COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2014

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 5 – COMMITMENTS AND CONTINGENCIES

Operating Leases

On June 29, 2007, the Company relocated its principal executive offices and sole operations facility to 350 Jim Moran Blvd., Suite 120, Deerfield Beach, Florida 33442, which is located in Broward County.  This space consists of 4,000 square rentable feet and was leased on a month to month basis.

Capstone Industries entered into a new lease agreement for the same office space as currently located. The new lease agreement dated January 17, 2014 and effective February 1, 2014, has a 3 year lease with a base annual rent of $46,810 paid in equal monthly installments. The company has the one time option to renew the lease for three (3) years subject to a 3% increase per each year of the renewal term. Under the new lease agreement, Additionally, Capstone is responsible for portion of Cam charges and any other utility consumed in the leased premises.

Capstone International Hong Kong Ltd. Entered in a two year lease agreement for office space at 303 Hennessy Road, Wanchai, Hong Kong.  The agreement is for the period from February 17, 2014 to February 16, 2016.  This lease has a base annual rent of $48,000 (HK$ 372,000) paid in equal monthly installments.

Rental expense for the period ending September 30, 2014 under above two lease agreements was $86,359 and $41,903 for the periods ending September 30, 2014 for Deerfield Beach, Florida & Wanchai, Hong Kong location.

The lease obligations under these agreements for the next five years are as follows:

Year Ended December, 31,	US	HK	Total
2014	$42,909	$42,000	$84,909
2015	48,083	48,000	96,083
2016	49,520	6,000	55,520
2017	4,137	-	4,137
2018	-	-	-
Total lease obligation	$144,649	$96,000	$240,649

Employment Agreements

On February 5, 2008, the Company entered into an Employment Agreement with Stewart Wallach, the Company’s Chief Executive Officer and President, whereby Mr. Wallach will be paid $225,000 per annum.  As part of the agreement, Mr. Wallach will receive a minimum increase of 5% per year.  For 2009, Mr. Wallach was paid $236,250, and for 2010 was paid $175,412.  For 2011 he was paid $180,000 and for 2012 he was paid $272,336.  For the year 2013 Mr. Wallach was paid $285,586. An amount of $40,233 has been accrued and is included on the balance sheet as part of accounts payable and accrued expenses for deferred wages in 2011.  This balance remains unpaid at December 31, 2013 and continues to be reported as part of accounts payable and accrued expenses.  The term of the contract begins February 5, 2008 and ends on February 5, 2011, but the term of the contract was extended for a further two years through February 5, 2013.  The Compensation Committee has further extended the agreement with the same terms for a further three years through February 5, 2016.

On February 5, 2008, the Company entered into an Employment Agreement with Gerry McClinton, the Company’s Chief Operating Officer, whereby Mr. McClinton will be paid $150,000 per annum.  As part of the agreement, Mr. McClinton will receive a minimum increase of 5% per year.  For 2009, Mr. McClinton was paid $157,500 and for 2010 was paid $113,546. For 2011, Mr. McClinton was paid $146,250 and for 2012 he was paid $181,403. For the year 2013 Mr. McClinton was paid $ 190,398.  An amount of $572 has been accrued and is included on the balance sheet as part of accounts payable and accrued expenses for deferred wages in 2011.  This balance remains unpaid at December 31, 2013 and continues to be reported as part of accounts payable and accrued expenses.  The term of the contract begins February 5, 2008 and ends on February 5, 2011 but the term of the contract was extended for a further two years through February 5, 2013. The Compensation Committee has further extended the agreement with the same terms for a further three years through February 5, 2016.