Colorado		(3670)		84-1463284
(State or jurisdiction of		(Primary Standard Industrial		(I.R.S. Employer
incorporation or organization)		Classification Code Number)		Identification No.)

Title of each class		Name of each exchange where registered
Common Stock par value $0.001 per share		The NASDAQ Stock Market

Part I
Item 1.	Business	3
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	26
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosure	26
Part II
Item 5.	Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
	Market Value	29
	Description of Securities	27
Item 6.	Selected Financial Data	36
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
	Critical Accounting Policies	39
	Liquidity and Capital Resources	41
	Results of Operations	48
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 8.	Financial Statements and Supplementary Data	55
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	55
Item 9A.	Controls and Procedures	55
Item 9B	Other Information	58
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	58
	Our Corporate Governance Practices	61
	Code of Ethics	61
	Audit Committee	63
	Audit Committee Report	64
	Nominating Committee	64
Item 11.	Executive Compensation	68
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	77
	Equity Incentive Plans
Item 13.	Certain Relationships, Related Transactions and Director Independence	78
Item 14.	Principal Accounting Fees and Services	80
Part IV
Item 15.	Exhibits, Financial Statement Schedules	82
	Exhibits	82
	Signatures	86
	Certifications

 

	2

 

PART I

 

Item 1.  Business

	3

	4

	5

	6

	7

·

Developing collaborative relationships with our customers by seeking to meet their design needs in a timely and cost effective manner.

·

Developing new technologies and expanded manufacturing capabilities as needed.

·

Growing our global sales and distribution through our primary international distribution channel, a prominent international sales and distribution strategic partner that ships product to more than 170 countries worldwide from a single location in the United States.

·

Directing our marketing efforts through one of our two channels, either directly with the sales representative who understands the targets in the area or through our distributor with partnership marketing.

·

Attending strategic trade shows to grow our brand presence for our proprietary products.  Because of our growing recognition in innovation, we need to be where the heads of the industries are, particularly at industry trade shows.

	8

	9

Intellectual Property Protection

	10

	11

 

	12

	•	challenges caused by distance, language and cultural differences and by doing business with foreign agencies and governments;
	•	longer payment cycles in some countries;
	•	uncertainty regarding liability for services and content;
	•	credit risk and higher levels of payment fraud;
	•	currency exchange rate fluctuations and our ability to manage these fluctuations;
	•	foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S.;
	•	import and export requirements that may prevent us from shipping products or providing services to a particular market and may increase our operating costs;
	•	potentially adverse tax consequences;
	•	higher costs associated with doing business internationally;
	•	political, social and economic instability abroad, terrorist attacks and security concerns in general;
	•	reduced or varied protection for intellectual property rights in some countries; and
	•	different employee/employer relationships and the existence of workers’ councils and labor unions.

	13

	14

	•	implementation or remediation of controls, procedures and policies of the acquired company;
	•	diversion of management time and focus from operating our business to acquisition integration challenges;
	•	coordination of product, engineering and sales and marketing functions;
	•	transition of operations, users and customers into our existing customs;
	•	cultural challenges associated with integrating employees from the acquired company into our organization;
	•	retention of employees from the businesses we acquire;
	•	integration of the acquired company’s accounting, management information, human resource and other administrative systems;
	•	liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;
	•	litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former shareholders, or other third parties;
	•	in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;
	•	failure to successfully further develop the acquired technologies; and
	•	other as yet unknown risks that may impact our business.

	15

	•	varying demand for our products due to the financial and operating condition of our distributors and their customers, distributor inventory management practices and general economic conditions;
	•	inability of our contract manufacturers and suppliers to meet our demand;
	•	success and timing of new product introductions by us and the performance of our products generally;
	•	announcements by us or our competitors regarding products, promotions or other transactions;
	•	costs related to responding to government inquiries related to regulatory compliance;
	•	our ability to control and reduce product costs;
	•	changes in the manner in which we sell products;
	•	volatility in foreign exchange rates, changes in interest rates and/or the availability and cost of financing or other working capital to our distributors and their customers; and
	•	the impact of write downs of excess and obsolete inventory.

	16

	17

	•	expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate or work around errors or defects;
	•	loss of existing or potential customers or distributors;
	•	delayed or lost revenue;
	•	delay or failure to attain market acceptance;
	•	delay in the development or release of new products or services;
	•	negative publicity, which will harm our reputation; warranty claims against us, which could result in an increase in our provision for doubtful accounts;
	•	an increase in collection cycles for accounts receivable or the expense and risk of litigation; and
	•	harm to our results of operations.

	18

	•	the continued employment and performance of our senior management;
	•	our ability to retain and motivate our officers and key employees; and
	•	our ability to identify, attract, hire, train, retain and motivate other highly skilled technical, managerial, marketing, sales and customer service personnel.

	19

 

	•	divert management’s attention;
	•	result in costly and time-consuming litigation;
	•	require us to enter into royalty or licensing agreements, which may not be available on acceptable terms, or at all; and
	•	require us to redesign our products to avoid infringement.

