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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">As filed with the Securities and Exchange
Commission on March 6, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">Registration No. 333-____</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Washington, D.C. 20549</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">UNDER</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">THE SECURITIES ACT OF 1933</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CUI Global, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified
in its Charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="width: 34%; border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 10pt">Colorado</FONT></TD>
    <TD NOWRAP STYLE="width: 33%; border-bottom: windowtext 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">5065</FONT></TD>
    <TD NOWRAP STYLE="width: 33%; border-bottom: windowtext 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">84-1463284</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP>(State or jurisdiction</TD>
    <TD NOWRAP STYLE="text-align: center">(Primary Standard Industrial</TD>
    <TD NOWRAP STYLE="text-align: center">(I.R.S. Employer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP>of incorporation or</TD>
    <TD NOWRAP STYLE="text-align: center">Classification Code Number)</TD>
    <TD NOWRAP STYLE="text-align: center">Identification No.)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP>organization)</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">20050 SW 112th Avenue</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Tualatin, Oregon 97062</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(503) 612-2300</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address and Telephone Number of Principal</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Executive Offices)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">William J. Clough, President</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CUI Global, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">20050 SW 112th Avenue</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Tualatin, Oregon 97062</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(503) 612-2300</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">(Name, Address and
Telephone Number of Agent for Service)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copies of all communications to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Michael T. Cronin, Esq.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Johnson, Pope, Bokor, Ruppel &amp;
        Burns, LLP</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">911 Chestnut Street,</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Clearwater, Florida 33756</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Telephone:&nbsp;&nbsp;(727) 461-1818</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Facsimile:&nbsp;&nbsp;&nbsp;&nbsp;(727)
        462-0365</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Issuer's Counsel)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P></TD>
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">W. Morgan Burns</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Matthew Kuhn</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Faegre Baker Daniels LLP</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">90 South Seventh Street</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Minneapolis, Minnesota 55402</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Telephone:&nbsp;&nbsp;(612) 766-7000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Facsimile:&nbsp;&nbsp;&nbsp;&nbsp;(612)
        766-1600</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Underwriter&rsquo;s Counsel)</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after the Registration Statement becomes effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box: </FONT><FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering. </FONT><FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. </FONT><FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. </FONT><FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of &ldquo;large accelerated
filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b2 of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 80%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="width: 70%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Large accelerated filer </FONT><FONT STYLE="font-family: Wingdings">&uml;</FONT></TD>
    <TD NOWRAP STYLE="width: 30%; padding-left: 0.25in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Accelerated filer
    </FONT><FONT STYLE="font-family: Wingdings">&uml;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Non-accelerated filer </FONT><FONT STYLE="font-family: Wingdings">&uml;
    </FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">(Do not check if a smaller reporting company) </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Smaller reporting company </FONT><FONT STYLE="font-family: Wingdings">x</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="color: black; font-weight: bold; text-align: center">Title&nbsp;of&nbsp;each&nbsp;class&nbsp;of<BR> securities&nbsp;to&nbsp;be<BR>
    registered</TD><TD NOWRAP STYLE="color: black; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; font-weight: bold; text-align: center">Amount<BR> to&nbsp;be<BR> registered<BR>
    (1)</TD><TD NOWRAP STYLE="color: black; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="color: black; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; font-weight: bold; text-align: center">Proposed<BR> maximum<BR> offering<BR> price&nbsp;per<BR>
    share&nbsp;(2)</TD><TD NOWRAP STYLE="color: black; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="color: black; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; font-weight: bold; text-align: center">Proposed<BR> maximum<BR> aggregate<BR>
    offering&nbsp;price<BR> (1)(2)</TD><TD NOWRAP STYLE="color: black; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="color: black; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; font-weight: bold; text-align: center">Amount&nbsp;of<BR> registration<BR> fee&nbsp;(3)</TD><TD NOWRAP STYLE="color: black; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; color: black">Common Stock, par value $0.001</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; color: black; text-align: right">8,050,000</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">5.45</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">43,872,500</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">5,984.21</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Includes 1,050,000&nbsp;shares of common stock that the underwriters
                                                                 may purchase from us upon exercise of the over-allotment option.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="text-underline-style: none; color: windowtext">(2)</FONT></TD><TD>Estimated
                                                                                                                                    solely
                                                                                                                                    for
                                                                                                                                    the
                                                                                                                                    purpose
                                                                                                                                    of
                                                                                                                                    calculating
                                                                                                                                    the
                                                                                                                                    registration
                                                                                                                                    fee
                                                                                                                                    pursuant
                                                                                                                                    to
                                                                                                                                    Rule
                                                                                                                                    457
                                                                                                                                    (c)
                                                                                                                                    of
                                                                                                                                    the
                                                                                                                                    Securities
                                                                                                                                    Act
                                                                                                                                    <FONT STYLE="text-underline-style: none; color: windowtext">based
                                                                                                                                    on
                                                                                                                                    the
                                                                                                                                    average
                                                                                                                                    of
                                                                                                                                    the
                                                                                                                                    high
                                                                                                                                    and
                                                                                                                                    low
                                                                                                                                    trading
                                                                                                                                    prices
                                                                                                                                    for
                                                                                                                                    the
                                                                                                                                    Registrant's
                                                                                                                                    common
                                                                                                                                    stock
                                                                                                                                    as
                                                                                                                                    reported
                                                                                                                                    by
                                                                                                                                    the
                                                                                                                                    NASDAQ
                                                                                                                                    Capital
                                                                                                                                    Market
                                                                                                                                    on
                                                                                                                                    February
                                                                                                                                    27,
                                                                                                                                    2013.</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD><FONT STYLE="text-underline-style: none; color: windowtext">Paid
                                                                 herewith.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting
pursuant to said Section&nbsp;8(a), may determine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>




<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; border: windowtext 1pt solid; color: red; text-align: justify; text-indent: 0in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: red">The
    information in this prospectus is not complete and may be changed. The securities may not be sold until the registration statement
    filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and
    is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 40%; color: red; text-align: left; text-indent: 0in; font-weight: bold"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: red"><B>Preliminary
    Prospectus</B></FONT><B> </B></TD>
    <TD STYLE="width: 60%; font-weight: bold; text-align: right; text-indent: 0in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Subject
    to Completion, Dated March 6, 2013</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">7,000,000 Shares of Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="tlogo.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are offering 7,000,000 shares of our common stock at a public
offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. Our common stock is currently quoted on the NASDAQ Capital Market tier of The NASDAQ Stock
Market under the symbol &quot;CUI&quot;.<FONT STYLE="text-underline-style: none; color: windowtext"> On February 27, 2013, the
last reported sale price of our common stock on the NASDAQ Capital Market was $5.51 per share. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We expect to deliver the shares of our common stock to purchasers
on or about&#9;, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Investing in our common stock involves a high degree
of risk. See &ldquo;Risk Factors&rdquo; beginning on page 17</I>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The underwriter is offering the shares of our common stock
on a &ldquo;firm commitment basis.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 85%; border-collapse: collapse; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt; color: black"><B>Per&nbsp;Share</B></FONT></TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt; color: black"><B>Total&nbsp;</B></FONT></TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 10pt; color: black">Offering price</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt; color: black">$</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt; color: black">$</FONT></TD>
    <TD STYLE="text-align: right"></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 68%"><FONT STYLE="font-size: 10pt; color: black">Underwriting discount (1)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt; color: black">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font-size: 10pt; color: black"></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 10pt; color: black">Proceeds to CUI Global, before expenses</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt; color: black">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt; color: black"></FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has granted the underwriter
a 30 day option to purchase up to 1,050,000 additional shares of common stock to cover over-allotments, if any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1)&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="text-underline-style: none; color: windowtext">In
addition to the underwriting discount, we agreed to reimburse the underwriter for its reasonable out-of-pocket accountable fees
and disbursements in connection with this offering, which are estimated to be $75,000. We also granted the underwriter a right
of first refusal to serve as our exclusive placement agent, lead managing underwriter or exclusive financial advisor in connection
with future financing or merger or acquisition transactions we might undertake on or before September 30, 2013. </FONT>See &quot;Underwriting&quot;
for information regarding underwriter's compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 16pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Craig-Hallum Capital Group</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Prospectus dated March&nbsp;&nbsp;&nbsp;,
2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Prospectus Summary</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">1</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">The Offering</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">9</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Summary of Historical and Pro Forma Combined Financial
    Data</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">11</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Risk Factors</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">17</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Special
    Note Regarding Forward-Looking Statements</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: left">31</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Use
    of Proceeds</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">32</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Dividend
    Policy</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">33</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Price Range of Our Common Stock</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">33</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Capitalization</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">33</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Selected Consolidated Financial Information</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">34</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Unaudited Pro Forma Condensed Combined Financial
    Information</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">37</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.1in; text-indent: -0.1in">Management's Discussion and Analysis of Financial Condition and Results
    of Operations</TD>
    <TD STYLE="text-align: left">46</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Description
    of Business</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: left">57</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Directors and Executive Officers</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">69</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Executive Compensation</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">73</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Director Compensation</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">81</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Security Ownership of Certain Beneficial Owners
    and Management</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">82</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.1in; text-indent: -0.1in">Transactions with Related Persons, Promoters and Certain Control Persons</TD>
    <TD STYLE="text-align: left">84</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Description
    of Capital Stock and Related Stockholder Matters</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">85</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Transfer
    Agent and Registrar</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">88</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Indemnification
    of Directors and Officers</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">88</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Underwriting</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">88</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Interests of Named Experts and Counsel</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">92</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font-size: 10pt">Disclosure of Commission Position on Indemnification
    for Securities Act Liabilities</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">93</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in">Where You Can Find Additional Information</TD>
    <TD STYLE="vertical-align: bottom; text-align: left">93</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; padding-left: 0.1in; text-indent: -0.1in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Index
    to Consolidated Financial Statements</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">F-1</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABOUT THIS PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>You should rely only on the information contained in this
prospectus. Neither we nor the underwriter has authorized anyone to provide you with information different from that contained
in this prospectus. We and the underwriter are offering to sell, and seeking offers to buy, shares of our common stock only in
jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Neither we nor the underwriter has done anything that would
permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required,
other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves
about and observe any restrictions relating to the offering of the sales of common stock and the distribution of this prospectus
outside of the United States.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This prospectus contains estimates and other statistical data
made by independent parties and by us relating to market size and growth and other industry data. This information involves a
number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently
verified the accuracy or completeness of the data contained in these industry publications and other reports. The industry in
which we operate is subject to risks and uncertainty due to a variety of factors, including those described in the &ldquo;Risk
Factors&rdquo; section of this prospectus. These and other factors could cause results to differ materially from those expressed
in these publications and reports.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Novum&reg;, V-Infinity&reg;, Solus&reg;, Vergence&reg;, AMT&reg;,
CUI Global&reg;, the CUI Global logo, GasPT2 and other trademarks or service marks of CUI Global, Inc. appearing in this prospectus
are the property of CUI Global, Inc. or its subsidiaries. Trade names, trademarks and service marks of other companies appearing
in this prospectus are the property of their respective owners.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 17, 2012 we effected a one share for thirty shares
(1:30) reverse split of our common stock. Except as otherwise indicated, all of the share and per share information referenced
throughout this prospectus has been adjusted to reflect this reverse stock split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<DIV STYLE="padding-right: 3pt; padding-left: 3pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>This summary highlights selected information contained in
greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing
in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed
under &ldquo;Risk Factors&rdquo; and our historical and pro forma consolidated financial statements and related notes and the
historical consolidated financial statements of Orbital Gas Systems Limited and related notes included elsewhere in this prospectus,
before making an investment decision. References to &ldquo;we,&rdquo; &ldquo;our,&rdquo; &ldquo;us,&rdquo; the &ldquo;Company,&rdquo;
or &ldquo;CUI Global&rdquo; refer to CUI Global, Inc., a Colorado corporation, and its subsidiaries unless the context requires
otherwise. References to &ldquo;CUI&rdquo; refer to CUI, Inc., a Colorado corporation, our wholly owned subsidiary. </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>WHO WE ARE</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a specialized provider of power management and other
electromechanical components for electronic devices and equipment. We offer both standardized products and customized solutions
to our customer base, which includes a number of well-known industrial and technology companies. Our product portfolio is extensive and we are dedicated to, and focused on growing it further by acquiring,
developing, and commercializing innovative electronic technologies and products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have more than 24 years of experience in the electronics
industry. We use that experience to identify and acquire or license forward-looking, market-ready technologies. Small product
engineering firms, individual entrepreneurs, and a variety of other sources comprise our potential pool of acquisition targets
and technology licensing partners. These entities often possess exciting technologies, but lack the necessary manufacturing, distribution,
and financial resources to commercialize their ideas. We possess these capabilities and can serve as a value-added partner in
commercialization, developing supplier-customer relationships, and providing liquidity to the technology owner. We believe we
have a track record of acquiring or licensing, and then commercializing advanced, market-ready technologies due to our management
team&rsquo;s history of doing so, as well as to the marketing, sales, research and development and engineering resources that
we are willing to dedicate to commercializing new products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">After we identify potential market-ready technologies, we put
considerable effort into our due diligence process to verify that demand for the technology exists, that the technology will have
synergies with our diverse product portfolio, and that the technology will achieve its intended design capabilities when integrated
into our customers&rsquo; products. If we are successful in completing an acquisition, we assign a team of engineers, market specialists,
and sales executives to implement our commercialization strategy. Our &ldquo;end-to-end&rdquo; strategy incorporates branding;
conducting market and product surveys to determine demand, the potential customer base, and target geographic and end markets;
and identifying appropriate commercialization partners. We utilize contract manufacturers located in mainland China, Japan, South
Korea, Taiwan, and the United Kingdom for production.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our current platform is focused on three primary market segments:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>Power
                                                                                                               Supply Units.</I></B>
                                                                                                               Our power supply
                                                                                                               units products
                                                                                                               include our embedded
                                                                                                               and external industrial
                                                                                                               power supplies,
                                                                                                               as well as our
                                                                                                               Novum Advanced
                                                                                                               Power and Solus
                                                                                                               Power Topology
                                                                                                               brands. Novum products,
                                                                                                               which consist of
                                                                                                               digital power modules,
                                                                                                               offer customers in the networking and telecommunications industries cost-saving programmable power chips. Solus products
                                                                                                               enhance the Novum
                                                                                                               line capabilities
                                                                                                               by providing a
                                                                                                               more efficient
                                                                                                               power supply source
                                                                                                               that is scalable
                                                                                                               to serve numerous
                                                                                                               customer needs.
                                                                                                               Our internal and
                                                                                                               external power
                                                                                                               products and related
                                                                                                               component sales
                                                                                                               accounted for approximately
                                                                                                               88% of our revenues
                                                                                                               during our fiscal
                                                                                                               year ended December
                                                                                                               31, 2012;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>Electronic
                                                                                                               Components.</I></B>
                                                                                                               Our electronic
                                                                                                               components products
                                                                                                               include a variety
                                                                                                               of proprietary
                                                                                                               motion control
                                                                                                               devices. We focus
                                                                                                               on the original
                                                                                                               equipment manufacturer
                                                                                                               (&ldquo;OEM&rdquo;)
                                                                                                               market and attempt
                                                                                                               to provide higher
                                                                                                               levels of support,
                                                                                                               customer service
                                                                                                               and a constantly
                                                                                                               expanding product
                                                                                                               line in order to
                                                                                                               further differentiate
                                                                                                               ourselves from
                                                                                                               our competitors;
                                                                                                               and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>Test
                                                                                                               and Measurement.
                                                                                                               </I></B>Our test
                                                                                                               and measurement
                                                                                                               products include
                                                                                                               probes and other
                                                                                                               test devices, as
                                                                                                               well as our inferential
                                                                                                               gas metering technology,
                                                                                                               the GasPT2 device,
                                                                                                               which we have branded
                                                                                                               under the name
                                                                                                               Vergence. </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conduct our operations globally, and as of December 31,
2012 we had sixty-two full-time and seven part-time employees located in the United States and Japan. We utilize a hybrid marketing
strategy that incorporates both direct and third-party sales channels. Our customer base is diverse and consists of smaller customers,
a broad group of OEM customers and several industrial technology conglomerates. Further, we have a significant customer and channel
partner relationship with Digi-Key Corporation (&ldquo;Digi-Key&rdquo;), an authorized distributor of electronic components for
more than 550 industry suppliers. As a percentage of our total gross revenues, sales to Digi-Key were approximately 47% and 41%
as of December 31, 2012 and December 31, 2011, respectively. Digi-Key sells our product to thousands of customers globally.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>OUR MARKETS AND OUR OPPORTUNITY</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Power Supply Units</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We offer a portfolio of both commoditized and emerging power
supply units for networking and telecommunications related applications. The market for our products evolves in response to technological
innovations and corresponding changes in our customers&rsquo; requirements for their product offerings. These changes occur rapidly.
Thus, although our historic business was a commoditized electromechanical parts distribution business, in recent years, we have
focused our business on the acquisition or licensing, development, and commercialization of new and innovative electronic technologies
and products in order to better serve our customer base.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Novum and Solus lines are our newest and most exciting
power supply products and are marketed primarily to networking and telecommunications companies. Earning design wins from OEMs
in these sectors is extremely important and competitive, and the design cycle often lasts between 18 and 24 months. OEMs typically
conduct a partial product line redesign every nine months, creating a recurring revenue opportunity for component suppliers like
ourselves. Once an OEM grants a supplier a design win, however, the test period for future designs decreases significantly, and
it is often difficult to displace incumbent suppliers without offering a product that significantly improves or outperforms existing
technologies. We have received positive industry and customer feedback regarding our Novum and Solus lines, and we believe that
major OEM product revamps will offer us the opportunity to potentially displace our competitors. Our products are intended to
serve the following vital functions for our customers&rsquo; end-products: enhanced design flexibility, size reductions,
power efficiency improvements, greater power density, reduced electro-magnetic interference, faster transient response, reduced
power output and quicker turn-on times.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to IMS Research, an independent provider of market
research and consultancy to the global electronics industry, the total global market for digital power components is expected
to quadruple to $15 billion between 2012 and 2017. As we gain traction in these product lines and capture OEM design wins, we
believe our power supply units will continue to be a significant source of our revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Electronic Components</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: windowtext">The market for electronic components,
like the market for power management devices, is driven by the needs of our OEM customers, as well as increases in the functionality
of the end-products in which our components are used. Other key factors driving innovation include product size reduction, cost
reduction, time to market, energy efficiency, and reliability. We offer a variety of buzzers, connectors, encoders, microphones,
speakers, and thermal management solutions for products such as </FONT>home theater equipment, insulin machines and defibrillators<FONT STYLE="color: windowtext">.
While the breadth of our electronic component portfolio is extensive, we are focused on operating as a niche provider of high-quality
products.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our AMT modular encoder, a device that is used in motion control
systems, allows for breakthroughs in selectable resolution, shaft-adaptation and convenient mounting solutions to bring ease of
installation, installed component reduction and economies of scale in purchasing. AMT has been awarded several design wins from
motion control OEMs that offer a wide range of products, including cash machines and other robotic devices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Test and Measurement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe our most significant opportunity exists in our test
and measurement technology line, specifically for our inferential gas metering technology, the GasPT2 device, which we currently
market under the Vergence brand name. The GasPT2 device is a low-cost, and we believe a highly disruptive, solution to measuring
natural gas quality in pipelines and in stationary gas turbines that are used for power generation and industrial machine drives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Natural gas quality is typically tested at pipeline
interchanges, off-takes, and delivery points (together, &ldquo;test sites&rdquo;), and today, standard quality test practices
utilize large, expensive gas chromatograph systems to analyze energy content. Sometimes, given the size of these systems,
they are constructed several miles away from actual test sites. <FONT STYLE="color: windowtext">Because natural gas is a
mixture of several gases, namely methane, propane, nitrogen and carbon dioxide, quality is determined by the relative
concentrations of each individual gas in any given delivery and is indicative of energy content. Total energy consumption, or
the quantity that customers ultimately pay for, is then a function of natural gas quality (total energy content) and volume
of gas used. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Gas chromatographs are housed in bulky, closet-like enclosures,
and may be located on- or off-site of pertinent test sites. According to a 2012 Emerson Process Management report, gas chromatograph
natural gas quality tests typically last between 12 and 40 minutes, and testing frequency varies from as often as possible
to once per day. Because natural gas flows through a pipeline at speeds of up to 25 miles per hour, standard quality readings
conducted by gas chromatographs are not in real-time and may not accurately reflect actual energy consumption by an end customer.
Additionally, gas chromatograph instruments can cost between $15,000 and $40,000, and the total installation cost for the instrument
and related accessories can exceed $200,000. Annual maintenance expenses may also be more than $10,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our GasPT device introduces a potentially disruptive, low-cost
solution to replace gas chromatograph systems. It is significantly less expensive, and dramatically smaller than gas chromatograph
systems. Our device costs approximately $50,000, fully installed, and is contained within a weather-proof enclosure that sits
on top of the pipeline. It also eases the installation burden associated with gas chromatograph systems, as it can be connected
in a process that typically requires less than 90 minutes of pipeline downtime.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Further, the GasPT2 device can complete natural gas quality
tests in as few as five seconds, without sacrificing accuracy or precision measures. Tests performed have verified that our device
typically measures natural gas quality within 0.04% accuracy, while industry standards require accuracy within 0.5%. The device
measures several physical properties of natural gas flow, including thermal conductivity, the speed of the sound of gas flow,
and carbon dioxide content. Using these measurements, it infers the natural gas quality mixture, and calculates other relevant
quality characteristics, such as calorific value, Wobbe index, relative density, and compression factor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe the market opportunity for our GasPT2 device is
significant, both from the perspective of replacing installed gas chromatographs, as well as creating new markets where gas chromatographs
were either previously impractical or too expensive to install.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We expect that natural gas pipeline off-takes and stationary
gas turbines will be our initial target markets for the GasPT2 device. In North America, this total market amounts to more than
300,000 miles of pipeline and 30,000 associated entry and off-take points according to the US Energy Information Administration,
representing a market opportunity of more than $600 million. In Europe, this total market amounts to more than 200,000 miles of
pipeline and 20,000 associated entry and off-take points according to the 2010 edition of Natural Gas Systems of Europe, representing
a market opportunity of more than $400 million. Further, this market includes approximately 50,000 stationary gas turbines world-wide
according to the November-December 2009 issue of Gas Turbine World, representing a market opportunity of more than $1 billion.
We will continue to use our extensive market knowledge, as well as the new distribution relationships we develop, in order to
strive to discover additional market opportunities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>OUR BUSINESS STRENGTHS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>High Quality Customer Base</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As of December 31, 2012, our products
touch more than 50,000 customers located in over 50 countries. We primarily serve customers in the computing, consumer
device, energy, networking, and telecommunications sectors, as well as several industrial technology conglomerates. We have
established OEM relationships with a number of our larger customers and believe we are well positioned to enter into
additional OEM partnerships as we gain design wins in the future. Our strategic third-party distribution relationship with
Digi-Key is a strong and significant relationship that we plan to continue to leverage for growth. Additionally, we have
entered into partnerships and product roll-out and test agreements. Our Novum line is currently working in partnership with
Ericsson to develop a line of multi-source digital point of load products based on their BMR46X series module. Further, our
GasPT2 device is currently installed in approximately 30 locations with more than 12 partners, including SNAM RETE Gas
(Italy); GASUNIE (The Netherlands); National Grid (UK); Scotia Gas (Ireland); and Wales &amp; West (UK). It is in testing
phases with more than 10 large-scale customers globally, including Repsol and Enagas in Spain; GazSystems in Poland;
TransCanada in North America; Energy Transfer Partners (ETP) in the US; the Pipeline Research Counsel International (PRCI),
which represents 69 of the largest companies in the natural gas industry, including Kinder-Morgan, Williams Pipeline, Shell
Pipeline, Chevron Pipeline, BP USA, and more; and GE-ENERGY in Houston, Texas.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Comprehensive Technology and Product Portfolio</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We offer more than 20,000 unique products. Our customers are
attracted to the breadth of our product offering, and often consider us to be an important niche supplier for the products that
they bring to the marketplace. We plan to work together with our customer base to continue to develop or acquire additional innovative
market-ready technologies and products in order to stay ahead of our competition. These efforts reduce our dependency on internal
research and development costs. We believe our knowledge of the marketplace for niche technologies and components provides us
with a significant advantage over other suppliers in our space.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Experienced Management Team</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are led by a management team and board of directors that
each possess substantial experience in our industries. Our President and Chief Executive Officer, William J. Clough, has been
with the company for more than six years. Mr. Clough has extensive legal and SEC experience and is an inventor of one of our early
patented thermal management technologies. Along with his other responsibilities, Mr. Clough spearheads our Vergence brand. <FONT STYLE="color: windowtext">Our
Chief Financial Officer, Daniel N. Ford, has been with us for more than five years and possesses a wealth of accounting experience,
including his tenure with KPMG LLP. Mr. Ford has helped us reach a position of profitability, efficiency and forward thinking,
transforming many of our accounting, inventory management and vendor relations processes</FONT>. Our Chief Operating Officer,
Matthew M. McKenzie has an extensive background in the electronics industry, as well as expertise in distribution, sales, and
supply chain management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Global Reach and Hybrid Marketing Strategy</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conduct operations globally, with employees located in the
United States and Japan. Further, we have outsourced manufacturing relationships in mainland China, Japan, South Korea, Taiwan,
and the United Kingdom, and our relationship with Digi-Key reaches customers globally. We utilize a hybrid marketing and sales
strategy, consisting of our internal sales and marketing team, as well as our third-party distribution relationships. Our internal
sales and marketing team focuses on larger, OEM customers, while we direct smaller customers to utilize our third-party distribution
channel. We believe that the global reach of our operations and distribution capabilities for our products will help our businesses
grow and mitigate the risks associated with operations concentrated in one geographic region.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>OUR STRATEGY</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our historic business was a commoditized electromechanical
parts distribution business, however, in recent years, we have focused our business on the acquisition and/or licensing, development
and commercialization of new and innovative electronic technologies and products. As our business continues to evolve along with
that of our customers, we must continue to identify, acquire or license, and commercialize novel technologies that enhance our
customers&rsquo; market position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Novum Advanced Power, Solus Power Topology and Vergence
GasPT2 device have enabled us to transform ourselves into a technology incubator dedicated to rapidly commercializing market-ready
technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In that regard, we have implemented a planned strategy to increase
our name recognition as a technology company. Our plan includes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Increasing
                                                                                                                our customer base
                                                                                                                by redirecting
                                                                                                                our customers
                                                                                                                into the right
                                                                                                                channel, including
                                                                                                                by handling smaller
                                                                                                                customer fulfillment
                                                                                                                through our distribution
                                                                                                                partner, Digi-Key,
                                                                                                                and focusing our
                                                                                                                efforts on larger
                                                                                                                OEM business;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Identifying
                                                                                                                large gas utility
                                                                                                                companies that
                                                                                                                represent likely
                                                                                                                opportunities
                                                                                                                for large batch
                                                                                                                sales of our Vergence
                                                                                                                GasPT2 device,
                                                                                                                as opposed to
                                                                                                                single unit sales;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Developing
                                                                                                                a collaborative
                                                                                                                relationship with
                                                                                                                our customers
                                                                                                                to identify and
                                                                                                                supply them with
                                                                                                                products that
                                                                                                                will fuel our
                                                                                                                growth;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Growing the
                                                                                                                brand presence
                                                                                                                of our products,
                                                                                                                which we will
                                                                                                                attempt to do
                                                                                                                by capturing the
                                                                                                                attention of industry
                                                                                                                heads at selected
                                                                                                                trade show events;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Developing
                                                                                                                and acquiring
                                                                                                                new technologies
                                                                                                                to grow our sales;
                                                                                                                and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Growing our
                                                                                                                global sales and
                                                                                                                distribution capabilities.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>RECENT DEVELOPMENTS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Acquisition of Orbital Gas Systems Limited</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 3, 2013, we entered into a definitive 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 (&ldquo;Orbital&rdquo;), including all of its operations which are located in the United Kingdom. The
purchase price for the acquisition of Orbital is 17,000,000 British pounds sterling (&ldquo;&pound;&rdquo;), subject to
purchase price adjustments, 100% of which is payable in cash. To secure indemnification obligations, 5.0% of the purchase
price, or &pound;850,000, will be held in escrow to and through December 1, 2013. The purchase price is approximately $25.8
million, based on the Wall Street Journal published exchange rate on New York closing on February 27, 2013 of $1.5158 per
pound sterling.&nbsp;</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Orbital is the largest natural gas systems integrator in the
U.K. and is a key partner of ours for commercializing our GasPT2 device. For over 25 years, Orbital has developed its portfolio
of products, solutions, services and resources to offer a diverse range of personalized gas engineering solutions to the gas utilities,
power generation, emissions, manufacturing and automotive industries. We believe that adding Orbital&rsquo;s operations will provide
a strengthened platform for us to enter new and attractive natural gas quality analysis markets and provide enhanced customer
and geographic diversification, resulting in additional domestic and international sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For fiscal years 2012 and 2011, Orbital generated revenues
from continuing operations of &pound;13,997,850 and &pound;13,751,265, respectively. For its fiscal years 2012 and 2011, Orbital
generated income before taxes and U.S. GAAP adjustments of &pound;2,283,138 and &pound;992,438, respectively. As of December 31,
2012, based upon unaudited financial statements, Orbital had cash and cash equivalents of &pound;5,678,794.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We intend to finance the consideration paid to the shareholder
of Orbital with the net proceeds from this offering. Although we have entered into a share purchase agreement in connection with
the Orbital acquisition, we cannot guarantee when, or whether, the acquisition will be completed. We do, however, currently anticipate
that the acquisition will be consummated by the end of April 2013. The share purchase agreement contains a number of important
conditions that must be satisfied before we can complete the acquisition, namely:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="color: black">We
                                                                                                                have raised sufficient
                                                                                                                funds to complete
                                                                                                                the transaction
                                                                                                                through either
                                                                                                                a debt or equity
                                                                                                                offering pursuant
                                                                                                                to the standard
                                                                                                                U.S. regulatory
                                                                                                                authority for
                                                                                                                publicly-traded
                                                                                                                U.S. companies;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="color: black">We
                                                                                                                and Orbital&rsquo;s
                                                                                                                owner have signed
                                                                                                                the escrow letter
                                                                                                                called for by
                                                                                                                the share purchase
                                                                                                                agreement and
                                                                                                                have procured
                                                                                                                the escrow agent&rsquo;s
                                                                                                                signature and
                                                                                                                delivery of the
                                                                                                                bank instruction
                                                                                                                letter to the
                                                                                                                escrow bank; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="color: black">We
                                                                                                                and Orbital&rsquo;s
                                                                                                                owner agree in
                                                                                                                writing to the
                                                                                                                &ldquo;closing
                                                                                                                free cash,&rdquo;
                                                                                                                as defined in
                                                                                                                </FONT>our share
                                                                                                                purchase agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe the acquisition will provide us with immediate credibility
in the natural gas industry. By acquiring Orbital, we will acquire a company that has operated successfully in the natural gas
industry for over 25 years. In addition, Orbital is a leading provider of natural gas infrastructure and high-tech solutions to
National Grid, the national gas transmission company in the U.K. and one of the most respected specialist gas engineering companies
in the world. We will also acquire access to Orbital&rsquo;s proprietary VE-Probe, which, by allowing us to acquire a sample gas
in as few as two seconds as opposed to the industry standard time of five to ten minutes, enables us to reduce our total sample-analysis
turnaround to fewer than five seconds. We believe this turnaround time is far faster than the turnaround time of any other technology
currently available to the gas industry.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Entry Into a Distribution Agreement with Future Electronics,
Inc.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 19, 2013, we announced that we entered into a new
distribution agreement with Future Electronics, Inc., which is a leader and innovator in the distribution and marketing of electronic
components. This agreement allows Future to leverage their experience and resources to launch our product portfolio to a global
market and a diverse customer base. In selecting Future as a global distribution partner, we recognized the strength of Future&rsquo;s
demand creation programs and its robust field support resources which will add greater reach for our Novum product line, as well
as its broad portfolio of standard power supplies and board level components. Under the terms of the agreement, Future will now
begin a phased rollout of products from our Power Supply and Electronic Components groups with stock available immediately for
many items.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Design News Golden Mousetrap Awards Finalist</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">On January 31, 2013, we announced
that Design News, a leading technical publication for design engineers, named our NDM2Z series point of load modules as a finalist
for its Golden Mousetrap Awards, an award that recognizes engineering innovation and creativity in product design. The NDM2Z sets
industry benchmarks in efficiency and current density, helping address the growing need to reduce energy use at the board level.
This was our third product from the </FONT>Novum Advanced Power group to receive industry recognition in the past three months.
