SOURCE: Action Products International, Inc.

November 14, 2006 13:18 ET

Action Products Reports Third Quarter 2006 Results

Company Improves Its Cash Flows and Reports Net Loss

ORLANDO, FL -- (MARKET WIRE) -- November 14, 2006 -- Action Products International, Inc. (NASDAQ: APII), a leading toy designer and manufacturer of educational and positive, non-violent branded toys for pre-school children through pre-teens, today announced its results for the third quarter and nine months ended September 30, 2006. There was net loss of $229,800, or 4 cents per share, on sales of $2,056,100 in the 2006 third quarter as compared with income of $111,500, or 2 cents per share, on net sales of $2,581,800 in the year ago third quarter. Net loss for the nine months ended September 30, 2006 was $1,614,900, or 31 cents per share, on net sales of $5,326,800 as compared with income of $20,500, or less than one cent per share, on sales of $6,448,500 for the nine months ended September 30, 2005. The results for the third quarter and nine months ended September 30, 2006 include approximately $13,200 and $112,400 respectively, in non-cash charges for stock options which negatively impacted earnings per share by > $0.01 and $0.02, respectively. Results for 2005 do not include compensation expense for stock options. In addition the Company incurred approximately $32,600 and $290,000 for third quarter and nine month ended September 30, 2006 respectively in bad debt expenses principally related to increased reserves for sales to larger accounts.

Year-to-date September operating cash flow for 2006 improved from net cash used in operations of $1,126,600 in 2005 to net cash provided by operations of $724,300 in 2006. When compared to a year ago accounts receivable collections greatly improved and the Company was able to significantly enhance terms with most of its major suppliers. As of September 30, 2006, the Company satisfied its long-term debt obligations compared with long-term debt of $66,700 a year ago.

"We are successfully bringing our expenses back in line with realized revenue and realistic revenue expectations in the near term. We have made the changes necessary to embrace those realities in building a solid financial future in line with changes in our industry. In the third quarter on comparative to last-year basis, our business continued to be off at the same 20% pace it was in the first and second quarters. Selling expenses were slightly lower than last year (down 1%) and we were successful in lowering general and administrative expenses, which was substantially lower than in the previous two quarters. General and administrative expense increased 25% in the 9 months but only 7% for the quarter ended Sept. 30," notes Ronald Kaplan, the company's CEO/CFO. "On similar 'run-rate' comparison, compensation expenses were lowered to be more in line with our revenue. Total Operating Expenses for the quarter were virtually equal to the third quarter last year. This is a significant change in spending trend, from the first and second quarters, as evidenced by the Operating Expense comparison of the nine-months, which increased $793,000."

"With expenses being brought back in line, we are investing in long-term strategies to return positive long-term growth in our sales and earnings. We are seeking to recruit top talent capable of managing profitability and long-term success in our targeted distribution channels and considering the changes our industry is undergoing," Mr. Kaplan stated.

On October 31, 2006, the Company announced that Curiosity Kits® Junior Bureau of Investigation "JBI" Evidence Kit had been selected as one of the 100 Best Children's Products for 2006 and one of the 10 Best Socially Responsible Products for 2006 by Stevanne Auerbach, PhD, a.k.a. "Dr. Toy," who developed the program as a service to consumers who desire to purchase safe, affordable, educational oriented, stimulating toys and products for children.

During the quarter, the Company received a jury verdict in the amount of $5,100,000. Once a judgment is entered, either party has 30 days to file an appeal, which requires a bond, during which time interest accrues.

The Company will hold its quarterly telephonic conference call with investors on Wednesday, November 15, 2006 at 4:30 pm EST. Participants can call (800) 379-3293 with an access code: 32789 #. An automated system will answer and prompt parties to enter their access code, followed by the pound (#) sign. All callers will be prompted to record a personal entry announcement that will be announced upon entry to the conference. During the course of the conference, you may hear beeps; this indicates that someone has disconnected from the conference. The listen only web cast of the conference call will be available at http://www.apii.com. For those unable to participate in the live conference, the audio replay will subsequently be available on the site.

About Action Products International, Inc.

Action Products International, Inc. (APII), based in Orlando, Florida, is a consumer products manufacturer, emphasizing branded educational and positive leisure products. Action Products consumer brands span activities, arts, crafts, juvenile products and toy categories. Its products are marketed and sold to retailers and consumers.

Visit the Company's web sites at www.apii.com and www.curiositykits.com

Any statements that are not historical facts contained in this release are forward-looking statements. It is possible that the assumptions made by management for purposes of such statements may not materialize. Actual results may differ materially from those projected or implied in any forward-looking statements. Such statements may involve risks and uncertainties, including but not limited to those relating to product demand, pricing, market acceptance, the effect of economic conditions, intellectual property rights, the outcome of competitive products, risks in product development, the results of financing efforts, the ability to complete transactions, and other factors discussed from time to time in the Company's Securities and Exchange Commission filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made.

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