	20

	•	actual or anticipated variations in our quarterly operating results;
	•	announcements of technological innovations or new products or services by the Company or our competitors;
	•	conditions or trends relating to our inferential natural gas monitoring device or electromechanical component technologies;
	•	changes in the economic performance and/or market valuations of other electromechanical, electronic component and industrial controls related companies;
	•	conditions or trends relating to the marketing, sale or distribution of electromechanical components and industrial controls to OEM manufacturing customers;
	•	changes in the economic performance and/or market valuations of other inferential natural gas monitoring device or electromechanical components and industrial electronic component related companies;
	•	additions or departures of key personnel;
	•	fluctuations of the stock market as a whole;
	•	announcements about our earnings that are not in line with expectations;
	•	announcements by our competitors of their earnings that are not in line with expectations;
	•	the volume of shares of common stock available for public sale;
	•	sales of stock by us or by our shareholders;
	•	short sales, hedging and other derivative transactions on shares of our common stock;
	•	our ability to retain existing customers, attract new customers and satisfy our customers’ requirements;
	•	general economic conditions;
	•	changes in our pricing policies;

	21

	•	our ability to expand our business;
	•	the effectiveness of our personnel;
	•	new product and service introductions;
	•	technical difficulties or interruptions in our services;
	•	the timing of additional investments in our products;
	•	regulatory compliance costs;
	•	costs associated with future acquisitions of technologies and businesses; and
	•	extraordinary expenses such as litigation or other dispute-related settlement payments.

	22

	•	provide that the authorized number of directors may be changed by resolution of the board of directors;
	•	provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; and
	•	do not provide for cumulative voting rights.

	23

	24

Item 1B.       Unresolved Staff Comments

	25

Item 2.  Properties 

Item 3.  Legal Proceedings

Item 4.  Mine Safety Disclosure

	26

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

	27

	28

	29

1.

1,030,807 common shares reserved for outstanding options issued under our Equity Compensation Plans

2.

1,613,112 common shares authorized for issuance under our Equity Compensation Plans

	30

	31

·

During 2009, the Company issued under the 2009 Equity Incentive Plan (Executive) to officers and directors options to purchase restricted common stock at $7.50 per share as follows: 85,009 fully vested shares; 28,800 shares that vest over four years, 25% at year one and thereafter in equal monthly installments; and 19,800 shares that fully vested one year after the date of grant.

·

During 2010 the Company issued under the 2009 Equity Incentive Plan (Executive) to officers and directors options to purchase restricted common stock at $9.00 per share as follows: 19,800 options that vest one year after the October 11, 2010 grant date and 82,213 options that vest over four years, 25% at one year after the grant date, thereafter in equal monthly installments.

·

During 2012 the Company issued under the 2009 Equity Incentive Plan (Executive) to officers and directors options to purchase restricted common stock at $4.56 per share as follows: 19,800 options that vest one year after the April 16, 2012 grant date, 64,875 options that vest over four years, 25% at one year after the grant date, thereafter in equal monthly installments and 330,000 options at $6.00 per share to an officer that vest in equal monthly installments over the course of forty-eight consecutive months beginning September 2012.

·

During 2013 the Company issued under the 2009 Equity Incentive Plan (Executive) to three officers three hundred fifty thousand (350,000) options to purchase restricted common stock at $6.25 per share as follows: one third that vest one year after the June 24, 2013 grant date, one third that vest two years after the grant date and the balance that vest three years after the grant date.

 

	33

	34

	35

Item 6.    Selected Financial Data

	36

(a)

During the year ended December 31, 2012, management determined that an impairment of $278,428 related to the intangible, trademark and trade name V-Infinity was necessary.  During the year ended December 31, 2010, management determined impairments of $3,105,956 related to technology rights and $418,185 related to patents were necessary.  During the year ended December 31, 2009, management determined impairments of $210,403 related to intangible, patent pending technology, $246,237 related to intangible, customer list, $136,811 related to patents, and $10,241,529 related to goodwill were necessary.

	(b)	In October 2013, in conjunction with the financing of the purchase of the headquarters facility. The purchase was funded, in part, by a promissory note payable to Wells Fargo Bank in the amount of $3,693,750 plus interest at the rate of 2% above LIBOR, payable over ten years.  It was secured by a deed of trust on the purchased property which was executed by CUI Properties, LLC and guaranteed by CUI Global, Inc.  In conjunction with the purchase, the parties to this transaction entered into a Swap Transaction Confirmation agreement effective October 1, 2013 incorporating the terms and definitions of the International Swaps and Derivatives Association, Inc. (ISDA) that effectively maximizes the annual interest rate at 6.27%.  The Company recorded a $427,818 expense associated with the derivative nature of the swap agreement.
	(c)	During the year ended December 31, 2011, in an effort to concentrate our business focus on our core product development and marketing, we conveyed our WayCool and WayFast patent portfolio to Olantra Fund X LLC for a cash payment of $500,000 and recognized a gain on sale of technology rights of $143,636.
	(d)	During 2013, it was determined that the note receivable related to the divestment of Comex Electronics had become impaired, at which time the Company recorded an impairment of $502,194.

	37

(e)

In July 2009, CUI Global acquired, as a wholly owned subsidiary, Comex Instruments, Ltd. now known as CUI Japan and 49% of Comex Electronics Ltd.  Both companies are Japanese based providers of electronic components.  Effective July 1, 2011, CUI Global entered into an agreement to convey its 49% ownership interest in Comex Electronics to the owners of the remaining 51% who are the original founders and were the original owners of Comex Instruments, for $617,975 in the form of a five year note receivable bearing interest at 4% per annum.  At December 31, 2013, the remaining balance on this note receivable is fully reserved against.  The operations of CUI Japan were not affected by this divestment.  As such, the operations of Comex Electronics are reported in discontinued operations for the year ended December 31, 2011.