Also in January 2013, Electronic Products chose our NSM2P &ldquo;No-Bus&rdquo; digital point of load series as a 2012 Product
of the Year. Previously, in November 2012, our NDM2P digital point of load series was named to EDN&rsquo;s &ldquo;Hot 100 Products
of 2012: Power.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>SUMMARY OF RISKS RELATED TO OUR BUSINESS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business and our ability to execute our business strategy
are subject to a number of risks that you should be aware of before you decide to buy our common stock. In particular you should
consider the following risks which are discussed more fully in &ldquo;Risk Factors.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">There
                                                                                                                is no assurance
                                                                                                                we will achieve
                                                                                                                profitability;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">We
                                                                                                                have expanded
                                                                                                                our business activities
                                                                                                                and these activities
                                                                                                                may not be successful
                                                                                                                and may divert
                                                                                                                our resources
                                                                                                                from our existing
                                                                                                                business activities;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">We
                                                                                                                are a relatively
                                                                                                                small specialty
                                                                                                                component and
                                                                                                                solutions business
                                                                                                                and face formidable
                                                                                                                competition;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">We
                                                                                                                depend on third-party
                                                                                                                manufacturers
                                                                                                                and suppliers
                                                                                                                for the production
                                                                                                                of our products
                                                                                                                and will need
                                                                                                                this parties to
                                                                                                                scale-up their
                                                                                                                operations for
                                                                                                                us to grow our
                                                                                                                business and achieve
                                                                                                                profitability;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
                                                                                                                revenues depend
                                                                                                                on a few major
                                                                                                                customers;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Acquisitions,
                                                                                                                including our
                                                                                                                acquisition of
                                                                                                                Orbital Gas Systems
                                                                                                                Limited, may not
                                                                                                                be completed or,
                                                                                                                if completed,
                                                                                                                could result in
                                                                                                                operational difficulties,
                                                                                                                increased expenses,
                                                                                                                and other harmful
                                                                                                                consequences;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">We
                                                                                                                will need to grow
                                                                                                                our organization,
                                                                                                                and we may encounter
                                                                                                                difficulties in
                                                                                                                managing this
                                                                                                                growth, which
                                                                                                                could disrupt
                                                                                                                our operations; </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
                                                                                                                operating results
                                                                                                                will vary over
                                                                                                                time and such
                                                                                                                fluctuations could
                                                                                                                cause the market
                                                                                                                price of our common
                                                                                                                stock to decline;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Risks
                                                                                                                related to foreign
                                                                                                                operations; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Market
                                                                                                                acceptance of
                                                                                                                new innovative
                                                                                                                technologies such
                                                                                                                as the Vergence
                                                                                                                GasPT2 device.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>CORPORATE INFORMATION</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CUI Global, Inc., formerly known as Waytronx, Inc., is a Colorado
corporation organized on April 21, 1998. Our principal place of business is located at 20050 SW 112 Avenue, Tualatin, Oregon 97062,
phone (503) 612-2300. Our website is www.cuiglobal.com.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective May 16, 2008, CUI Global, Inc. acquired the assets
and liabilities of CUI, Inc., a Tualatin, Oregon based provider of electronic components. Through this acquisition, the Company
obtained an 11.54% ownership interest in Test Products International, Inc., a provider of handheld test and measurement equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective July 1, 2009, CUI Global acquired all of Comex Instruments,
Ltd, which we subsequently rebranded, CUI Japan and 49% of Comex Electronics, Ltd. CUI Japan is a Japanese based provider of test
and measurement, power and electronic components for original equipment manufacturer. 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, payable monthly beginning January 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

</DIV>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<DIV STYLE="padding: 0.05in; border: Black 1pt solid; width: 100%"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>THE OFFERING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 42%">Common Shares Offered by Us</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 57%">7,000,000 shares</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Common Shares to be Outstanding Immediately After this Offering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: bottom">17,883,280 shares</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Offer Price</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Over-allotment Option</TD>
    <TD>&nbsp;</TD>
    <TD><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have granted to the underwriter an option, which
is exercisable within 30 days from the date&nbsp;of this prospectus, to purchase up to 1,050,000 additional common shares to cover over-allotments,
if any.</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Use of Proceeds</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">We intend to use the net proceeds from this offering for the purchase
    of all outstanding capital shares of Orbital Gas Systems Limited, payment of long-term debt, and for working capital and general
    corporate purposes. See &ldquo;Use of Proceeds.&rdquo;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Dividend Policy</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">We do not currently pay nor contemplate paying dividends. See &ldquo;Dividend
    Policy.&rdquo;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-indent: 0.5in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Risk Factors</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Investing in our common shares involves a high degree of risk.
    You should read and consider the information set forth under the heading &ldquo;Risk Factors&rdquo; beginning on page 17 and
    all other information included in this prospectus before deciding to invest in our common shares.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: normal"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">Trading Market</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Our common shares are listed on the NASDAQ Capital Market under
    the symbol &ldquo;CUI.&rdquo;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The number of our common shares that will be issued and outstanding
immediately after this offering is based on 10,883,280 common shares outstanding as of December 31, 2012, and excludes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: center"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">682,141 shares
                                                                                                                of common stock
                                                                                                                issuable upon
                                                                                                                the exercise of
                                                                                                                outstanding options
                                                                                                                to purchase our
                                                                                                                common stock at
                                                                                                                a weighted average
                                                                                                                exercise price
                                                                                                                of $6.47 per share
                                                                                                                as of December
                                                                                                                31, 2012;</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: center"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">1,979,083
                                                                                                                shares of our
                                                                                                                common stock reserved
                                                                                                                for future awards
                                                                                                                under our equity
                                                                                                                compensation plans
                                                                                                                as of December
                                                                                                                31, 2012; and</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: center"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">A number of
                                                                                                                our shares of
                                                                                                                common stock with
                                                                                                                a value of up
                                                                                                                to $1,993,363
                                                                                                                potentially issuable
                                                                                                                to James McKenzie
                                                                                                                as of December
                                                                                                                31, 2012 pursuant
                                                                                                                to a finder&rsquo;s
                                                                                                                fee arrangement
                                                                                                                with him.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Unless otherwise noted, the information in this prospectus
assumes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: center"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">No exercise
                                                                                                                of the underwriter&rsquo;s
                                                                                                                over-allotment
                                                                                                                option to purchase
                                                                                                                up to 1,050,000
                                                                                                                additional shares
                                                                                                                of our common
                                                                                                                stock;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: center"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">The number
                                                                                                                of shares of common
                                                                                                                stock sold in
                                                                                                                this offering
                                                                                                                is the same as
                                                                                                                the number on
                                                                                                                the cover of this
                                                                                                                prospectus; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: center"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">A price per
                                                                                                                share to the public
                                                                                                                in this offering
                                                                                                                of &nbsp;$5.51, which was the
                                                                                                                closing price
                                                                                                                of our common
                                                                                                                stock on the NASDAQ
                                                                                                                Capital Market
                                                                                                                on February 27,
                                                                                                                2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the summary unaudited pro forma
combined financial data of CUI Global, Inc. and Orbital Gas Systems Limited for the years ended December 31, 2012 and 2011. This
information has been prepared by our management and gives pro forma effect to (a) the completion of the Orbital acquisition, (b)
the sale of 7,000,000 shares of our common stock in this offering at an assumed offering prices of $5.51 per share, the last reported
sale price of our common stock on the NASDAQ Capital Market on February 27, 2013, less estimated underwriting discounts and commissions
and estimated offering expenses, and (c) the application of the proceeds from this offering, in each case as if they occurred
on January 1, 2011 for income statement purposes and December 31, 2012 for balance sheet purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">The financial statements and other
financial information in this prospectus related to </FONT>Orbital Gas Systems Limited<FONT STYLE="color: black"> have been prepared
in accordance with United Kingdom generally accepted accounting principles (&ldquo;U.K. GAAP&rdquo;). U.K. GAAP differs in some
material respects from U.S. generally accepted accounting principles (&ldquo;U.S. GAAP&rdquo;), and as a result, the historical
financial statements and other financial information of </FONT>Orbital Gas Systems Limited <FONT STYLE="color: black">may not
be comparable to our historical financial statements. For a discussion of material differences between U.K. GAAP and U.S. GAAP
as they relate to </FONT>Orbital Gas Systems Limited<FONT STYLE="color: black">, see Note 22 to the financial statements of </FONT>Orbital
Gas Systems Limited<FONT STYLE="color: black"> included elsewhere in this prospectus.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fiscal year of CUI Global, Inc. ends on December
31, and the fiscal year of Orbital Gas Systems Limited ends on June 30. The pro forma data has been prepared from, and should
be read in conjunction with, our audited annual financial statements and accompanying notes for years ended December 31,
2012 and 2011, the audited financial statements and accompanying notes of Orbital for the years ended June 30, 2012 and
2011, prepared in accordance with U.K. GAAP reconciled to U.S. GAAP, included elsewhere in this prospectus, and selected
unaudited interim financial information of Orbital for the six months ended December 31, 2012 and 2011. For more information on
the assumptions made in preparing this pro forma financial data, see &ldquo;Unaudited Pro Forma Condensed Combined
Financial Information.&rdquo; This information is for illustrative purposes only. The companies may have performed
differently had they always have been combined. The historical and pro forma results do not necessarily indicate results that
may be expected for any future period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Where applicable, the amounts in the following
tables related to the acquisition price are converted from British pound sterling to U. S. dollars based on the Wall Street
Journal published exchange rate on New York closing on February 27, 2013 of $1.5158 per British pound sterling. For
converting the fiscal year statements of operations amounts related to Orbital, the following average exchange rates were
used, as published by Oanda Corporation: $1.5768 average per British pound sterling for the six months January to June 2012,
$1.5926 average per British pound sterling for the six months July to December 2012, $1.6160 average per British pound
sterling for the six months January to June 2011 and $1.5919 average for the British pound sterling for the six months July
to December 2011. The amounts included on the balance sheets related to Orbital were converted, based on the following
exchange rates published by Oanda Corporation, $1.6153 per British pound sterling at December 31, 2012 and $1.5453 per
British pound sterling at December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">December 31,</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Statement of Operations Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 64%; color: black">Revenue</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 15%; color: black; text-align: right">63,981,573</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 15%; color: black; text-align: right">62,271,825</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Operating expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">24,066,331</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">20,698,034</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Income from operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,956,381</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,675,040</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Net income</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">511,399</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,660,699</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Earnings per share</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-left: 9pt">Basic</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.03</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.12</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-left: 9pt">Diluted</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.03</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.12</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Other Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Adjusted EBITDA (1)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">4,567,140</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">4,454,657</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">December 31, <BR> 2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Balance Sheet Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 77%; color: black; text-align: left">Cash and cash equivalents</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 20%; color: black; text-align: right">20,379,440</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Total assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">78,047,679</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Total debt, including current portion</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,450,002</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Total stockholders' equity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">60,597,677</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Adjusted EBITDA is the net income before interest expense, income
                                                                 taxes, equity compensation, depreciation, impairment expenses
                                                                 and amortization. We believe that Adjusted EBITDA                                                                  is useful
                                                                 as an indicator of our performance. Our
                                                                 management uses Adjusted EBITDA, in conjunction with traditional
                                                                 U.S. GAAP measures, as part of our overall assessment of our
                                                                 performance. We use this non- U.S. GAAP measure in internal management
                                                                 reports used to monitor and make decisions about our business.
                                                                 The principal limitations of Adjusted EBITDA as a performance
                                                                 measure are that it excludes significant adjustments for one-time expenses and gains required
                                                                 under U.S. GAAP, and that our definition of Adjusted EBITDA may
                                                                 be different than similar-sounding non- U.S. GAAP measures used
                                                                 by other the companies. To mitigate these limitations, we present
                                                                 our U.S. GAAP results along with the non- U.S. GAAP measure,
                                                                 reconcile Adjusted EBITDA to the net income and recommend that investors
                                                                 not give undue weight to it. We believe that Adjusted EBITDA
                                                                 provides investors useful information by allowing them to view
                                                                 the business through the eyes of management.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The reconciliation of pro forma Adjusted EBITDA to
pro forma net income, is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">For the Years Ended</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">December 31,</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Net income</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">511,399</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">1,660,699</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Income tax expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">972,654</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">350,255</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Impairment of intangible, trademark and trade name V-Infinity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">278,428</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Interest expense - amortization of debt offering costs and debt discount</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">73,333</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">334,747</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Interest expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">584,914</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">920,802</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Stock based compensation expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,190,081</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">227,867</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Depreciation and amortization</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">956,331</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">960,287</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Adjusted EBITDA</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">4,567,140</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">4,454,657</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>SUMMARY CONSOLIDATED FINANCIAL DATA &ndash; CUI Global,
Inc.</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following tables set forth our summary consolidated financial
data. The summary consolidated financial data for the years ended December 31, 2012 and 2011 are derived from our audited consolidated
financial statements appearing elsewhere in this prospectus. The data set forth below should be read in conjunction with &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations,&rdquo; our financial
statements and the related notes included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">For the Years Ended</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">December 31,</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Statement of Operations Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; color: black; text-indent: -0.1in; padding-left: 0.1in">Revenue</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">41,084,589</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">38,938,326</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Operating expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,356,896</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,146,366</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Income (loss) from operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,980,200</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">658,887</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Net (loss) allocable to common stockholders</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,526,321</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(48,763</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Basic and diluted (loss) per common share</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(0.25</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(0.01</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Other Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Adjusted EBITDA (1)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">354,727</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,232,614</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Balance Sheet Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Cash and cash equivalents</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,039,840</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">176,775</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">36,723,461</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">31,978,491</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total liabilities</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">11,961,028</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">19,381,488</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total stockholders' equity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">24,762,433</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">12,597,003</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Adjusted EBITDA is the net  (loss) allocable to common stockholders before interest expense, income
                                                                 taxes, equity compensation, depreciation, impairment expenses
                                                                 and amortization. We believe that Adjusted EBITDA                                                                  is useful
                                                                 as an indicator of our performance. Our
                                                                 management uses Adjusted EBITDA, in conjunction with traditional
                                                                 U.S. GAAP measures, as part of our overall assessment of our
                                                                 performance. We use this non- U.S. GAAP measure in internal management
                                                                 reports used to monitor and make decisions about our business.
                                                                 The principal limitations of Adjusted EBITDA as a performance
                                                                 measure are that it excludes significant adjustments for one-time expenses and gains required
                                                                 under U.S. GAAP, and that our definition of Adjusted EBITDA may
                                                                 be different than similar-sounding non- U.S. GAAP measures used
                                                                 by other companies. To mitigate these limitations, we present
                                                                 our U.S. GAAP results along with the non- U.S. GAAP measure,
                                                                 reconcile Adjusted EBITDA to the net (loss) allocable to common stockholders, and recommend that investors
                                                                 not give undue weight to it. We believe that Adjusted EBITDA
                                                                 provides investors useful information by allowing them to view
                                                                 the business through the eyes of management.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The reconciliation of CUI Global, Inc. Adjusted EBITDA
to net (loss) allocable to common stockholders, is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">For the Years Ended</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">December 31,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Net (loss) allocable to common stockholders</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(2,526,321</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(48,763</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Provision for taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,714</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29,810</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Impairment of intangible, trademark and trade name V-Infinity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">278,428</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Interest expense - amortization of debt offering costs
    and debt discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">73,333</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">334,747</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">575,199</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">918,189</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,190,081</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">227,867</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Depreciation and amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">730,293</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">770,764</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Adjusted EBITDA</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">354,727</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,232,614</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>SUMMARY CONSOLIDATED FINANCIAL DATA &ndash; Orbital
Gas Systems Limited </U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth summary consolidated financial
data of Orbital Gas Systems Limited. You should read the following summary consolidated financial data in conjunction with the
consolidated financial statements and notes thereto of Orbital included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fiscal year of CUI Global, Inc. ends on December 31,
and the fiscal year of Orbital Gas Systems Limited ends on June 30. The summary consolidated financial information presented
has been derived from the audited financial statements and accompanying notes of Orbital for the years ended June 30, 2012
and 2011, prepared in accordance with U.K. GAAP reconciled to U.S. GAAP, included elsewhere in this prospectus, and selected
unaudited interim financial information of Orbital for the six months ended December 31, 2012 and 2011, and reflects Orbital Gas
Systems Limited financial information as of calendar years ended December 31, 2012 and 2011. Orbital&rsquo;s historical
results do not necessarily indicate results that may be expected for any future period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For a discussion of material differences between U.K. GAAP
and U.S. GAAP as they relate to Orbital Gas Systems Limited, see Note 22 to the financial statements of Orbital Gas Systems Limited
included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Where applicable, the amounts in the following tables related
to the acquisition price are converted from British pound sterling to U. S. dollars based on the Wall Street Journal published
exchange rate on New York closing on February 27, 2013 of $1.5158 per British pound sterling. For converting the fiscal year statements
of operations amounts related to Orbital, the following average exchange rates published by Oanda Corporation: $1.5768 average
per British pound sterling for the six months January to June 2012, $1.5926 average per British pound sterling for the six months
July to December 2012, $1.6160 average per British pound sterling for the six months January to June 2011 and $1.5919 average
for the British pound sterling for the six months July to December 2011. The amounts included on the balance sheets related to
Orbital were converted, based on the following exchange rates published by Oanda Corporation, $1.6153 per British pound sterling
at December 31, 2012 and $1.5453 per British pound sterling at December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">For the Years Ended</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">December 31,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Statement of Operations Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%">Revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">23,017,544</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">23,360,136</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,659,995</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,506,305</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Income from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,986,581</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,066,153</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Net income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,087,720</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,759,462</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Other Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>EBITDA (1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,212,413</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,222,043</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Balance Sheet Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">9,172,956</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,606,492</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Total debt, including current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,588,974</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total stockholders' equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,017,518</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>EBITDA is net income before interest expense, income taxes,
                                                                 depreciation and, amortization. We believe that EBITDA is useful
                                                                 as an indicator of ongoing operating performance. Our management
                                                                 uses EBITDA, in conjunction with traditional U.S. GAAP measures,
                                                                 as part of the overall assessment of performance. We use this
                                                                 non-U.S. GAAP measure in internal management reports used to
                                                                 monitor and make decisions about our business. To mitigate these
                                                                 limitations, we present Orbital&rsquo;s U.S. GAAP results along
                                                                 with the non-U.S. GAAP measure, reconcile EBITDA to net income, and
                                                                 recommend that investors not give undue weight to it. We believe
                                                                 that EBITDA provides investors useful information by allowing
                                                                 them to view the business through the eyes of management, facilitating
                                                                 comparison of results across historical periods and across companies,
                                                                 and providing a focus on the underlying operating performance
                                                                 of the business.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The reconciliation of Orbital Gas Systems Limited
EBITDA to net income, is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">For the Years Ended</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Net income</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,087,720</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,759,462</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Provision for taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">938,940</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">320,445</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,715</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,613</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Depreciation and amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">176,038</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">139,523</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">EBITDA</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,212,413</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,222,043</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">An investment in our common stock involves a significant degree
of risk. You should carefully consider the following risk factors and all other information contained in this prospectus before
purchasing our common stock. If any of the risks discussed in this prospectus actually occur, our business, financial condition
and results of operations could be materially and adversely affected. If this were to happen, the price of our shares could decline
significantly and you may lose all or a part of your investment. The risk factors described below are not the only ones that may
affect us. <FONT STYLE="color: windowtext"><STRIKE> </STRIKE></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Business<FONT STYLE="text-underline-style: none; color: windowtext">
and Products</FONT></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: double"><I><U>Historically,
we have generated losses from operations and we may need additional funding in the future.</U></I></FONT><FONT STYLE="text-underline-style: none">
</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Historically, we have not generated sufficient revenues from
operations to self-fund our capital and operating requirements. <FONT STYLE="text-underline-style: none; color: windowtext">For
the year ended 2012, we had a net loss of $2,526,321 and our accumulated deficit as of December 31, 2012 was $76,171,822. If we
are not able to generate sufficient income and cash flows from operations to fund our operations and growth plans</FONT>, we may
seek additional capital from equity and debt placements<FONT STYLE="text-underline-style: none; color: windowtext"> or corporate
arrangements. Additional capital may not be available on terms favorable to us, or at all. If we raise additional funds by issuing
equity securities, our shareholders may experience dilution. Debt financing, if available, may involve restrictive covenants or
security interests in our assets. If we raise additional funds through collaboration arrangements with third parties, it may be
necessary to relinquish some rights to technologies or products. If we are unable to raise adequate funds or generate them from
operations, it may have to delay, reduce the scope of, or eliminate some or all of its growth plans or liquidate some or all of
our assets</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>There is no assurance we will achieve profitability.
</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended 2012, we had a net loss of $2,526,321. There
is no assurance that we will achieve <FONT STYLE="text-underline-style: none; color: windowtext">or sustain profitability. If
we fail to achieve or sustain profitability, the price of our common stock could fall and our ability to raise additional capital
could be adversely affected.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>We have expanded our business activities and these activities
may not be successful and may divert our resources from our existing business activities</U></I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our historic business was a commoditized electromechanical
parts distribution business. In recent years, we have focused our business on the acquisition, development and commercialization
of new and innovative electronic technologies/products. We may not be successful in acquiring technologies that are commercially
viable. We may fail to successfully develop or commercialize technologies that we acquire. Research, development and commercialization
of such acquired technologies may disproportionately divert our resources from our other business activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: double"><I><U>If our manufacturers
or our suppliers are unable to provide an adequate supply of products, our growth could be limited and our business could be harmed</U></I></FONT><FONT STYLE="text-underline-style: none">.
</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We rely on third parties to supply components for and to manufacture
our products. In order to grow our business to achieve profitability, we will need our manufacturers and suppliers to increase,
or scale-up, production and supply by a significant factor over current levels. There are technical challenges to scaling-up capacity
that may require the investment of substantial additional funds by our manufacturers or suppliers and hiring and retaining additional
management and technical personnel who have the necessary experience. If our manufacturers and suppliers are unable to do so,
we may not be able to meet the requirements to grow our business to anticipated levels. We also may represent only a small portion
of our supplier's or manufacturer's business and if they become capacity constrained they may choose to allocate their available
resources to other customers that represent a larger portion of their business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our international operations are subject to increased
risks which could harm our business, operating results and financial condition</U></I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our ability to manage our business and conduct our operations
internationally requires considerable management attention and resources and is subject to a number of risks, including the following:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">challenges caused
                                                                by distance, language and cultural differences and by doing business
                                                                with foreign agencies and governments;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">longer payment
                                                                cycles in some countries;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">uncertainty regarding
                                                                liability for services and content;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">credit risk and
                                                                higher levels of payment fraud;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">currency exchange
                                                                rate fluctuations and our ability to manage these fluctuations;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">foreign exchange
                                                                controls that might prevent us from repatriating cash earned in
                                                                countries outside the U.S.;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD>import and export requirements that may prevent us from shipping
                                                                products or providing services to a particular market and may
                                                                increase our operating costs;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD>potentially adverse tax consequences;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">higher costs
                                                                associated with doing business internationally<FONT STYLE="text-underline-style: none; color: windowtext">;
                                                                </FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="text-underline-style: none; color: windowtext">political,
                                                                social and economic instability abroad, terrorist attacks and
                                                                security concerns in general; </FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="text-underline-style: none; color: windowtext">reduced
                                                                or varied protection for intellectual property rights in some
                                                                countries</FONT>; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 15pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt">different employee/employer
                                                                relationships and the existence of workers' councils and labor
                                                                unions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, compliance with complex foreign and U.S. laws
and regulations that apply to our international operations increases our cost of doing business in international venues and could
expose us or our employees to fines and penalties. These numerous and sometimes conflicting laws and regulations include import
and export requirements, content requirements, trade restrictions, tax laws, sanctions, internal and disclosure control rules,
data privacy requirements, labor relations laws, U.S. laws such as the Foreign Corrupt Practices Act and local laws prohibiting
corrupt payments to governmental officials. Violations of these laws and regulations could result in fines, civil and criminal
penalties against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.
Any such violations could include prohibitions on our ability to offer our products and services in one or more countries and
could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain
employees, our business and our operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our revenues depend on a key customers.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s major product lines in 2012 and 2011 were
external power, internal power and industrial controls.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012, 59% of revenues were derived from five customers
at 47%, 4%, 3%, 3% and 2%. During 2011, 55% of revenues were derived from six customers at 41%, 4%, 3%, 3%, 2% and 2%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2012, of the gross trade accounts receivable
from continuing operations totaling $5,095,926, 57% was due from six customers: 37%, 8%, 3%, 3%, 3% and 3%. At December 31, 2011,
of the gross trade accounts receivable from continuing operations totaling $3,819,641, 53% was due from eight customers: 21%,
9%, 7%, 5%, 4%, 3%, 2% and 2%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There is no assurance that we will continue to maintain all
of our existing key customers in the future. Should we, for any reason, discontinue our business relationship with any one of
these key customers, the impact to our revenue stream would be substantial.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>We rely on third party distributors to generate a substantial
part of our revenue and, if we fail to expand and manage our distribution channels, our revenues could decline and our growth
prospects could suffer. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We derive a substantial portion of our revenues from sales
of our electronic component products through distributors and we expect that sales through these distributors will represent a
substantial portion of our revenues for the foreseeable future. Our ability to expand our distribution channels depends in part
on our ability to educate our distributors about our products, which are complex. Many of our distributors have established relationships
with our competitors. If our distributors choose to place greater emphasis on products and services of their own or those offered
by our competitors, our ability to grow our business and sell our products may be adversely affected. If our distributors do not
effectively market and sell our products, or if they fail to meet the needs of our customers, then our ability to grow our business
and sell our products may be adversely affected. The loss of one or more of our larger distributors, who may cease marketing our
products with limited or no notice and our possible inability to replace them, could adversely affect our sales. Our failure to
recruit additional distributors or any reduction or delay in their sales of our products or conflicts between distributor sales
and our direct sales and marketing activities could materially and adversely affect our results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>We are a relatively small specialty component and solutions
business and face formidable competition.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We define our specialty solutions business into three categories:
<B>PSU</B> (power supply units) that includes our Novum digital power and Solus advanced power; <B>Test and Measurement</B> equipment
that includes our Vergence GasPT2; and <B>Components </B>including our AMT modular encoder. We are a relatively small company
with limited capitalization in comparison to many of our international competitors. Because of our size and capitalization, we
believe that we have not yet established sufficient market awareness in the specialty electronic component and solutions business
that is essential to our continued growth and success in all of our markets. We face formidable competition in every aspect of
our specialty component and solutions business from other companies<FONT STYLE="text-underline-style: none; color: windowtext">
many of whom have greater name recognition, more resources and broader product offerings than ours. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none; color: windowtext">We
also</FONT> expect competition to intensify in the future. <FONT STYLE="text-underline-style: none; color: windowtext">For example,
the market for our electronic components and our inferential natural gas monitoring device, the Vergence GasPT2,</FONT> is emerging
and is characterized by rapid technological change, evolving industry standards, frequent new product introductions and shortening
product life cycles. Our future success in keeping pace with technological developments and achieving product acceptance depends
upon our ability to enhance our current products and to continue to develop and introduce new product offerings and enhanced performance
features and functionality on a timely basis at competitive prices. <FONT STYLE="text-underline-style: none; color: windowtext">Our
inability, for technological or other reasons, to enhance, develop, introduce or deliver compelling products in a timely manner,
or at all, in response to changing market conditions, technologies or customer expectations, could have a material adverse effect
on our operating results and growth prospects. Our ability to compete successfully will depend in large measure on our ability
to maintain a technically skilled development and engineering staff and to adapt to technological changes and advances in the
industry, including providing for the continued compatibility of our products with evolving industry standards and protocols and
competitive environments. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Acquisitions could result in operating difficulties,
dilution and other harmful consequences. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We continue our process of integrating recent acquisitions
into our own business model and we expect to continue to evaluate and enter into discussions regarding a wide array of potential
strategic transactions. These transactions could be material to our financial condition and results of operations. The process
of integrating an acquired company, business or technologies may create unforeseen operating difficulties and expenditures. The
areas where we face risks include:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>implementation
                                                                                                               or remediation
                                                                                                               of controls, procedures
                                                                                                               and policies of
                                                                                                               the acquired company;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>diversion of
                                                                                                               management time
                                                                                                               and focus from
                                                                                                               operating our business
                                                                                                               to acquisition
                                                                                                               integration challenges;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>coordination
                                                                                                               of product, engineering
                                                                                                               and sales and marketing
                                                                                                               functions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>transition
                                                                                                               of operations,
                                                                                                               users and customers
                                                                                                               into our existing
                                                                                                               customs;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>cultural challenges
                                                                                                               associated with
                                                                                                               integrating employees
                                                                                                               from the acquired
                                                                                                               company into our
                                                                                                               organization;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>retention of
                                                                                                               employees from
                                                                                                               the businesses
                                                                                                               we acquire;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>integration
                                                                                                               of the acquired
                                                                                                               company&rsquo;s
                                                                                                               accounting, management
                                                                                                               information, human
                                                                                                               resource and other
                                                                                                               administrative
                                                                                                               systems;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>litigation
                                                                                                               or other claims
                                                                                                               in connection with
                                                                                                               the acquired company,
                                                                                                               including claims
                                                                                                               from terminated
                                                                                                               employees, customers,
                                                                                                               former shareholders,
                                                                                                               or other third
                                                                                                               parties;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>failure to
                                                                                                               successfully further
                                                                                                               develop the acquired
                                                                                                               technologies; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>other as yet
                                                                                                               unknown risks that
                                                                                                               may impact our
                                                                                                               business.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our failure to address these risks or other problems encountered
in connection with our past or future acquisitions could cause us to fail to realize the anticipated benefits of such acquisitions
incur unanticipated liabilities and harm our business generally. <FONT STYLE="text-underline-style: none; color: windowtext">For
example, a majority of Orbital Gas Systems Limited's revenues for each of its last two fiscal years has come from one customer.
If we complete the Orbital acquisition and fail to continue to do business with Orbital's primary customer at substantially similar
or greater levels than recent historical levels, our financial condition, results of operations and growth prospects would be
significantly harmed.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Future acquisitions could also result in dilutive issuances
of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, write-offs of goodwill, <FONT STYLE="text-underline-style: none; color: windowtext">or
reductions to our tangible net worth </FONT>any of which could harm our <FONT STYLE="text-underline-style: none; color: windowtext">business,
</FONT>financial condition<FONT STYLE="text-underline-style: none; color: windowtext">, results of operations and prospects</FONT>.
Also, the anticipated benefit of many of our acquisitions may not materialize.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>We will need to grow our organization and we may encounter
difficulties in managing this growth. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2012, the Company, together with its consolidated
subsidiaries, had sixty-two full-time and seven part-time employees. If we acquire Orbital we will have approximately one hundred
thirty-nine fulltime employees and seven part time employees. We expect to experience significant growth in the number of our
employees and the scope of our operations. To manage our anticipated future growth, we must continue to implement and improve
our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified
personnel. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities
and devote a substantial amount of time to managing these growth activities. Due to our limited resources, we may not be able
to effectively manage the expansion of our operations or recruit and train additional qualified personnel, which may result in
weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced
productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert
financial resources from other projects, such as the development of new products. If our management is unable to effectively manage
our expected growth, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced
and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize new
products including the Vergence GasPT2, Novum digital power and Solus advanced power and compete effectively will depend, in part,
on our ability to effectively manage any future growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our operating results will vary over time and such fluctuations
could cause the market price of our common stock to decline. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our operating results may fluctuate significantly due to a
variety of factors, many of which are outside of our control. Because revenues for any future period are not predictable with
any significant degree of certainty, you should not rely on our past results as an indication of our future performance. If our
revenues or operating results fall below the expectations of investors or securities analysts or below any estimates we may provide
to the market, the price of our common shares would likely decline substantially. Factors that could cause our operating results
and stock price to fluctuate include:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>inability of
                                                                                                               our contract manufacturers
                                                                                                               and suppliers to
                                                                                                               meet our demand;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>success and
                                                                                                               timing of new product
                                                                                                               introductions by
                                                                                                               us and the performance
                                                                                                               of our products
                                                                                                               generally;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>announcements
                                                                                                               by us or our competitors
                                                                                                               regarding products,
                                                                                                               promotions or other
                                                                                                               transactions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>costs related
                                                                                                               to responding to
                                                                                                               government inquiries
                                                                                                               related to regulatory
                                                                                                               compliance;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability
                                                                                                               to control and
                                                                                                               reduce product
                                                                                                               costs;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in
                                                                                                               the manner in which
                                                                                                               we sell products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the impact
                                                                                                               of write downs
                                                                                                               of excess and obsolete
                                                                                                               inventory.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our operating expenses will increase as we make further
expenditures to enhance and expand our operations in order to support additional growth in our business and national stock market
reporting and compliance obligations. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Historically, we limited our investment in operations, but
in the future we expect our operations and marketing investments to increase substantially to support our anticipated growth and
as a result of our recent listing on the NASDAQ Stock Market. We are making significant investments in using more professional
services and expanding our operations outside the United States. We intend to make additional investments in personnel and continue
to expand our operations to support anticipated growth in our business. In addition, we may determine the need in the future to
build a direct sales force to market and sell our products or provide additional resources or cooperative funds to our distributors.
