CAPSTONE COMPANIES INC

Role of Management

The Company believes that it is important to have our Chief Executive Officer’s input in the design of compensation programs for his direct reports. The Chief Executive Officer reviews his direct reports’ compensation programs annually with the Committee, evaluating the adequacy relative to the marketplace, inflation, internal equity, external competitiveness, business and motivational challenges and opportunities facing the Company and its executives. In particular, he considers base salary a critical component of compensation to remain competitive and retain his executives. All final decisions regarding compensation for the Chief Executive Officer’s direct reports listed in the Summary Compensation Table are made by the Compensation Committee. The Chief Executive Officer does not make recommendations with regard to his own compensation.

Role of the Compensation Consultant

While we may consult industry sources on compensation for executives, we have not engaged a consultant to analyze our compensation levels.

Compensation Components

For 2023, the principal components of compensation for each named executive officer (“NEO(s)”) were:

Due to the financial condition of the Company, cash compensation has been deferred in fiscal years 2022 and 2023 and into first fiscal quarter of 2024 -See“Salary Deferrals” below.

EXECUTIVE COMPENSATION

(1) On February 5, 2023, the Company extended Stewart Wallach’s Employment Agreement, whereby Mr. Wallach will be paid $301,521 per annum.

(4) On February 5, 2020, the Company entered into a new Employment Agreement with James McClinton, , whereby Mr. McClinton would be paid $191,442 per annum.

(7) The Company has no non-equity incentive plans.

(8) The Company has no established bonus plan. Any bonus payments are made ad hoc upon recommendation of the Compensation Committee. Bonuses are only paid on a performance basis.

(9) On September 1, 2020, fifty percent of both Mr. Wallach and Mr. McClinton’s salary for the period September 1, 2020 through December 31, 2020 was accrued and deferred for payment until further notice.

(10) On January 1, 2021, fifty percent of both Mr. Wallach and Mr. McClinton’s salary for the period January 1, 2021 through March 31, 2021 was deferred for payment until further notice.

(11) On January 1, 2022, fifty percent of both Mr. Wallach and Mr. McClinton’s salary was deferred for payment until further notice.

(12) On October 1, 2022, one hundred percent of Mr. Wallach’s salary was deferred for payment until further notice.

Key Developments impacting Executive Compensation

The financial condition of the Company as of 2023 and into the first fiscal quarter of 2024 has caused the Company to defer cash compensation of senior executives. The Company did not replace the retired chief financial officer with a full-time chief financial officer. There were no grants of incentive compensation to senior executives. The deferral of compensation for senior executive officers is anticipated to continue in fiscal year 2024 if the financial condition of the Company does not significantly improve.See “Salary Deferrals” below.

Compensation Objectives

The overall objectives of the Company’s compensation program for NEO’s are as follows:

CEO Pay Ratio

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the annual total compensation of the Company’s median employee to the annual total compensation of Stewart Wallach, the Company’s Chief Executive Officer and President. We consider the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements of Item 402(u) of Regulation S-K. For the fiscal year ended December 31, 2023:

Pay versus Performance Table

The Company chose December 31, 2023, as the date for determining the employee population used to identify the median employee. The Company used base salaries to identify the median employee because the Company does not widely distribute annual equity awards to employees and because this measure approximately reflects the total annual compensation of employees. The Company calculated the median employee’s and the Chief Executive Officer’s annual total compensation consistent with the disclosure requirements for the Summary Compensation Table. For purposes of this calculation, the median employee’s annual total compensation consisted of wages, premium pay (including overtime and holiday pay), paid time off, non-equity incentive plan compensation, change in pension value and retirement plan contributions.

Compensation Peer Review

To better review the compensation practices of similar companies (“peer group companies”), the Company has from time to time in the past reviewed the median compensation levels of companies of peer group companies as a reference point for determining the competitiveness of the Company’s compensation of its principal executive officers. No peer group companies review was conducted in 2023 due to the financial condition of the Company and the deferral of cash compensation of the principal executive officers.