(f)

Effective April 1, 2013, CUI Global closed on a share purchase agreement to acquire 100% of the equity interest in Orbital Gas Systems Limited, a company organized under the laws of England and Wales (“Orbital”), from Orbital’s sole shareholder. The purchase price for the acquisition of Orbital was £17,000,000 British pounds sterling (“£”), subject to purchase price adjustments, 100% of the purchase price was paid in cash. To secure indemnification obligations, 5.0% of the purchase price, or £850,000, was held in escrow through December 1, 2013. The purchase price was $26,205,500, based on the actual exchange rate for British pound sterling to U.S. dollars achieved on April 18, 2013 for the acquisition of Orbital. The cash paid upon acquisition, net of cash received was $17,709,507. As a result of the acquisition of Orbital, CUI Global acquired Goodwill of $5,484,956, intangible, customer lists $7,680,110, intangible, order backlog $3,673,526, intangible, technology-based asset know how $3,111,286, intangible, technology based asset software $674,359 and intangible, trade name $1,975,262.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

	38

	39

Intellectual Property

	40

Product revenue is recognized in the period when persuasive evidence of an arrangement with a customer exists, the products are shipped and title has transferred to the customer, the price is fixed or determinable, and collection is reasonably assured. The Company sells to distributors pursuant to distribution agreements that have certain terms and conditions such as the right of return and price protection which inhibit revenue recognition unless they can be reasonably estimated as we cannot assert the price is fixed and determinable and estimate returns.  For one distributor that comprises 33% of revenue, we have such history and ability to estimate and therefore recognized revenue upon sale to the distributor and record a corresponding reserve for the estimated returns.  For a different distributor arrangement that represents 2% of revenue, we do not have sufficient history to reasonably estimate price protection reserve and the right of return and accordingly defer revenue and the related costs until such time as the distributor resells the product. 

	41

	42

	43

	44

	45

	46

	47

 

	48

 

	49

	50

	51

	52

 

Effect of Inflation and Changing Prices

The Company believes, that during fiscal years ended December 31, 2013, 2012 and 2011, the effect of a hypothetical 100 basis point shift in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements.

 

Recent Accounting Pronouncements

	53

	54

Item 8.  Financial Statements and Supplementary Data

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 

Item 9A.  Controls and Procedures

Notwithstanding the identified material weaknesses, management believes the consolidated financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP. 

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2013 financial statements, and this report does not affect our report dated March 31, 2014, on those financial statements.

 

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, CUI Global, Inc. and Subsidiaries has not maintained effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO-1992).

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets and the related statements of income, comprehensive income, stockholders’ equity, and cash flows of CUI Global, Inc. and Subsidiaries, and our report dated March 31, 2014 expressed an unqualified opinion.

 

Liggett, Vogt & Webb, P.A.

LIGGETT, VOGT & WEBB, P.A.

Certified Public Accountants

 

Boynton Beach, Florida

March 31, 2014

  

 

There are no matters to be reported under this Item.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

	58

	59

	60

 

	61

	62

	63

1.

Reviewed and discussed with management the audited financial statements included in the Company’s Annual Report on Form 10-K and the most recent Quarterly Report on Form 10-Q;

2.

Discussed with Liggett, Vogt & Webb, P.A., the Company’s independent auditors, the matters required to be discussed by statement of Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T;

3.

Received the written disclosures and letter from Liggett, Vogt & Webb, P.A. as required by Independence Standards Board Standard No. 1 and

4.

Discussed with Liggett, Vogt & Webb, P.A. its independence.

Submitted by:	Sean P. Rooney
	Thomas A. Price
	Corey A. Lambrecht,
	Audit Committee

	64

·

To annually review the Company’s philosophy regarding executive compensation.

	65

 

·

To periodically review market and industry data to assess the Company’s competitive position, and to retain any compensation consultant to be used to assist in the evaluation of directors’ and executive officers’ compensation.

·

To establish and approve the Company goals and objectives, and associated measurement metrics relevant to compensation of the Company’s executive officers.

·

To establish and approve incentive levels and targets relevant to compensation of the executive officers.

·

To annually review and make recommendations to the board to approve, for all principal executives and officers, the base and incentive compensation, taking into consideration the judgment and recommendation of the Chief Executive Officer for the compensation of the principal executives and officers.

·

To separately review, determine and approve the Chief Executive Officer’s applicable compensation levels based on the Committee’s evaluation of the Chief Executive Officer’s performance in light of the Company’s and the individual goals and objectives.

·

To periodically review and make recommendations to the board with respect to the compensation of directors, including board and committee retainers, meeting fees, equity-based compensation and such other forms of compensation as the Compensation Committee may consider appropriate.

·

To administer and annually review the Company’s incentive compensation plans and equity-based plans.

·

To review and make recommendations to the board regarding any executive employment agreements, any proposed severance arrangements or change in control and similar agreements/provisions, and any amendments, supplements or waivers to the foregoing agreements, and any perquisites, special or supplemental benefits.

·

To review and discuss with management, the Compensation Discussion and Analysis (CD&A), and determine the Committee’s recommendation for the CD&A’s inclusion in the Company’s annual report filed with the SEC on Form 10-K and proxy statement on Schedule 14A.

·

The Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser.

·

The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the Committee. The Company must provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the Committee.

·

The Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Committee, other than in-house legal counsel, only after taking into consideration the following factors:

(i)

the provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser;

(ii)

the amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser;

(iii)

the policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest;

(iv)

any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the Committee;

	66

(v)

any stock of the Company owned by the compensation consultant, legal counsel or other adviser; and

(vi)

any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the Company.

⋅

The Committee is not required to implement or act consistently with the advice or recommendations of the compensation consultant, legal counsel or other adviser to the Committee.