Such changes to our existing sales model would likely result in higher selling, general and administrative expenses as a percentage
of our revenues. We expect our increased investments to adversely affect operating income in the short term while providing long
term benefit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our business depends on a strong brand and failing to
maintain and enhance our brand would hurt our ability to expand our base of distributors, customers and end-users. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe that we have not yet established sufficient market
awareness in the electronic component market. Market awareness of our capabilities and products is essential to our continued
growth and our success in all of our markets. We expect the brand identity that we have developed through CUI, Vergence, GasPT2,
Novum, AMT, Solus, and CUI Japan to significantly contribute to the success of our business. Maintaining and enhancing these brands
<FONT STYLE="text-underline-style: none; color: windowtext">and any brands we might acquire, such as Orbital Gas Systems,</FONT>
is critical to expanding our base of distributors, customers and end-users. If we fail to maintain and enhance our brands, or
if we incur excessive expenses in this effort, our business, operating results and financial condition will be materially and
adversely affected. Maintaining and enhancing our brands will depend largely on our ability to be a technology leader and continue
to provide high-quality products, which we may not do successfully.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>New entrants and the introduction of other distribution
models in our markets may harm our competitive position. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The markets for development, distribution and sale of our products
are rapidly evolving. New entrants seeking to gain market share by introducing new technology and new products may make it more
difficult for us to sell our products and could create increased pricing pressure, reduced profit margins, increased sales and
marketing expenses or the loss of market share or expected market share, any of which may significantly harm our business, operating
results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Adverse conditions in the global economy and disruption
of financial markets may significantly restrict our ability to generate revenues or obtain debt or equity financing.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The global economy continues to experience volatility and uncertainty
<FONT STYLE="text-underline-style: none; color: windowtext">and governments in many countries continue to evaluate and implement
spending cuts designed to reduce budget deficits. These</FONT> conditions <FONT STYLE="text-underline-style: none; color: windowtext">and
deficit reduction measures </FONT>could reduce demand for our products and services<FONT STYLE="text-underline-style: none; color: windowtext">,
including through reduced government infrastructure projects,</FONT> which would significantly jeopardize our ability to achieve
our sales targets. These conditions could also affect our potential strategic partners, which, in turn, could make it more difficult
to execute a strategic collaboration. Moreover, volatility and disruption of financial markets could limit our customers&rsquo;
ability to obtain adequate financing or credit to purchase and pay for our products and services in a timely manner, or to maintain
operations and result in a decrease in sales volume. General concerns about the fundamental soundness of domestic and international
economies may also cause customers to reduce purchases. Changes in governmental banking, monetary and fiscal policies to restore
liquidity and increase credit availability may not be effective. Economic conditions and market turbulence may also impact our
suppliers&rsquo; ability to supply sufficient quantities of product components in a timely manner, which could impair our ability
to fulfill sales orders. It is difficult to determine the extent of the economic and financial market problems and the many ways
in which they may affect our suppliers, customers, investors and business in general. Continuation or further deterioration of
these financial and macroeconomic conditions could significantly harm sales, profitability and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our subsidiary and certain suppliers are in Japan and
located in areas subject to natural disasters or other events that could stop us from having our products made or shipped or could
result in a substantial delay in our production or development activities. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have research, development and manufacturing resources in
Japan. The risk of earthquakes, typhoons and other natural disasters in this geographic area is significant due to the proximity
of major earthquake fault lines. Despite precautions taken by us and our third-party providers, over which we have no control,
a natural disaster or other unanticipated problems at our location in Japan or a third-party provider could cause interruptions
in the products that we provide. Earthquakes, fire, flooding or other natural disasters could result in the disruption of our
development, manufacturing, assembly, testing or shipping capacity. Any disruption resulting from these events could cause significant
delays in product development or shipments of our products until we are able to shift our development, manufacturing, assembly
or testing from the affected contractor to another third party vendor or our research and development activities to another location.
We cannot assure you that alternative capacity could be obtained on favorable terms, if at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Defects in our products could harm our reputation and
business. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our electronic products are complex and have contained and
may contain undetected defects or errors, especially when first introduced or when new versions are released. Defects in our products
may lead to product returns and require us to implement design changes or updates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 30.6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any defects or errors in our electronic products, or the perception
of such defects or errors, could result in:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>expenditure
                                                                                                               of significant
                                                                                                               financial and product
                                                                                                               development resources
                                                                                                               in efforts to analyze,
                                                                                                               correct, eliminate
                                                                                                               or work around
                                                                                                               errors or defects;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>loss of existing
                                                                                                               or potential customers
                                                                                                               or distributors;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delayed or
                                                                                                               lost revenue;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delay or failure
                                                                                                               to attain market
                                                                                                               acceptance;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delay in the
                                                                                                               development or
                                                                                                               release of new
                                                                                                               products or services;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>negative publicity,
                                                                                                               which will harm
                                                                                                               our reputation;
                                                                                                               warranty claims
                                                                                                               against us, which
                                                                                                               could result in
                                                                                                               an increase in
                                                                                                               our provision for
                                                                                                               doubtful accounts;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an increase
                                                                                                               in collection cycles
                                                                                                               for accounts receivable
                                                                                                               or the expense
                                                                                                               and risk of litigation;
                                                                                                               and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>harm to our
                                                                                                               results of operations.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 30.6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>We and our contract manufacturers purchase some components,
subassemblies and products from a limited number of suppliers. The loss of any of these suppliers may substantially disrupt our
ability to obtain orders and fulfill sales as we design and qualify new components. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We rely on third party components and technology to build and
operate our products and we rely on our contract manufacturers to obtain the components, subassemblies and products necessary
for the manufacture of our products. Shortages in components that we use in our products are possible and our ability to predict
the availability of such components is limited. If shortages occur in the future, as they have in the past, our business, operating
results and financial condition would be materially adversely affected. Unpredictable price increases of such components due to
market demand may occur. While components and supplies are generally available from a variety of sources, we and our contract
manufacturers currently depend on a single or limited number of suppliers for several components for our products. If our suppliers
of these components or technology were to enter into exclusive relationships with other providers of electronic components or
were to discontinue providing such components and technology to us and we were unable to replace them cost effectively, or at
all, our ability to provide our products would be impaired. Therefore, we may be unable to meet customer demand for our products,
which would have a material adverse effect on our business, operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>We depend on key personnel and will need to recruit new
personnel as our business grows</U></I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a small company, our future success depends in a large part
upon the continued service of key members of our senior management team who are critical to the overall management of CUI Global
and our subsidiary companies, CUI, Inc. and CUI Japan (formerly Comex Instruments, Ltd.), including our intended acquisition of
Orbital Gas Systems Limited, as well as the development of our technologies, our business culture and our strategic direction.
The loss of any of our management or key personnel could seriously harm our business and we do not maintain any key-person life
insurance policies on the lives of these critical individuals.<FONT STYLE="text-underline-style: none; color: windowtext"> We
also do not have an agreement not to compete with William J. Clough, our President and CEO</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we are successful in expanding our product and customer
base, we will need to add additional key personnel as our business continues to grow. If we cannot attract and retain enough qualified
and skilled staff, the growth of the business may be limited. Our ability to provide services to customers and expand our business
depends, in part, on our ability to attract and retain staff with professional experiences that are relevant to technology development
and other functions the Company performs. Competition for personnel with these skills is intense. We may not be able to recruit
or retain the caliber of staff required to carry out essential functions at the pace necessary to sustain or expand our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe our future success will depend in part on the following:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the continued
                                                                                                               employment and
                                                                                                               performance of
                                                                                                               our senior management;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability
                                                                                                               to retain and motivate
                                                                                                               our officers and
                                                                                                               key employees;
                                                                                                               and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability
                                                                                                               to identify, attract,
                                                                                                               hire, train, retain
                                                                                                               and motivate other
                                                                                                               highly skilled
                                                                                                               technical, managerial,
                                                                                                               marketing, sales
                                                                                                               and customer service
                                                                                                               personnel.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Intellectual Property and Technology</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>If we fail to protect our intellectual property rights
adequately, our ability to compete effectively or to defend ourselves from litigation could be impaired. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We rely primarily on patent, copyright, trademark and trade
secret laws, as well as confidentiality and non-disclosure agreements and other methods, to protect our proprietary technologies
and know-how. Given the costs of obtaining patent protection, we may choose not to protect certain innovations that later turn
out to be important. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained
will be insufficient or that an issued patent may be deemed invalid or unenforceable. We license a significant amount of our underlying
intellectual property from third parties, i. e., AMT Encoder Technology, Novum Digital Point of Load Technology, Solus Advanced
Power Topology Technology and Vergence GasPT2 Technology. The loss of our rights as a licensee under any of these or future technology
licensing arrangements could have a material adverse impact upon our financial position and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Monitoring unauthorized use of our intellectual property is
difficult and costly. Unauthorized use of our intellectual property may occur in the future without our knowledge. The steps we
have taken may not prevent unauthorized use of our intellectual property. Further, we may not be able to detect unauthorized use
of, or take appropriate steps to enforce our intellectual property rights. Our competitors may also independently develop similar
technology. Our failure to effectively protect our intellectual property could reduce the value of our technology in licensing
arrangements or in cross-licensing negotiations and could impair our ability to compete. Any failure by us to meaningfully protect
our intellectual property could result in competitors offering products that incorporate our most technologically advanced features,
which could seriously reduce demand for our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We may in the future need to initiate infringement claims or
litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive and time-consuming and may divert the efforts
of our technical staff and managerial personnel, which could result in lower revenues and higher expenses, whether or not such
litigation results in a determination favorable to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Confidentiality agreements with employees and others
may not adequately prevent disclosure of our trade secrets and other proprietary information. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have devoted substantial resources to the development of
our proprietary technology and trade secrets. In order to protect our proprietary technology and trade secrets, we rely in part
on confidentiality agreements with our key employees, licensees, independent contractors and other advisors. These agreements
may not effectively prevent disclosure of our trade secrets and may not provide an adequate remedy in the event of unauthorized
disclosure of our trade secrets. We may have difficulty enforcing our rights to our proprietary technology and trade secrets,
which could have a material adverse effect on our business, operating results and financial condition. In addition, others may
independently discover trade secrets and proprietary information and in such cases we could not assert any trade secret rights
against such parties. Costly and time consuming litigation could be necessary to determine and enforce the scope of our proprietary
rights and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>If a third party asserts that we are infringing on its
intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation and our business
may be adversely affected. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The technology industry is characterized by the existence of
a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other
violations of intellectual property rights. Third parties may assert patent and other intellectual property infringement claims
against us or the parties from whom we license our technological rights in the form of lawsuits, letters or other forms of communication.
These claims, whether or not successful, could: </P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>divert management&rsquo;s
                                                                                                               attention;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>result in costly
                                                                                                               and time-consuming
                                                                                                               litigation;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>require us
                                                                                                               to enter into royalty
                                                                                                               or licensing agreements,
                                                                                                               which may not be
                                                                                                               available on acceptable
                                                                                                               terms, or at all;
                                                                                                               and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>require us
                                                                                                               to redesign our
                                                                                                               products to avoid
                                                                                                               infringement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result, any third-party intellectual property claims against
us could increase our expenses and adversely affect our business. Even if we have not infringed any third parties&rsquo; intellectual
property rights, we cannot be sure our legal defenses will be successful and even if we are successful in defending against such
claims, our legal defense could require significant financial resources and management time. Finally, if a third party successfully
asserts a claim that our products infringe its proprietary rights, royalty or licensing agreements might not be available on terms
we find acceptable or at all and we may be required to pay significant monetary damages to such third party. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>If our contract manufacturers do not respect our intellectual
property and trade secrets, our business, operating results and financial condition could be materially adversely affected. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Because most of our contract manufacturers operate outside
the United States, where prosecution of intellectual property infringement and trade secret theft is more difficult than in the
United States, certain of our contract manufacturers, their affiliates, their other customers or their suppliers may attempt to
use our intellectual property and trade secrets to manufacture our products for themselves or others without our knowledge. Although
we attempt to enter into agreements with our manufacturers to preclude them from using our intellectual property and trade secrets,
we may be unsuccessful in monitoring and enforcing our intellectual property rights. Although we take steps to stop counterfeits,
we may not be successful and customers who purchase these counterfeit goods may have a bad experience and our brand may be harmed.
If such an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our products at
competitive prices and to be the sole provider of our products may be adversely affected and our business, operating results and
financial condition could be materially and adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Common Stock </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our common stock price may be volatile, which could result
in substantial losses for individual shareholders.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The market price for the Company&rsquo;s common stock is volatile
and subject to wide fluctuations in response to factors, including the following, some of which are beyond our control, which
means our market price could be depressed and could impair our ability to raise capital:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>actual or anticipated
                                                                                                               variations in our
                                                                                                               quarterly operating
                                                                                                               results;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>announcements
                                                                                                               of technological
                                                                                                               innovations or
                                                                                                               new products or
                                                                                                               services by the
                                                                                                               Company or our
                                                                                                               competitors;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>conditions
                                                                                                               or trends relating
                                                                                                               to our inferential
                                                                                                               natural gas monitoring
                                                                                                               device or electromechanical
                                                                                                               component technologies;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in
                                                                                                               the economic performance
                                                                                                               and/or market valuations
                                                                                                               of other electromechanical,
                                                                                                               electronic component
                                                                                                               and industrial
                                                                                                               controls related
                                                                                                               companies;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>conditions
                                                                                                               or trends relating
                                                                                                               to the marketing,
                                                                                                               sale or distribution
                                                                                                               of electromechanical
                                                                                                               components and
                                                                                                               industrial controls
                                                                                                               to OEM manufacturing
                                                                                                               customers;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>additions or
                                                                                                               departures of key
                                                                                                               personnel;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>fluctuations
                                                                                                               of the stock market
                                                                                                               as a whole;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>announcements
                                                                                                               about our earnings
                                                                                                               that are not in
                                                                                                               line with expectations;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>announcements
                                                                                                               by our competitors
                                                                                                               of their earnings
                                                                                                               that are not in
                                                                                                               line with expectations;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the volume
                                                                                                               of shares of common
                                                                                                               stock available
                                                                                                               for public sale;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>sales of stock
                                                                                                               by us or by our
                                                                                                               shareholders;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>short sales,
                                                                                                               hedging and other
                                                                                                               derivative transactions
                                                                                                               on shares of our
                                                                                                               common stock;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability
                                                                                                               to retain existing
                                                                                                               customers, attract
                                                                                                               new customers and
                                                                                                               satisfy our customers&rsquo;
                                                                                                               requirements;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>general economic
                                                                                                               conditions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in
                                                                                                               our pricing policies;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our ability
                                                                                                               to expand our business;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the effectiveness
                                                                                                               of our personnel;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>new product
                                                                                                               and service introductions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>technical difficulties
                                                                                                               or interruptions
                                                                                                               in our services;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the timing
                                                                                                               of additional investments
                                                                                                               in our products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>regulatory
                                                                                                               compliance costs;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>costs associated
                                                                                                               with future acquisitions
                                                                                                               of technologies
                                                                                                               and businesses;
                                                                                                               and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>extraordinary
                                                                                                               expenses such as
                                                                                                               litigation or other
                                                                                                               dispute-related
                                                                                                               settlement payments.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These factors may materially and adversely affect the market
price of our common stock, regardless of our performance. In addition, the stock market in general and the market for technology
companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of
our common stock, regardless of our actual operating performance. Additionally, because our stock is thinly trading, there is
a disparity between the bid and the asked price that may not be indicative of the stock&rsquo;s true value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Offers or availability for sale of a substantial number
of shares of our common stock may cause the price of our common stock to decline.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Sales of a significant number of shares of our common stock
in the public market could harm the market price of our common stock and make it more difficult for us to raise funds through
future offerings of common stock. Upon the effectiveness of the registration statement of which this prospectus forms a part,
7,000,000 shares of our common stock will become freely tradable. In addition, approximately 8,636,820 shares of our common stock
are freely tradable prior to the effective date of this registration statement. As these shares and as additional shares of our
common stock become available for resale in the public market, the supply of our common stock will increase, which could decrease
the price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>We have never paid dividends on our common stock and
do not expect to pay any in the foreseeable future.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Potential purchasers should not expect to receive a return
on their investment in the form of dividends on our common stock. The Company has <FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal">never
paid cash dividends</FONT> on its common stock and the Company does not expect to pay dividends in the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We currently anticipate that we will retain future earnings
for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for
the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into
account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and
the terms of any credit agreements that we may be a party to at the time. <FONT STYLE="text-underline-style: none; color: windowtext">Our
ability to pay dividends on our common stock is limited by our existing line of credit, and may be further restricted by the terms
of any of our future debt or preferred securities. </FONT>Accordingly, investors must rely on sales of their own common stock
after price appreciation, which may never occur, as the only way to realize their investment. Investors seeking cash dividends
should not purchase shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>There is a limited public trading market for our common
stock so you may not be able to resell your stock and may not be able to turn your investment into cash.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our common stock is currently traded on the NASDAQ Stock Market
under the trading symbol &quot;CUI&quot;. Our shares of common stock are thinly traded. Due to the illiquidity, the market price
may not accurately reflect our relative value. There can be no assurance that there will be an active market for our shares of
common stock either now or in the future. Because our common stock is thinly traded, a large block of shares traded can lead to
a dramatic fluctuation in the share price and investors may not be able to liquidate their investment in us at all or at a price
that reflects the value of the business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Relating to Shareholder Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our board of directors has the authority, without shareholder
approval, to issue preferred stock with terms that may not be beneficial to existing common shareholders and with the ability
to affect adversely shareholder voting power and perpetuate their control over us.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Although we do not have any preferred stock outstanding presently,
our Articles of Incorporation allow us to issue shares of preferred stock without any vote or further action by our shareholders.
Our board of directors has the authority to issue preferred stock without further shareholder approval, including large blocks
of preferred stock as well as the authority to fix and determine the relative rights and preferences of preferred stock. As a
result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred
right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of
common stock or other preferred shareholders and the right to the redemption of the shares, together with a premium, prior to
the redemption of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Preferred stock could be used to dilute a potential hostile
acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred shares may have the effect of
making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control or an
unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to and
assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including
voting rights, of the holders of our common stock and preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our Articles of Incorporation limits director liability,
thereby making it difficult to bring any action against them for breach of fiduciary duty.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is a Colorado corporation. As permitted by Colorado
law, the Company's Articles of Incorporation limits the liability of directors to the Company or its shareholders for monetary
damages for breach of a director's fiduciary duty, with certain exceptions. These provisions may discourage shareholders from
bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by
shareholders on behalf of the Company against a director.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: double"><I><U>Our charter
documents and outstanding note to IED, Inc. may inhibit a takeover that shareholders consider favorable. </U></I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Provisions of our Articles of Incorporation and Bylaws may
delay or discourage transactions involving an actual or potential change in control of the Company, including transactions in
which shareholders might otherwise receive a premium for their shares, or transactions that our shareholders might otherwise deem
to be in their best interests. These provisions:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 10pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="text-underline-style: none; color: windowtext">provide
                                                                that the authorized number of directors may be changed by resolution
                                                                of the board of directors;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 10pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="text-underline-style: none; color: windowtext">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</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 10pt">&bull;</TD><TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="text-underline-style: none; color: windowtext">do
                                                                not provide for cumulative voting rights.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our operating subsidiary, CUI, Inc. (formerly Waytronx Holding,
Inc.), also issued a note to IED, Inc. (formerly CUI, Inc.) in connection with our acquisition of CUI, Inc. The note provides
that, for so long as any obligations are outstanding under the note, IED will have a right to match any bona fide offer from a
third party to acquire CUI, Inc. by any means. This matching right could discourage third parties from making an offer to acquire
us, which would involve indirectly acquiring CUI, Inc., or from acquiring CUI, Inc. directly, in a transaction our shareholders
might find advantageous because any such offer could be matched by IED and result in the third party utilizing time and resources
to formulate an offer without being able to complete a transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Acquisition of Orbital Gas Systems</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: double"><I><U>As a private
company, Orbital Gas Systems may not have in place a system of internal control over financial reporting that is adequate to manage
that business effectively as part of a public company. </U></I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we complete the Orbital Gas Systems acquisition, we will
acquire the shares of a private company that has not previously been subject to financial reporting on the basis of U.S. GAAP,
and has not been subject to periodic reporting as a public company. There can be no assurance that Orbital Gas Systems has in
place a system of internal control over financial reporting that is required for public companies. Establishing, testing and maintaining
an effective system of internal control over financial reporting requires significant resources and time commitments on the part
of our management and our finance and accounting staff, may require additional staffing and infrastructure investments, and would
increase our costs of doing business. Moreover, if we discover aspects of the Orbital Gas Systems internal controls that need
improvement, we cannot be certain that our remedial measures will be effective. Any failure to implement required new or improved
controls, or difficulties encountered in their implementation could harm our operating results or increase our risk of material
weakness in internal controls.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: double"><I><U>If we do not
complete the Orbital Gas Systems acquisition the market price of our common stock may decline. </U></I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we do not complete the Orbital Gas Systems acquisition,
we will have incurred significant transaction costs, including an investment of a substantial amount of management time, without
realizing any of the expected benefits. Moreover, our attention to the acquisition may have cost us opportunities to pursue other
potentially beneficial opportunities. If we do not complete the acquisition, the market price of our common stock may decline
if the current market price reflects an assumption that the acquisition will be completed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>A significant portion of our unaudited pro forma total
assets consists of goodwill, which is subject to a periodic impairment analysis, and a significant impairment determination in
any future period could have an adverse effect on our results of operations even without a significant loss of revenue or increase
in cash expenses attributable to such period.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We will have goodwill totaling approximately $26.8 million
if the acquisition is successful. We will be required to evaluate this goodwill for impairment based on the fair value of the
operating business units to which this goodwill relates, at least once a year. This estimated fair value could change if we are
unable to achieve operating results at the levels that have been forecasted, the market valuation of those business units decreases
based on transactions involving similar companies, or there is a permanent, negative change in the market demand for the services
offered by the business units. These changes could result in an impairment of the existing goodwill balance that could require
a material non-cash charge to our results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our operating results may be affected by fluctuations
in foreign currency exchange rates, which may affect our operating results in U.S. dollar terms.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A portion of our revenue arises from our international operations
and we anticipate that, as we grow, our revenues from international operations will increase. Revenues generated and expenses
incurred by our international operations are often denominated in local currencies. As a result, our consolidated U.S. dollar
financial statements are subject to fluctuations due to changes in exchange rates as revenues and expenses of our international
operations are translated from local currencies into U.S. dollars. In addition, our financial results are subject to changes in
exchange rates that impact the settlement of transactions. The Company does not undertake any hedges to protect against adverse
foreign currency exposure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to This Offering<FONT STYLE="color: windowtext"><STRIKE>
</STRIKE></FONT></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: double"><I><U>We may allocate
the net proceeds from this offering in ways that you and other stockholders may not approve. </U></I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We intend to use the net proceeds from this offering for the
purchase of the entire issued share capital of Orbital Gas System Limited, an independent specialist gas control and instrumentation
solutions provider located in the United Kingdom; pay down a portion of our existing long term debt; and working capital and general
corporate purposes. Because of the number and variability of factors that will determine our use of the proceeds from this offering,
their ultimate use may vary from the currently intended use. If, for any reason, we are not able to complete the acquisition of
Orbital Gas Systems Limited, we may allocate the net proceeds from this offering for general corporate purposes or in ways that
you may not approve. As such, our management will have discretion in the application of the net proceeds from this offering and
could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our common stock.
For a further description of our intended use of the proceeds of the offering, see &quot;Use of Proceeds.&quot;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>The large number of authorized, but not issued common
shares leaves an opportunity for dilution of your proportionate ownership of the company.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company currently has authorized 325,000,000 shares of
common stock of which, as of December 31, 2012, 10,883,280 shares are issued and outstanding. The Company, presently, has no shares
of preferred stock outstanding. An issuance of additional shares will have the effect of diluting the current shareholders' percentage
of ownership. We may seek additional capital through a combination of private and public equity offerings, debt financings and
other strategic arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your
rights as a stockholder. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements
that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures
or declaring dividends. If we raise additional funds through other strategic arrangements with third parties, we may have to relinquish
valuable rights to our technologies, future revenue streams or grant licenses on terms that are not favorable to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>If securities analysts do not publish research or reports
about our business or if they publish negative evaluations of our stock, the price of our stock could decline. </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">After listing our common stock on the NASDAQ Stock Market,
we have become more visible to security and financial analysts which subject us to additional financial and legal compliance scrutiny.
Such additional scrutiny could affect any research or reports that industry or financial analysts publish about us or our business
which, in turn, could affect the trading price for our common stock. If one or more of the analysts who may elect to cover us
downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease coverage
of our Company, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Our <FONT STYLE="text-underline-style: double; color: windowtext">ability
to use U.S. net operating loss carry forwards might be limited, including as a result of this offering</FONT></U></I><U>. </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2012, we had net operating loss carry forwards
of approximately $20.7 million. These loss carry forwards expire in various years through the year ending December 31, 2032. To
the extent these net operating loss carry forwards are available, we intend to use them to reduce the corporate income tax liability
associated with our operations. Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount
of net operating loss carry forwards that might be used to offset taxable income when a corporation has undergone significant
changes in stock ownership. Due to changes in ownership, some of our net operating loss carry forwards might be limited. In addition,
future changes in ownership, including as a result of the issuance of common stock in this offering, could further limit the availability
of our net operating loss carry forwards. To the extent our use of net operating loss carry forwards is significantly limited,
our income could be subject to corporate income tax earlier than it would if we were able to use net operating loss carry forwards,
which could result in lower profits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This prospectus contains &ldquo;forward-looking statements&rdquo;
within the meaning of the federal securities laws, <FONT STYLE="text-underline-style: none; color: windowtext">including the Private
Securities Litigation Reform Act of 1995, </FONT>which involve substantial risks and uncertainties. All statements contained in
this prospectus other than statements of historical fact, including statements of estimated and projected revenue, margins, costs,
expenditures, cash flows, growth rates, financial results, <FONT STYLE="text-underline-style: none; color: windowtext">acquisition
activity</FONT> and prospects are forward-looking statements. You can generally identify forward-looking statements by terminology
such as &ldquo;may,&rdquo; &ldquo;could,&rdquo; &ldquo;should,&rdquo; &ldquo;expects,&rdquo; &ldquo;plans,&rdquo; &ldquo;projects,&rdquo;
&ldquo;intends,&rdquo; &ldquo;anticipates,&rdquo; &ldquo;believes,&rdquo; &ldquo;estimates,&rdquo; &ldquo;predicts,&rdquo; &ldquo;potential,&rdquo;
&ldquo;pursue,&rdquo; &ldquo;target,&rdquo; or &ldquo;continue,&rdquo; or the negative of these terms or other similar expressions
that concern our strategy, plans or intentions, although not all forward-looking statements contain these words. We have based
these forward-looking statements largely on our historical performance, our current expectations and projections about future
events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and
long-term business operations and objectives, and financial needs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These forward-looking statements are subject to a number of
risks, uncertainties and assumptions that we believe are reasonable, including those described in the &ldquo;Risk Factors&rdquo;
section. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is
not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent
to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this
prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The forward-looking statements made in this prospectus relate
only to events as of the date on which the statements are made. We undertake no obligation to publicly update or revise any forward-looking
statement as a result of new information, future events or otherwise, except as required by law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We estimate that the net proceeds of this offering to us will
be approximately $35,935,244, after deducting underwriting discounts and commissions and our estimated offering expenses. Our
estimate of the net proceeds is based on an assumed offering price of $5.51 per share, which was the closing price of our common
stock on the NASDAQ Capital Market on February&nbsp;27, 2013, and assumes the number of shares we sell in this offering is the
same as set forth on the cover page of this prospectus. A $1.00 increase or decrease in the assumed public offering price would
increase or decrease the estimated net proceeds we receive from this offering by approximately $6,580,000 assuming the number
of shares we sell in this offering, as set forth on the cover of this prospectus, remains the same and after deducting estimated
underwriter discounts and commissions and offering expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none; color: windowtext">We
intend to use the net proceeds from this offering as follows: first for the &pound;17 million (approximately </FONT>$25.8 million,
based on the Wall Street Journal published exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound
sterling)<FONT STYLE="text-underline-style: none; color: windowtext"> purchase of the entire issued share capital of Orbital Gas
Systems Limited, an independent specialist gas control and instrumentation solutions provider located in the United Kingdom; second,
to pay down approximately $2 million of our debt incurred in connection with our May 15, 2008 acquisition of CUI, Inc., which
has an interest rate of 6% per annum and matures on May 15, 2018; and the remainder of the proceeds for working capital and general
corporate purposes. If we do not consummate the Orbital Gas Systems Limited acquisition, we intend to use the net proceeds of
this offering for general corporate purposes, including repayment of $2 million of our existing indebtedness.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pending the <FONT STYLE="text-underline-style: none; color: windowtext">uses
of proceeds </FONT>as described above, we plan to invest all or a substantial portion of the net proceeds in a variety of capital
preservation investments, including short and intermediate-term interest-bearing obligations, investment-grade instruments, certificates
of deposit or guaranteed obligations of the United States government.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The estimated sources and uses of funds for the Orbital acquisition
and the repayment of $2 million of existing debt, assuming these transactions had closed on December 31, 2012, are shown in the
table below. Actual amounts will vary from estimated amounts depending on several factors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Sources</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="5" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Uses</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 35%; text-align: left">Common stock offered hereby (1)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">38,570,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 35%">Purchase of Orbital (2)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">25,768,600</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Repayment of existing indebtedness (3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Transactions costs (4)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,634,756</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Total sources</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,570,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Total uses</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">30,403,356</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Gross proceeds based on an assumed offering price of $5.51
per share, the last reported sale price of our common stock on the NASDAQ Capital Market on February 27, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Purchase price of &pound;17 million, converted at US$1.5158
per pound sterling, based on the Wall Street Journal published exchange rate as of the New York market close on February 27, 2013.
