor agreement, but can you tell us how many new products are in your backlog or has been order for distribution in 2017 that were not available on the shelves in 2016?

Stewart Wallach: Yes, I can answer that. Currently, we have five new products that are either on order or have been shipped.

Deborah Pawlowski: Okay, great. This one is regarding investor conferences. We know that you have attended some investor conferences more recently. Can you comment on whether these were beneficial? Of course, we would only be about to see impact through the stock price on our end?

Stewart Wallach: Yes, we have attended a total of four conferences since November 2016. In these conferences, we’ve met professional investors, individual investors, investment bankers. It was informative and we feel there has been more traction to the stock albeit not as significant as we had hoped. We are definitely on more radar screens than in the past and we believe that at some point in time this will convert to increased support of our stock. The most significant of the conferences was the most recent conference The Roth Conference which was held in California. I must point out that this conference was invitation only and one of the most recognized micro cap conferences available today. We have a great deal of follow-up to do as a result of our attendance there and we do believe that there are significant benefits that will come out of our attendance at this conference.

Deborah Pawlowski: Michelle, maybe you would like to see as well if there is anybody on conference call lines that would like ask questions.

Operator: [Operator Instructions]

Stewart Wallach: Do you want to continue with…?

Deborah Pawlowski: Sure, we did have a few, we have just a few more questions that we’d like to address before the lines go open. This one is with regards to uplisting. Do you see an uplisting to NASDAQ this fiscal year?

Gerry McClinton: Yes, let me answer that one. At this particular point in time, I don’t see that’s occurring. However, we have met with the folks from NASDAQ as well as OTCQX representatives. These meetings provided us with a great deal of information so that as if we should elect to uplist again, then we are prepared for it.

Deborah Pawlowski: Great, great. Thanks, Gerry. Maybe you can add some color to this question. Can you add more color to the international sales?

Stewart Wallach: Yes, not only are we continuing to expand our product placement through our existing international markets, but Capstone Hong Kong is now actively doing current sales into the European and other Pacific Rim markets. Just recently in early 2017, we brought on two new customers directly purchasing through our Capstone HK operation one of which is HomePro in Thailand, very similar to a Home Depot Lowe’s in that market and Bunnings in New Zealand, which is probably the largest of the home improvement chains in that region.

Deborah Pawlowski: Okay, great and last question. As per IR, what specific efforts are being made to attract new investors into CAPC?

Stewart Wallach: All right. Well, as I mentioned in the webcast, we are currently evaluating the IR strategy in its entirety. We have made progress through the investment conferences. However we feel there is much to be done to improve our following: we have consistently avoided shortcuts as long time shareholders know. We do not endorse low credibility stock promotion, fluff PR and/or associating ourselves less than reputable companies that promise to deliver exposure. It’s a longer road, but it’s one we can be proud of and again as I mentioned earlier, we believe the results should translate to share value. Now that being said, our performance is unlike most companies trading Over-The-Counter and we do feel that we will breakthrough in the months ahead.

Deborah Pawlowski: Okay, great.

Operator: Okay and our first question over the phone comes from the line of Bill Chapman who is a private investor. Please proceed with your question.

Unidentified Analyst: Yes, good morning everyone. Congratulations on such a fine year. And, Stewart, let me as you on the CPC bulb, could you give more understandings to us on the features and benefits of it? And possibly the range of the pricing?

Stewart Wallach: Yes, well, let me do as far as I can, Bill. All right?

Unidentified Analyst: Okay, sure. Fair enough.

