CPS TECHNOLOGIES CORP/DE/

The components of compensation provided to named executive officers (as well as non-officer employees) typically include base salary, annual discretionary bonuses, and equity incentives. In general, base salaries are reviewed annually and modified when corporate and/or individual performance dictates. Our Chief Executive Officer’s annual salary was increased from $300,000 in 2024 to $319,500 in 2025. Our Chief Financial Officer’s annual salary was increased from $210,000 in 2024 to $223,650 in 2025. No other changes were made to salaries in fiscal 2025. Bonuses and equity incentives have historically been granted in periods during which the Company’s financial performance has supported such awards; such components of compensation are not granted when the Company’s operating results have not been positive and/or the recipients have not achieved specified performance milestones. For fiscal year 2025, bonuses were granted to our named executive officers of $151,994 for the Chief Executive Officer and $59,103 for the Chief Financial Officer. These bonuses were paid in 2026. The Company granted stock options to purchase an aggregate 25,000 shares of Common Stock in fiscal year 2025 to our Chief Executive Officer and 14,000 shares of Common Stock in fiscal year 2025 to our Chief Financial Officer.

The Company’s named executive officers also participate in the group benefits offered to all employees, such as medical and life insurance and a retirement savings plan.

Base Salary

Base salary levels for the Company’s officers typically are reviewed annually and are tied to the Company’s fiscal year. Among those factors taken into consideration when setting executive officer salaries are individual and corporate performance, level of responsibility, prior experience, breadth of knowledge of the industry, and competitive pay practices. Specific weight is not given to any factor when establishing base salaries, although most weight is typically given for individual performance. In unusual cases salaries may be reviewed more frequently.

Annual Bonuses

We believe that executive performance may be maximized through a system of incentive awards. Toward this end, the Company has established a discretionary cash incentive plan. Bonuses, when paid, are designed to tie awards to the achievement of specific corporate sales and earnings targets; the amount of the bonus award earned depends primarily on the extent to which such performance objectives are achieved. The Compensation Committee establishes the annual sales and earnings objectives for the Company, along with the milestones required to be achieved at each bonus level, and shares them with each individual officer. At year-end, the Compensation Committee evaluates each individual’s performance compared with each individual’s specific goals and makes a determination as to whether the specified milestones have been reached.

Equity Incentives

As with base salary and bonus determinations, equity compensation awards are determined on an annual basis, typically in the first half of each fiscal year. An important objective of this component of compensation is to strengthen the relationship between the long-term value of the Company’s stock price and the potential financial gain for employees, as well as retention of personnel. Historically the Company has awarded stock options to its employees, officers and directors as the equity component of compensation, which provide recipients the opportunity to purchase shares of our Common Stock upon vesting and become valuable only if the trading price of the Common Stock increases. The recipient is therefore motivated to remain with the Company until the options vest and motivated to improve individual performance in support of improved Company performance as reflected in an improved trading price.

In selecting employees eligible to receive equity compensation grants (whether at the initial hire date or through periodic grants) and determining the size of such grants, a variety of factors are considered. Determination of the employees eligible to receive awards and the size of such awards is based on a subjective analysis by the Compensation Committee, with input from Mr. Mackey, of each individual’s position within the Company, his or her performance, his or her growth potential and that of the Company, and awards made to similarly situated employees at the Company’s peer companies. For our named executive officers, consideration has also been given in the last several years, and is expected to continue to be given, to long-term beneficial ownership goals. An informal beneficial ownership target has been established for each officer, which is intended to be achieved within a specified time period, and the Compensation Committee considers such targets – along with competitive practices at peer companies, individual performance, and seniority, among other factors – when making decisions about the size of option awards for such officers.