The U.S. dollar purchase price is subject to foreign exchange fluctuation between now and the closing of the acquisition purchase.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) Indebtedness to be repaid of $2 million in aggregate principal
amount of our currently outstanding note payable, bearing interest at 6.0% per annum and due May 15, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4) Reflects our estimate of fees and expenses
associated with the Orbital Gas Systems Limited acquisition and expenses associated with this offering, including estimated
underwriter discounts and commissions assuming the sale of all shares of our common stock as reflected on the cover page at
an assumed offering price of &nbsp;$5.51 per share, the last reported sale price of our common stock on the NASDAQ Capital
Market on February 27, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIVIDEND POLICY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has <FONT STYLE="font-weight: normal">never paid
cash dividends</FONT> on its common stock, and the Company does not expect to pay dividends in the foreseeable future. <FONT STYLE="text-underline-style: none; color: windowtext">Our
ability to pay dividends on our common stock is limited by our existing line of credit, and may be further restricted by the terms
of any of our future debt or preferred securities.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We currently expect to retain future earnings to finance
the growth and development of our business. The timing, amount and form of future dividends, if any, will depend on, among
other things, our future results of operations and cash flows; our general financial condition and future prospects; our
capital requirements and surplus; contractual restrictions; the amount of distributions, if any, received by us from our
subsidiaries; and other factors deemed relevant by our board of directors. Any future dividends on our common shares would be
declared by and subject to the discretion of our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PRICE RANGE OF OUR COMMON STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our common stock <FONT STYLE="text-underline-style: none; color: windowtext">began
trading</FONT> on the NASDAQ Stock Market under the trading symbol &quot;CUI&quot;<FONT STYLE="text-underline-style: none; color: windowtext">
on August 17, 2011. Prior to that, the our common stock was traded on the OTC Bulletin Board (OTC:BB)</FONT>. The following table
sets forth<FONT STYLE="text-underline-style: none; color: windowtext"> for the quarters indicated</FONT>, the high and low <FONT STYLE="text-underline-style: none; color: windowtext">sales
</FONT>prices of our common stock <FONT STYLE="text-underline-style: none; color: windowtext">on the NASDAQ Stock Market for the
periods it has been listed on that exchange, and the high and low bid prices</FONT> as reported by the National Quotation Bureau
<FONT STYLE="text-underline-style: none; color: windowtext">for the periods from January 1, 2011 through December 31, 2012. The
high and low bid prices</FONT> and reflect inter-dealer prices without retail mark-up, markdown or commission and may not represent
actual transactions. The 2011 prices have been adjusted to account for the one for thirty (1:30) reverse split that became effective
February 17, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">Year</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">Quarter</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">High Bid</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Low Bid</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center; width: 15%">2011</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 38%; text-align: left">First Quarter</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 20%; text-align: right">8.70</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 20%; text-align: right">5.40</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.05</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.90</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.30</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.40</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.45</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.15</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.90</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.50</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.81</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.48</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.06</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.40</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.34</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 27, 2013, the last reported sale price of our common
stock on the NASDAQ Capital Market was $5.51 per share. As of February 27, 2013, we had 3,000 holders of record of our common
stock. The actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial
owners, but whose shares are held in street name by brokers and other nominees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CAPITALIZATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth our cash, cash equivalents and
capitalization as of December 31, 2012:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">1.</TD><TD>On an actual basis; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">2.</TD><TD>On a pro forma as adjusted basis to give effect to the Orbital
                                                                Gas Systems Limited acquisition, the indebtedness we expect to
                                                                repay, and the sale of 7,000,000 share of our common stock in
                                                                this offering at an assumed offering price of $5.51, the last
                                                                reported sale price of our common stock on the NASDAQ Capital
                                                                Market on February 27, 2013, less estimated underwriting discounts
                                                                and commissions and offering expenses.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This offering is not contingent upon the closing of the
Orbital Gas Systems Limited acquisition. If the Orbital acquisition is not consummated, our pro forma cash and cash
equivalents would have been approximately $37.0 million (based on an assumed price to the public of $5.51 per share), the $2
million repayment towards the existing long term note payable would be completed and total capitalization would reflect the
significant transaction costs we have incurred in connection with the Orbital acquisition, and this offering. If we are
unable to complete the Orbital acquisition, the net proceeds of this offering may be used in the discretion of management for
working capital and other general corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This capitalization table should be read in conjunction with
our &ldquo;Selected Consolidated Financial Information,&rdquo; &ldquo;Management&rsquo;s Discussion and Analysis
of Financial Condition and Results of Operations&rdquo; and our consolidated financial statements and related notes included elsewhere
in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">As of December 31, 2012</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Actual</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Pro Forma as <BR> Adjusted</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Cash and cash equivalents</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">3,039,840</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">20,379,440</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-indent: -0.1in; padding-left: 0.1in">Line of credit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">459,448</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">459,448</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Long term notes payable, related party, net of current portion due</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">7,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">5,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Total long term liabilities</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">7,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">5,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Stockholders' equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock, par value $0.001; 325,000,000 shares authorized; 10,883,280 shares issued and outstanding, actual and 17,883,280 shares issued and outstanding, pro forma as adjusted</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,883</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,883</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Additional paid-in capital</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">100,947,708</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">136,875,952</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Accumulated deficit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(76,171,822</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(76,171,822</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Accumulated other comprehensive (loss)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(24,336</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(24,336</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Total stockholders' equity</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">24,762,433</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">60,697,677</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Total capitalization</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">35,565,404</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">86,840,248</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELECTED CONSOLIDATED FINANCIAL INFORMATION
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Presentation of Financial Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The financial statements and other financial information in
this prospectus related to the results of operations of the Orbital Gas Systems Limited business have been prepared in accordance
with U.K. GAAP. U.K. GAAP differs in some material respects from U.S. GAAP, and as a result, the historical financial statements
and other financial information for Orbital may not be comparable to our historical financial statements. For a discussion of material
differences between U.K. GAAP and U.S. GAAP as they related to Orbital, see Note 22 to the  financial statements of
Orbital Gas Systems Limited included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>CUI Global, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following tables set forth our selected consolidated financial
data. The selected consolidated financial data for the years ended December 31, 2012 and 2011 are derived from our audited consolidated
financial statements appearing elsewhere in this prospectus. The data set forth below should be read in conjunction with &ldquo; Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations,&rdquo; our financial
statements and the related notes included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">For the Years Ended</TD><TD STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">December 31,</TD><TD STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold">Statement of Operations Data:</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 64%; color: black; text-indent: -0.1in; padding-left: 0.1in">Revenue</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 15%; color: black; text-align: right">41,084,589</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 15%; color: black; text-align: right">38,938,326</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Operating expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,356,896</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,146,366</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Income (loss) from operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,980,200</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">658,887</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Net (loss) allocable to common stockholders</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,526,321</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(48,763</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Basic and diluted (loss) per common share</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(0.25</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(0.01</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Other Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Adjusted EBITDA (1)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">354,727</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,232,614</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Balance Sheet Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Cash and cash equivalents</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,039,840</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">176,775</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">36,723,461</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">31,978,491</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total liabilities</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">11,961,028</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">19,381,488</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total stockholders' equity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">24,762,433</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">12,597,003</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Adjusted EBITDA is the net   (loss) allocable to common stockholders before interest expense, income taxes, equity
                                                                compensation, depreciation, impairment                                                                 expenses and
                                                                amortization. We believe that Adjusted EBITDA is useful as an indicator of our performance. Our management uses Adjusted
                                                                EBITDA, in conjunction with traditional U.S. GAAP measures, as part of our overall
                                                                assessment of our performance. We use this non- U.S. GAAP measure in internal management reports used to monitor and make
                                                                decisions about our business. The principal limitations of Adjusted EBITDA as a performance measure are that it excludes
                                                                significant adjustments for one-time expenses and gains required under U.S. GAAP, and that our definition of Adjusted EBITDA
                                                                may be                                                                 different than
                                                                similar-sounding non- U.S. GAAP measures used                                                                 by other
                                                                companies. To mitigate these limitations, we present our GAAP results
                                                                along with the non- U.S. GAAP measure, reconcile Adjusted EBITDA to the net (loss) allocable to common stockholders, and recommend that
                                                                investors                                                                 not give
                                                                undue                                                                                                          weight to it.
                                                                We believe that Adjusted EBITDA provides
                                                                investors useful information by allowing them to view the business
                                                                through the eyes of management.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The reconciliation of CUI Global, Inc. Adjusted EBITDA to net
(loss) allocable to common stockholders, is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">For the Years Ended</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">December 31,</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Net (loss) allocable to common stockholders</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">(2,526,321</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">(48,763</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Provision for taxes</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">33,714</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">29,810</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Impairment of intangible, trademark and trade name V-Infinity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">278,428</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Interest expense - amortization of debt offering costs and debt discount</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">73,333</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">334,747</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Interest expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">575,199</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">918,189</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Stock based compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,190,081</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">227,867</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Depreciation and amortization</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">730,293</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">770,764</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Adjusted EBITDA</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">354,727</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">2,232,614</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Orbital Gas Systems Limited </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">The following table sets forth </FONT>selected
consolidated financial information<FONT STYLE="color: black"> of Orbital Gas Systems Limited. You should read the following </FONT>selected
consolidated financial information<FONT STYLE="color: black"> in conjunction with the consolidated financial statements and notes
thereto of Orbital included elsewhere in this prospectus. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">The fiscal year of CUI
Global, Inc. ends on December 31, and the fiscal year of Orbital Gas Systems Limited ends on June 30. The </FONT>selected
consolidated financial information <FONT STYLE="color: black">presented has been derived from the audited
financial statements and accompanying notes of Orbital for the years ended June 30, 2012 and 2011, prepared in accordance
with U.K. GAAP reconciled to U.S. GAAP, included elsewhere in this prospectus, and selected unaudited interim financial
information of Orbital for the six months ended December 31, 2012 and 2011, and reflects Orbital Gas Systems Limited financial
information as of calendar years ended December 31, 2012 and 2011. </FONT>Orbital&rsquo;s historical results do not
necessarily indicate results that may be expected for any future period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">For a discussion of material differences
between U.K. GAAP and U.S. GAAP as they relate to </FONT>Orbital Gas Systems Limited<FONT STYLE="color: black">, see Note 22 to
the financial statements of </FONT>Orbital Gas Systems Limited<FONT STYLE="color: black"> included elsewhere in this prospectus.
</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Where applicable, the amounts in the following tables related
to the acquisition price are converted from British pound sterling to U. S. dollars based on the Wall Street Journal published
exchange rate on New York closing on February 27, 2013 of $1.5158 per British pound sterling. For converting the fiscal year statements
of operations amounts related to Orbital, the following average exchange rates published by Oanda Corporation: $1.5768 average
per British pound sterling for the six months January to June 2012, $1.5926 average per British pound sterling for the six months
July to December 2012, $1.6160 average per British pound sterling for the six months January to June 2011 and $1.5919 average for
the British pound sterling for the six months July to December 2011. The amounts included on the balance sheets related to Orbital
were converted, based on the following exchange rates published by Oanda Corporation, $1.6153 per British pound sterling at December
31, 2012 and $1.5453 per British pound sterling at December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">For the Years Ended</TD><TD STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">December 31,</TD><TD STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold">Statement of Operations Data:</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 64%; color: black">Revenue</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 15%; color: black; text-align: right">23,017,544</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 15%; color: black; text-align: right">23,360,136</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Operating expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,659,995</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,506,305</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Income from operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,986,581</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,066,153</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Net income</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,087,720</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,759,462</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Other Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">EBITDA (1)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">4,212,413</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">2,222,043</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Balance Sheet Data:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Cash and cash equivalents</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">9,172,956</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Total assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,606,492</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Total debt, including current portion</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,588,974</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Total stockholders' equity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,017,518</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>EBITDA is net income before interest expense, income taxes, depreciation and, amortization. We believe that EBITDA is
                                                            useful as an indicator of ongoing operating performance. Our management uses EBITDA, in conjunction with traditional U.S.
                                                            GAAP measures, as part of the overall assessment of performance. We use this non-U.S. GAAP measure in internal management
                                                            reports used to monitor and make decisions about our business. To mitigate these limitations, we present Orbital&rsquo;s
                                                            U.S.                                                             GAAP results along with the non-U.S. GAAP measure,
                                                            reconcile EBITDA to net income, and recommend that investors not give undue
                                                            weight to it. We believe that EBITDA provides investors useful information by allowing them to view the business through the
                                                            eyes of management, facilitating comparison of results across historical periods and across companies, and providing a focus
                                                            on the underlying operating performance of the business.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The reconciliation of Orbital Gas Systems
Limited EBITDA to net income, is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 92%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">For the Years Ended</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center">December 31,</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; color: black; text-align: left">Net income</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">3,087,720</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 12%; color: black; text-align: right">1,759,462</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Provision for taxes</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">938,940</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">320,445</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Interest expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">9,715</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,613</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Depreciation and amortization</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">176,038</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">139,523</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">EBITDA</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">4,212,413</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">2,222,043</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">On March 3, 2013, <FONT STYLE="font: 10pt Times New Roman, Times, Serif">we agreed to acquire Orbital
Gas Systems Limited (&ldquo;Orbital&rdquo;) for &pound;17 million, which <FONT STYLE="color: black">based on the Wall Street Journal
published exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound sterling</FONT>, is $ 25,768,600
(subject to foreign exchange rate fluctuations). The acquisition includes all of Orbital&rsquo;s issued and outstanding shares.
We anticipate that this acquisition will be consummated during<FONT STYLE="color: black"> the second quarter of 2013. Although
we have entered into a share purchase agreement in connection with the proposed Orbital acquisition, we cannot guarantee when,
or whether, the acquisition will be completed. The share purchase agreement contains a number of important conditions that must
be satisfied before we can complete the acquisition.</FONT></FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unaudited pro forma financial information has been compiled
from underlying audited financial statements of Orbital Gas Systems Limited prepared in accordance with U.K. GAAP and reconciled
to U.S. GAAP for the purpose of such presentation, and selected unaudited interim financial information of Orbital for the six
months ended December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unaudited pro forma condensed combined financial information
combine the historical consolidated statements of operations of CUI Global, Inc., giving effect to (a) the completion of the Orbital
acquisition, b) the sale of 7,000,000 shares of our common stock in this offering at an assumed offering prices of $5.51 per share,
the last reported sale price of our common stock on the NASDAQ Capital Market on February 27, 2013, less estimated underwriting
discounts and commissions and estimated offering expenses, and (c) the application of the proceeds from this offering, in each
case as if they occurred on January 1, 2011 for income statement purposes and December 31, 2012 for balance sheet purposes. The
unaudited pro forma condensed combined information should be read in conjunction with the accompanying notes to the unaudited pro
forma condensed combined financial information, the historical financial statements of CUI Global, Inc. and Orbital Gas Systems
Limited and &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations,&rdquo;
all of which are included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Orbital Gas Systems Limited acquisition will be treated
as a purchase by CUI Global, Inc., with CUI Global, Inc. acquiring the entity. The unaudited pro forma condensed combined financial
information will differ from our final acquisition accounting for a number of reasons, including the fact that our purchase price
allocation and estimates of fair value are preliminary and subject to change when our formal valuation and other studies are finalized,
fluctuation in foreign exchange rates impacting the agreed upon purchase price, and variation in the actual proceeds and expenses
associated with this offering. Additionally, changes in Orbital&rsquo;s working capital, including the results of operations from
December 31, 2012 through the date the acquisition is completed, will change the amount of goodwill. The differences that will
occur between the preliminary estimates and the final acquisition accounting could have a material impact on the accompanying unaudited
pro forma condensed combined financial information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unaudited pro forma condensed combined financial information
is presented for informational purposes only. It has been prepared in accordance with the regulations of the SEC and is not necessarily
indicative of what our financial position or results of operations actually would have been had we completed the Orbital acquisition
at the dates indicated, nor does it purport to project the future financial position or operating results of the combined company.
The unaudited pro forma condensed combined statement of operations does not reflect any revenue or cost savings from synergies
that may be achieved with respect to the combined companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fiscal year of CUI Global, Inc. ends on December 31, and
the fiscal year of Orbital Gas Systems Limited ends on June 30. The unaudited pro forma condensed combined financial information
presented herein combines the results of operations of CUI Global for the years ended December 31, 2012 and 2011 with the results
of operations of Orbital for the years ended December 31, 2012 and 2011, utilizing Orbital&rsquo;s audited results of operations
for the years ended June 30, 2012 and 2011, prepared in accordance with U.K. GAAP and reconciled to U.S. GAAP, and Orbital&rsquo;s
interim period results for the six months ended December 31, 2012 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CUI Global has incurred, and will continue to incur,
certain non-recurring expenses in connection with the Orbital acquisition. These expenses are currently estimated to be less
than $100,000. In addition CUI Global estimates the fees and expenses of approximately $220,556 in connection with this
offering, excluding underwriter discounts and commissions. These estimated expenses are reflected in the unaudited pro forma condensed
combined balance sheet as of December 31, 2012 and 2011, as an adjustment to cash and equity, but are not reflected in the
unaudited pro forma condensed combined statements of operations for the years ended December 31, 2012 and 2011, as they are
not expected to have a continuing impact on operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Unaudited Pro Forma Condensed Combined
Balance Sheet</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">As of December 31, 2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">CUI Global, <BR> Inc.</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Orbital Gas<BR> Systems<BR> Limited (a)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Pro Forma<BR> Adjustments</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Pro Forma<BR> Consolidated (a)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Current assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; color: black; text-align: left; padding-left: 9pt">Cash and cash equivalents</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">3,039,840</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">9,172,956</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">8,166,644</TD><TD NOWRAP STYLE="width: 1%; color: black; text-align: center">b</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">20,379,440</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Trade receivables, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,965,926</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,388,744</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="color: black">(100,000</FONT></TD><TD NOWRAP STYLE="color: black; text-align: left">)c</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">8,254,670</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Inventory, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,843,905</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">873,892</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">5,717,797</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Prepaid expenses and other</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">378,885</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">378,885</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 0.25in">Total current assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,228,556</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,435,592</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">8,066,644</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">34,730,792</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Property, plant and equipment, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,016,219</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,170,900</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,187,119</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Other assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Investment - equity method</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">258,244</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">258,244</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Other intangible assets, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">8,618,524</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="color: black">5,000,000</FONT></TD><TD NOWRAP STYLE="color: black; text-align: center">d</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,518,524</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="color: black">(100,000</FONT></TD><TD NOWRAP STYLE="color: black; text-align: left">)k</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Deposits and other</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">11,360</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">11,360</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Notes receivable, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">501,422</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">501,422</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Debt offering costs, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">42,778</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">42,778</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 1pt; padding-left: 9pt">Goodwill</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">13,046,358</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right"><FONT STYLE="color: black">13,751,082</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">d</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">26,797,440</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total other assets</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">22,478,686</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">18,651,082</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">41,129,768</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in">Total assets</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">36,723,461</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">14,606,492</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">26,717,726</TD><TD NOWRAP STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">78,047,679</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Liabilities and stockholders' equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accounts payable</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">2,496,881</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">1,886,735</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="color: black"> (100,000</FONT></TD><TD NOWRAP STYLE="color: black; text-align: left">)c</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">4,283,616</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-left: 9pt">Line of credit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">459,448</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">459,448</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accrued expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,142,839</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">5,142,225</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,285,064</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accrued compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">186,636</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,537</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">201,173</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Unearned revenue</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">371,541</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">545,477</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">917,018</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 0.25in">Total current liabilities</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,657,345</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,588,974</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(100,000</TD><TD NOWRAP STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">12,146,319</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Long term note payable, related party, net of current portion due</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">7,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right"><FONT STYLE="color: black">(2,000,000</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">)e</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">5,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total long term liabilities</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">7,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(2,000,000</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">5,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 0.25in">Total liabilities</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">11,961,028</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,588,974</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,100,000</TD><TD NOWRAP STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,450,002</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Commitments and contingencies</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Total stockholders' equity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">24,762,433</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,017,518</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="color: black">35,935,244</FONT></TD><TD NOWRAP STYLE="color: black; text-align: center">f</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">60,597,677</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="color: black">(7,017,518</FONT></TD><TD NOWRAP STYLE="color: black; text-align: left">)g</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right"><FONT STYLE="color: black">(100,000</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">)k</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 0.25in">Total liabilities and stockholders' equity</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">36,723,461</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">14,606,492</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">26,717,726</TD><TD NOWRAP STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">78,047,679</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>See accompanying notes to unaudited pro
forma condensed combined financial information.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Unaudited Pro Forma Condensed Combined
Statement of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31, 2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">CUI Global, <BR> Inc.</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Orbital Gas<BR> Systems<BR> Limited</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Pro Forma<BR> Adjustments</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Pro Forma<BR> Consolidated</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Total revenue</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">41,084,589</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">23,017,544</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black"> (120,000</FONT></TD><TD NOWRAP STYLE="width: 1%; color: black; text-align: left">)h</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">63,981,573</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">(560</FONT></TD><TD NOWRAP STYLE="color: black; text-align: left">)i</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Cost of revenues</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">25,707,893</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">12,370,968</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">(120,000) h</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">37,958,861</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Gross profit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">15,376,696</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,646,576</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">26,022,712</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Operating expenses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Selling, general and administrative</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">16,221,373</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,659,995</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">(560</FONT></TD><TD NOWRAP STYLE="color: black; text-align: left">)i</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">22,930,808</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">50,000</FONT></TD><TD NOWRAP STYLE="color: black; text-align: center"> k</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Research and development</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">791,332</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">791,332</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Bad debt</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">65,763</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">65,763</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Impairment of intangible, trademark and trade name V-Infinity</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">278,428</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">278,428</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.35in">Total operating expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,356,896</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,659,995</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">49,440</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">24,066,331</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Income (loss) from continuing operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,980,200</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,986,581</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(49,440</TD><TD NOWRAP STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,956,381</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Other income (expense):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Other income</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">95,069</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">50,057</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">145,126</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Other expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(18,567</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(263</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">(18,830</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Earnings from equity investment</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">59,623</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">59,623</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Interest expense - amortization of debt offering costs and debt discount</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(73,333</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">(73,333</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Interest expense</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(575,199</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(9,715</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(584,914</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.35in; padding-bottom: 1pt">Total other income (expense), net</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="color: black; text-align: right; border-bottom: Black 1pt solid">(512,407</TD><TD STYLE="color: black; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="color: black; text-align: right; border-bottom: Black 1pt solid">40,079</TD><TD STYLE="color: black; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="color: black; text-align: right; border-bottom: Black 1pt solid">-</TD><TD NOWRAP STYLE="color: black; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="color: black; text-align: right; border-bottom: Black 1pt solid">(472,328</TD><TD STYLE="color: black; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Income (loss) from continuing operations before taxes</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,492,607</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,026,660</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(49,440</TD><TD NOWRAP STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,484,053</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Provision for taxes</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">33,714</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">938,940</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left"></TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">972,654</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Consolidated net income (loss)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(2,526,321</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">3,087,720</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(49,440</TD><TD NOWRAP STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">511,399</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-indent: -0.1in; padding-left: 0.1in">Earnings per share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-indent: -0.1in; padding-left: 16.2pt">Basic</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(0.25</TD><TD STYLE="color: black; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.03</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-indent: -0.1in; padding-left: 16.2pt">Diluted</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(0.25</TD><TD STYLE="color: black; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.03</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-indent: -0.1in; padding-left: 0.1in">Shares used to compute earnings per share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-indent: -0.1in; padding-left: 16.2pt">Basic</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,175,989</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,000,000</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,175,989</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-indent: -0.1in; padding-left: 16.2pt">Diluted</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,175,989</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,000,953</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,176,942</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>See accompanying notes to unaudited pro
forma condensed combined financial information.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I></I></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31, 2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">CUI Global, <BR> Inc.</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Orbital Gas<BR> Systems<BR> Limited</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Pro Forma<BR> Adjustments</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Pro Forma<BR> Consolidated</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; color: black; text-align: left">Total revenue</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">38,938,326</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">23,360,136</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">(26,637</TD><TD NOWRAP STYLE="width: 1%; color: black; text-align: left">)j</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">62,271,825</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 1pt">Cost of revenues</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">24,133,073</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">14,787,678</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">(22,000</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">)j</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">38,898,751</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Gross profit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,805,253</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">8,572,458</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(4,637</TD><TD NOWRAP STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">23,373,074</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Operating expenses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Selling, general and administrative</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,347,853</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,506,305</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">(4,637</FONT></TD><TD NOWRAP STYLE="color: black; text-align: left">)j</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">19,899,521</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">50,000</FONT></TD><TD NOWRAP STYLE="color: black; text-align: right">k</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Research and development</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">716,321</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">716,321</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Bad debt</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">82,192</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left"></TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">82,192</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 0.25in">Total operating expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,146,366</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,506,305</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">45,363</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">20,698,034</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Income from continuing operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">658,887</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,066,153</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(50,000</TD><TD NOWRAP STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,675,040</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Other income (expense):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Other income</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">53,657</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,316</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">70,973</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Other expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(38,678</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(949</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">(39,627</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Gain on sale of technology rights</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">143,636</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">143,636</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Earnings from equity investment</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">41,472</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">41,472</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Interest expense - amortization of debt offering costs and debt discount</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(334,747</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left"></TD><TD STYLE="color: black; text-align: right">(334,747</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Interest expense</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(918,189</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(2,613</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(920,802</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 0.25in; padding-bottom: 1pt">Total other income (expense), net</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="color: black; text-align: right; border-bottom: Black 1pt solid">(1,052,849</TD><TD STYLE="color: black; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="color: black; text-align: right; border-bottom: Black 1pt solid">13,754</TD><TD STYLE="color: black; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="color: black; text-align: right; border-bottom: Black 1pt solid">-</TD><TD NOWRAP STYLE="color: black; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="color: black; text-align: right; border-bottom: Black 1pt solid">(1,039,095</TD><TD STYLE="color: black; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Income (loss) from continuing operations before taxes</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(393,962</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,079,907</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(50,000</TD><TD NOWRAP STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,635,945</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Provision for taxes</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">29,810</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">320,445</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left"></TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">350,255</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Consolidated income (loss) from continuing operations</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(423,772</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">1,759,462</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(50,000</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">1,285,690</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Income (loss) from discontinued operations:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">(Loss) from discontinued operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(160,153</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(160,153</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Gain on divestment of Comex Electronics</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">603,034</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">603,034</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net income from discontinued operations</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">442,881</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">442,881</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Consolidated Net income</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">19,109</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">1,759,462</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(50,000</TD><TD NOWRAP STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">1,728,571</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Less: Net income from discontinued operations - noncontrolling interest</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">67,872</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">67,872</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Net income (loss) allocable to common stockholders</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(48,763</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">1,759,462</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(50,000</TD><TD NOWRAP STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">1,660,699</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Earnings per share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-left: 9pt">Basic</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(0.01</TD><TD STYLE="color: black; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.12</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-left: 9pt">Diluted</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">(0.01</TD><TD STYLE="color: black; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.12</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Shares used to compute earnings per share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-left: 9pt">Basic</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,249,180</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,000,000</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,249,180</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-left: 9pt">Diluted</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,249,180</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,017,951</TD><TD NOWRAP STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,267,131</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>See accompanying notes to unaudited pro
forma condensed combined financial information.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Notes to Unaudited Pro Forma Condensed Combined Financial
Information for CUI Global, Inc. and Orbital Gas Systems Limited</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 6pt"></TD><TD STYLE="width: 18pt"><B><I>1.</I></B></TD><TD><B><I>Description of Transaction</I></B></TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">On March 3, 2013, we agreed to acquire the Orbital Gas Systems
Limited business by purchasing its entire issued share capital for &pound;17 million, which based on the Wall Street Journal published
exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound sterling, is $25,768,600, subject to possible
closing adjustments and foreign currency fluctuations. The acquisition includes all of Orbital&rsquo;s operations, which are located
in the United Kingdom. We expect that this acquisition will be consummated in during the second quarter of 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 6pt"></TD><TD STYLE="width: 18pt"><B><I>2.</I></B></TD><TD><B><I>Basis of Presentation</I></B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">The unaudited pro forma condensed combined financial information has been
compiled from underlying audited financial statements of Orbital Gas Systems Limited prepared in accordance with U.K. GAAP and
reconciled to U.S. GAAP for the purpose of such presentation, and selected unaudited interim financial information of Orbital for
the six months ended December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">The unaudited pro forma condensed combined financial
information combine the historical consolidated statements of operations of CUI Global, Inc., giving effect to (a) the completion
of the Orbital acquisition, (b) the sale of 7,000,000 shares of our common stock in this offering at an assumed offering prices
of $5.51 per share, the last reported sale price of our common stock on the NASDAQ Capital Market on February 27,2013, less estimated
underwriting discounts and commissions and estimated offering expenses, and (c) the application of the proceeds from this offering,
in each case as if they occurred on January 1, 2011 for income statement purposes and December 31, 2012 for balance sheet purposes.
The unaudited pro forma condensed combined financial information should be read in conjunction with these notes to the unaudited pro forma
condensed combined financial information, the historical financial statements of CUI Global, Inc. and Orbital Gas Systems Limited
and &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations,&rdquo;
all of which are included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">The Orbital Gas Systems Limited acquisition will be
treated as a purchase by CUI Global, Inc., with CUI Global, Inc. acquiring the entity. The unaudited pro forma condensed combined
financial information will differ from our final acquisition accounting for a number of reasons, including the fact that our purchase
price allocation and estimates of fair value are preliminary and subject to change when our formal valuation and other studies
are finalized, fluctuation in foreign exchange rates impacting the agreed upon purchase price, and variation in the actual proceeds
and expenses associated with this offering. Additionally, changes in Orbital&rsquo;s working capital, including the results of
operations from December 31, 2012 through the date the acquisition is completed, will change the amount of goodwill. The differences
that will occur between the preliminary estimates and the final acquisition accounting could have a material impact on the accompanying
unaudited pro forma condensed combined financial information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">The unaudited pro forma condensed combined financial
information is presented for informational purposes only. It has been prepared in accordance with the regulations of the SEC and
is not necessarily indicative of what our financial position or results of operations actually would have been had we completed
the Orbital acquisition at the dates indicated, nor does it purport to project the future financial position or operating results
of the combined companies. The unaudited pro forma condensed combined statement of operations does not reflect any revenue or cost
savings from synergies that may be achieved with respect to the combined companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">The fiscal year of CUI Global, Inc. ends on December
31, and the fiscal year of Orbital Gas Systems Limited ends on June 30. The unaudited pro forma condensed combined financial information
presented herein combines the results of operations of CUI Global for the years ended December 31, 2012 and 2011 with the results
of operations of Orbital for the years ended December 31, 2012 and 2011, utilizing Orbital&rsquo;s audited results of operations
for the years ended June 30, 2012 and 2011 and Orbital&rsquo;s unaudited interim period results for the six months ended December
31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt"><FONT STYLE="color: black">For the unaudited pro forma
condensed combined balances, the purchase price of </FONT>&pound;17 million, which <FONT STYLE="color: black">based on the Wall
Street Journal published exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound sterling</FONT>,
is $25,768,600, <FONT STYLE="color: black">subject to possible closing adjustments and foreign currency fluctuations, has been
allocated to the fair values of assets and liabilities acquired as of December 31, 2012. The allocation of the purchase price is
preliminary, pending the completion of various analyses and the finalization of estimates. An appraisal will be performed to assist
management in determining the fair value of acquired assets and liabilities, including identifiable intangible assets, in order
to allocate the estimated $18,988,096 to goodwill and identifiable intangible assets. The final purchase price allocation may result
in a materially different allocation than that presented in this unaudited pro forma condensed combined financial information.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif; margin-left: 1.5in">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 82%; color: black; text-align: left">Cash and cash equivalents</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 15%; color: black; text-align: right">9,172,956</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Trade receivables</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,388,744</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Inventory</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">873,892</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Property, plant and equipment</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,170,900</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Intangible, technology</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">500,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Intangible, customer relationships</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,500,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Intangible, trademark and trade name</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,000,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Goodwill</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,751,082</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Assumed liabilities</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">7,588,974</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Purchase price</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">25,768,600</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt"><I>Identifiable intangible assets: </I>The intangible,
technology is expected to be treated as a finite lived asset based upon initial review of Orbital&rsquo;s business, with an estimated
10 year amortization life. Customer relationships are expected to be treated as a infinite lived asset based upon the initial
review of Orbital&rsquo;s customer history, thus they will not be amortized. Trademark and trade name intangibles will not be
amortized as they are deemed to have indefinite useful lives. Intangibles will be reviewed for impairment at least annually (more
frequently if certain indicators are present). In the event that management determines that the value of an intangible asset has
become impaired, an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made
will be recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt"><I>Goodwill:</I> Goodwill represents the excess of
the purchase price over the fair value of the underlying net tangible and intangible assets. Goodwill will not be amortized, but
instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event that
management determines that the value of goodwill has become impaired, an accounting charge for the amount of impairment during
the fiscal quarter in which the determination is made will be recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 24pt; text-align: left"><B><I>3.</I></B></TD><TD STYLE="text-align: justify"><B><I>Accounting
                                                                                           Principles</I></B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Upon completion of the acquisition, CUI Global will review
Orbital&rsquo;s accounting policies. As a result of that review it may become necessary to adjust the combined entity&rsquo;s
financial statements to conform to those accounting policies that are determined to be more appropriate for the combined entity.
The unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 6pt"></TD><TD STYLE="width: 18pt"><B><I>4.</I></B></TD><TD><B><I>Pro Forma Adjustments</I></B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">The following are the descriptions of the unaudited
pro forma condensed combined balance sheet and statement of operations adjustments:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(a)</TD><TD>The unaudited pro forma condensed combined balance sheet combines
                                                             the audited historical consolidated balance sheet of CUI Global as
                                                             of December 31, 2012 and the unaudited historical consolidated balance
                                                             sheet of Orbital as of December 31, 2012 and gives effect to the
                                                             acquisition as if it had been completed on December 31, 2012. CUI
                                                             Global&rsquo;s fiscal year end is December 31, and Orbital&rsquo;s
                                                             fiscal year end is June 30. Accordingly, the unaudited historical
                                                             results of Orbital for the year ended December 31, 2012, is derived
                                                             from the audited historical results for the year ended June 30, 2012
                                                             less the unaudited six months ended December 31, 2011 plus the unaudited
                                                             six months ended December 31, 2012. The unaudited pro forma condensed
                                                             combined statement of operations for the year ended December 31,
                                                             2012 combines the audited results of CUI Global for the fiscal year
                                                             ended December 31, 2012 and the unaudited results of Orbital for
                                                             the twelve months ended December 31, 2012 and gives effect to the
                                                             acquisition as if it had been completed on January 1, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt">Where applicable, the amounts in the following tables
related to the acquisition price are converted from British pound sterling to U.S. dollars based on the Wall Street Journal published
exchange rate on New York closing on February 27, 2013 of $1.5158 per British pound sterling. For converting the fiscal year statements
of operations amounts related to Orbital, the following average exchange rates published by Oanda Corporation: $1.5768 average
per British pound sterling for the six months January to June 2012, $1.5926 average per British pound sterling for the six months
July to December 2012, $1.6160 average per British pound sterling for the six months January to June 2011 and $1.5919 average
for the British pound sterling for the six months July to December 2011. The amounts included on the balance sheets related to
Orbital were converted, based on the following exchange rates published by Oanda Corporation, $1.6153 per British pound sterling
at December 31, 2012 and $1.5453 per British pound sterling at December 31, 2011.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(b)</TD><TD>Net change in cash relates to the estimated net proceeds from the offering of $35,935,244, assuming the sale of 7,000,000 shares
of our common stock in this offering at an assumed offering prices of $5.51 per share, the last reported sale price of our common
stock on the NASDAQ Capital Market on February 27, 2013, less estimated underwriting discounts and commissions and estimated offering
expenses, less the purchase price of Orbital of $25,768,600, less the $2,000,000 repayment of note payable.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(c)</TD><TD>Adjustment to remove intercompany trade receivable and accounts payable balances of $100,000 existing prior to acquisition.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(d)</TD><TD>Adjustment representing the allocation of the purchase price in excess of the tangible assets. The allocation of the purchase
price is preliminary pending the completion of various analyses and the finalization of estimates. An appraisal will be performed
to assist management in determining the fair value of acquired assets and liabilities, including identifiable intangible assets,
in order to allocate the estimated $18,751,082 to goodwill and identifiable intangible assets as follows: $500,000 to intangible,
technology, $1,500,000 to intangible, customer relationships, $3,000,000 to intangible, trademark and trade name, and $13,751,082
to goodwill. The final purchase price allocation may result in a materially different allocation that that presented in this unaudited
pro forma condensed combined financial information.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(e)</TD><TD>Adjustment representing the $2,000,000 repayment of long term note payable to be completed following the offering.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(f)</TD><TD>We intend to issue 7,000,000 shares of common stock in this offering to fund the purchase price of the Orbital Gas Systems
                                                             Limited acquisition, repay $2,000,000 of long term note payable and provide funds for ongoing operating and investing
                                                             activities. Net proceeds from this offering are anticipated to be $35,935,244, assuming the sale of all 7,000,000 shares of
                                                             our common stock in this offering at an assumed offering price of $5.51 per share, the last reported sale price of our common
                                                             stock on the NASDAQ Capital Market on February 27, 2013, including estimated underwriting discounts and commissions and
                                                             estimated offering expenses.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(g)</TD><TD>Elimination of historical Orbital Gas Systems Limited balances related to equity.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(h)</TD><TD>Entry to eliminate sales and related cost of revenues activity between CUI and Orbital of $120,000.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(i)</TD><TD>Entry to eliminate sales and related selling, general and administrative expense activity between CUI and Orbital of $560.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(j)</TD><TD>Entry to eliminate sales of $26,637, cost of revenues of $22,000, and selling, general and administrative expense of $4,637
activities between CUI and Orbital.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(k)</TD><TD>Entry to recognize the estimated amortization for each of the presented periods assuming amortization of the intangible, technology
over the estimated 10 year life.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Important Note about Forward-Looking Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following discussion and analysis <FONT STYLE="text-underline-style: none; color: windowtext">of
our financial condition and results of operations </FONT>should be read in conjunction with <FONT STYLE="text-underline-style: none; color: windowtext">the
section titled &quot;Selected Financial Data&quot; and </FONT>our <FONT STYLE="color: windowtext">audited </FONT>financial statements
<FONT STYLE="text-underline-style: none; color: windowtext">and related notes appearing</FONT> elsewhere in this <FONT STYLE="text-underline-style: none; color: windowtext">prospectus.</FONT>
Our actual results could differ materially from those anticipated <FONT STYLE="text-underline-style: none; color: windowtext">in
the forward-looking statements included in this discussion as a result of certain factors, including, but not limited to, those
discussed in &quot;Risk Factors&quot; and &quot;Special Note Regarding Forward-Looking Statements&quot; included elsewhere in this
prospectus</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Financial Impact of the Orbital Gas Systems Limited Acquisition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Orbital Gas Systems Limited acquisition will be accounted
for as a purchase. As a result, the excess of the purchase price over net assets acquired and liabilities assumed is recorded as
goodwill. Purchase price allocated to property, including inventory, equipment, trade names and other identifiable intangible assets
acquired, will result in an increase in the cost of sales and depreciation and amortization expense with respect to Orbital Gas
Systems Limited following the consummation of the Orbital Gas Systems Limited acquisition. The amount of depreciation and amortization
will be based on the amount of the purchase price allocated and the estimated useful lives of the respective assets. See &quot;Unaudited
Pro Forma Condensed Combined Financial Information.&quot;<FONT STYLE="text-underline-style: none; color: windowtext"> </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We also expect to incur certain non-recurring expenses in connection
with the consummation of the Orbital acquisition, including this offering. We currently estimate these expenses to be approximately
$100,000. Although we do not have any cost savings initiatives planned in connection with the acquisition, we may opportunistically
take actions from time to time that will result in material cost or operating synergies as a result of acquiring Orbital. In turn,
we may also incur corresponding restructuring and other non-recurring charges that would impact net income in the periods in which
they are taken. No assurances can be given as to timing or that we will be able to achieve any cost or operating synergies as a
result of the acquisition, or that the corresponding restructuring and other non-recurring charges will not be greater than expected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 42.85pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe the Orbital acquisition will significantly increase
our presence in the natural gas industry. Pro forma for the year ended 2012, 64% of our net sales would have been from our CUI
Power Supply Units, Electronic Components, and Test and Measurement product lines, excluding Vergence GasPT2 revenues, and 36%
of our net sales would have been from Orbital&rsquo;s systems integration related revenues, including the Vergence GasPT2. Pro
forma for the year ended 2011, 63% of our net sales would have been from our CUI Power Supply Units, Electronic Components, and
Test and Measurement product lines, excluding Vergence GasPT2 revenues, and 37% of our net sales would have been from Orbital&rsquo;s
systems integration related revenues, including the Vergence GasPT2. With the addition of Orbital, we expect our Adjusted EBITDA
and net income to improve. Our pro forma Adjusted EBITDA for the years ended December 31, 2012 and 2011 would have been $4,567,140
and $4,454,657. This in turn, is expected to also increase our net income and earnings per share. We expect to invest in Orbital
to maintain the current infrastructure and to increase capacity to meet the demand of existing and new customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Overview</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CUI Global, Inc. is dedicated to maximizing shareholder value
through the acquisition, development and commercialization of innovative companies and technologies.&nbsp;&nbsp;From its GasPT2
platform targeting the energy sector, to its subsidiary CUI, Inc.'s digital power platform targeting the networking and telecommunications
industries, CUI Global has built a diversified portfolio of industry leading technologies that touch many markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In May 2008, CUI Global formed a wholly owned subsidiary that
acquired the assets of CUI, Inc., a technology company dedicated to the development, commercialization and distribution of new,
innovative electro-mechanical products. Over the past 20 years, CUI has become a recognized name in electronic components worldwide
in the areas of power, interconnect, motion control, and sound.&nbsp;&nbsp;In that time, the Company has been able to leverage
many long-standing relationships in Asia to create a flexible, responsive business model that ultimately benefits CUI customers.&nbsp;&nbsp;Today,
the Company believes its technology platforms, including Novum Advanced Power, Solus Power Topology and AMT Capacitive Encoders,
will position CUI, Inc. to be a global leader in the fields of power electronics and motion control.&nbsp;&nbsp;Through the acquisition
of CUI, Inc., the Company obtained 352,589 common shares of Test Products International, Inc. (&ldquo;TPI&rdquo;), a provider of
handheld test and measurement equipment, representing an 11.54% interest in TPI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. As of December 31, 2012, the Comex Electronics
note receivable was current in accordance with the agreed terms. The operations of CUI Japan are not affected by this divestment.
As such, the operations of Comex Electronics are reported as discontinued operations for the current and comparable periods. CUI
Global will continue to maintain its 100% ownership of CUI Japan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the years ended December 31, 2012 and 2011, the Company
has identified a single operating segment based on the activities of the Company in accordance with the ASC 280-10-50-1 for which
the operating results are regularly reviewed by the Company&rsquo;s chief operating decision makers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Critical Accounting Policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that have a
significant impact on the results the Company will report in the Company's financial statements. Some of the Company's accounting
policies require the Company to make difficult and subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. Actual results may differ from these estimates under different assumptions or conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Long-Lived Assets</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Long-lived assets and certain identifiable assets related to
those assets are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication
that the carrying amounts may not be recoverable. In performing the review for recoverability, the future cash flows expected to
result from the use of the asset and its eventual disposition are estimated. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized as the excess of
the carrying amount over the fair value. Otherwise, an impairment loss is not recognized. Management estimates the fair value and
the estimated future cash flows expected. Any changes in these estimates could impact whether there was impairment and the amount
of the impairment. There were $278,428 and $0 of impairment expenses recorded by the Company in 2012 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Stock-Based Compensation</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for stock based compensation using FASB
Accounting Standards Codification No. 718 (&ldquo;FASB ASC 718&rdquo;), &ldquo;Compensation &ndash; Stock Compensation.&rdquo;
FASB ASC No. 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense
over the related vesting period. The statement also requires the recognition of compensation expense for the fair value of any
unvested stock option awards outstanding at the date of adoption. Employee stock compensation is recorded at fair value using the
Black Scholes Pricing Model. The underlying assumptions used in the Black Scholes Pricing Model by the Company are taken from publicly
available sources, including: volatility is calculated using historic stock price information from online finance websites such
as Google Finance and Yahoo Finance; the stock price on the date of grant is obtained from online finance websites such as those
previously noted; appropriate discount rates are obtained from the United States Federal Reserve economic research and data website;
and other inputs are determined based on previous experience and related estimates. See Note 13 of Notes to Consolidated Financial
Statements, Stock-Based Employee Compensation for additional disclosure and discussion of the employee stock plan and activity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Common stock, stock options and common stock warrants issued
to other than employees or directors are recorded on the basis of their fair value, as required by FASB ASC 505, which is measured
as of the date required by FASB ASC 505, &ldquo;Equity &ndash; Based Payments to Non-Employees.&rdquo; In accordance with FASB
ASC 505, the stock options or common stock warrants are valued using the Black-Scholes option pricing model on the basis of the
market price of the underlying common stock on the &ldquo;valuation date,&rdquo; which for options and warrants related to contracts
that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting
date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which
services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed
under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the end of the
period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected
in the expense recorded in the subsequent period in which that change occurs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Revenue Recognition</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The recognition of the Company&rsquo;s revenues requires judgment,
including whether a sale includes multiple elements and, if so, whether vendor-specific objective evidence (VSOE) of fair value
exists for those elements. Customers may receive certain elements of our products over a period of time. These elements could include
licensing rights to manufacture and sell our proprietary patent protected products. The ability to identify VSOE for those elements
and the fair value of the respective elements could materially impact the amount of earned and unearned revenue. The Company does
not have any history as to the costs expected to be incurred in granting licensing rights relating to its products. Therefore,
revenues may be recorded that are not in proportion to the costs expected to be incurred in performing these services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>General</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company's cash and cash equivalents balance at December
31, 2012 <FONT STYLE="text-underline-style: none; color: windowtext">was</FONT> $3,039,840. During the <FONT STYLE="text-underline-style: none; color: windowtext">years</FONT>
ended December 31, <FONT STYLE="text-underline-style: none; color: windowtext">2012 and December 31, 2011,</FONT> operations and
investment activities have been funded through cash from operations, proceeds from sales of equity and warrant exercises, and borrowings
from financial institutions. <FONT STYLE="text-underline-style: none; color: windowtext">Historically, the Company has not generated
sufficient revenues from operations to self-fund its capital and operating requirements. Following the equity raises closed in
2012 and subsequent reductions of debt coupled with the continued improvement in the Company's operations, management believes
the Company has sufficient resources and that it is generating significant revenues that it expects will provide the Company with
the ability to self-fund its capital and operating requirements. If that is not possible, the Company will seek additional working
capital from funding that will primarily include equity and debt placements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Cash from Operations</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">Operating activities generated negative
cash flow of $1,803,659 during the year ended December 31, 2012 as compared with positive cash flow of $860,705 during the prior
year ended. This decrease is primarily the result of a larger net loss attributable to CUI Global, Inc. in 2012 of $</FONT>2,526,321<FONT STYLE="color: black">
which included increased sales related travel for CUI, Inc. to manage third party sales representatives, reach new customers, maintain
existing customers, and promote new product lines including Novum and Solus, professional fees expenses related to engineering
support, testing fees and travel expenses related to the Vergence GasPT2 product as the Company increased the Vergence GasPT2 exposure
to customers in North America, parts of Europe and elsewhere, increased expenses associated with being a public company, such as
filing services and fees, professional fees, and listing fees among others, increased advertising costs for company products, increased
commissions to third party sales representatives related to the increase in sales, increased expenses associated with the growth
in operations at CUI Japan, operating costs associated with the newer technologies Novum and Solus and the overall growth of the
business in relation to revenues. Additional factors impacting the cash from operations include increases in trade accounts receivable,
inventory, accounts payable and unearned revenue of $1,337,048, $1,290,794, $382,852, and $300,786, respectively, and decreases
in prepaid expenses and other current assets of $280,917. The increase in trade accounts receivable is largely attributed to the
increased revenues in the fourth quarter of 2012, $11,890,762, as compared to $8,790,698 during the same period in 2011. The increase
in inventory is primarily related to the inventory on hand associated with the increased back log of customer orders at December
31, 2012 of $14,149,352 as compared with $9,244,748 at December 31, 2011 and increased inventory of GasPT2 units on hand at year
end to prevent potential shortages in 2013 associated with manufacturing and calibration lead times. The increase in accounts payable
is associated with the increase in inventory levels and fourth quarter activity during 2012 as well as timing in relation to payment
terms with vendors. The increase in unearned revenue is related to an increase in the accrual for potential returns from customers
and deposits received from customers for orders that have not been fulfilled as of December 31, 2012. The decrease in prepaid expenses
and other current assets is primarily related to decreases in prepayments for inventory purchases as compared to the prior year,
which will vary based on the products purchased and the vendors utilized. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012 and 2011, the Company used stock and warrants as
a form of payment to certain vendors, consultants and employees. For 2012 and 2011, respectively, the Company recorded a total
of $1,190,081 and $227,867 for compensation and services expense including amortization of deferred compensation related to equity
given, or to be given, to employees and consultants for services provided. The large increase in 2012 is attributable to increased
stock compensation issued for stock issued to consultants for strategic investor marketing services, employee stock compensation
and options expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012, CUI Global recorded two significant non-cash entries
- $73,333 of non-cash interest expense, including amortization of debt offering costs and $278,428 for the impairment of intangible,
trademark and trade name V-Infinity. The intangible, trademark and trade name V-Infinity was determined to have a finite life and
an impaired value during 2012. As a result of this evaluation and the impairment, management determined the trademark and trade
name, V-Infinity, no longer has an indefinite life and will, instead, be amortized over the estimated remaining useful life of
5 years. During 2011, the Company recorded one significant non-cash entry - $334,747 of non-cash interest expense, including amortization
of debt offering costs. The decrease in the non-cash interest expense, including amortization of debt offering costs is the result
of the completion in mid-year 2011 of the amortization of the beneficial interest associated with debts from the CUI, Inc. acquisition
offset by an increase in the amortization of debt issuance costs associated with the Wells Fargo debts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012 the Company had no cash flows from discontinued
operating activities whereas in 2011, the Company had positive cash flow from discontinued operations of $22,141.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As the Company continues to focus on technology development
and product line additions during 2013, it will continue to fund research and development together with related sales and marketing
efforts for its technology platforms including the Vergence GasPT2, Novum Advanced Power, Solus Power Topology, AMT Capacitive
Encoders and its other electromechanical products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Capital Expenditures and Investments </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the years ended 2012 and 2011, the Company invested $685,269
and $422,970, respectively, in fixed assets.&nbsp;&nbsp;Among the larger investments in fixed assets were additions to equipment
and software for engineering and research and development, tooling for manufacturing, and regular computer equipment and software
upgrades for office personnel.<FONT STYLE="color: red"> </FONT>The Company anticipates further investment in fixed assets during
2013 in support of its on-going business and continued development of product lines and technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company invested $0 and $6,646, respectively, in patent
costs during 2012 and 2011.&nbsp;&nbsp;The Company expects its investment in patent costs will continue throughout 2013 as it invests
in patents to protect the rights to use its product and technology developments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company invested $80,343 and $37,418, respectively in other
intangible assets during 2012 and 2011.&nbsp;&nbsp;The 2012 investments were related to the new CUI Inc. website. The 2011 investments
were related to the new CUI Global and CUI Japan websites. The Company&rsquo;s websites are utilized to communicate with our investors,
customers, vendors and other stakeholders.<FONT STYLE="color: red"> </FONT>The Company expects its investment in other intangible
assets may continue throughout 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012 and 2011, CUI Global had proceeds from notes receivable
of $46,808 and $63,506, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Also during 2012 and 2011, the Company received proceeds of
$0 and $425,000, respectively, from the sale of technology rights. The 2011 proceeds of $425,000 were in relation to the sale of
our WayCool and WayFast patent portfolio to Olantra Fund X LLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were no cash flows in 2012 associated with discontinued
investing activities. For the year ended December 31, 2011, there was $195,278 provided by discontinued investing activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Financing activities </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012, the Company received proceeds of $13,532,285 from
the sales of common stock, net of offering costs and from the exercise of warrants, $1,069,452 of payments were made against the
demand notes payable, $4,000,000 of payments were made against the term note with the Business Credit division of Wells Fargo Capital
Finance, Wells Fargo Bank, N.A., $3,000,000 was paid against the principal balance of the IED related party note payable associated
with the acquisition of CUI Inc., and $35,000 was utilized to repay a related party convertible note payable owed to an officer
of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Included in these equity financing transactions were the
following items, discussed in greater detail in  Note <FONT STYLE="text-underline-style: none; color: windowtext">8 of Notes
to Consolidated Financial Statements, Stockholders&rsquo; Equity included elsewhere in this
prospectus</FONT>:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>During February 2012, the issued and outstanding shares of the Company&rsquo;s common stock, $0.001 par value, were reverse
split at a ratio of one for thirty (1:30) as a part of our plan to up-list our common stock on to the NASDAQ Stock Market.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>During February 2012 our Form S-1 registration statement became effective that allowed us to sell 2,222,222 shares of common
stock to our underwriter. We received $8,913,302 in net proceeds from this sale after related costs for this transaction.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our Form S-1 registration statement included 333,333 shares of common stock that were sold in March 2012 to our underwriter
pursuant to the over-allotment provision of our underwriting contract. We received $1,387,499 in net proceeds from this sale after
related costs for this transaction.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Also in March 2012, pursuant to stock purchase agreement, we sold to seven investors a total of 570,000 shares of common stock
at $4.50 per share. We received $2,253,008 in net proceeds from this sale after related costs for this transaction.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; color: #161616"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>During March 2012, a warrant holder exercised 10,071 warrants he previously received in relation to a note provided to the
Company which has since been paid in full. The Company received $3,021 from this transaction.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>During June and July 2012, we sold 234,332 shares of common stock to nine investors at $4.50 per share pursuant to stock purchase
agreements with net proceeds of $975,455 after related costs for this transaction.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="color: #161616">During 2011, $50,000 of proceeds was received from the exercise of warrants and options. </FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; color: #161616"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>In February 2011, two former employees exercised options for 269 shares of common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; color: #161616"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>In April 2011, a director exercised a warrant for 23,333 shares of common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; color: #161616"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>In May 2011, an owner of 10% of the voting rights attached to outstanding shares exercised a warrant for 133,333 shares of
common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; color: #161616"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Also in May 2011, an investor exercised a warrant for 10,000 shares of common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; color: #161616"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>CUI Global may raise additional capital needed to fund the further development and marketing of its products as well as payment
of its debt obligations.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Financing activities &ndash; related party activity</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012, a short term convertible loan from July 2011 of
$35,000, with interest accrued at 6% per annum, convertible at $5.10 per common share, was repaid to a CUI Global officer. There
was no beneficial conversion on the convertible note as the conversion price was equal to the fair value on the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to a September 1, 2010 agreement with the holder of
the $14,000,000 promissory note, IED, Inc., the Company paid $492,508 of the principal balance during the first quarter of 2011.
The revised terms set the interest rate at 6% per annum with monthly interest payments and a May 15, 2018 balloon payment. Please
see Note 9 of Notes to Consolidated Financial Statements, Related Party Transactions and Note 5 of Notes to Consolidated Financial
Statements, Notes Payable, Related Parties, <FONT STYLE="text-underline-style: none; color: windowtext">included in our audited
financial statements elsewhere in this prospectus</FONT> for further discussion of this transaction. During 2012 and 2011, $3,468,221
and $1,110,809, respectively, in principal and interest payments were made in relation to the promissory notes issued to related
party, IED, Inc. The 2012 payment utilized $3,000,000 from the equity sale proceeds for the repayment of principal. The 2011 payment
included a note receivable balance of $192,508 held by CUI Global that was conveyed to IED, Inc. and applied towards the promissory
note balance in accordance with a settlement agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Recap of liquidity and capital resources</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012, the Company continued to improve its financial
strength with the equity raise in early 2012 and the significant reductions in debt, combined with the continued growth of revenues.
As a result of the financing activities completed in 2012, management believes the Company has sufficient resources and is generating
sufficient revenues to fund operations and meet its short term working capital requirements for the next twelve months.&nbsp;&nbsp;As
of December 31, 2012 the Company had an accumulated deficit of $76,171,822. <FONT STYLE="color: black">As of December 31, 2012,
the Company had cash and cash equivalents of $3,039,840 and an unused availability under the asset based line of credit of $3,119,857
(available borrowing capacity of $3,579,305 less outstanding borrowings of $459,448).</FONT> The Company may seek to raise additional
capital for the continued development and commercialization of its various technology product lines, as well as to retire debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2012 CUI, Inc. maintained a revolving working
capital line of credit with the Business Credit division of Wells Fargo Capital Finance, part of Wells Fargo Bank, National Association
(NYSE:&nbsp;WFC), granting borrowings of up to $4,000,000 with interest payable monthly at the Daily Three Month LIBOR plus 3.25%
(3.56% at December 31, 2012). At December 31, 2012, there was an outstanding balance of $459,448 on this line of credit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company expects revenues to help cover the operating and
other expenses.&nbsp;&nbsp;If revenues and cash on hand are not sufficient to cover all operating and other expenses, additional
funding may be required.&nbsp;&nbsp;There is no assurance the Company will be able to raise such additional capital.&nbsp;&nbsp;Any
failure to generate product sales in the expected time frame or to raise additional capital, if needed, will have a material adverse
effect on the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Off-Balance Sheet Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2012 the Company had no off-balance sheet
arrangements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying financial statements reflect the operations
of the Company for the fiscal years ended December 31, 2012 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Revenue</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended 2012, revenue was $41,084,589 and $38,938,326
for 2011. The growth in 2012 from 2011 is primarily due to management&rsquo;s decision to continue to push smaller sales through
the distribution sales channel and focus on larger value direct sales through CUI, Inc. as well as the continued expansion of CUI&rsquo;s
product offering and further penetration in the Japanese market through CUI Japan. This change resulted in a 4.7% decrease in the
total number of customer sales orders processed,<FONT STYLE="color: red"> </FONT>while total revenue increased $2,146,263, or 5.5%
for the year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company introduced 207 new products during the year ended
2012. The continued product expansion and moving smaller sales through the distribution channel is expected to continue to result
in revenue growth in future periods as CUI&rsquo;s sales group and support staff continues to reach new customers, further expand
relationships with existing customers and while the Company introduces new products in efforts to have CUI products designed into
new projects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenue for the year ended December 31, 2012 is comprised of
$39,802,620 from CUI products, $1,228,430 from CUI Japan products and $53,539 from freight. The revenue for the year ended December
31, 2011 is comprised of $38,366,403 from CUI products, $511,295 from CUI Japan products and $60,628 for freight.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: #161616">During 2012, 59% of revenues were
derived from five customers at 47%, 4%, 3%, 3% and 2%. During 2011, 55% of revenues were derived from six customers at 41%, 4%,
3%, 3%, 2% and 2%. </FONT>The Company&rsquo;s major product lines in 2012 and 2011 were external power, internal power and industrial
controls.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Cost of revenue</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Cost of revenue for the year ended December 31, 2012 and 2011
was $25,707,893 and $24,133,073, respectively.&nbsp;&nbsp;The significant increase during 2012 compared to the prior year is primarily
the result of the overall growth in sales. As a percentage of sales, the cost of revenue remained relatively consistent at 62.5%
for 2012 compared with 62.0% in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Selling, General and Administrative Expenses</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Selling, General and Administrative (SG&amp;A) expenses include
such items as wages, consulting, general office expenses, business promotion expenses and public company costs, including legal
and accounting fees, insurance and investor relations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">SG&amp;A expenses increased to $16,221,373 for the year ended
December 31, 2012 from $13,347,853 for the same period during 2011.&nbsp;&nbsp;This increase of $2,873,520 is primarily the result
of an increase of $616,695 of stock compensation expense for issuances to consultants related to strategic investor marketing services,
an increase of $400,290 for public relations related expenses including travel, supplies, conferences, meetings and cash expenses
for strategic investor marketing services, $371,574 increase in sales related travel for CUI, Inc. related sales activity to manage
third party sales representatives, reach new customers, maintain existing customers, and promote new product lines including Novum
and Solus, $298,600 of stock compensation expenses for issuances to officers and employees as bonuses for achieving corporate goals,
$242,352 increase in expenses associated with professional fees related to engineering support, testing fees and travel expenses
related to the Vergence GasPT2 product as the Company increased the Vergence GasPT2 exposure to customers in North America, parts
of Europe and elsewhere, $177,039 increase in depreciation and amortization associated with investments in capital assets as well
as the amortization of the intangible, trademark and trade name V-Infinity which began in 2012, an increase of $130,206 in costs
associated with being a public company such as filing services and fees, professional fees, and listing fees among others, increase
in costs associated with an increase in advertising costs for Company products of $34,666, increased commissions to third party
sales representatives related to the increase in sales, growth in operations at CUI Japan associated with the increase revenues,
operating costs associated with the newer technologies Novum and Solus and the overall growth of the business in relation to revenues.&nbsp;&nbsp;The
total dollar amount of SG&amp;A as a percentage of total revenue increased to 39.5% for 2012 as compared to 34.3% in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company anticipates the amount of its sales and marketing
expenditures and general and administrative expenses will further increase in 2013 as the Company continues to grow its revenues,
launches its second distributor for the CUI, Inc. product lines during 2013, continues to work to penetrate the market with its
newer product lines including Vergence, Novum and Solus as well as seeks to continue to further its technology offerings. However,
management expects the SG&amp;A as a percentage of total revenue to decrease in 2013 as the Company continues to increase total
revenue, particularly as the Vergence GasPT2 product line gains traction in the market place in conjunction with reductions in
stock compensation expenses for issuances to consultants in 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Research and Development</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The research and development costs are related to the various
technologies for which CUI Global has acquired licensing rights or is developing internally.&nbsp;&nbsp;The expenditures for research
and development have been directed primarily towards the further development of Novum Advanced Power technologies including digital
POLs and the Solus Topology, AMT Capacitive Encoders and towards the development of the Vergence GasPT2. Research and development
costs were $791,332 and $716,321 for the year ended December 31, 2012 and 2011, respectively. The Company expects that 2013 research
and development expenses will be consistent with 2012 as the Company continues to expand its product offering and technologies
due to market acceptance and customer integration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Impairment Loss</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.&nbsp;&nbsp;In
performing the review for recoverability, the future cash flows expected to result from the use of the asset and its eventual disposition
are estimated.&nbsp;&nbsp;If the sum of the expected future cash flows (undiscounted and without interest charges) is less than
the carrying amount of the asset, an impairment loss is recognized as the excess of the carrying amount over the fair value.&nbsp;&nbsp;Otherwise,
an impairment loss is not recognized.&nbsp;&nbsp;Management estimates the fair value and the estimated future cash flows expected.&nbsp;&nbsp;Any
changes in these estimates could impact whether there was impairment and the amount of the impairment.&nbsp;&nbsp;There were $278,428
and $0 of impairment expenses recorded by the Company in 2012 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Bad Debt</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Bad debt expense decreased to $65,763 for the year ended December
31, 2012 from $82,192 for the same period ended 2011.&nbsp;&nbsp;The bad debt expense for both 2012 and 2011 represents less than
1/2% of total revenues. The bad debt expense for both periods relates to miscellaneous receivables which the Company has either
recorded an allowance for doubtful collections of the receivable or for which the Company has determined the balance to be uncollectible.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Other Income</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the years ended 2012 and 2011, the Company had other
income of $95,069 and $53,657, respectively. Other income for the year ended December 31, 2012, consisted of $49,475 of foreign
exchange gain, $30,620 of interest income, $12,000 of rental income, $2,636 of other income and of $338 in bad debt recoveries.
Other income for the year ended December 31, 2011, consisted of $18,688 in bad debt recoveries, $17,592 for interest income, $15,103
of foreign exchange gain and $2,274 in other income.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Investment Income</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company recognized investment income on equity investment
in an affiliate of $59,623 for the year ended December 31, 2012 as compared with $41,472 for the same period ended 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Financing Fees</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012, the Company incurred financing fees associated
with the equity raises of $1,590,259. These fees were offset against Additional Paid in Capital in relation to the equity proceeds.
During 2011, the Company did not incur financing fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Non-cash interest expense, amortization of beneficial
conversion value, amortization of debt offering costs, warrant related debt discounts debt and amortization of warrant related
debt discount</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company recorded an expense of $73,333 and $334,747 during
2012 and 2011, respectively, for non-cash interest expenses, including amortization of debt offering costs.&nbsp;&nbsp;The decrease
in this expense is primarily associated with the completion in 2011 of the amortization of the discounts on debt related to the
CUI Inc. acquisition in 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Interest Expense</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company incurred $575,199 and $918,189 of interest expense
during 2012 and 2011, respectively.&nbsp;&nbsp;Interest expense is for interest on the secured and unsecured convertible notes,
secured and unsecured promissory notes, and bank working capital loans and term loans. The Company was able to reduce debts during
2012 through utilizing the proceeds from the sales of equity to repay the $4,000,000 term note with Wells Fargo, $3,000,000 towards
the IED, Inc. note payable, $35,000 on the related party convertible note payable, and reduce the demand notes payable on the Wells
Fargo Line of Credit by $1,069,452 which all contributed to the decrease in interest expenses for the year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Income (loss) from Discontinued Operations</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December 31, 2012, there was no activity
related to discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2011, CUI Global recognized a loss from the discontinued
operations of Comex Electronics of $160,153, a gain on the divestment of Comex Electronics of $603,034 in discontinued operations,
and a net income from discontinued operations of $442,881.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Consolidated Net Loss</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company had a net loss of $2,526,321 for the year ended
December 31, 2012 as compared to a net profit of $19,109 for the year ended December 31, 2011.&nbsp;&nbsp;The decrease is primarily
the result of the following items discussed in the above sections: an increase in total revenues of $2,146,263, an increase in
cost of revenues of $1,574,820, an increase in selling, general and administrative expenses of $2,873,520, no gain on the sale
of technology rights in 2012 as compared to a gain of $143,636 in 2011, a decrease in amortization of debt offering costs, a decrease
in interest expense of $261,414, decreased interest expense of $342,990 and the full year in 2012 without the losses incurred in
relation to the operations of Comex Electronics divested in 2011 or the associated gain on the divestment of $603,034.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Recent Accounting Pronouncements</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In June, 2011, the FASB issued Accounting Standards Update (&ldquo;ASU&rdquo;)
No. 2011-05, which amends ASC Topic 220, Comprehensive Income. Under the amendment, an entity has the option to present the total
of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present
each component of net income along with total net income, each component of other comprehensive income along with a total for other
comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of
other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change
the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified
to net income. The amendments in this ASU have been applied retrospectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, FASB issued ASU 2011-11, Balance Sheet - Disclosures
about Offsetting Assets and Liabilities&rdquo; to enhance disclosure requirements relating to the offsetting of assets and liabilities
on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net
or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting
arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods
beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the adoption of this standard
did not have a material impact on our results of operations, cash flows or financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In July 2012, the FASB issued updated guidance on the periodic
testing of indefinite-lived intangible assets, other than goodwill, for impairment. This updated guidance will allow companies
the option to first assess qualitative factors to determine if it is more-likely-than-not that an indefinite-lived intangible asset
might be impaired and whether it is necessary to perform the quantitative impairment test required under current accounting standards.