Stewart Wallach: Bill, the limiter here is not the lack of stuff I want you to know, it’s the vendor agreements that bind us not to talk about a product, its pricing, or its position prior to hitting the shelves. But that being said, it’s a product that’s been in development for several years at this point. Patents were issued on our CPC, in fact, as early as this morning, I do not have the details in front of me, but I did received a notification that a second patent was allowed as well, which only strengthens our position globally. That being said, the interesting thing about our bulb has always been how it operated and that being that very simply, under normal power conditions, a bulb operates at a light switch, whether it be a lamp switch or a wall switch, et cetera. Under power failure conditions, typically what happens is when the power goes out the light goes on and this becomes a problem if you have a power outage in the day time, daylight hours or if you have a battery that doesn’t have an extensive run time. So, long story short, the Capstone Power Control, which is, this is quite counterintuitive, but it does in fact work. The same light switch that operates the light bulb under power conditions operates the light bulb under power outage conditions. Of course, this means that you are only using it when you need to use it, short to interim periods of time, finding your way in the dark and that means that a battery that would normally maybe have a run time of three hours could last as much as a week considering that it will not be on in the daylight hours, it would only be on when you enter that room. The product is currently produced and I will tell you on the water and will be available in the US market the month of May. That much I can tell you. And so far as price decisions and where it will be available at this time it would be inappropriate to share that with you, Bill.

Unidentified Analyst: Okay, that – I totally understand the situation you are in. In licensing the technology to lighting fixture and possibly bulb companies, do you see any deals happening this year?

Stewart Wallach: I can tell you that we are engaged in discussions along those lines. We did in fact have a reciprocal relationships with one of our manufacturers that has in fact licensed the CPC technology for a bulb that will be going into the European marketplace. It requires further development and testing because of course they are operating on 220 bulbs that were at one tap. But yes, our first licensing agreement has in fact been signed and we expect to see business in the European markets in Q2 or Q3.

Unidentified Analyst: Great to hear. One last question on the back – on the – you mentioned the backlog five new products on order are being shipped, so you are talking about the bulb, the CPC bulb and could you give us a general idea about the other products?

Stewart Wallach: Well, I can give you categories. We…

Unidentified Analyst: Okay, thanks.

Stewart Wallach: Because, I think that the primary question would be, is this an expansion of the puck light or the small accent lights. This is above and beyond. We have entered into and are going to be positioning products in motion sensor security, of course, yes the light bulbs, we have under cabinets, linear lighting that’s coming on. We also have outdoor lighting that’s coming on. Those four category entries all will be on shelf within the next 90 days.

Unidentified Analyst: Okay, thank you very much.

Stewart Wallach: You bet, Bill. Nice talking with you.

Operator: Thank you. Our next question comes from the line of Mike Schellinger with MicroCapClub. Please proceed with your question.

Mike Schellinger: Yes, I noted in the last presentation that you have licensing agreement with Duracell. I was wondering if you could explain the background behind that.

Stewart Wallach: All right. Well, Mike, by the way pleasure to meet you.

Mike Schellinger: Yes.

Stewart Wallach: This one is difficult, because of NDA requirements that bind our licensing agreement. What I can tell you is that, the product is currently produced. It’s on the water. It’s an expansion of the accent lighting line. It will be unique to a single customer. That much I can tell you. And in fact, it was a result of the particular customer saying, I think you would do very well with this and they were supportive of us getting that license. It’s a pretty significant step as you can imagine. It’s a powerful brand and I don’t know that it will lead to other products. I can’t say that at this point in time, but we are very excited about this because of course, this is now the third brand that we are marketing that being Capstone Lighting, the Hoover HOME LED and now of course, Duracell in a restrictive market.

Mike Schellinger: Okay, thank you. On the CPC bulb, I don’t know if you can talk about this, but can you say how many different chains it will be available in this year, at least of your current plans?

Stewart Wallach: Well, the initial – it’s like, our strategy has always been that we pick a primary partner to launch with. And we have found this to be successful and that we learn a great deal from limited exclusive launch campaign that could mean maybe a six month advantage to the market for that retailer, but what does happened for us is that we get full support, because they are not concerned about another retailer undercutting their pricing position or undermining their marketing activities. They are comfortable in knowing that if they go out and make a statement about the product and/or decide to dedicate end cap space et cetera to the items that again, that effort will not be compromised. So, at this point, keeping with our strategies that we’ve used for the last five years, we have picked our partner. They are fully supporting it. It will be available nationally and then we will see how well it resonates with the consumer and then we’ll see how we expand from there.

Mike Schellinger: Okay, great. Regarding operating expenses for 2017, can you just give us some general color on directionally, what we should be expecting to happen there?