	•	Minutes and materials from the previous meeting(s);
	•	Reports on year-to-date Company and Partnership financial performance versus budget;
	•	Reports on progress and levels of performance of individual and Company performance objectives;
	•	Reports on the Company’s financial and stock performance versus a peer group of companies;
	•	Reports from the Committee’s compensation consultant regarding market and industry data relevant to executive officer compensation;
	•	Reports and executive compensation summary worksheets, which sets forth for each executive officer: current total compensation and incentive compensation target percentages, current equity ownership holdings and general partner ownership interest and current and projected value of each and all such compensation elements, including distributions and dividends therefrom, over a five year period.

	67

Submitted by:	Compensation Committee
	Colton R. Melby, Chairman
	Corey A. Lambrecht

	68

 

	69

	70

	71

	1.	Mr. Clough joined the Company on September 1, 2005. Effective September 13, 2007, Mr. Clough was appointed CEO/President of CUI Global and Chief Executive Officer of CUI, Inc., a wholly owned subsidiary of the Company.
	2.	Mr. Clough is employed under a multi-year employment contract with the Company, which was recently extended to run to and through August 1, 2015. Said contract provides, in relevant part, for an annual salary of $460,000 which became effective July 1, 2013 and includes bonus provisions for each calendar year and entitles Mr. Clough to a three year severance package. Bonuses are approved quarterly based on various performance-related factors and an evaluation of current performance. All such bonus payments shall be paid to Mr. Clough in equal monthly installments following the quarter in which the bonus is earned and shall be paid on the 15th day of each month. During 2013, in accordance with the bonus provisions of his employment contract, Mr. Clough received 33,350 shares of common stock with a fair value of $160,080. At December 31, 2013 and 2012, there was an accrual of $14,167 and $53,542, respectively, for compensation owed to Mr. Clough.

	72

	3.	Effective June 24, 2013, Mr. Clough received a bonus option to purchase 200,000 common shares within ten years from date of issuance, at a price of $6.25 per share that vests one third each year over 3 years. Under the terms of Mr. Clough’s contract extension, effective September 21, 2012, Mr. Clough received a bonus option to purchase 330,000 common shares, within ten years from date of issuance, at a price of $6.00 per share that vests in equal monthly installments over 4 years. Effective April 16, 2012, Mr. Clough received a bonus option to purchase 37,177 common shares, within ten years from date of issuance, at a price of $4.56 per share that vests over 4 years: 25% at year one and thereafter in equal monthly installments.
	4.	Mr. Ford joined the Company May 15, 2008 as Chief Financial Officer of CUI Global and CUI, Inc., a wholly owned subsidiary of the Company.
	5.	Mr. Ford is employed under a three year employment contract with the Company, which was extended to July 1, 2014 and provides, in relevant part, for an annual salary of $250,000 effective July 1, 2013 and bonus provisions up to one hundred twenty-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including adjusted EBITDA performance. The bonus includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Previous to July 1, 2013, Mr. Ford’s employment contract provided, in relevant part, for an annual salary of $195,000 and bonus provisions for each calendar year, in which the CUI Global year end Statement of Operations shows a Net Profit and the Gross Revenue equal to or that exceeds fifteen percent (15%), but less than thirty percent (30%), of the immediate preceding calendar year, he shall be entitled to receive a cash bonus in an amount equal to fifty percent (50%) of his prior year base salary in addition to any other compensation to which he may be entitled; provided, however, that he shall be entitled to the bonus only if he has been employed by the Company during that entire calendar year. In substitution of the bonus percentages described above, he shall be entitled to receive, in any year in which annual Gross Revenue exceeds by 30% of the prior calendar year gross revenue, a sum equal to 100% of his prior year base salary. Bonuses are approved quarterly based on the above factors and an evaluation of current performance. All such bonus payments shall be paid to Mr. Ford in equal monthly installments following the quarter in which the bonus is earned and shall be paid on the 15th day of each month. During 2012, in accordance with the bonus provisions of his employment contract, Mr. Ford received 10,650 shares of common stock with a fair value of $51,120. At December 31, 2013 and 2012 there was an accrual of $8,125 and $8,125, respectively, for compensation owed to Mr. Ford.
	6.	Effective June 24, 2013, Mr. Ford received a bonus option to purchase 100,000 common shares within ten years from date of issuance, at a price of $6.25 per share that vests one third each year over 3 years. Effective April 16, 2012, Mr. Ford received a bonus option to purchase 12,598 common shares, within ten years from date of issuance, at a price of $4.56 per share that vests over 4 years: 25% at year one and thereafter in equal monthly installments.
	7.	Mr. McKenzie joined the Company May 15, 2008 as Chief Operating Officer of CUI Global and President and Chief Operating Officer of CUI, Inc., a wholly owned subsidiary of the Company.
	8.	Mr. McKenzie is employed under a three year employment contract with the Company, which was extended to July 1, 2014 and provides, in relevant part, for an annual salary of $250,000 and bonus provisions up to one hundred twenty-five percent of base salary to be based on performance objectives, goals, and milestones for each calendar year, including revenue and EBITDA performance in the power and electro-mechanical segment. The bonus includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Previous to July 1, 2013, Mr. McKenzie’s employment contract provided, in relevant part, for an annual salary of $205,000 and bonus provisions for each calendar year in which the CUI Global year end Statement of Operations shows a Net Profit and the Gross Revenue equal to or that exceeds fifteen percent (15%), but less than thirty percent (30%), of the immediate preceding calendar year, he shall be entitled to receive a cash bonus in an amount equal to fifty percent (50%) of his prior year base salary in addition to any other compensation to which he may be entitled; provided, however, that he shall be entitled to the bonus only if he has been employed by the Company during that entire calendar year. In substitution of the bonus percentages described above, he shall be entitled to receive, in any year in which annual Gross Revenue exceeds by 30% of the prior calendar year gross revenue, a sum equal to 100% of his prior year base salary. Bonuses are approved quarterly based on the above factors and an evaluation of current performance. All such bonus payments shall be paid to Mr. McKenzie in equal monthly installments following the quarter in which the bonus is earned and shall be paid on the 15th day of each month. During 2012, in accordance with the bonus provisions of his employment contract, Mr. McKenzie received 6,750 shares of common stock with a fair value of $32,400. At December 31, 2013 and 2012 there was an accrual of $8,542 and $8,542, respectively, for compensation owed to Mr. McKenzie.