This guidance is applicable for reporting periods beginning after September 15, 2012. This updated guidance did not have a material
impact on our results of operations, cash flows or financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>WHO WE ARE</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a specialized provider of power management and other
electromechanical components for electronic devices and equipment. We offer both standardized products and customized solutions
to our customer base, which includes a number of well-known industrial and technology companies. Our product portfolio is extensive,
and we are dedicated to, and focused on growing it further by acquiring, developing, and commercializing innovative electronic
technologies and products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have more than 24 years of experience in the electronics
industry. We use that experience to identify and acquire or license forward-looking, market-ready technologies. Small product engineering
firms, individual entrepreneurs, and a variety of other sources comprise our potential pool of acquisition targets and technology
licensing partners. These entities often possess exciting technologies, but lack the necessary manufacturing, distribution, and
financial resources to commercialize their ideas. We possess these capabilities and can serve as a value-added partner in commercialization,
developing supplier-customer relationships, and providing liquidity to the technology owner. We believe we have a track record
of acquiring, or licensing, and then commercializing advanced, market-ready technologies due to our management team&rsquo;s history
of doing so, as well as to the marketing, sales, research and development and engineering resources that we are willing to dedicate
to commercializing new products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">After we identify potential market-ready technologies, we put
considerable effort into our due diligence process to verify that demand for the technology exists, that the technology will have
synergies with our diverse product portfolio, and that the technology will achieve its intended design capabilities when integrated
into our customers&rsquo; products. If we are successful in completing an acquisition, we assign a team of engineers, market specialists,
and sales executives to implement our commercialization strategy. Our &ldquo;end-to-end&rdquo; strategy incorporates branding;
conducting market and product surveys to determine demand, the potential customer base, and the target geographic and end markets;
and identifying appropriate commercialization partners. We utilize contract manufacturers located in mainland China, Japan, South
Korea, Taiwan, and the United Kingdom for production.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our current platform is focused on three primary market segments:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>Power Supply Units.</I></B> Our power supply units
                                                                                                               products include our embedded and external industrial power supplies, as well as our Novum Advanced Power and Solus Power
                                                                                                               Topology brands. Novum products, which consist of digital power modules, offer customers in the networking and
                                                                                                               telecommunications industries cost-saving programmable power chips. Solus products enhance the Novum line capabilities by
                                                                                                               providing a more efficient power supply source that is scalable to serve numerous customer needs. Our internal and external
                                                                                                               power products and related component sales accounted for approximately 88% of our revenues during our fiscal year ended
                                                                                                               December 31, 2012;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>Electronic Components.</I></B> Our electronic components products
include a variety of proprietary motion control devices. We focus on the original equipment manufacturer (&ldquo;OEM&rdquo;) market
and attempt to provide higher levels of support, customer service and a constantly expanding product line in order to further differentiate
ourselves from our competitors; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><I>Test and Measurement.</I></B> Our test and measurement products
include probes and other test devices, as well as our inferential gas metering technology, the GasPT2 device, which we have branded
under the name Vergence. </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conduct our operations globally, and as of December 31, 2012
we had sixty-two full-time and seven part-time employees located in the United States and Japan. We utilize a hybrid marketing
strategy that incorporates both direct and third-party sales channels. Our customer base is diverse and consists of smaller customers,
a broad group of OEM customers and several industrial technology conglomerates. Further, we have a significant customer and channel
partner relationship with Digi-Key Corporation (&ldquo;Digi-Key&rdquo;), an authorized distributor of electronic components for
more than 550 industry suppliers. As a percentage of our total gross revenues, sales to Digi-Key were approximately 47% and 41%
as of December 31, 2012 and December 31, 2011, respectively. Digi-Key sells our product to thousands of customers globally.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>OUR MARKETS AND OUR OPPORTUNITY</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Power Supply Units</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We offer a portfolio of both commoditized and emerging power
supply units for networking and telecommunications related applications. The market for our products evolves in response to technological
innovations and corresponding changes in our customers&rsquo; requirements for their product offerings. These changes occur rapidly.
Thus, although our historic business was a commoditized electromechanical parts distribution business, in recent years, we have
focused our business on the acquisition or licensing, development, and commercialization of new and innovative technologies and
products in order to better serve our customer base.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Novum and Solus lines are our newest and most exciting power
supply products and are marketed primarily to networking and telecommunications companies. Earning design wins from OEMs in these
sectors is extremely important and competitive, and the design cycle often lasts between 18 and 24 months. OEMs typically conduct
a partial product line redesign every nine months, creating a recurring revenue opportunity for component suppliers like ourselves.
Once an OEM grants a supplier a design win, however, the test period for future designs decreases significantly, and it is often
difficult to displace incumbent suppliers without offering a product that significantly improves or outperforms existing technologies.
We have received positive industry and customer feedback regarding our Novum and Solus lines, and we believe that major OEM product
revamps will offer us the opportunity to potentially displace our competitors. Our products are intended to serve the following
vital functions for our customers&rsquo; end-products: enhanced design flexibility, size reductions, power efficiency improvements,
greater power density, reduced electro-magnetic interference, faster transient response, reduced power output and quicker turn-on
times.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to IMS Research, an independent provider of market
research and consultancy to the global electronics industry, the total global market for digital power components is expected to
quadruple to $15 billion between 2012 and 2017. As we gain traction in these product lines and capture OEM design wins, we believe
our power supply units will continue to be a significant source of our revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Electronic Components</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: windowtext">The market for electronic components,
like the market for power management devices, is driven by the needs of our OEM customers, as well as increases in the functionality
of the end-products in which our components are used. Other key factors driving innovation include product size reduction, cost
reduction, time to market, energy efficiency, and reliability. We offer a variety of buzzers, connectors, encoders, microphones,
speakers, and thermal management solutions for products such as </FONT>home theater equipment, insulin machines and defibrillators<FONT STYLE="color: windowtext">.
While the breadth of our electronic component portfolio is extensive, we are focused on operating as a niche provider of high-quality
products.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our AMT modular encoder, a device that is used in motion control
systems, allows for breakthroughs in selectable resolution, shaft-adaptation and convenient mounting solutions to bring ease of
installation, installed component reduction and economies of scale in purchasing. AMT has been awarded several design wins from
motion control OEMs that offer a wide range of products, including cash machines and other robotic devices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Test and Measurement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe our most significant opportunity exists in our test
and measurement technology line, specifically for our inferential gas metering technology, the GasPT2 device, which we currently
market under the Vergence brand name. The GasPT2 device is a low-cost, and we believe a highly disruptive, solution to measuring
natural gas quality in pipelines and in stationary gas turbines that are used for power generation and industrial machine drives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Natural gas quality is typically tested at pipeline
interchanges, off-takes, and delivery points (together, &ldquo;test sites&rdquo;). Standard quality test practices utilize
large, expensive gas chromatograph systems to analyze energy content. Given the size of these systems, they are sometimes
constructed several miles away from where a gas sample is drawn. <FONT STYLE="color: windowtext">Because natural gas is a
mixture of several gases, namely methane, propane, nitrogen and carbon dioxide, quality is determined by the relative
concentrations of each individual gas in any given delivery and is indicative of energy content. Total energy consumption, or
the quantity that customers ultimately pay for, is then a function of natural gas quality (total energy content) and volume
of gas used. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Gas chromatographs are housed in bulky, closet-like
enclosures, and may be located on- or off-site of pertinent test sites. According to a 2012 Emerson Process Management
report, gas chromatograph natural gas quality tests typically last between 12 and 40 minutes, and testing frequency varies
from as often as possible to once per day. Because natural gas flows through a pipeline at speeds of up to 25 miles per hour,
standard quality readings conducted by gas chromatographs are not in real-time and may not accurately reflect actual energy
consumption by an end customer. Additionally, gas chromatograph instruments can cost between $15,000 and $40,000, and the
total installation cost for the instrument and related accessories can exceed $200,000. Annual maintenance expenses may also
be more than $10,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe the market opportunity for our GasPT2 device is significant,
both from the perspective of replacing installed gas chromatographs, as well as creating new markets where gas chromatographs were
either previously impractical or too expensive to install. In addition to significant opportunities in the natural gas pipeline
space, we believe that quality testing stationary gas turbines presents another promising market. Depending on natural gas quality,
stationary gas turbines can be calibrated to operate more efficiently, and therefore longer, while simultaneously reducing carbon
emissions and other pollutants. Due to the gas chromatograph quality test period length, proper calibration is difficult to achieve.
Turbine operators attempt to manage this delay <FONT STYLE="color: windowtext">by placing the monitoring station miles away from
the turbine, or by constructing large holding tanks to maintain the gas until an analysis can be completed. Our technology will
enable operators to place GasPT2 units right next to their turbines, and by interfacing our device with the machine&rsquo;s process
control software, calibration can be accomplished on a near real-time basis&mdash;thus allowing the turbines to run longer, more
efficiently and cleaner.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We expect that natural gas pipeline off-takes and stationary
gas turbines will be our initial target markets for the GasPT2 device. In North America, this total market amounts to more than
300,000 miles of pipeline and 30,000 associated entry and off-take points according to the US Energy Information Administration,
representing a market opportunity of more than $600 million. In Europe, this total market amounts to more than 200,000 miles of
pipeline and 20,000 associated entry and off-take points according to the 2010 edition of Natural Gas Systems of Europe, representing
a market opportunity of more than $400 million. Further, this market includes approximately 50,000 stationary gas turbines world-wide
according to the November-December 2009 issue of Gas Turbine World, representing a market opportunity of more than $1 billion.
We will continue to use our extensive market knowledge, as well as the new distribution relationships we develop, in order to strive
to discover additional market opportunities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>OUR PRODUCTS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Power Supply Units</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Power</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our current power line, consists of external and embedded ac-dc
power supplies, dc-dc converters and basic digital point of load modules. This dynamic, broadly applicable product line accounts
for a significant portion of our current revenues and recent revenue growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Novum Advanced Power</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have developed the first fully featured digital point of
load dc-dc converter in the power market under our Novum Advanced Power line of products. It is a next generation product targeted
at the intermediate bus power architecture that is prolifically used in the networking and telecommunications markets. In September
of 2010 we released full production versions of two point of load modules. We were finalists for the prestigious Golden Mousetrap
Award and EDN Innovation Award for these parts in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">With the shift towards smarter, smaller, and more energy efficient
power requirements, our engineers are seeking innovative solutions that allow them to keep pace with lower core voltages, faster
transient response needs and increasing thermal issues that they face in their designs. Our recently introduced Novum NDM2 modules
offer a full suite of digital features and specifically address these growing system complexities through intelligent power management.
The NDM2 series is our first product designed under the cooperation that we announced with Ericsson in July 2011. Our agreement
formalizes a mutual plan to offer a multi-source digital point of load platform based on Ericsson&rsquo;s BMR46X series. We anticipate
future plans to co-develop modules outside the existing range of 10~50A.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have also developed a middle tier product line in order to
introduce our customer base to the benefits of utilizing digital power components in their products. It is a &ldquo;smart module&rdquo;
that offers the benefits of digital in the design cycle, but functions like a highly optimized analog unit when installed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Solus Power Topology</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Power topology is a key factor to consider when designing and
analyzing an integrated power system (&ldquo;IPS&rdquo;). It is a characteristic of an IPS that takes into account the number of
power sources included in a system, how they are connected with one another and with loads, and how the loads are connected between
themselves. Further, the topology of a system is obtained by determining the status of the system&rsquo;s circuit breakers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Through an exclusive Field of Use Agreement with California
Power Research, we licensed their BPS-5 topology, which we market under the brand Solus Power Topology. This price competitive
product allows for greater power efficiency, higher power density, reduced electro-magnetic interference, and faster transient
response time in our customers&rsquo; end products. Further, it is broadly applicable to both dc-dc and ac-dc products. We believe
it will allow us to continue to develop a variety of new, industry leading products to service our broad customer base for the
next decade. Our first target product market for this technology is the intermediate bus architecture where digital point of load
modules are used.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Because Solus Topology is effective regardless of the power
control method utilized, it can operate with analog voltage mode control, analog current mode control, and various digital control
profiles. We believe that unique feature will allow us to implement the product in a wide variety of power supply product platforms.
Additionally, as large-scale networking and telecommunications companies convert to digital power, we believe our early entry into
the market, our unique Solus Topology, and our relationship with Ericsson should enhance our ability to penetrate this multi-billion
dollar market (according to IMS Research, an independent provider of market research and consultancy to the global electronics
industry).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Electronic Components</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>AMT Encoder</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have an exclusive agreement with AnderMotion Technologies
LLC to develop, sell and distribute the AMT encoder worldwide. The AMT series modular encoder is designed with proprietary, capacitive,
code-generating technology, as opposed to optical or magnetic encoding. This unique device allows breakthroughs in selectable resolution,
shaft-adaptation and convenient mounting solutions to bring ease of installation, and economies of scale in purchasing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are selling and distributing the AMT through various customers.
Moreover, the product is being marketed by multiple dc motor manufacturers. AMT has been awarded several design wins from motion
control OEMs that offer a wide range of products, including cash machines and robotic devices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Other</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We offer a variety of buzzers, connectors, encoders, microphones,
speakers, and thermal management solutions. While the breadth of our electronic component portfolio is extensive, we are focused
on operating as a niche provider of high-quality products. These products are found in a variety of OEM products, including motorized
car seats, home theater equipment, insulin machines, satellite radios and defibrillators</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Test and Measurement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Vergence GasPT2</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Through an exclusive licensing contract with GL Industrial Services
UK, Ltd. (&ldquo;GL&rdquo;), formerly British-based Advantica, Ltd., CUI Global owns exclusive rights to manufacture, sell and
distribute a gas quality inferential measurement device (&ldquo;GasPT2&rdquo;) designed by GL on a worldwide basis, currently marketed
as the Vergence GasPT2.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This device is a potentially disruptive, low-cost natural gas
quality measurement tool that is housed inside of a compact, weather-proof enclosure that sits on top of a pipeline. It can complete
a full sample and analysis cycle in fewer than five seconds, thus enabling near real-time gas quality testing. This device, fully
installed, costs approximately $50,000, significantly less than the current industry standard gas chromatograph, as discussed above.
Further, our customers will benefit from a streamlined installation process, which can be completed with less than 90 minutes of
pipeline downtime.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The GasPT2 device does not sacrifice accuracy or precision measures.
Tests performed have verified that our device typically measures natural gas quality within 0.04% accuracy, while industry standards
require accuracy within 0.5%. The device measures several physical properties of natural gas flow, including thermal conductivity,
the speed of the sound of gas flow, and carbon dioxide content. Using these measurements, it infers the natural gas quality mixture,
and calculates other relevant quality characteristics, such as calorific value, Wobbe index, relative density, and compression
factor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">It has been certified for use in fiscal monitoring by Ofgem
in the United Kingdom, the Polish Oil &amp; Gas Company Department of Testing and Calibration in Warsaw, NOVA Chemical/TransCanada
in Canada, and SNAM RETE in Italy. <FONT STYLE="color: windowtext">In 2011, the Company reached agreements with several European
and U.S.-based companies to place beta test units for both laboratory and infield testing. These companies included SNAM RETE in
Italy; National Grid in the United Kingdom; and GASUNIE in The Netherlands, among others. In early 2012, the company began the
delivery of beta units to North American companies for their own beta test programs. Additionally, in October and November 2012,
the GasPT2 device successfully passed first-phase testing by GE-ENERGY at its Turbine Test Facility in Houston, Texas.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We signed an exclusive, five-year agreement for distribution
in the United Kingdom with Orbital Gas Systems Limited, the largest specialty gas engineering company in England. In conjunction
with Orbital, we have introduced the combined Vergence GasPT2 device and Vergence VE-Probe to National Grid, the largest gas transmission
and distribution company in the U.K. In January 2012 we entered into a second five-year, exclusive distribution agreement with
an Italian company, SOCRATE s.p.a. for sales, marketing, distribution and servicing of our GasPT2 device in Italy and North Africa,
including Libya and Tunisia. The agreement calls for sales of as many as 2,000 to 3,000 units and is valued between $40 million
and $60 million over the five-year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have entered into non-exclusive distribution agreements with
two North American companies, Energy Measurement Consulting (EMC) and MGlobal. For its part, in December 2012, EMC issued a purchase
order for scheduled delivery of 150 units in our fiscal year 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has also reached an agreement with BWG/Blue Flame,
a company based in Dubai, for exclusive representation in the Middle East, including the UAE, Qatar, and Saudi Arabia, among others.
BWG/Blue Flame are also in negotiations with several large Middle Eastern organizations to place the device in the Gulf Region,
as well as with representatives from Thailand, Romania, Turkey, and India for placement of the device.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>OUR BUSINESS STRENGTHS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>High Quality Customer Base</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2012, our products touch more than 50,000
customers located in over 50 countries. We primarily serve customers in the computing, consumer device, energy, networking, and
telecommunications sectors, as well as several industrial technology conglomerates. We have established OEM relationships with
a number of our larger customers and believe we are well positioned to enter into additional OEM partnerships as we gain design
wins in the future. Our strategic third-party distribution relationship with Digi-Key is a strong and significant relationship
that we plan to continue to leverage for growth. Further, our GasPT2 device is currently installed in approximately 30 locations
with more than 12 partners, and it is in testing phases with more than 10 large-scale customers globally.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Comprehensive Technology and Product Portfolio</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We offer more than 20,000 unique products. Our customers are
attracted to the breadth of our product offering, and often consider us to be an important niche supplier for the products that
they bring to the marketplace. We plan to work together with our customer base to continue to develop or acquire additional innovative
market-ready technologies and products in order to stay ahead of our competition. These efforts reduce our dependency on internal
research and development costs. We believe our knowledge of the marketplace for niche technologies and components provides us with
a significant advantage over other suppliers in our space.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Experienced Management Team</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are led by a management team and board of directors that
each possesses substantial experience in our industries. Our President and Chief Executive Officer, William J. Clough, has been
with the company for more than six years. Mr. Clough has extensive SEC experience and is an inventor of one of our early patented
thermal management technologies. Along with his other responsibilities, Mr. Clough spearheads our Vergence brand. <FONT STYLE="color: windowtext">Our
Chief Financial Officer, Daniel N. Ford, has been with us for more than five years and possesses a wealth of accounting experience,
including his tenure with KPMG LLP. Mr. Ford has helped us reach a position of profitability, efficiency and forward thinking,
transforming many of our accounting, inventory management and vendor relations processes</FONT>. Our Chief Operating Officer, Matthew
M. McKenzie has an extensive background in the electronics industry, as well as expertise in distribution, sales, and supply chain
management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Global Reach and Hybrid Marketing Strategy</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conduct operations globally, with employees located in the
United States and Japan. Further, we have outsourced manufacturing relationships in mainland China, Japan, South Korea, Taiwan,
and the United Kingdom, and our relationship with Digi-Key reaches customers globally. We utilize a hybrid marketing and sales
strategy, consisting of our internal sales and marketing team, as well as our third-party distribution relationships. Our internal
sales and marketing team focuses on larger, OEM customers, while we direct smaller customers to utilize our third-party distribution
channel. We believe that the global reach of our operations and distribution capabilities for our products will help our businesses
grow and mitigate the risks associated with operations concentrated in one geographic region.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>OUR STRATEGY</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our historic business was a commoditized electromechanical parts
distribution business, however, in recent years, we have focused our business on the acquisition and/or licensing, development
and commercialization of new and innovative electronic technologies and products. As our business continues to evolve along with
that of our customers, we must continue to identify, acquire or license, and commercialize novel technologies that enhance our
customers&rsquo; market position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Novum Advanced Power, Solus Power Topology and Vergence
GasPT2 device have enabled us to transform ourselves into a technology incubator dedicated to rapidly commercializing market-ready
technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In that regard, we have implemented a planned strategy to increase
our name recognition as a technology company. Our plan includes:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Increasing our customer base by redirecting our customers into the right channel, including by handling smaller customer fulfillment
through our distribution partner, Digi-Key, and focusing our efforts on larger OEM business;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Identifying large gas utility companies that represent likely opportunities for large batch sales of our Vergence GasPT2 device,
as opposed to single unit sales;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Developing a collaborative relationship with our customers to identify and supply them with products that will fuel our growth;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Growing the brand presence of our products, which we will attempt to do by capturing the attention of industry heads at selected
trade show events;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Developing and acquiring new technologies to grow our revenue base; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Growing our global sales and distribution capabilities.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>RECENT DEVELOPMENTS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Acquisition of Orbital Gas Systems Limited</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">On March </FONT>3<FONT STYLE="color: black">,
2013, we entered into a definitive share purchase agreement to acquire 100% of the equity interest in </FONT>Orbital
Gas Systems Limited, a company organized under the laws of England and Wales,<FONT STYLE="color: black"> including all of its
operations which are located in the United Kingdom. The purchase price for the acquisition of Orbital is &pound;17,000,000, subject
to purchase price adjustments, 100% of which is payable in cash. To secure indemnification obligations, 5.0% of the purchase price,
or &pound;850,000, will be held in escrow to and through December 1, 2013. The purchase price is approximately $25.8 million,
based on the Wall Street Journal published exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound
sterling. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Orbital is the largest specialty natural gas engineering company
in England and is a key partner of ours for commercializing our GasPT2 device. For over 25 years, Orbital has developed its portfolio
of products, solutions, services and resources to offer a diverse range of personalized gas engineering solutions to the gas utilities,
power generation, emissions, manufacturing and automotive industries. We believe that adding Orbital&rsquo;s operations will provide
a strengthened platform for us to enter new and attractive natural gas quality analysis markets and provide enhanced customer and
geographic diversification, resulting in additional domestic and international sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For fiscal years 2012 and 2011, Orbital generated
revenues from continuing operations of &pound;13,997,850 and &pound;13,751,265, respectively. For its fiscal years 2012 and
2011, Orbital generated income before taxes and U.S. GAAP adjustments of &pound;2,283,138 and &pound;992,438, respectively. As
of December 31, 2012, Orbital had cash and cash equivalents of &pound;5,678,794.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We intend to finance the consideration paid to the shareholders
of Orbital with the net proceeds from this offering. Although we have entered into a share purchase agreement in connection with
the Orbital acquisition, we cannot guarantee when, or whether, the acquisition will be completed. We do, however, currently anticipate
that the acquisition will be consummated by the end of April 2013. The share purchase agreement contains a number of important
conditions that must be satisfied before we can complete the acquisition, namely:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="color: black">We have raised sufficient funds to complete the transaction through either a debt or equity offering
pursuant to the standard U.S. regulatory authority for publicly-traded U.S. companies;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="color: black">We and Orbital&rsquo;s owner have signed the escrow letter called for by the share purchase agreement
and have procured the escrow agent&rsquo;s signature and delivery of the bank instruction letter to the escrow bank; and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD><FONT STYLE="color: black">We and Orbital&rsquo;s owner agree in writing the &ldquo;closing free cash,&rdquo; as defined in
</FONT>our share purchase agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe the acquisition will provide us with immediate credibility
in the natural gas industry. By acquiring Orbital, we will acquire a company that has operated successfully in the natural gas
industry for over 25 years. In addition, Orbital is a leading provider of natural gas infrastructure and high-tech solutions to
National Grid, the national gas transmission company in the U.K. and one of the most respected specialist gas engineering companies
in the world. We will also acquire access to Orbital&rsquo;s proprietary VE-Probe, which, by allowing us to acquire a sample gas
in as few as two seconds as opposed to the industry standard time of five to ten minutes, enables us to reduce our total sample-analysis
turnaround to fewer than five seconds. We believe this turnaround time is far faster than the turnaround time of any other technology
currently available to the gas industry.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Entry into a Distribution Agreement with Future Electronics,
Inc.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 19, 2013, we announced that we entered into a new
distribution agreement with Future Electronics, Inc. ("Future"), which is a leader and innovator in the distribution and marketing of electronic
components. This agreement allows Future to leverage their experience and resources to launch our product portfolio to a global
market and a diverse customer base. In selecting Future as a global distribution partner, we recognized the strength of Future&rsquo;s
demand creation programs and its robust field support resources which will add greater reach for our Novum product line, as well
as its broad portfolio of standard power supplies and board level components. Under the terms of the agreement, Future will now
begin a phased rollout of products from our Power Supply and Electronic Components groups with stock available immediately for
many items.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Design News Golden Mousetrap Awards Finalist</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">On January 31, 2013, we announced
that Design News, a leading technical publication for design engineers, named our NDM2Z series point of load modules as a finalist
for its Golden Mousetrap Awards, an award that recognizes engineering innovation and creativity in product design. The NDM2Z sets
industry benchmarks in efficiency and current density, helping address the growing need to reduce energy use at the board level.
This was our third product from the </FONT>Novum Advanced Power group to receive industry recognition in the past three months.
Also in January 2013, Electronic Products chose our NSM2P &ldquo;No-Bus&rdquo; digital point of load series as a 2012 Product of
the Year. Previously, in November 2012, our NDM2P digital point of load series was named to EDN&rsquo;s &ldquo;Hot 100 Products
of 2012: Power.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>ACQUISITION STRATEGY</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We monitor our industry to identify potential acquisition targets,
both in the form of technology and potential strategic partners. In that regard, we are repeatedly approached by inventors and
others, most especially in the power industry, to assess and assist in commercialization and marketing of new technologies. These
contacts largely arise because of our reputation and successes with our Novum and Solus product lines. Moreover, much like CUI,
Inc. when we acquired it, there are many small, well-run electronics companies that become available due to the age or desires
of their founders. We will consider each of these potential opportunities as they arise with a careful analysis of the relevant
synergies between any potential acquisition and our current business, as well as with the potential for increased revenue and/or
market share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>RESEARCH AND DEVELOPMENT</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe our future success depends in large part on our ability
to develop, commercialize and innovate our existing product lines, as well as identify, acquire or license, and commercialize additional
market-ready products and technologies. Further, we believe our ability to further develop our GasPT2 device will be a significant
factor in the future revenue and profitability growth of our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our research and development costs were $791,332 and $716,321
for the years ended December 31, 2012 and December 31, 2011, respectively. Research and development costs are related to the various
technologies for which we have acquired licensing rights or are developing internally. Our expenditures for research and development
have been directed primarily towards the further development of Novum Advanced Power technologies, including digital point of load
power modules and the Solus Topology, AMT Capacitive Encoders and towards the development of the Vergence GasPT2 device. We expect
that research and development expenses will increase during our fiscal year 2013 as we continue to expand our product offering
and technologies, which we expect will gain further market acceptance and customer integration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>INTELLECTUAL PROPERTY LICENSE EVOLUTION</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>AMT Encoder Technology. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Upon the acquisition of CUI, Inc., we obtained the relationship
with the holder of the AMT encoder technology. Through an exclusive licensing contract with AnderMotion Technologies, LLC, signed
on or about April 20, 2009, we acquired exclusive rights to manufacture, sell and distribute motion control devices utilizing the
AMT encoder technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Novum Digital Point of Load Technology. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Through a non-exclusive licensing agreement with Power-One,
Inc., signed on or about September 18, 2009, we have access to Power-One&rsquo;s portfolio of Digital Power Technology patents
for incorporation into our new line of digital point of load power modules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Solus Advanced Power Topology Technology. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Through an exclusive licensing contract with California Power
Research, Inc., signed on or about March 4, 2010, we acquired the exclusive rights to manufacture, market, sell, lease, maintain,
give over and dispose of licensed product using the BPS-5 advanced power topology technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Vergence GasPT2 Technology. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Through an exclusive licensing contract with GL Industrial Services
UK, Ltd. (&ldquo;GL&rdquo;), formerly British-based Advantica, Ltd., signed on or about January 4, 2010, we acquired exclusive
rights to manufacture, sell and distribute a gas quality inferential measurement device (&ldquo;GasPT2&rdquo;) designed by GL on
a worldwide basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>INTELLECTUAL PROPERTY PROTECTION</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We rely on various intellectual property laws and contractual
restrictions to protect our proprietary rights in products and services. These include confidentiality, invention assignment and
nondisclosure agreements with our key employees, contractors, suppliers and strategic partners. The confidentiality and nondisclosure
agreements with our key employees, contractors and suppliers are in perpetuity, or for a sufficient length of time so as to not
threaten exposure of proprietary information. We intend to pursue the registration of our trademarks and service marks in the United
States and internationally.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We license a significant amount of our underlying intellectual
property from third parties, i.e. AMT Encoder Technology, Novum Digital Point of Load Technology, Solus Advanced Power Topology
Technology and Vergence GasPT2 Technology. The loss of our rights as a licensee under any of these or future technology licensing
arrangements could have a material adverse impact upon our financial position and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In an effort to concentrate our business focus on our core product
development and marketing, in December 2011, we conveyed our WayCool and WayFast patent portfolio to Olantra Fund X, LLC for a
cash payment of $500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the Trademark Act of 1946, as amended, the United States
Patent and Trademark Office permitted our registration of the following trademarks that we actively maintain up to date: CUI INC,
CUI Europe, V-Infinity, AMT, Novum, CUI Global, Simple Digital, Vergence and Solus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We continuously review and update our existing intellectual
property filings and file new documentation both domestically and internationally (Patent Cooperation Treaty) in a continuing effort
to maintain up to date protection of our intellectual property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For those intellectual property applications pending, we cannot
assure that the registrations will be granted. Furthermore, we are exposed to the risk that other parties may claim that we infringe
on their existing patent and trademark rights, which could result in our inability to develop and market our products unless we
enter into licensing agreements with the technology owner, or could force us to engage in costly and potentially protracted litigation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>COMPETITIVE BUSINESS CONDITIONS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We operate a commoditized electromechanical parts distribution
business, as well as an emerging test and measurement business built around our GasPT2 device. In our electromechanical parts distribution
business, the industries in which we compete are very broad. We believe our market is highly fragmented, competitive, evolving
and subject to technological change. Our competitors vary in size and in the scope and breadth of products offered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe the principal competitive factors in our electromechanical
parts business are efficiency of delivery and pricing. We believe our competitive advantages include:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Our strong relationship with Digi-Key, an authorized
distributor of electronic components for more than 550 industry suppliers, which maximizes our product exposure to new designs
and small to medium sized customers;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>


<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"></P>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"></P>


<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Our additional third-party external sales representative organization relationships that allow us to penetrate new and better
customers otherwise not readily available to us;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Our new products and technologies that are in development, which will allow us to compete on innovation and by entering into
strategic partnerships, as opposed to solely on price;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Our forward-looking and early focus on digitally-based controllers for power supply switching; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Our focus on providing our OEM customers with greater levels of support, customer service, and a constantly expanding product
line.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our GasPT2 device competes in a mature industry with established
competitors. There are significant investments being made into the natural gas extraction and transportation infrastructure globally.
We believe our competitive advantages are:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Our device is a comparably low-cost solution to measuring natural gas quality;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Our device is compact and sits directly on top of a natural gas pipeline;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Our device can provide a fast, accurate, and near real-time measurement of the physical properties of the gas flow to infer
gas quality characteristics; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD>Our device requires minimal pipeline downtime to install.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>DEPENDENCE ON A KEY CUSTOMER</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our major product lines in 2012 and 2011 were external power,
internal power and industrial controls.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012, 59% of revenues were derived from five customers
at 47%, 4%, 3%, 3% and 2%. During 2011, 55% of revenues were derived from six customers at 41%, 4%, 3%, 3%, 2% and 2%. Our largest
customer for 2012 and 2011 was Digi-Key Corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2012, of the gross trade accounts receivable
from continuing operations totaling $5,095,926, 57% was due from six customers: 37%, 8%, 3%, 3%, 3% and 3%. At December 31, 2011,
of the gross trade accounts receivable from continuing operations totaling $3,819,641, 53% was due from eight customers: 21%, 9%,
7%, 5%, 4%, 3%, 2% and 2%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>LEGAL PROCEEDINGS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We and our subsidiaries are not a party in any legal proceedings.