Gerry McClinton: Well, this is Gerry. Let me just share this with you. Most of our operating expenses are very fixed. So, even with our revenue going up, the actual expense level may go up for those variable expenses, particularly as we get into sales and marketing and it’s important – necessary as or license agreements and so forth. But the actual operating expenses relating to running the company are very, very fixed. So we should expect that the relationship between operating expenses and sales will actually continue to go lower and lower as our sales volume gets higher. So that’s the easiest way I could explain it.

Mike Schellinger: Great. Thanks, that answers my questions.

Stewart Wallach: You bet. Thanks, Mike.

Operator: Thank you. Your next question comes from the line of George DeAngelo, who is a private investor. Please proceed with your question.

Unidentified Analyst: Hi, good morning guys. Thanks for taking my questions. So, regarding the strategic alternatives, can you guys say anymore about what you might be thinking there? Would it be finding someone to acquire you or acquiring a new product and specifically, it was you guys acquiring something? How would you plan on financing that, whether it be a capital raise or – and what?

Stewart Wallach: George, it would be – that would be premature to talk about how we would be able to capitalize our funds, something of that nature. Here is what initiated the concern and the decision to do this which – let me share that with you and maybe I’ll give you some comfort. Where we have always been a company that has been focused on sound business reporting. We are a very disciplined company. As I have commented many times before, we are a real company with real people in a real business. Little bit unusual than what you typically find over-the-counter. The stock value has been a frustration. There is no question about it. But we’ve stayed the course and we’ve continued to focus our attentions to operating the business at the lowest cost of operation possible, so that we get full advantage of the operating leverage that we have that was indicative of the advantage in the profits and that were generated – the operating income was generated directly as a result of this year’s – of 2016’s revenue increase. Good portion of that goes right to the bottom-line. That being said, I did want to distract any of our attention to pursuing outside opportunities. However, with a company that has demonstrated year-over-year performance with a compound annual growth rate of 50% over the last two years, it’s a company that deserves to be recognized and deserves to reach its full potential. To that point, having an outside financial advisor that is not limited by our necessary knowledge of the market which may in fact be limited. It’s a huge advantage for us. We will be receiving feedback regularly. We have our weekly meetings with them. But at the end of the day, all of the above to answer your question, potential mergers, acquisitions, being acquired, product line expansions, we have not put any limitation to any of those. And we’ve asked them to come to us, say how can we best grow this company other than what we are doing as a disciplined executive management team. What can we do to complement our growth with the intention long term of accelerating and improving upon the return to the shareholder? So that answer may sound a bit vague, but that’s because the reality is until we sit down and actually talk about their recommendations it is somewhat vague. But I have an experience, I have an experience with the banker that we are dealing with, a past history. I have a great deal of respect for their insights and they are by the way, very excited about the company, which I think goes a long way in having somebody represent you in the marketplace. So, I would expect that in the next 90 days, we will be reporting on that activity, see if a direction unfolds, see if opportunities presents themselves that would benefit all of us, and when I say all of us, as the largest single shareholder, I assure you that my interest are aligned with yours.

Unidentified Analyst: Okay, thanks. That’s helpful. And then another one, so you guys are now in a net cash position, it’s great. So how do you allocate your free cash flow going forward? And if you can hit your guidance or the 25% to 30% growth you are going to generate a lot of free cash flow next year, or this year? Just how do we think about that?

Stewart Wallach: Quite frankly, the growth that we’ve had last year because of the way we’ve negotiated our payment terms and our arrangements with our banks and so forth, we’ve actually had a very positive cash flow scenario. And our first priority quite frankly is to be able to retire debt. We’ve got some debts on our books for few years and we’ve taken a focused approach to make sure we start retiring and we have. We’ve done a really good job there. At the same time, by great cash management, we try not to take our bank lines when we don’t need it. You’ll notice even today our bank line is zero and I’ve got $7 million or $8 million available for me. So, I am not using it. So I’ll use it very sparingly. And a lot of that has to do with the relationships we have overseas and our factories because we are getting tremendous terms over there, just to give you an example. Few years ago, we would have to pay deposits for purchases and now we are getting open terms. So this helps our cash flow tremendously. As a result, we pay our factories off whenever we get paid by our retailers. So the cash flow works for us. So as we expand, the business model that we are using really works and even if we double ourselves, I think that also – I think George, correct if I am wrong, but your question may also be directed to what’s going to happen when you are throwing off significantly more cash, how are you going to use that cash.