	73

	9.	Effective June 24, 2013, Mr. McKenzie received a bonus option to purchase 50,000 common shares within ten years from date of issuance, at a price of $6.25 per share that vests one third each year over 3 years. Effective April 16, 2012, Mr. McKenzie received a bonus option to purchase 15,100 common shares as COO, within ten years from date of issuance, at a price of $4.56 per share that vests over 4 years: 25% at year one and thereafter in equal monthly installments.
	10.	As of December 31, 2013, William J. Clough, CEO/Director held 656,231 outstanding options, Matthew M. McKenzie, COO/Director held 112,796 outstanding options which includes shares owned by his spouse and Daniel N. Ford, CFO held 137,794 outstanding options.
	11.	Please see the disclosure of assumptions made in the valuation of the option awards included in Note 12 of Notes to Consolidated Financial Statements, Stockholders’ Equity in the Company’s financial statements included with this proxy statement.

	74

 

1.

Effective January 1, 2009, Mr. Clough, Mr. McKenzie and Mr. Ford received fully vested bonus options to purchase 37,177, 15,100, and 12,598 common shares, respectively, within ten years from date of issuance, at a price of $7.50 per share.  Also effective January 1, 2009, for their service as directors of the Company, Mr. Clough and Mr. McKenzie received an option to purchase 4,800 common shares at a price of $7.50 within ten years from date of issuance that vests over four years, 25% after the first year and in equal monthly installments over the balance of the four year term and an option to purchase 3,300 common shares at a price of $7.50 per share that vests one year after issuance.

2.

Effective October 11, 2010, Mr. Clough, Mr. McKenzie and Mr. Ford received bonus options to purchase 37,177, 15,100 and 12,598 common shares, respectively, within ten years from date of issuance, at a price of $9.00 per share that vests over 4 years: 25% at year one and thereafter in equal monthly installments.  Additionally, effective October 11, 2010, for their service as directors of the Company, Mr. Clough and Mr. McKenzie received an option to purchase 3,300 common shares at a price of $9.00 per share that vests one year after issuance.

	75

3.

Effective April 16, 2012, Mr. Clough, Mr. McKenzie and Mr. Ford received bonus options to purchase 37,177, 15,100 and 12,598 common shares, respectively, within ten years from date of issuance, at a price of $4.56 per share that vests over 4 years: 25% at year one and thereafter in equal monthly installments.  Additionally, effective April 16, 2012, for their service as directors of the Company, Mr. Clough and Mr. McKenzie received an option to purchase 3,300 common shares at a price of $4.56 per share that vests one year after issuance.

4.

Effective September 21, 2012, under the terms of his contract extension, Mr. Clough received a bonus option to purchase 330,000 common shares, within ten years from date of issuance, at a price of $6.00 per share that vests in equal monthly installments over 4 years.

5.

Effective June 24, 2013 Mr. Clough, Mr. McKenzie and Mr. Ford received bonus options to purchase 200,000, 50,000 and 100,000 common shares, respectively, within ten years from date of issuance, at a price of $6.25 per share that vests one third per year over three years.

•

Through September 30, 2013, board members received a cash retainer of $17,813 and the Chairman received $25,313.  For the period after September 30, 2013, board members received a retainer fee of $8,250, the Chairman received a retainer fee of $10,750, audit committee members received a retainer fee of $2,375, the audit committee chairman received a retainer fee of $5,000, the compensation committee members received a retainer fee of $1,500 and the compensation committee chairman received a retainer fee of $3,125.  For 2014, each board member will receive a retainer fees in the form of cash or options with a fair value as follows:  board member fee of $33,000, Chairman fee of $43,000, audit committee member fee of $9,500, audit committee chair fee of $9,500, compensation committee member fee of $6,000 and compensation committee chair fee of $12,500.

•

Meeting fee: none.

	76

1.

As of December 31, 2013, each non-employee director held 14,700 options remaining outstanding of which 14,700 of those options were fully vested.  Please see the disclosure of assumptions made in the valuation of the option awards included in Note 8 of Notes to Consolidated Financial Statements, Stockholders’ Equity in the Company’s financial statements included with this proxy statement.

2.

Through September 30, 2013, board members received a cash retainer of $17,813 and the Chairman received $25,313.  For the period after September 30, 2013, board members received a retainer fee of $8,250, the Chairman received a retainer fee of $10,750, audit committee members received a retainer fee of $2,375, the audit committee chairman received a retainer fee of $5,000, the compensation committee members received a retainer fee of $1,500 and the compensation committee chairman received a retainer fee of $3,125.  For 2014, each board member will receive a retainer fees in the form of cash or options with a fair value as follows:  board member fee of $33,000, Chairman fee of $43,000, audit committee member fee of $9,500, audit committee chair fee of $9,500, compensation committee member fee of $6,000 and compensation committee chair fee of $12,500.  No meeting fee.