None of our directors, officers or affiliates, any owner of record, or beneficially of more than five percent of any class of our
voting securities, or any associate of any such of our directors, officers, affiliates or security holders is a party adverse to
us or any of our subsidiaries, or has a material interest adverse to us or any of our subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>PHILANTHROPIC PHILOSOPHY</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have chosen that, in addition to sales commission, certain
sales representative firms will also receive a charity commission to be donated to charities of their choice. One of our core values
is generosity, which includes philanthropic giving. We give in our local community, and we want to also give in the communities
in which we do business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>EMPLOYEES</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2012, we, together with our consolidated
subsidiaries, had sixty-two full-time and seven part-time employees. None of our employees are represented by a labor union. We
consider our relations with our employees to be good. We plan to add additional staff as needed to handle all phases of the growth
of our business. We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified
personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>PROPERTIES</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As an integrated part of the acquisition of CUI, Inc., our corporate
offices were relocated to Tualatin, Oregon. We occupy the 61,380 square feet of offices and warehouse premises under a ten year
non-cancelable lease agreement beginning September 1, 2006 with Barakel, LLC (a related party) at a base monthly rent subject to
periodic base payment increases plus real property taxes, utilities, insurance and common area maintenance charges. Barakel, LLC
is controlled by James McKenzie, the majority owner of CUI, Inc. prior to acquisition and majority owner of IED, Inc., along with
Matt McKenzie, our COO, Corporate Secretary and Director.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>CORPORATE INFORMATION</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CUI Global, Inc., formerly known as Waytronx, Inc., is a Colorado
corporation organized on April 21, 1998. Our principal place of business is located at 20050 SW 112 Avenue, Tualatin, Oregon 97062,
phone (503) 612-2300. Our website is www.cuiglobal.com.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective May 16, 2008, CUI Global, Inc. acquired the assets
and liabilities of CUI, Inc., a Tualatin, Oregon based provider of electronic components. Through this acquisition, the Company
obtained an 11.54% ownership interest in Test Products International, Inc., a provider of handheld test and measurement equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective July 1, 2009, CUI Global acquired all of Comex Instruments,
Ltd., which we subsequently rebranded, CUI Japan and 49% of Comex Electronics, Ltd. Both companies are Japanese based DSP providers
of digital to analog and analog to digital test and measurement systems and electronic components for original equipment manufacturer
research and development. 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, payable monthly beginning January 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTORS AND EXECUTIVE OFFICERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Bylaws permit the number of directors to be fixed by resolution
of the Board of Directors, but to be no less than one. The Board of Directors has set the maximum number of members to no more
than eight members. Directors are elected by a majority of the votes cast by the stockholders and have served two-year terms or
until their successors have been elected and qualified or until their earlier resignation or removal. Commencing with our next
annual meeting we intend to elect all of our directors simultaneously for a one year term or until their successors have been elected
and qualified, or their earlier resignation or removal. Currently, we have six directors, four of whom are &ldquo;independent&rdquo;
in accordance with applicable rules promulgated by the Securities and Exchange Commission and within the meaning of Rule <FONT STYLE="color: black">5605(a)(2)</FONT>
of the NASDAQ Stock Market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Board of Directors has three standing committees: Audit
Committee, Compensation Committee and Nomination Committee, each of which has a written charter and/or statement of policy approved
by our board. Our board currently appoints the members of each committee. Copies of the current committee charters and/or statement
of policy for each committee are posted on our website at www.cuiglobal.com. No incumbent director attended fewer than 100% of
the total number of meetings held by the committees on which such director served.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: double">The following are
officers and directors of the Company</FONT> with their ages as of December 31, 2012, and a list of the members of our three standing
committees: Audit Committee, Compensation Committee and Nomination Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse; margin-left: 0.5in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30%; text-decoration: underline">Name</TD>
    <TD STYLE="width: 20%; text-decoration: underline">Age</TD>
    <TD STYLE="width: 50%; text-decoration: underline">Position</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Colton R. Melby*</TD>
    <TD>55</TD>
    <TD>Director, Chairman</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>William J. Clough</TD>
    <TD>61</TD>
    <TD>President/Chief Executive Officer, Director and General Counsel</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Thomas A. Price*</TD>
    <TD>69</TD>
    <TD>Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Matthew M. McKenzie</TD>
    <TD>32</TD>
    <TD>Director, Chief Operating Officer and Corporate Secretary</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Sean P. Rooney*</TD>
    <TD>41</TD>
    <TD>Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Corey A. Lambrecht*</TD>
    <TD>43</TD>
    <TD>Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Daniel N. Ford</TD>
    <TD>33</TD>
    <TD>Chief Financial Officer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.5in; text-indent: -3in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Audit Committee:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Sean P. Rooney*, Chairman</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Thomas A. Price*, Deputy Chairman</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Colton R. Melby*, Committee Member</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Compensation Committee</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Cory A. Lambrecht*, Chairman</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Colton R. Melby*, Committee Member</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-weight: normal">Nominating
Committee</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Nominating Committee consists of the independent
directors of the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* &quot;independent director&quot; within the meaning of <FONT STYLE="color: black">Rule
5605(a)(2)</FONT> of the Nasdaq Capital Market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Business Experience of Directors and Executive Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Colton R. Melby, Chairman of the Board of Directors</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective June 11, 2008, Colton Melby was appointed to the Board
of Directors and was elected by the Board of Directors to serve as Chairman of the Board of Directors. Mr. Melby continues to serve
as Chairman of the Board of Directors and at the 2012 Annual Meeting of Shareholders; Mr. Melby was reelected to a two year term
on the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Melby has a 20 year background in aerospace manufacturing.
He spent 15 years as owner and chief executive officer of Metal Form, Inc., serving a customer base that included: Boeing, Bombardier,
Rockwell, Grumman, and Lockheed Martin, among others. One of Mr. Melby&rsquo;s more notable investments was the financing and purchase
of firearms-maker Smith &amp; Wesson from London-based Tomkins PLC in 2001. Mr. Melby has investments in Earth 911, a recycling
company dedicated to green initiatives and green recycling.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>William J. Clough, Esq., President/Chief Executive Officer,
Director and General Counsel of CUI Global, Inc. and Chief Executive Officer of CUI, Inc.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Clough was elected at the 2006 Annual Meeting of Shareholders
to serve a two year term on the Board of Directors. Mr. Clough continues to serve on the Board of Directors and was reelected at
the 2012 Annual Meeting of Shareholders to serve a third two year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Clough was appointed President and Chief Executive Officer
of CUI Global, Inc. September 13, 2007 at which time Mr. Clough stepped down as Executive Vice President of Corporate Development.
Effective May 16, 2008, CUI Global, Inc. formed a wholly owned subsidiary, Waytronx Holdings, Inc., to acquire the assets of CUI,
Inc. Along with this acquisition Mr. Clough was appointed Chief Executive Officer of Waytronx Holdings, Inc. (now renamed to CUI,
Inc.). Mr. Clough was a police officer for 16 years, working at the local, state and federal levels as a Federal Air Marshall in
Southern Europe and the Middle East, in 1985 and 1986. Mr. Clough received his Juris Doctorate, cum laude, from the University
of California, Hastings College of the Law in 1990. He is certified to practice law in state and federal courts in California,
Illinois, Hawaii and before the United States Supreme Court.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During late 2011 into early 2012, along with Company CFO, Daniel
Ford, Mr. Clough led the efforts to complete a successful equity raise; coupled with a re-structuring of the Company&rsquo;s capital
structure and up-listing the Company to the NASDAQ Capital Market in February 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Thomas A. Price, Director</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Price was elected at the 2008 Annual Meeting of Shareholders
to serve a one year term on the Board of Directors and was reelected at the 2011 Annual Meeting of Shareholders to serve a two
year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Price has more than 30 years of business and operational
management experience. He is the founder of Tom Price Dealership Group, a leading auto dealership with 11 franchises at six locations
across California. Mr. Price developed the multi-brand San Francisco Auto Repair Center and a conference facility in Larkspur,
California. Currently, Mr. Price is the owner of nine car dealerships in Northern California. He was Chairman of the Lexus National
Dealer Advisory Board and charter member of the J.D. Power Dealer Roundtable. The Price Family Dealerships are major sponsors of
Special Olympics of Marin, Dedication to Special Education, CASA/Advocates for Children, Marin Breast Cancer Council and the Golden
Gate Shootout.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Matthew M. McKenzie, President and Chief Operational Officer
of CUI, Inc., Chief Operational Officer, Corporate Secretary of CUI Global, Inc. and Director.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Matt McKenzie was elected to the Board of Directors at the 2008
Annual Meeting of Shareholders to serve a two year term and was reelected at the 2012 Annual Meeting of Shareholders to a two year
term on the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. McKenzie earned an MBA from George Fox University. He has
been working in various functions for CUI for over 10 years, gaining intimate knowledge of the business, its operations and its
opportunities for growth. Over the past several years, Mr. McKenzie has worked to position CUI, Inc. for growth through sales and
operation expansion as well as channel development and technology development. Mr. McKenzie initiated ISO 9001 certification, a
quality management system, provided structure to global logistics, including CUI&rsquo;s international partners, and implemented
CUI&rsquo;s ERP system, which allows for more visibility and analysis opportunities for CUI. He spearheads the research, development
and implementation of the Novum and Solus technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Sean P. Rooney, Director</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Rooney was elected at the 2008 Annual Meeting of Shareholders
to serve a one year term on the Board of Directors and was reelected at the 2011 Annual Meeting of Shareholders to serve a two
year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Rooney brings to the CUI Global board nearly 20 years of
financial management experience. He currently serves as Senior Director of Investments for Oppenheimer &amp; Co. Inc., a leading
full service investment banking, securities and wealth management firm. Prior to joining Oppenheimer, he served in a similar capacity
at Maxim Group, a boutique investment bank in New York, and Investec Ernst &amp; Company, an international specialist bank headquartered
in South Africa and the U.K. Through his many years of experience, Mr. Rooney has built a vast network of industry resources and
contacts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Rooney graduated from C. W. Post University in 1993 with
a Bachelors of Arts degree in Business Administration. Mr. Rooney currently manages a clientele of high net worth investors, institutions
and foundations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Corey A. Lambrecht, Director</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Lambrecht was elected at the 2008 Annual Meeting of Shareholders
to serve a one year term on the Board of Directors and was reelected at the 2011 Annual Meeting of Shareholders to serve a two
year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Lambrecht is a 14+ year public company executive with
experience in strategic acquisitions, new business development, pioneering consumer products, corporate licensing and
interactive technology services. Mr. Lambrecht&nbsp;currently serves as the President of Earth911, Inc. and is a current
director&nbsp;of Guardian 8 Holdings and Carbon Credits International.&nbsp; He previously served&nbsp;as Director of Sales for Leveraged
Marketing Associates, a worldwide leader in licensed brand extension strategies. While Executive Vice President for Smith
&amp; Wesson Holding Corporation he was responsible for Smith &amp; Wesson Licensing, Advanced Technologies and Interactive
Marketing divisions. He was the former President of A For Effort (sold to Freesoftwareclub.com), an interactive database
marketing company specializing in online content (advergaming) for clients such as the National Hockey League.&nbsp;
Mr. Lambrecht&rsquo;s prior experience also includes Pre-IPO founder for Premium Cigars International and VP
Sales/Marketing for ProductExpress.com.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Daniel N. Ford, Chief Financial Officer of CUI Global
and CUI, Inc.</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Ford has a background in accounting, including working at
KPMG. As CFO of CUI for in excess of five years, Mr. Ford moved CUI into a position of profitability, efficiency and forward thinking,
transforming many of CUI&rsquo;s accounting, inventory management and vendor relations processes. During 2012, along with Mr. Clough,
Mr. Ford facilitated the equity raise and uplisting to the NASDAQ Capital Market. Over the past five years, Mr. Ford has implemented
advanced internal fixed asset tracking, implemented a &ldquo;real time&rdquo; inventory system and participated in implementing
CUI&rsquo;s ERP system. His skills as a financier have allowed CUI to move to its current, 61,380 square foot building, to transition
its banking relationships to Wells Fargo National Association, as well as to acquire CUI and CUI Japan. Mr. Ford holds an MBA from
George Fox University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation Discussion and Analysis</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Compensation Committee Members</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Compensation Committee of the Board of Directors is appointed
by the Board of Directors to discharge the Board's responsibilities with respect to all forms of compensation of the Company's
executive officers, to administer the Company's equity incentive plans and to produce an annual report on executive compensation
for use in the Company's Form 10-K. The Compensation Committee consists of two members of the board of directors, Messers Colton
R. Melby and Corey A. Lambrecht, both of whom are &quot;independent directors&quot; within the meaning of <FONT STYLE="color: black">Rule
5605(a)(2)</FONT> of the Nasdaq Capital Market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Role of Committee</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Compensation Committee discharges the Board&rsquo;s responsibilities
relating to general compensation policies and practices and to compensation of our executives. In discharging its responsibilities,
the Compensation Committee establishes principles and procedures in order to ensure to the Board and the shareholders that the
compensation practices of the Company are appropriately designed and implemented to attract, retain and reward high quality executives
and are in accordance with all applicable legal and regulatory requirements. In this context, the Compensation Committee&rsquo;s
authority, duties and responsibilities are to:&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Annually review the Company&rsquo;s philosophy regarding executive compensation.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Periodically review market and industry data to assess the Company&rsquo;s competitive position and to retain any compensation
consultant to be used to assist in the evaluation of directors&rsquo; and executive officers&rsquo; compensation.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Establish and approve the Company&rsquo;s goals and objectives and associated measurement metrics relevant to compensation
of the Company&rsquo;s executive officers.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Establish and approve incentive levels and targets relevant to compensation of the executive officers.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Separately review, determine and approve the Chief Executive Officer&rsquo;s applicable compensation levels based on the Committee&rsquo;s
evaluation of the Chief Executive Officer&rsquo;s performance in light of the Company&rsquo;s and the individual goals and objectives.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Administer and annually review the Company&rsquo;s incentive compensation plans and equity-based plans.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Review and discuss with management, the Compensation Disclosure and Analysis (CD&amp;A) and determine the Committee&rsquo;s
recommendation for the CD&amp;A&rsquo;s inclusion in the Company&rsquo;s annual report filed on Form 10-K with the SEC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.45in; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Committee Meetings </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">  Our Compensation Committee meets formally and informally as often as necessary to perform its duties and responsibilities. The Compensation Committee held three meetings during fiscal 2012. On an as requested basis, our Compensation Committee receives and reviews materials prepared by management, consultants or committee members, in advance of each meeting. Depending on the agenda for the particular meeting, these materials may include:</P>



<P STYLE="margin: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.2in"></TD><TD STYLE="width: 0.2in">&bull;</TD><TD>Minutes and materials from the previous meeting(s);</TD></TR>
<TR STYLE="vertical-align: top">
<TD></TD><TD>&bull;</TD><TD>Reports on year-to-date Company and Partnership financial
                                                                  performance versus budget;</TD></TR>
<TR STYLE="vertical-align: top">
<TD></TD><TD>&bull;</TD><TD>Reports on progress and levels of performance of individual
                                                                  and Company performance objectives;</TD></TR>
<TR STYLE="vertical-align: top">
<TD></TD><TD>&bull;</TD><TD>Reports on the Company&rsquo;s financial and stock performance
                                                                  versus a peer group of companies;</TD></TR>
<TR STYLE="vertical-align: top">
<TD></TD><TD>&bull;</TD><TD>Reports from the Committee&rsquo;s compensation consultant
                                                                  regarding market and industry data relevant to executive officer
                                                                  compensation;</TD></TR>
<TR STYLE="vertical-align: top">
<TD></TD><TD>&bull;</TD><TD>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.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation Philosophy </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>General Philosophy </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our compensation philosophy is based on the premise of attracting,
retaining and motivating exceptional leaders, setting high goals, working toward the common objectives of meeting the expectations
of customers and stockholders and rewarding outstanding performance. Following this philosophy, in determining executive compensation,
we consider all relevant factors, such as the competition for talent, our desire to link pay with performance, the use of equity
to align executive interests with those of our stockholders, individual contributions, teamwork and performance, each executive&rsquo;s
total compensation package and internal pay equity. We strive to accomplish these objectives by compensating all employees with
total compensation packages consisting of a combination of competitive base salary and incentive compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Pay for Performance </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At the core of our compensation philosophy is our strong belief
that pay should be directly linked to performance. We believe in a pay for performance culture that places a significant portion
of executive officer total compensation as contingent upon, or variable with, individual performance, Company performance and
achievement of strategic goals including increasing shareholder value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The performance based compensation for our executives may be
in the form of (i) annual cash incentives to promote achievement of, and accountability for, shorter term performance plans and
strategic goals and (ii) equity grants, designed to align the long-term interests of our executive officers with those of our
shareholders, by creating a strong and direct link between executive compensation and shareholder return over a multiple year
performance cycle. Long term incentive equity awards are granted in restricted stock or stock options. These awards generally
vest over a two to four year period. This opportunity for share ownership was provided in order to provide incentive and retain
key employees and align their interests with our long term strategic goals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Base Compensation to be Competitive within Industry </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A key component of an executive&rsquo;s total compensation
base salary is designed to compensate executives commensurate with their respective level of experience, scope of responsibilities,
sustained individual performance and future potential. The goal has been to provide for base salaries that are sufficiently competitive
with other similar-sized companies, both regionally and nationally, in order to attract and retain talented leaders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation Setting Process </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Management&rsquo;s Role in the Compensation Setting Process.
</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management plays a significant role in the compensation-setting
process. The most significant aspects of management&rsquo;s role are:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Assisting in establishing business performance goals and
                                                                    objectives;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Evaluating employee and Company performance;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>CEO recommending compensation levels and awards for executive
                                                                    officers;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Implementing the Board approved compensation plans; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">&bull;</TD><TD>Assistance in preparing agenda and materials for the Committee
                                                                    meetings.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Chief Executive Officer generally attends the Committee
meetings; however, the Committee also regularly meets in executive session. The Chief Executive Officer makes recommendations
with respect to financial and corporate goals and objectives and makes non CEO executive compensation recommendations to the Compensation
Committee based on Company performance, individual performance and the peer group compensation market analysis. The Compensation
Committee considers and deliberates on this information and in turn makes recommendations to the Board of Directors, for the Board&rsquo;s
determination and approval of the executives&rsquo; and other members of senior management&rsquo;s compensation, including base
compensation, short-term cash incentives and long-term equity incentives. The Chief Executive Officer&rsquo;s performance and
compensation is reviewed, evaluated and established separately by the Compensation Committee and ratified and approved by the
Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Setting Compensation Levels </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To evaluate our total compensation is competitive and provides
appropriate rewards to attract and retain talented leaders, as discussed above, we may rely on analyses of peer companies performed
by independent compensation consultants and on other industry and occupation specific survey data available to us. Our general
benchmark is to establish both base salary and total compensation for the executive officers at the 50<SUP>th</SUP> percentile
of the peer group data, recognizing that a significant portion of executive officer total compensation should be contingent upon,
or variable with, achievement of individual and Company performance objectives and strategic goals, as well as being variable
with stockholder value. Further, while the objective for base salary is at the 50<SUP>th</SUP> percentile of the peer group data,
executives&rsquo; base salaries are designed to reward core competencies and contributions to the Company and may be increased
above this general benchmark based on (i) the individual&rsquo;s increased contribution over the preceding year; (ii) the individual&rsquo;s
increased responsibilities over the preceding year; and (iii) any increase in median competitive pay levels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Setting Performance Objectives </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s business plans and strategic objectives
are generally presented by management at the Company&rsquo;s annual board meeting. The board engages in an active discussion concerning
the financial targets, the appropriateness of the strategic objectives and the difficulty in achieving the same. In establishing
the compensation plan, our Compensation Committee then utilizes the primary financial objectives from the adopted business plan
and operating cash flow as the primary targets for determining the executive officers&rsquo; short-term cash incentives and long
term equity incentive compensation. The Committee also establishes additional non-financial performance goals and objectives,
the achievement of which is required for funding of a significant portion, approximately twenty five percent, of the executive
officers&rsquo; incentive compensation. In 2012, these non-financial performance goals and objectives included achieving accurate
financial reporting and timely SEC filings; demonstrating full compliance and superior performance in the Company&rsquo;s environmental,
health and safety practices; performing appropriate remediation activities <FONT STYLE="text-underline-style: none; color: windowtext">under
Sarbanes-Oxley Act of 2002 Section 404 </FONT>and achieving successful testing of and compliance with <FONT STYLE="text-underline-style: none; color: windowtext">the
</FONT>requirements<FONT STYLE="text-underline-style: none; color: windowtext"> of the Sarbanes-Oxley Act</FONT> and general and
administrative expense management. In addition, the executive team was charged with positioning the Company for up-listing to
a national stock exchange and an equity raise in early 2012. Said funding to be used to enhance the Company&rsquo;s balance sheet;
pay down corporate debt; increase the Company&rsquo;s ability to rapidly bring its new products to market; and other appropriate
matters.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Annual Evaluation </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Chief Executive Officer recommends the actual incentive
award amounts for all other executives based on actual Company performance relative to the targets set as well as on individual
performance and recommends the executives&rsquo; base salaries levels for the coming year. The Compensation Committee considers
these recommendations generally at the end of each fiscal year in determining its recommendations to the Board of Directors for
the final short-term cash incentive and long-term equity award amounts for each executive and for the executive&rsquo;s base salary
levels. The actual incentive amounts awarded to each executive are ultimately subject to the discretion of the Compensation Committee
and the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Additional equity-based awards may be also granted to executives,
as well as other employees, upon commencement of employment, for promotions or special performance recognition or for retention
purposes, based on the recommendation of the Chief Executive Officer. In determining whether to recommend additional grants to
an executive, the Chief Executive Officer typically considers the individual&rsquo;s performance and any planned change in functional
responsibility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Elements of Executive Compensation </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Total Compensation </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Total compensation for our executives consists of three elements:
(i) base salary; (ii) incentive cash award based on achieving specific performance targets as measured by cash flow and other
objectives and (iii) equity incentive award, which is also performance based and paid out over a future period in the form of
restricted stock or stock purchase options. Base salaries are the value upon which both the incentive compensation percentage
targets are measured against. For evaluation and comparison of overall compensation of the executives and to assist it in making
its compensation decisions, the Compensation Committee reviews an executive compensation summary, which sets forth for each executive:
current compensation and current equity ownership holdings as well as the projected value of each and all such compensation elements,
including distributions and dividends therefrom.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Base Salaries </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Base salaries are designed to compensate executives commensurate
with their respective level of experience, scope of responsibilities and to reward sustained individual performance and future
potential. The goal has been to provide for base salaries that are sufficiently competitive with other similar-sized companies,
both regionally and nationally, in order to attract and retain talented leaders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Incentive Compensation </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Incentive compensation is intended to align compensation with
business objectives and performance and enable the Company to attract, retain and reward high quality executive officers whose
contributions are critical to short and long-term success of the Company. The executives&rsquo; incentive awards are based upon
three key performance metrics: (i) the Company&rsquo;s EBIDTA; (ii) achievement of agreed-upon strategic and corporate performance
goals; and (iii) existing Employment Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The strategic and corporate performance goals are not intended
to be a specific agreed-upon goal, but rather a general objective. Management and the board of directors discuss these factors
and set objectives that are dynamic and change periodically. In setting these periodic goals, the board of directors discusses
with management the nature of the objective and management's proposed method of achieving the goal. These goals change throughout
the operational process because of changing dynamics such as economic conditions, current success of marketing, availability of
materials, availability of funding and overall momentum toward achieving the goal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Incentive Plan Compensation </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Incentive awards are paid out in cash, restricted common stock
or option awards. The incentive award targets for the executives are established at the beginning of the year, generally, as a
percentage of their base salary and the actual awards are determined at the following year&rsquo;s annual board of directors meetings
based on actual Company performance relative to established goals and objectives, as well as on evaluation of the executive&rsquo;s
relevant departmental and individual performance during the past year. In many instances the award of restricted common stock
vests over a four year term in equal periodic tranches. The award of restricted common stock purchased through options generally,
although not in every instance, vests immediately upon exercise of the option and generally has a validity of up to ten years
and a per share purchase price, of no less than, the fair market value of our common stock on the date of grant. The awards are
intended to serve as a means of incentive compensation for performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Retirement Plans </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our wholly owned subsidiary, CUI, Inc., maintains a 401(k)
plan. The Company has a 401(k) retirement savings plan that allows employees to contribute to the plan after they have completed
3 months of service and are 21 years of age. The Company matches the employee&rsquo;s contribution up to 6% of total compensation.
Total employer contributions, net of forfeitures, were $215,118 and $179,234, for 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Change in Control Agreements </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our executives are awarded protection upon a change in control
as specifically provided in their employment contracts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Perquisites </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company does not provide for any perquisites or any other
benefits for its senior executives that are not generally available to all employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Compensation Committee Charter</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Compensation Committee Charter is posted on our website
at www.cuiglobal.com.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Summary Compensation Table </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the compensation paid and accrued
to be paid by the Company for the fiscal years 2012, 2011 and 2010 to the Company&rsquo;s Chief Executive Officer and two most
highly compensated executive officers of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SUMMARY COMPENSATION TABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Option</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Non-equity</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Stock</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Awards</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Incentive Plan</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">All Other</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Name and</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Awards</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">($)(10)</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Compensation</FONT></TD><TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Compensation</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Principal Position</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Year</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Salary ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">(11)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">William J. Clough,</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="width: 25%; text-align: left"><FONT STYLE="font-size: 8pt">CEO / President /</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">2012</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">337,500</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;(2)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">160,080</FONT></TD><TD STYLE="width: 1%; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">848,599</FONT></TD><TD STYLE="width: 1%; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(3)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">204,920</FONT></TD><TD STYLE="width: 1%; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(2)</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">17,860</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">1,568,959</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Counsel / Director</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(1)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">325,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">124,792</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(2)</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,110</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">455,902</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Daniel N. Ford,</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2012</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">195,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;(5)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">51,120</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(5)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">27,451</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(6)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">160,130</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(5)</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">34,860</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">468,561</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">CFO (4)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">195,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;(5)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">62,500</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(5)</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">33,186</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">290,686</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Matthew M.</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">McKenzie, COO /</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2012</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">205,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;(8)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">32,400</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(8)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">40,093</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(9)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">147,808</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(8)</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">34,860</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">460,161</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">President of CUI</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Inc. / Director (7)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">205,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;(8)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">114,583</FONT></TD><TD STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 8pt">(8)</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">32,475</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">352,058</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Footnotes:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">1.</TD><TD>Mr. Clough joined the Company on September 1, 2005.&nbsp; 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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">2.</TD><TD>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 $350,000 and bonus provisions for each calendar
                                                              year. 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 15<SUP>th</SUP> day of each month. During 2012, 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, 2012 and 2011, there was an accrual of $53,542 and
                                                              $13,542, respectively, for compensation owed to Mr. Clough.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">3.</TD><TD>Effective April 16, 2012, Mr. Clough received a bonus option
                                                              to purchase 37,177 common shares as CEO and an additional 3,300
                                                              common shares as a director, 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. 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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">4.</TD><TD>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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">5.</TD><TD>Mr. Ford is employed under a three year employment contract
                                                              with the Company, which was extended to May 15, 2014 and provides,
                                                              in relevant part, for an annual salary of $195,000 and bonus provisions
                                                              for each calendar year, beginning with 2010, 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, 2012 and 2011 there was an accrual of $8,125 and $0, respectively,
                                                              for compensation owed to Mr. Ford.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.6in; text-indent: -0.3in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.6in; text-indent: -0.3in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">6.</TD><TD>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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">7.</TD><TD>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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">8.</TD><TD>Mr. McKenzie is employed under a three year employment contract
                                                              with the Company, which was extended to May 15, 2014 and provides,
                                                              in relevant part, for an annual salary of $205,000 and bonus provisions
                                                              for each calendar year, beginning with 2010, 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, 2012 and 2011 there was an accrual of
                                                              $8,542 and $12,083, respectively, for compensation owed to Mr. McKenzie.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.25in">9.</TD><TD>Effective April 16, 2012, Mr. McKenzie received a bonus option
                                                               to purchase 15,100 common shares as COO and an additional 3,300
                                                               common shares as a director, 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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">10.</TD><TD>As of December 31, 2012, William J. Clough, CEO/Director held
                                                               456,231 outstanding options, Matthew M. McKenzie, COO/Director
                                                               held 60,001 outstanding options and Daniel N. Ford, CFO held 37,794
                                                               outstanding options.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">11.</TD><TD>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&rsquo;s
                                                               financial statements included elsewhere in this prospectus.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Equity Awards At Fiscal Year End</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the outstanding equity awards
at December 31, 2012 to each of the named executive officers:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Name</FONT></TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Equity Incentive Plan </B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Awards: Number of Shares, Units or Other Rights That Have Vested (#)</B></FONT></TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Equity Incentive Plan </B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Awards: Number of Shares, Units or Other Rights That Have Not Vested (#)</B></FONT></TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Option</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Exercise Price ($)</B></FONT></TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Option</B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Expiration</B></FONT></TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Equity Incentive Plan </B></FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Awards: Market or Payout Value of Shares, Units or Other Rights That Have Not Vested (1) ($)</B></FONT></TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 27%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">William J. Clough (2)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">37,177</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7.50</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1/1/2019</FONT></TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">William J. Clough (2)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">8,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7.50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1/1/2019</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Matthew M. McKenzie (2)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">15,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7.50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1/1/2019</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Matthew M. McKenzie (2)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">8,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7.50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1/1/2019</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Daniel N. Ford (2)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">12,598</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7.50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1/1/2019</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">William J. Clough (3)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">20,912</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">16,265</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">9.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10/11/2020</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">89,295</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">William J. Clough (3)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,300</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">9.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10/11/2020</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Matthew M. McKenzie (3)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">8,494</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">6,606</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">9.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10/11/2020</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">36,267</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Matthew M. McKenzie (3)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,300</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">9.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10/11/2020</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Daniel N. Ford (3)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7,086</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5,512</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">9.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10/11/2020</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">30,261</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">William J. Clough (4)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">37,177</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4/16/2022</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">204,102</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">William J. Clough (4)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,300</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4/16/2022</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">18,117</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Matthew M. McKenzie (4)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">15,100</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4/16/2022</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">82,899</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Matthew M. McKenzie (4)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,300</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4/16/2022</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">18,117</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Daniel N. Ford (4)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">12,597</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4/16/2022</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">69,158</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">William J. Clough (5)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">27,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">302,500</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">6.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">9/21/2022</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,660,725</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Footnotes:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 20.5pt"></TD><TD STYLE="width: 18pt">1.</TD><TD>Calculated by multiplying the number of units by the CUI Global
                                                              closing market price ($5.49) as of December 31, 2012.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 20.5pt"></TD><TD STYLE="width: 18pt">2.</TD><TD>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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 20.5pt"></TD><TD STYLE="width: 18pt">3.</TD><TD>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.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 38.5pt; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 38.5pt; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 20.5pt"></TD><TD STYLE="width: 18pt">4.</TD><TD>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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 20.5pt"></TD><TD STYLE="width: 18pt">5.</TD><TD>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.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTOR COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For 2012, each of our non-employee directors received the following
compensation pursuant to our director compensation plan:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Cash Retainer
                                                                                                               - $23,750 annually
                                                                                                               for board members
                                                                                                               and $33,750 for
                                                                                                               the Chairman.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Initial, one
                                                                                                               time only, option
                                                                                                               to purchase 4,800
                                                                                                               common shares at
                                                                                                               an exercise price
                                                                                                               that is not less
                                                                                                               than the fair market
                                                                                                               value per share
                                                                                                               <FONT STYLE="text-underline-style: none; color: windowtext">in
                                                                                                               connection with
                                                                                                               appointment the
                                                                                                               board of directors</FONT>.