Executive Compensation Best Practices the Company Follows

Compensation Philosophy

The Company’s guiding philosophy in setting executive compensation is that the compensation of executive officers should reflect the scope of their job responsibilities and the level of individual and corporate performance achieved. With the declining financial condition of the Company in 2023 and into the first fiscal quarter of 2024, the compensation of senior executives has been deferred to conserve cash for basic operating overhead.

The Company endeavors to strike an appropriate balance between long-term and current cash compensation. The current executives are key to the ability of the Company to conduct its business because of their individual experience and relationships in our current business line. Their compensation reflects their individual value to the ability of the Company to conduct its current business.

EMPLOYMENT AGREEMENTS

Stewart Wallach, Chief Executive Officer and President

On February 5, 2020, the Company entered into an Employment Agreement with Stewart Wallach, whereby Mr. Wallach would be paid $301,521 per annum. The term of this new agreement began February 5, 2020, and ends February 5, 2023. The parties may extend the employment period of this agreement by mutual consent with approval of the Company’s Board of Directors, but the extension may not exceed two years in length.

On February 5, 2023, was extended through February 5, 2025.

The February 5, 2020, Employment Agreement with Mr. Wallach was filed by the Company as an exhibit to Report Form 10-K for fiscal year ended December 31, 2019 - (as filed by the Company with the Commission on March 30, 2020).

Dana Eschenburg Perez Chief Financial Officer

The February 5, 2020, Consulting Agreement with Ms. Perez was filed by the Company as an exhibit to Report Form 8-K on March 28, 2023. The Consulting Agreement was extended and filed by the Company as an exhibit to Report Form 10-K for fiscal year ended December 31, 2023.

Salary Deferrals

Effective September 1, 2020 through December 31, 2020, payments equivalent to fifty percent of Mr. Wallach’s salary or approximately $48,707 was deferred until further notice.

Effective January 1, 2021 through March 31, 2021, payments equivalent to fifty percent of Mr. Wallach’s salary or approximately $40,589 was deferred until further notice.

On January 1, 2022, fifty percent of Mr. Wallach’s salary was deferred for payment until further notice.

On October 1, 2022, one hundred percent of Mr. Wallach’s salary was deferred for payment until further notice.

Total salary deferral for Mr. Wallach amounted to $371,103 through December 31, 2023.

Common Provisions in both new Employment Agreements:

The following provisions are contained in each of the above employment agreements: If the officer’s employment is terminated by death or disability or without cause, the Company is obligated to pay to the officer’s estate or the officer, an amount equal to accrued and unpaid base salary as well as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal to (a) the sum of twelve (12) months base salary at the rate the Executive was earning as of the date of termination and (b) the sum of “merit” based bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by the Company shall be paid from a normal payroll account on a bi-weekly basis in accordance with the normal payroll policies of the Company. The amount owed by the Company to the Executive, from the effective Termination date, will be paid out bi-weekly over the course of the year but at no time will be no more than twenty (26) installments. The Company will also continue to pay the Executive’s health and dental insurance benefits for 6 months starting at the Executives date of termination. If the Executive had family health coverage at the time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive’s severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment.

The above summary of the employment agreements is qualified by reference to the actual employment agreements, which were filed as exhibits to the Form 10-K by the Company for fiscal year ended December 31, 2019 (as filed by the Company with the Commission on March 30, 2020).

These amended agreements supersede any existing employment agreements and are the only employment agreements with Company officers:

SUMMARY TABLE OF OPTION GRANTS TO OFFICERS OF COMPANY(1)

As of December 31, 2023

OTHER COMPENSATION(1)

OUTSTANDING EQUITY AWARDS FOR YEAR END 2023 TABLE

OPTIONS(1)

2023 OPTION EXERCISES AND VESTED OPTIONS

POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT

Indemnification.

The Company maintains directors and officer’s liability insurance or “D&O insurance” coverage to reduce its exposure to such obligations, and payments made under these agreements historically have not been material. Further, the Company’s articles of incorporation and bylaws provide for indemnification of directors and officers.