	77

1.

Except as otherwise indicated, the address of each beneficial owner is c/o CUI Global, Inc., 20050 SW 112th Avenue, Tualatin, Oregon 97062.

2.

Calculated on the basis of 20,566,663 shares of common stock issued and outstanding at December 31, 2013 except that shares of common stock underlying options and warrants exercisable within 60 days of the date hereof are deemed to be outstanding for purposes of calculating the beneficial ownership of securities of such holder of options or warrants.

3.

Calculated on the basis of 20,566,663 shares of common stock with one vote per share; shares of common stock underlying options exercisable within 60 days of the date hereof are deemed to be outstanding for purposes of calculating the beneficial ownership of securities of such holder of options or warrants.

4.

Mr. Melby controls the investment decisions of a limited liability company that owns the securities.  The limited liability company is owned by a limited partnership in which Mr. Melby owns an indirect interest.  Mr. Melby’s common stock includes vested options to purchase 14,700 common shares.  Mr. Melby is the former Chairman of the Board of Directors.  The outstanding shares beneficially owned by Mr. Melby are pledged as collateral for a margin account.

5.

Mr. Clough’s common stock includes vested options to purchase 225,196 common shares.  Mr. Clough is a Director, interim Chairman and Chief Executive Officer/President of CUI Global, Inc.

6.

Mr. Price’s shares included vested options to purchase 14,700 common shares.  Mr. Price is a Director.

7.

Mr. Rooney’s shares include vested options to purchase 14,700 common shares.  Mr. Rooney is a Director.

8.

Mr. Lambrecht’s shares include vested options to purchase 14,700 common shares.  Mr. Lambrecht is a Director.

9.

Mr. McKenzie’s shares include vested options to purchase 52,729 common shares.  Mr. McKenzie is a Director, Chief Operating Officer of CUI Global, Inc. Mr. McKenzie’s securities include an option to purchase 2,796 shares owned by his spouse.

10.

Mr. Ford’s shares include vested options to purchase 29,396 common shares.  Mr. Ford is the Chief Financial Officer of CUI Global, Inc.

Item 13.  Certain Relationships and Related Transactions and Director Independence

	78

·

The acquisition of CUI utilized a $14,000,000 seller’s promissory note issued to International Electronic Devices, Inc. (IED), the former CUI shareholders, payable monthly over three years at $30,000 per month including 1.7% annual simple interest with a balloon payment at the thirty sixth monthly payment, no prepayment penalty, annual success fee of 2.3% payable within three years, right of first refusal to the note payees relating to any private capital raising transactions of CUI Global during the term of the note.  Effective September 1, 2010, the Company and the holder of the $14,000,000 promissory note agreed to reduce the note principal by $1,588,063 and accrued interest by $724,729 and to restructure the interest rate and payment terms.  The forgiveness of debt and accrued interest of $2,312,792 was recognized as a contribution of additional paid in capital.  With this amendment, the Company agreed to pay $1,200,000 of the principal balance during the fourth quarter of 2010 and an additional $487,208 of the principal balance during the first quarter of 2011.  The new terms set the interest rate at 6% per annum with monthly interest payments and a May 15, 2018 balloon payment.

·

During 2013 and 2012, $2,322,863 and $3,468,221, respectively, in principal and interest payments were made in relation to the promissory notes issued to IED.  The 2013 payment utilized $2,000,000 from the 2013 public offering proceeds that was applied towards the promissory note balance in accordance with a settlement agreement.  The 2012 payment utilized $3,000,000 from the equity sale proceeds for the repayment of principal.

	79

Item 14.  Principal Accountants Fees and Services

Audit Fees

	80

Shareholder Communications

	81

Item 15.  Exhibits, Financial Statement Schedules

Exhibit No.		Description
2.11		Share Purchase Agreement dated March 5, 2013 to acquire 100% of the equity interest in Orbital Gas Systems Ltd., a company organized under the laws of England and Wales.
3.112		Amended Restated Articles of Incorporation that compile prior amendments into a single document.
10.323		Amendment to $14,000,000 Convertible Promissory Note effective September 1, 2010.
10.333		Agreement for Accord and Satisfaction of an Undisputed Debt dated April 1, 2010.
10.344		Agreement for the sale of certain intellectual property rights dated September 2, 2011.
10.355		July 1, 2011 binding LOI for CUI Global to convey its 49% ownership interest in Comex Electronics to the owners of the remaining 51% of Comex Electronics.
10.365		Comex divestiture payment schedule, effective July 1, 2011.
10.375		July 11, 2011 Memorandum of Understanding with Ericsson.
10.385		March 5, 2010 Exclusive Field of Use Agreement with California Power Research to license their BPS-5 topology, now marketed as Solus Topology.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.