Unidentified Analyst: Yes.

Stewart Wallach: Okay. I thought about, that’s where you are going.

Unidentified Analyst: Yes.

Stewart Wallach: More than the things of course that has always in the back of our minds is acceleration of product lines. And when I say the acceleration, we are pretty quick relative to speed to market, that’s not what I mean by – I am talking about acceleration - expansion of product lines that being possibly a product that we would have to acquire from somebody, possibly additional licensing arrangements that would operate as well as we have demonstrated with the Hoover HOME LED. This would be the primary areas that we would invest in. And of course, stock repurchase programs. All of those contribute – all those gestures contribute to our growth and also contributes to our shareholder value. So, it’s – the money will continue to work for us. And as long as we continue to see an opportunity for organic growth but also see an opportunity for potentially growing through acquisition or growing through product line acquisition, that would definitely be on our radar for that term.

Unidentified Analyst: Okay, thanks. That’s helpful. And then, can you answer me on licensing? I think the previous question you said, you might have some licenses in Europe later this year. Can you just talk about the economics of your licensing, your technology and how does that look?

Stewart Wallach: Yes, particularly, if we are licensing and again I am under NDA with the manufacturer signed a license, but I can tell you this, let me give you a general range of licensing that occurs in the hardware industry or electronics industry.

Unidentified Analyst: Okay.

Stewart Wallach: Typically, that would mean, revenue to the licensing company somewhere in the range of 5% to 7% and that would be on net sales and they would incur all expense relative to marketing et cetera. So, for long-term purposes that’s a clean contribution to our net income.

Unidentified Analyst: Okay. And just I am new to this story, but , so you guys do licensed your products now and it’s what…

Stewart Wallach: We have one license agreement that have been signed.

Unidentified Analyst: Okay.

Stewart Wallach: And we are going to learn a great deal about that and its potential and then we have the opportunity to take our existing power failure control module. That technology quite frankly could be outfitted into a whole host of products. So, while we have those products on our screen, on our radar, we can’t act on those until we’ve proven our ability to take it to market. So, when we are talking about the CPC bulb, that we are talking about the bulb in Europe, not only did that contribute to our top-line revenue number but it’s also a learning experience for us and building our comfort level and expanding that licensing agreements with other companies.

Unidentified Analyst: Okay. Thanks, and just one more – just internationally, you guys, it sounds like, internationally, you had about the same percentage of revenues as last year. Just, could you talk about the opportunity? And how big could it potentially be for you?

Stewart Wallach: Yes, let me say this. It would be expected to maintain the same – as a percentage of sales, interestingly not because the locations have remained relatively the same. So, as we are growing in the US, even if it grows as a percentage of that growth in the North American region, the numbers are going up significantly. In fact, we doubled the volume. That being said, however, we are also as I mentioned earlier, doing direct sales now spearheaded by the President of Capstone Hong Kong which is Larry Sloven, he has been travelling and meeting with companies throughout Thailand and Europe relative to direct selling opportunities through Capstone HK and/or collaborative sales through manufacturers that we are currently working through. So for instance, a manufacturer may in fact be developing or providing products for us but they also provide products for other companies into Europe and they may come to us which they haven’t said, I would really like to license your power control technology to integrate into a product that I am supplying into Europe for another company. It’s not competitive to you. It’s a great situation, would you be interested? That’s how that will evolve, George.

Unidentified Analyst: Okay. All right, great. Thank you guys.

Stewart Wallach: You bet. Thank you for attending.

Operator: Thank you. Our next question comes from the line of Tomer Cohen with Five Roads Capital. Please proceed with your question.