	82

10.395		September 18, 2009 non-exclusive Field of Use Agreement with Power-One, Inc. to license Power-One’s Digital Power Technology patent.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
10.475		April 20, 2009 exclusive Licensing Agreement with AnderMotion Technologies LLC to manufacture, sell and distribute motion control devices utilizing the AMT encoder technology.
10.415		December 1, 2009 exclusive License Agreement with GL Industrial Services UK, Ltd. through which CUI Global owns exclusive rights to manufacture, sell and distribute a Gas Quality Inferential Measurement Device designed by GL on a worldwide basis.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
10.425		October 21, 2011 exclusive three-year Distribution Agreement with Orbital-UK for distribution of the GasPT2 technology within the United Kingdom.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
10.435		January 16, 2012 exclusive three-year distribution agreement with SOCRATE s.p.a for distribution of the GasPT2 technology for Italy and North Africa.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
10.445		November 1, 2011 two year Manufacturing Agreement with Agilent Technologies Singapore International for the sale of product to Agilent.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
10.465		April 1, 2009 exclusive world-wide Distribution Agreement with Digi-Key Corporation.
10.465		March 18, 2011 Contract Manufacturing Agreement with Ingenion Design, Ltd.
10.475		June 5, 2012 three year Distributor Agreement with Belleau Wood Group.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
10.495		July 26, 2010, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Credit and Security Agreement.
10.505		July 26, 2010, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Revolving Note.
10.515		July 26, 2010, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Security Agreement.
10.525		May 27, 2011, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Subordination Agreement.
10.535		August 23, 2010, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Term Note.
10.545		August 9, 2010, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Patent and Trademark Security Agreement.
10.565		January 25, 2011, line of credit document with the Business Credit division of Wells Fargo Capital Finance, First Amendment to the Credit and Security Agreement.
10.565		April 12, 2011, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Second Amendment to the Credit and Security Agreement.

	83

10.575		May 24, 2011, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Third Amendment to the Credit and Security Agreement.
10.585		November 29, 2011, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Fourth Amendment to the Credit and Security Agreement.
10.595		December 21, 2011, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Fifth Amendment to the Credit and Security Agreement.
10.605		May 15, 2008 Employment Agreement of Daniel N. Ford and Addendum “A” dated July 1, 2010.
10.615		May 15, 2008 Employment Agreement of Matthew M. McKenzie and Addendum “A” dated July 1, 2010.
10.625		August 1, 2012 Addendum “D” to the employment Agreement of William J. Clough.
10.635		Amendment to promissory note payable to IED, Inc., effective September 1, 2010.
10.645		Amendment to promissory note payable to IED, Inc., effective December 1, 2010.
10.655		Amendment to promissory payable to Central Finance, LLC, managed by a former officer, dated September 30, 2010.
10.665		Satisfaction of promissory note payable to Central Finance, LLC dated December 15, 2011.
10.675		July 28, 2011 Promissory note payable to Daniel N. Ford, CFO.
10.685		November 3, 2010 Purchase Sales Agreement with Tensility International Corporation, controlled by a sibling of an officer and director.
10.695		October 28, 2011 Finder’s Fee Agreement with Test Products International, Inc. and James McKenzie, a related party.
10.716		April 3, 2012, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Sixth Amendment to the Credit and Security Agreement.
10.726		December 7, 2012, line of credit document with the Business Credit division of Wells Fargo Capital Finance, Seventh Amendment to the Credit and Security Agreement.
10.737		April 30, 2013 Amendment to California Power Research Agreement.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
10.747		June 20, 2013 Second Amendment to Divestment Agreement regarding Stock Sale and Purchase Agreement between CUI Global, Inc. and Kunio Yamagish et al, dated July1, 2009.
10.767		July 19, 2013 Letter agreement between Orbital Gas Systems, Ltd., a wholly owned subsidiary, and a former employee relating to intellectual property for which Orbital is the licensee.
10.777		July 19, 2013 Intellectual Property License between Orbital Gas Systems, a wholly owned subsidiary of CUI Global and EnDet, Ltd.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
10.78		Documents relating to our April 18, 2013, acquisition of 100% of the equity interest in Orbital Gas Systems Limited, a company organized under the laws of England and Wales (“Orbital”), from Orbital’s sole shareholder are included with our Form 8-K filed with the Commission April 24, 2013.
10.79		Documents relating to the purchase of our office complex by our wholly owned subsidiary, CUI Properties, LLC, please see our Form 8-K filed with the Commission on October 3, 2013.
10.80		Documents relating to the Line of Credit of our subsidiary, CUI, Inc., with Wells Fargo Bank, please see our Form 8-K filed with the Commission on October 3, 2013.

	84

10.81		Documents relating to an Addendum to our May 15, 2013 Distributorship Agreement with Digi-Key Corporation are included with our Form 8-K filed with the Commission December 20, 2013.  Confidential portion(s) of this document have been redacted pursuant to protection as "confidential" under Exemption 4 of the Freedom of Information Act, 5 U.S.C. § 552(b)(4).  A request for confidential treatment has been filed separately with the SEC.
14.18		Code of Ethics and Business Conduct Statement of General Policy.
14.28		Whistleblower Policy
21.18		List of all subsidiaries, state of incorporation and name under which the subsidiary does business.
22.8		Proxy Statement and Notice of 2013 Annual Shareholder Meeting filed with the Commission September 17, 2013.
31.18		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.88		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
32.18		Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
32.88		Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
1008		XBRL-Related Documents.

1

Incorporated by reference to our Report on Form 8-K filed with the Commission on March 6, 2013.

2

Incorporated by reference to our Proxy Statement and Notice of 2013 Annual Shareholder Meeting filed with the Commission September 17, 2013.

3

Incorporated by reference to our Report on Form 10-K filed with the Commission on March 31, 2011.

4

Incorporated by reference to our Report on Form 10-K filed with the Commission on March 26, 2012.

5

Incorporated by reference to our Report on Form 8-K filed with the Commission on January 18, 2013.

6

Incorporated by reference to our Report on Form 8-K filed with the Commission on February 14, 2013.

7

Incorporated by reference to our Report on Form 8-K filed with the Commission on July 30, 2013.

8

Filed herewith.

	85

Name		Title		Date
/s/ William J. Clough		CEO/President/Director		March 31, 2014
William J. Clough
/s/ Daniel N. Ford		CFO/ Principal		March 31, 2014
Daniel N. Ford		Accounting Officer
/s/ Sean P. Rooney		Audit Committee/Director		March 31, 2014
Sean P. Rooney

	86

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Comprehensive Income and Loss	F-5
Consolidated Statements of Changes in Stockholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7 – F-8
Notes to Consolidated Financial Statements	F-9 – F-40

	F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

	F-2

 

	F-3

 

	F-4

	F-5

 

	F-6

 

	F-8

1.

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

·

Level 1 – Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date.

·

Level 2 – Pricing inputs are quoted for similar assets, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes assets or liabilities valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.

·

Level 3 – Pricing inputs are unobservable for the assets or liabilities; that is, the inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

	F-11

1.

Inputs used to measure fair value are unadjusted quote prices available in active markets for the identical assets or liabilities if available.

	F-12

2.

Inputs used to measure fair value, other than quoted prices included in 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in inactive markets.  This includes assets and liabilities valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full life of the asset.

3.

Inputs used to measure fair value are unobservable inputs supported by little or no market activity and reflect the use of significant management judgment.  These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

4.

Expert appraisal and fair value measurement as completed by third party experts.

	F-13

	F-15

4.         ACQUISITION

Effective April 1, 2013, CUI Global closed on a share purchase agreement to acquire 100% of the equity interest in Orbital Gas Systems Limited, a company organized under the laws of England and Wales (“Orbital”), from Orbital’s sole shareholder. The purchase price for the acquisition of Orbital was £17,000,000 British pounds sterling (“£”), ($26,205,500), subject to purchase price adjustments, 100% of the purchase price was paid in cash. To secure indemnification obligation, 5.0% of the purchase price, or £850,000, was held in escrow through December 1, 2013.

7.

CAPITAL LEASES

 

		2014			2015			2016			2017			2018			Thereafter			Total
Minimum lease payments		$	83,904		$	18,752		$	14,663		$	11,390		$	10,165		$	3,393		$	142,267

8.

INSTRUMENTS AND RISK MANAGEMENT

The Company has limited involvement with derivative instruments and does not trade them. The Company does use derivatives to manage certain interest rate and foreign currency exchange rate exposures.  In conjunction with the mortgage note payable for the purchase of the headquarters facility completed in 2013, the Company entered into a Swap Transaction Confirmation agreement effective October 1, 2013 incorporating the terms and definitions of the International Swaps and Derivatives Association, Inc. (ISDA) that effectively fixes our effective annual interest rate at 6.27%.  

9.

NOTES PAYABLE

(a)

On October 1, 2013, the funding of the purchase of our Tualatin, Oregon corporate offices from Barakel, LLC was completed. The purchase price for this asset was $5,050,000.  The purchase was funded, in part, by a promissory note payable to Wells Fargo Bank in the amount of $3,693,750 plus interest at the rate of 2% above LIBOR, payable over ten years with a balloon payment due at maturity.  It was secured by a deed of trust on the purchased property which was executed by CUI Properties, LLC and guaranteed by CUI Global, Inc.  During 2013, the Company made principal payments of $12,694 against the mortgage promissory note payable.  At December 31, 2013, the balance owed on the mortgage promissory note payable was $3,681,056, of which $76,814 and $3,604,242 were in current and long term liabilities, respectively at December 31, 2013.

(b)

In May 2013, the Company utilized funds from the equity sale to pay down $2,000,000 of principal owing on the note payable owed to International Electronic Devices, Inc. (formerly CUI, Inc.) associated with the acquisition of CUI, Inc.  In conjunction with the 2013 principal payment, the promissory note terms were amended to extend the due date to May 15, 2020 and the interest rate was reduced to 5% per annum, with interest payable monthly and the principal due as a balloon payment at maturity.  As of December 31, 2013, the Company is in compliance with all terms of this promissory note.

	F-27

 

	F-28

	F-29

As an integrated part of the Orbital Gas Systems Limited acquisition, CUI Global, Inc. acquired the land and buildings owned by Orbital.  In addition to the land and buildings owned by Orbital, the Orbital leases facilities for office and manufacturing space requirements.  During the year ended December 31, 2013, the monthly base rent of these leases was approximately $9,430. 

	F-30

	F-31

	F-32

	F-33

                     

	F-34

	F-35

The remaining total compensation cost related to nonvested option awards not yet recognized as of December 31, 2013 is $1,020,771 which is expected to be recognized over the weighted average remaining vesting period of 2.49 years. The following tables summarize information about employee stock warrants and options outstanding at December 31, 2013, 2012 and 2011:

	F-37

The Company recorded investment income of $24,766, $59,623 and $41,472 during 2013, 2012 and 2011, respectively, related to its interest in Test Products International (“TPI”).  For further details regarding TPI, see Note 2 discussion Investment – Equity Method. During 2013, the Company repaid $2,000,000 of principal on the International Electronic Devices note payable related to the acquisition of CUI, Inc.   At December 31, 2013, the balance of this note is $5,303,683 and is held in long term notes payable, related party.

	F-38

15.          ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
16.          INCOME TAXES

	F-39

 
Following the acquisition of Orbital Gas Systems, the Company also has revenue and trade accounts receivable concentrations in the United Kingdom of 29% and 60%, respectively for the year ended December 31, 2013.

	F-40