Tomer Cohen : Hi, Stewart, hi, Gerry. Congrats on closing a fantastic year. You’ve done a great job.

Gerry McClinton: Thanks Tomer.

Stewart Wallach: Thank you.

Tomer Cohen : My first question has to do with the next generation of puck lights. I am curious if they are on the shelves and if you know yet how consumers are responding to them and what sell through has been like?

Stewart Wallach: The next generation of accent lights as well as puck lights will not be on the shelves until May, June.

Tomer Cohen : Okay, I see, and when we will sort of getting…

Stewart Wallach: However, let me just share further with you, they were tested in the marketplace in Q3 of last year. And they did exceedingly well equal to or better than the first generation product.

Tomer Cohen : That’s great to hear. Have you started getting orders from your retail partners?

Stewart Wallach: Yes, absolutely. In fact they are a significant part of our Q2 backlog.

Tomer Cohen : That’s good to know. Okay, so it sounds like early indications there are positive as well.

Stewart Wallach: Yes, absolutely.

Tomer Cohen : Okay, great. My next question has to do with the gooseneck lamps, I saw that they are available at some Sam’s Clubs. I am just curious if you can say anything about which clubs and if there is a potential to grow the number of clubs that carry them?

Stewart Wallach: There is absolutely a potential to grow the number of clubs. They are and were in what we consider to be a test phase. So, they are a restricted number of clubs. It’s good for us. It’s good for them. We decide what the potential is and then, that product will find its way to national distribution. I can also say that gooseneck lantern lights are also being sold elsewhere and on a much grander scale. So, they will be nationally available, I am going to put myself, I am going to say probably June 1st in at least one major location, major customer that you have not mentioned.

Tomer Cohen : Wow, that’s great to hear. Is the branding and the packaging the same as the Sam’s Club or did you need to differentiate those?

Stewart Wallach: We marketed that product as Capstone Lighting.

Tomer Cohen : I see. Okay, that’s great to know. Okay, that’s very helpful and then good to know. The next question is about the AC Kinetics transaction, just curious if you are able to provide any update on timing of close or likelihood of close?

Stewart Wallach: We can’t possibly comment it, because we are not in control of that. What I can tell you is, we regularly communicate with AC Kinetics team because they are still assisting us and participating with us on our patent evolution. We have an excellent relationship with them and they are very bullish on their transaction. And so to that end, we share their enthusiasm and confidence. Okay, I am giving the hindsight here Tomer, that we are probably over – way over schedule. Do you have any further questions, because that will be the last question we will take today?

Tomer Cohen : Just one very quick comment, I will make it fast. You’ve done a fantastic job and the balance sheet is much better now and with regards to the strategic review, most acquisitions fail to create value and so I would just hate to see all the hard work you’ve done go to waste over a bad acquisition. So, I would just encourage you as you are thinking of strategic options to be very selective if you do decide to make an acquisition.

Stewart Wallach: I appreciate your commentary on that and I think we’ve demonstrated clearly over the last few years that we are cautious and we are very prudent about the directions we take. We’ve taken the longest and hardest road possible and we have succeeded and we stayed the course and we are very confident and we feel terrific about what we’ve done and I will share with you that there is nothing we would do to take a shortcut that could possibly undermine the value curve that we are on right now.

Operator: Thank you. There are no further questions at this time. I would like to turn the call back over to Mr. Wallach for closing remarks.

Stewart Wallach: Well, closing remarks, thank you. Listen, we’ve had this time more participation than we’ve ever had on one of our webcasts. So I certainly do appreciate it. We are – want you to know, we are very, very enthusiastic and optimistic about this and the momentum is continuing into 2017. As I said, it was a long process. We followed a very well documented disciplined strategic plan. We stayed the course. We weren’t distracted and I think we are now all going to enjoy the results. I want to thank you all for your participation. Long-term shareholders, thank you for your support and should you want to discuss anything or do you have any questions, et cetera, I travel pretty extensively. But we can find time make yourselves available from time-to-time. So please feel free to direct some questions or anything you might have to Aimee Gaudet’s attention by email and we will go from there. Thank you very much and speak to you again soon.

Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.