                                                                                                               The option vests
                                                                                                               over four years,
                                                                                                               25% after the first
                                                                                                               year, thereafter
                                                                                                               equally each month
                                                                                                               for the balance
                                                                                                               of the four year
                                                                                                               term.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Annual Option
                                                                                                               to purchase 3,300
                                                                                                               common shares at
                                                                                                               an exercise price
                                                                                                               that is not less
                                                                                                               than the fair market
                                                                                                               value per share
                                                                                                               at the date of
                                                                                                               grant. The option
                                                                                                               vests in full after
                                                                                                               one year.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Meeting fee:
                                                                                                               none.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Compensation Table</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the compensation of the non-employee
directors for the fiscal year ending December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Name and Principal<BR>
Position</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Year</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Fees <BR> earned or <BR> paid in <BR> cash ($) <BR> (2)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Option <BR> Awards <BR> ($) (1)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Non-Equity <BR> Incentive Plan <BR> Compensation<BR>
 ($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Nonqualified <BR> Deferred <BR> Compensation <BR> Earnings ($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">All Other <BR> Compensation <BR> ($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Total ($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 37%; text-align: left">Colton Melby, Chmn.</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">2012</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">33,750</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">7,191</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">40,941</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Thomas A. Price</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2012</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,750</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,191</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,941</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Sean P. Rooney</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2012</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,750</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,191</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,941</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Corey Lambrecht</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2012</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,750</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,191</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,941</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Footnotes:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">1.</TD><TD>Effective April 16, 2012, each director received an option to
                                                              purchase 3,300 common shares at a price of $4.56 per share that
                                                              vests one year after issuance. As of December 31, 2012, each non-employee
                                                              director held 14,700 options remaining outstanding of which 11,400
                                                              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&rsquo;s financial statements included with
                                                              this prospectus.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">2.</TD><TD>Each director receives a cash retainer of $23,750 annually,
                                                              no meeting fee and the Chairman receives a cash retainer of $33,750
                                                              annually, no meeting fee.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employment Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During fiscal year 2012, three executive officers were employed
under employment agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Those executive officers are:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Chief Executive
                                                                                                               Officer and General
                                                                                                               Counsel</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>President/Chief
                                                                                                               Operating Officer
                                                                                                               of CUI, Inc., a
                                                                                                               wholly owned subsidiary
                                                                                                               of CUI Global,
                                                                                                               Inc. and Chief
                                                                                                               Operating Officer
                                                                                                               of CUI Global,
                                                                                                               Inc.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Chief Financial
                                                                                                               Officer of CUI
                                                                                                               Global, Inc. and
                                                                                                               CUI, Inc., a wholly
                                                                                                               owned subsidiary
                                                                                                               of CUI Global,
                                                                                                               Inc.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To see the material terms of each named executive officer&rsquo;s
employment agreement, please see the footnotes to the Summary Compensation Table.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation Committee Interlocks and Insider Participation
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">None of the members of the Company's Compensation Committee
is or has at any time during the last completed fiscal year been an officer or employee of the Company. None of the Company's
executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee,
of any entity that has one or more executive officers who served on the Company's board of directors or Compensation Committee
during the last completed fiscal year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth certain information regarding
beneficial ownership of our voting shares as of February 25, 2013 by: (i) each shareholder known by us to be the beneficial owner
of 5% or more of the outstanding voting shares, (ii) each of our directors and executives and (iii) all directors and executive
officers as a group. Except as otherwise indicated, we believe that the beneficial owners of the voting shares listed below, based
on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community
property laws where applicable. Shares of common stock issuable upon exercise of options and warrants that are currently exercisable
or that will become exercisable within 60 days of February 25, 2013 have been included in the table.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective September 17, 2012, the Board of Directors passed
a resolution eliminating and discontinuing all Series A and B Convertible Preferred and Series C Preferred stock. No shares of
preferred stock are outstanding at the date of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="17" STYLE="text-align: center; border-bottom: Black 1pt solid">BENEFICIAL INTEREST TABLE</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="text-align: center; border-bottom: Black 1pt solid">Common Stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Name and Address of Beneficial Owner (1)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Number</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Percent of <BR>
Class (2)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Percent of All <BR>
Voting <BR>
Securities (3)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Percent of All <BR>
Voting <BR>
Securities <BR>
After Offering <BR>
(12)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 64%; text-align: left">Colton Melby (4)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">388,021</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">3.56</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">3.56</TD><TD NOWRAP STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">2.17</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">William J. Clough (5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">153,514</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.39</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.39</TD><TD NOWRAP STYLE="text-align: left">%*</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Thomas A. Price (6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">71,367</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sean P. Rooney (7)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,473</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Corey Lambrecht (8)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,700</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Matthew M McKenzie (9)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">53,551</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Daniel N. Ford (10)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,939</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Manchester Management Company, LLC (11)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">691,665</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.36</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.36</TD><TD NOWRAP STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.87</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Officers, Directors, Executives as Group</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">738,565</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.62</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.62</TD><TD NOWRAP STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.07</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Footnotes:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">1.</TD><TD>Except as otherwise indicated, the address of each beneficial
                                                              owner is c/o CUI Global, Inc., 20050 SW 112th Avenue, Tualatin,
                                                              Oregon 97062.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">2.</TD><TD>Calculated on the basis of 10,883,280 shares of common stock
                                                              issued and outstanding at December 31, 2012 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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">3.</TD><TD>Calculated on the basis of 10,883,280 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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">4.</TD><TD>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 Chairman of the Board of Directors.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">5.</TD><TD>Mr. Clough's common stock includes vested options to purchase
                                                              140,181 common shares. Mr. Clough is a Director and Chief Executive
                                                              Officer/President of CUI Global, Inc.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">6.</TD><TD>Mr. Price's shares included vested options to purchase 14,700
                                                              common shares. Mr. Price is a Director.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">7.</TD><TD>Mr. Rooney's shares include vested options to purchase 14,700
                                                              common shares. Mr. Rooney is a Director.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">8.</TD><TD>Mr. Lambrecht's shares include vested options to purchase 14,700
                                                              common shares. Mr. Lambrecht is a Director.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">9.</TD><TD>Mr. McKenzie's shares include vested options to purchase 46,124
                                                              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.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">10.</TD><TD>Mr. Ford's shares include vested options to purchase 24,935
                                                               common shares. Mr. Ford is the Chief Financial Officer of CUI Global,
                                                               Inc.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in"><FONT STYLE="text-underline-style: none; color: windowtext">11.</FONT></TD><TD>The
                                                                                                                                  securities
                                                                                                                                  are
                                                                                                                                  beneficially
                                                                                                                                  owned
                                                                                                                                  by
                                                                                                                                  both
                                                                                                                                  Manchester
                                                                                                                                  Management
                                                                                                                                  Company,
                                                                                                                                  LLC
                                                                                                                                  and
                                                                                                                                  James
                                                                                                                                  E.
                                                                                                                                  Besser
                                                                                                                                  per
                                                                                                                                  the
                                                                                                                                  Schedule
                                                                                                                                  13G/A
                                                                                                                                  filed
                                                                                                                                  February
                                                                                                                                  8,
                                                                                                                                  2013.
                                                                                                                                  <FONT STYLE="text-underline-style: none; color: windowtext">The
                                                                                                                                  address
                                                                                                                                  for
                                                                                                                                  Manchester
                                                                                                                                  Management
                                                                                                                                  Company,
                                                                                                                                  LLC
                                                                                                                                  and
                                                                                                                                  James
                                                                                                                                  E.
                                                                                                                                  Besser
                                                                                                                                  is
                                                                                                                                  131
                                                                                                                                  Charles
                                                                                                                                  Street,
                                                                                                                                  1st
                                                                                                                                  Floor,
                                                                                                                                  Boston,
                                                                                                                                  Massachusetts
                                                                                                                                  02114.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.6in; text-indent: -0.3in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.6in; text-indent: -0.3in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.3in"></TD><TD STYLE="width: 0.3in">12.</TD><TD>Calculated on the basis of 10,883,280 shares of common stock
                                                               outstanding plus the 7,000,000 shares to be issued by this offering;
                                                               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.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.6in; text-indent: -0.3in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.6in; text-indent: -0.3in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TRANSACTIONS WITH RELATED PERSONS, PROMOTERS
AND </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN CONTROL PERSONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Except as set forth herein, none of the Company&rsquo;s directors
or officers nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached
to its outstanding shares, nor any immediate family member of any of the foregoing persons, since the beginning of fiscal year
2010, has any material interest, direct or indirect, in any transaction or in any presently proposed transaction where the amount
involved exceeds $120,000 which has or will materially affect the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>International Electronic Devices, Inc. and Other Affiliate
Related Matters </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective May 16, 2008 the Company formed a wholly owned subsidiary
into which CUI, Inc., an Oregon corporation, merged all of its assets. The funding for this acquisition was provided by a bank
note, a seller&rsquo;s note and a convertible seller&rsquo;s note. Matthew McKenzie, COO, and Daniel Ford, CFO, each were partial
owners in CUI, Inc. prior to the acquisition and they each, along with James McKenzie, are shareholders in International Electronic
Devices, Inc. (&ldquo;IED&rdquo;). The seller&rsquo;s convertible note was satisfied in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The acquisition of CUI<FONT STYLE="text-underline-style: none">,
Inc.</FONT> utilized a $14,000,000 seller's promissory note issued<FONT STYLE="text-underline-style: none"> by CUI, Inc. (formerly
Waytronx Holding, Inc.)</FONT> to IED, <FONT STYLE="text-underline-style: none">seller of assets in the transaction</FONT>, 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, and 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 $1,500,000 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2012 and 2011, $3,468,221 and $1,110,809, respectively,
in principal and interest payments were made in relation to the promissory notes issued to IED. The 2012 payment utilized $3,000,000
from the equity sale proceeds for the repayment of principal. The 2011 payment included a note receivable balance of $192,508
held by CUI Global that was conveyed to IED and applied towards the promissory note balance in accordance with a settlement agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Leased Office and Warehouse</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As an integrated part of the CUI asset acquisition, the CUI
Global, Inc. corporate offices were relocated to the CUI location at 20050 SW 112th Avenue, Tualatin, Oregon 97062. CUI and CUI
Global occupy the 61,380 square feet of offices and warehouse premises under a ten year, non-cancelable lease agreement beginning
September 1, 2006 with Barakel, LLC (a related party) at a base monthly rent subject to periodic base payment increases plus real
property taxes, utilities, insurance and common area maintenance charges. During the year ended December 31, 2012, the monthly
base rent was $40,250 in accordance with the lease schedule. During the period January 1 through August 31, 2011, the monthly
base rent was $40,000 and increased in accordance with the lease schedule to $40,250 for the period September 1 through December
31, 2011. Barakel, LLC is controlled by James McKenzie, majority owner of CUI, Inc. prior to acquisition and father of Matt McKenzie,
and Matt McKenzie, COO and Director of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Matters Relating to the Bank Note</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The $6,000,000 bank note utilized in the acquisition of CUI
Inc., as noted above, was secured by personal guarantees in the form of Letters of Credit in favor of the Commerce Bank of Oregon
(&ldquo;Commerce Bank&rdquo;). In consideration for posting the Letters of Credit, the Company issued to each individual who supplied
a Letter of Credit, warrants to purchase, within three years at a per share price of $0.30, one CUI Global common share for every
thirty dollars ($30) of the Letter of Credit. The warrants became fully vested at the second anniversary date. A former officer
of the Company, Clifford Melby, received a 10,000 share warrant which was exercised August 17, 2010; a former director, John Rouse,
received a 10,000 share warrant which was exercised December 16, 2010; a director, Colton Melby (through an entity in which Colton
Melby controls the investment decisions), received a 13,333 share warrant which was exercised August 18, 2010; a director, Thomas
A. Price, received a 23,333 share warrant which was exercised April 19, 2011; a former owner of 10% of the voting rights attached
to our outstanding shares, Kjell H. Qvale Survivors Trust, received a 133,333 share warrant which was exercised May 13, 2011;
and a 10,000 share warrant was issued to an individual investor, which was exercised May 4, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In August 2010, the Company received $2,000,000 in equity investment
for which the Company issued 631,314 shares of common stock at $3.168 per share. The $2,000,000 received was used to pay down
the $6,000,000 bank loan with Commerce Bank, bringing the net loan balance to $4,000,000. The 631,314 shares of common stock were
issued as follows: 284,091 to an investor, 126,263 to an entity controlled by a director, Colton Melby, 126,263 to a director,
Thomas A. Price, and 94,697 to a former officer of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF CAPITAL STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AND RELATED STOCKHOLDER MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Description of Securities</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s common stock is traded on The NASDAQ Stock
Market under the trading symbol &quot;CUI.&quot; The Company currently has authorized 325,000,000 common shares, par value $0.001
per share and, as of December 31, 2012, the Company&rsquo;s issued and outstanding shares consisted of 10,883,280 shares of common
stock of which 8,636,820 shares are freely tradable without restriction or limitation under the Securities Act of 1933 (the &ldquo;Securities
Act&rdquo;). Effective September 17, 2012, the Board of Directors passed a resolution eliminating and discontinuing all Series A and B Convertible Preferred
and Series C Preferred stock. No shares of preferred stock are outstanding at the date of this prospectus. As of December 31,
2012, the Company had in excess of 3,000 beneficial shareholders of record. <FONT STYLE="text-underline-style: none; color: windowtext">For
a description of provisions of the Company's Articles of Incorporation and Bylaws that could delay, defer or prevent a change
of control, see &quot;Risk Factors-Risks Relating to Shareholder Rights.&quot;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><I><U>Common Stock</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The holders of common stock are entitled to one vote per share
for each share on all matters to be voted on by the stockholders and do not have cumulative voting rights, pre-emptive rights
or other rights to subscribe for, or purchase additional shares of capital stock, and no conversion rights, redemption or sinking-fund
provisions. The Company may issue additional shares of common stock which could dilute its current shareholder's share value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The holders of common stock are entitled to share ratably in
dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available
therefor. The Company has not paid any dividends to date. The Company intends to employ all available funds for the growth and
development of its business, and accordingly, does not intend to declare or pay any dividends in the foreseeable future. <FONT STYLE="text-underline-style: none; color: windowtext">
Our ability to pay dividends on our common stock is limited by our existing line of credit, and may be further restricted by the
terms of any of our future debt or preferred securities.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The approximate 2,246,460 shares of common stock held by existing
shareholders as of December 31, 2012 that are &quot;restricted&quot; within the meaning of Rule 144 adopted under the Securities
Act (the &quot;Restricted Shares&quot;), may not be sold unless they are registered under the Securities Act or sold pursuant
to an exemption from registration, such as the exemption provided by Rule 144 promulgated under the Securities Act. The Restricted
Shares were issued and sold by us in private transactions in reliance upon exemptions from registration under the Securities Act
and may only be sold in accordance with the provisions of Rule 144 of the Securities Act, unless otherwise registered under the
Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other than as described herein, as of the date of this prospectus,
there are currently no plans, arrangements, commitments or understandings for the issuance of additional shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Preferred Stock</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective September 17, 2012, the Board of Directors passed
a resolution eliminating and discontinuing all Series A and B Convertible Preferred and Series C Preferred stock. As of December
31, 2012, no shares of Series B and Series C Convertible Preferred Stock were outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Although we do not presently have any preferred stock outstanding
and at present the Company has no plans to issue any preferred stock, our Articles of Incorporation allow us to issue shares of
preferred stock without any vote or further action by our stockholders. Our board of directors has the authority to issue preferred
stock without further stockholder approval, including large blocks of preferred stock as well as the authority to fix and determine
the relative rights and preferences of preferred stock. As a result, our board of directors could authorize the issuance of a
series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive
dividend payments before dividends are distributed to the holders of common stock or other preferred stockholders and the right
to the redemption of the shares, together with a premium, prior to the redemption of our common stock or existing preferred shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The issuance of shares of preferred stock or the issuance of
rights to purchase such shares could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of
a series of preferred stock might impede a business combination by including class voting rights that would enable the holder
to block such a transaction or facilitate a business combination by including voting rights that would provide a required percentage
vote of the stockholders. In addition, under certain circumstances, the issuance of preferred stock could adversely affect the
voting power of the holders of the common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Although the Company&rsquo;s board of directors is required
to make any determination to issue such preferred stock based on its judgment as to the best interests of the shareholders of
the Company, the board of directors could act in a manner that would discourage an acquisition attempt or other transaction that
some, or a majority, of the shareholders might believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then market price of such stock. The board of directors does not at present intend to seek stockholder
approval prior to any issuance of currently authorized stock, unless required by law or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Employee Equity Incentive Plans</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2012, the Company had outstanding the following
equity compensation plan information:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">Plan Category</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Number of securities <BR>
to be issued upon <BR>
exercise of <BR>
outstanding options, <BR>
warrants and rights </TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted-average <BR>
exercise price of <BR>
outstanding options, <BR>
warrants and rights</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Number of securities <BR>
remaining available for <BR>
future issuances under <BR>
equity compensation <BR>
plans (excluding securities <BR>
reflected in column</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 73%; text-align: left">Equity compensation plans approved by security holders</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">49,917</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">5.47</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">1,329,833</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Equity compensation plans not approved by security holders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">632,224</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6.54</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">649,250</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">682,141</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.47</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,979,083</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Equity Compensation Plans Not Approved by Shareholders</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The 2009 Equity Incentive Plan (Executive)
provides for the issuance of stock options to attract, retain and motivate executive and management employees and directors and
to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management employees
and directors based upon the value of the Company&rsquo;s stock and to provide these individuals with an incentive to maximize
the success of the Company and further the interest of the shareholders. The 2009 Plan provides for the issuance of Incentive
Non Statutory Options. The Administrator of the plan is authorized to determine the exercise price per share at the time the option
is granted, but the exercise price shall not be less than the fair market value on the date the option is granted. Stock options
granted under the 2009 Plan have a maximum duration of ten years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The description of the Company&rsquo;s capital stock does not
purport to be complete and is subject to and qualified by its Articles of Incorporation, Bylaws, amendments thereto<FONT STYLE="text-underline-style: none; color: windowtext">,
which are filed as exhibits to the registration statement of which this prospectus is a part ,</FONT>and by the provisions of
applicable Colorado law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TRANSFER AGENT AND REGISTRAR</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The transfer agent and registrar for our common stock is Computershare
Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, Colorado 80401.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEMNIFICATION OF DIRECTORS AND OFFICERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Colorado General Corporation Act, as revised, provides
that if so provided in the articles of incorporation, the corporation shall eliminate or limit the personal liability of a director
to the corporation or to its shareholders for monetary damages for breach of fiduciary duty as a director; except that any such
provision shall not eliminate or limit the liability of a director to the corporation or to its shareholders for monetary damages
for any breach of the director's duty of loyalty to the corporation or to its shareholders, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, unlawful distributions, or any transaction from which the
director directly or indirectly derived an improper personal benefit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Articles of Incorporation and Bylaws provide that a person
who is performing his or her duties shall not have any liability by reason of being or having been a director of the corporation
and that the Company shall indemnify and advance expenses to a director or officer in connection with a proceeding to the fullest
extent permitted or required by and in accordance with the indemnification sections of Colorado statutes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The above discussion of our Articles of Incorporation and the
General Corporation Law of Colorado is only a summary and is qualified in its entirety by the full text of each of the foregoing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNDERWRITING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The <FONT STYLE="text-underline-style: none; color: windowtext">underwriter
named below has agreed to buy, subject to the terms of the underwriting agreement, the number of shares of common stock listed
opposite its name below. The underwriter is committed to purchase and pay for all of the shares if any are purchased, other than
those shares covered by the over-allotment option we describe below. The underwriting agreement also provides that if the underwriter
defaults, this offering of our securities may be terminated. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 49%; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; text-underline-style: double; color: windowtext">Number
    of Shares of Common Stock</FONT></TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 49%; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; text-underline-style: double; color: windowtext">Underwriter</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; text-align: center"></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; text-underline-style: none; color: windowtext">Craig-Hallum
    Capital Group LLC</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The underwriter has advised us that it proposes to offer the
shares of common stock to the public at $ per share. The underwriter proposes to offer the shares to be sold in this offering
to certain dealers at the same prices less an aggregate concession of not more than $ for each share. After the offering, these
figures may be changed by the underwriter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have granted to the underwriter an option to purchase up
to an additional 1,050,000 shares of common stock from us at the same prices to the public, and with the same underwriting discount,
as set forth in the table below. The underwriter may exercise this option any time during the 30-day period after the date of
this prospectus, but only to cover over-allotments, if any. To the extent the underwriter exercises the option, the underwriter
will become obligated, subject to certain conditions, to purchase the shares for which it exercises the option.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The table below summarizes the underwriting discounts that
we will pay to the underwriter. These amounts are shown assuming both no exercise and full exercise of the over-allotment option.
In addition to the underwriting discount, we have agreed to reimburse the underwriter for its reasonable out-of-pocket accountable
fees and disbursements in connection with this offering, which are estimated to be $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. We also granted the underwriter a right
of first refusal to serve as our exclusive placement agent, lead managing underwriter or exclusive financial advisor in connection
with future financing or merger or acquisition transactions we undertake on or before September 30, 2013. In accordance with applicable
rules of the Financial Industry Regulatory Authority (&quot;FINRA&quot;), the underwriter does not have more than one opportunity
to waive or terminate the right of first refusal in consideration of any payment or fee, and any payment or fee to waive or terminate
the underwriter's right of first refusal must be paid in cash and have a value not in excess of the greater of 1% of the proceeds
in this offering (or, if greater, the maximum amount permitted by FINRA rules for compensation in connection with this offering)
or 5% of the underwriting discount or commission paid in connection with any future financing subject to right of first refusal
(including any overallotment option that may be exercised). The fees and expenses of the underwriter that we have agreed to reimburse
are not included in the underwriting discounts set forth in the table below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The underwriter has not received and will not receive from
us any other item of compensation or value in connection with this offering considered by FINRA to be underwriting compensation
under its rule of fair price. The underwriting discount and other items of compensation the underwriter will receive were determined
through arms' length negotiations between us and the underwriter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Total with no</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Total with</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Over-Allotment</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Over-Allotment</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 82%"></TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Underwriting discount to be paid to the underwriter by us</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right"></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right"></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none; color: windowtext">We
</FONT>estimate that <FONT STYLE="text-underline-style: none; color: windowtext">the total expenses of the offering, excluding
underwriting discounts and commissions, will be $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. This includes $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of fees and expenses of the underwriter. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have agreed to indemnify the underwriter against certain
liabilities, including civil liabilities under the Securities Act of 1933, or to contribute to payments that the underwriter may
be required to make in respect of those liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our directors and officers have agreed not to offer, sell,
agree to sell, directly or indirectly, or otherwise dispose of any shares of common stock or any securities convertible into or
exchangeable for shares of common stock without the prior written consent of the underwriter for a period of 90 days after the
date of this prospectus. These &quot;lock-up&quot; agreements are subject to limited exceptions, including with respect to Colton
Melby, the Chairman of our Board of Directors, an exception for non-elected or forced sales of our securities in connection with
a margin account maintained by him with a broker-dealer and for which shares of our common stock serve as collateral for the account.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have agreed to certain restrictions on our ability to sell
additional shares of our common stock for a period of 90 days after the date of this prospectus. We have agreed not to offer,
sell, agree to sell, directly or indirectly, or otherwise issue or dispose of, any shares of common stock, securities convertible
into or exchangeable for shares of common stock, or any related security or instrument, without the prior written consent of the
underwriter. The agreement is subject to limited exceptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The 90-day lock-up period in all of the lock-up agreements
is subject to extension if (i) during the last 17 days of the lock-up period we issue an earnings release or material news or
a material event relating to us occurs or (ii) prior to the expiration of the lock-up period, we announce that we will release
earnings results during the 16-day period beginning on the last day of the lock-up period, in which case the restrictions imposed
in these lock-up agreements shall continue to apply until the expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event. The restrictions in the lock-up agreements can be waived
at any time in the sole discretion of the underwriter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To facilitate the offering, the underwriter may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock during and after the offering. Specifically, the underwriter
may over-allot or otherwise create a short position in the common stock for its own account by selling more shares than have been
sold to it by us. The underwriter may elect to cover any such short position by purchasing shares of common stock in the open
market or by exercising the over-allotment option granted to the underwriter. In addition, the underwriter may stabilize or maintain
the price of the common stock by bidding for or purchasing shares of common stock in the open market and may impose penalty bids.
If penalty bids are imposed, selling concessions allowed to broker-dealers participating in the offering are reclaimed if shares
of common stock previously distributed in the offering are repurchased, whether in connection with stabilization transactions
or otherwise. The effect of these transactions may be to stabilize or maintain the market price of the common stock at a level
above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of the
common stock to the extent that it discourages resales of the common stock. The magnitude or effect of any stabilization or other
transactions is uncertain. These transactions may be effected on the NASDAQ Stock Market or otherwise and, if commenced, may be
discontinued at any time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with this offering, the underwriter (and selling
group members) may also engage in passive market making transactions in the common stock on the NASDAQ Stock Market. Passive market
making consists of displaying bids on the NASDAQ Stock Market limited by the prices of independent market makers and effecting
purchases limited by those prices in response to order flow. Rule 103 of Regulation M promulgated by the SEC limits the amount
of net purchases that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize
the market price of the common stock at a level above that which might otherwise prevail in the open market and, if commenced,
may be discontinued at any time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The underwriter may facilitate the marketing of this offering
online directly or through one of its affiliates. In those cases, prospective investors may view offering terms and a prospectus
online and place orders online or through their financial advisors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Selling Restrictions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>European Economic Area </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a &quot;Relevant Member State&quot;) an offer to the public of any shares
of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member
State of any shares of our common stock may be made at any time under the following exemptions under the Prospectus Directive,
if they have been implemented in that Relevant Member State:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(a)</TD><TD><FONT STYLE="text-underline-style: none; color: windowtext">to
                                                                 any legal entity which is a qualified investor as defined in
                                                                 the Prospectus Directive; </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(b)</TD><TD>to fewer than 100 or, if the Relevant Member State has implemented
                                                                 the relevant provision of the 2010 PD Amending Directive, 150,
                                                                 natural or legal persons (other than qualified investors as defined
                                                                 in the Prospectus Directive), as permitted under the Prospectus
                                                                 Directive, subject to obtaining the prior consent of the representatives
                                                                 for any such offer; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">(c)&nbsp;&nbsp;&nbsp;in any
other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares of our common
stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the
Prospectus Directive. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the purposes of this provision, the expression an &quot;offer
to the public&quot; in relation to any shares of our common stock in any Relevant Member State means the communication in any
form and by any means of sufficient information on the terms of the offer and any shares of our common stock to be offered so
as to enable an investor to decide to purchase any shares of our common stock, as the same may be varied in that Member State
by any measure implementing the Prospectus Directive in that Member State, the expression &quot;Prospectus Directive&quot; means
Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant
Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression &quot;2010 PD Amending
Directive&quot; means Directive 2010/73/EU.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>United Kingdom </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This prospectus and any other material in relation to the shares
described herein is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors
within the meaning of Article 2(1)(e) of the Prospective Directive (&quot;qualified investors&quot;) that also (i) have professional
experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended (the &quot;Order&quot;), (ii) who fall within Article 49(2)(a) to (d) of the Order or (iii)
to whom it may otherwise lawfully be communicated (all such persons together being referred to as &quot;relevant persons&quot;).
The shares are only available to, and any invitation, offer or agreement to purchase or otherwise acquire such shares will be
engaged in only with, relevant persons. This prospectus and its contents are confidential and should not be distributed, published
or reproduced (in whole or in part) or disclosed by recipients to any other person in the United Kingdom. Any person in the United
Kingdom that is not a relevant person should not act or rely on this prospectus or any of its contents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The distribution of this prospectus in the United Kingdom to
anyone not falling within the above categories is not permitted and may contravene the Order. No person falling outside those
categories should treat this prospectus as constituting a promotion to him, or act on it for any purposes whatever. Recipients
of this prospectus are advised that we, the underwriter and any other person that communicates this prospectus are not, as a result
solely of communicating this prospectus, acting for or advising them and are not responsible for providing recipients of this
prospectus with the protections which would be given to those who are clients of any aforementioned entities that is subject to
the Financial Services Authority Rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Italy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The offering of the shares of our common stock has not been
registered pursuant to the Italian securities legislation and, accordingly, we have not offered or sold, and will not offer or
sell, our common stock in the Republic of Italy in a solicitation to the public, and that sales of our common stock in the Republic
of Italy shall be effected in accordance with all Italian securities, tax and exchange control and other applicable laws and regulations.
In any case, our common stock cannot be offered or sold to any individuals in the Republic of Italy either in the primary market
or the secondary market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We will not offer, sell or deliver any securities or distribute
copies of this prospectus or any other document relating to our common stock in the Republic of Italy except to &quot;Professional
Investors&quot;, as defined in Article 31.2 of CONSOB Regulation No. 11522 of 2 July 1998 as amended (&quot;Regulation No. 11522&quot;),
pursuant to Article 30.2 and 100 of Legislative Decree No. 58 of 24 February 1998 as amended (&quot;Decree No. 58&quot;), or in
any other circumstances where an expressed exemption to comply with the solicitation restrictions provided by Decree No. 58 or
Regulation No. 11971 of 14 May 1999 as amended applies, provided, however, that any such offer, sale or delivery of our common
stock or distribution of copies of this prospectus or any other document relating to our common stock in the Republic of Italy
must be:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(a)</TD><TD><FONT STYLE="text-underline-style: none; color: windowtext">made
                                                             by investment firms, banks or financial intermediaries permitted
                                                             to conduct such activities in the Republic of Italy in accordance
                                                             with Legislative Decree No. 385 of 1 September 1993 as amended (&quot;Decree
                                                             No. 385&quot;), Decree No. 58, CONSOB Regulation No. 11522 and any
                                                             other applicable laws and regulations;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(b)</TD><TD><FONT STYLE="text-underline-style: none; color: windowtext">in
                                                             compliance with Article 129 of Decree No. 385 and the implementing
                                                             instructions of the Bank of Italy, pursuant to which the issue, trading
                                                             or placement of securities in Italy is subject to a prior notification
                                                             to the Bank of Italy, unless an exemption, depending, inter alia,
                                                             on the aggregate amount and the characteristics of our common stock
                                                             issued or offered in the Republic of Italy, applies; and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 27pt"></TD><TD STYLE="width: 18pt">(c)</TD><TD><FONT STYLE="text-underline-style: none; color: windowtext">in
                                                             compliance with any other applicable notification requirement or
                                                             limitation which may be imposed by CONSOB or the Bank of Italy.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INTERESTS OF NAMED EXPERTS AND COUNSEL
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Legal Counsel</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The legality of the issuance of the shares offered in this
prospectus will be passed on for us by Johnson, Pope, Boker, Ruppel &amp; Burns, LLP. <FONT STYLE="font-size: 10pt">No shareholder
of this firm owns any of our securities. </FONT>The underwriter has been represented by Faegre Baker Daniels LLP, Minneapolis,
Minnesota.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">No expert or counsel named in this prospectus as having prepared
or having certified any part of this prospectus or having given an opinion upon the validity of the securities being registered
or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant
or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parent or subsidiaries
as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Certifying Accountant</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The financial statements of the Company<FONT STYLE="text-underline-style: none; color: windowtext">
included</FONT> herein as of<FONT STYLE="text-underline-style: none; color: windowtext"> December 31, 2012 and December 31, 2011,
and for each of the two fiscal years ended</FONT> December 31, 2012, have been audited by Liggett, Vogt &amp; Webb, P. A., Independent
Registered Public Accounting Firm<FONT STYLE="text-underline-style: none; color: windowtext">, as set forth in its report thereon
appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting
and auditing. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none; color: windowtext">The
financial statements of Orbital Gas Systems Limited included herein as of fiscal years ended June 30, 2012 and June 30, 2011 have
been audited by </FONT>Baker Tilly Virchow Krause, LLP, <FONT STYLE="text-underline-style: none; color: windowtext">Independent
Auditors, as set forth in its report thereon appearing elsewhere herein, and are included in reliance upon such report given on
the authority of such firm as experts in accounting and auditing. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FOR SECURITIES ACT LIABILITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Insofar as indemnification for liabilities may be invoked to
disclaim liability for damages arising under the Securities Act of 1933, as amended, or the Securities Act of 1934 (collectively,
the &quot;Acts&quot;), as amended, it is the position of the Securities and Exchange Commission that such indemnification is against
public policy as expressed in the Acts and are therefore, unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WHERE YOU CAN FIND ADDITIONAL INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 pursuant to the Securities Act of 1933, as amended, with respect to the offer, issuance and
sale of the shares of our common stock being registered herein. This Prospectus does not contain all of the information set forth
in the registration statement. For further information with respect to us and the shares of our common stock to be sold in this
offering, we make reference to the registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none; color: windowtext">We
are subject to the informational requirements of the Securities Exchange Act of 1934 and are required to file annual, quarterly
and current reports, proxy statements and other information with the SEC. </FONT>You may read and copy all or any portion of the
registration statement or any other information, which we filed at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. The address for the SEC's public reference room in Washington, D.C. is U.S. Securities and Exchange
Commission, 100 &quot;F&quot; Street, N.E., Washington, DC 20549. You may request copies of these documents, upon payment of a
duplicating filing fee, by writing to the SEC. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are also available to you free of charge at the SEC's
web site at http://www.sec.gov and our Company website at www.CUIGlobal.com.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 85%; font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="color: black"><B>CUI Global, Inc.</B></FONT></TD>
    <TD STYLE="width: 3%; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: left; vertical-align: bottom"><FONT STYLE="color: black">Pages</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="color: black">Report of Independent Auditors</FONT></TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="color: black">F-2</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="color: black">Consolidated Balance Sheets as of December 31, 2012 and 2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="color: black">F-3</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="color: black">Consolidated Statements of Operations for the Years Ended December 31,</FONT> <FONT STYLE="color: black">2012
    and 2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="color: black">F-4</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="color: black">Consolidated Statements of Comprehensive Income and Loss for the Years</FONT> <FONT STYLE="color: black">Ended
    December 31, 2012 and 2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="color: black">F-5</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="color: black">Consolidated Statement of Changes in Stockholders&rsquo; Equity for the Years</FONT> <FONT STYLE="color: black">Ended
    December 31, 2012 and 2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="color: black">F-6 - F-7</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="color: black">Consolidated Statement of Cash Flows for the Years Ended December 31, 2012 and 2011 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="color: black">F-8 &ndash; F-9</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="color: black">Notes to the Consolidated Financial Statements</FONT></TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: bottom"><FONT STYLE="color: black">F-10</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 85%; font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="color: black"><B>Orbital Gas Systems Limited</B></FONT></TD>
    <TD STYLE="width: 3%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="color: black">Pages</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="color: black">Report of Independent Auditor&rsquo;s</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="color: black">F-31</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Profit and Loss Account for the Years Ended June 30, 2012 and 2011</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="color: black">F-32</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Statement of Total Recognized Gains and Losses for the Years Ended June 30, 2012 and 2011</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="color: black">F-33</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Note of Historical Cost Profits and Losses for the Years Ended June 30, 2012 and 2011</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="color: black">F-33</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Balance Sheet for as of June 30, 2012 and 2011</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="color: black">F-34</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Cash Flow Statement for the Years Ended June 30, 2012 and 2011</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="color: black">F-35</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Reconciliation of Movements in Shareholders' Funds</TD>
    <TD>&nbsp;</TD>
    <TD>F-36</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Accounting Policies and Notes to the Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD>F-37</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the Board of Directors and Shareholders of:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">CUI Global, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying consolidated
balance sheets of CUI Global, Inc. (the &ldquo;Company&rdquo;) as of December 31, 2012 and 2011, and the related statements of
operations and comprehensive income and loss, stockholders&rsquo; equity, and cash flows for the years ended December 31, 2012
and 2011. These financial statements are the responsibility of the Company&rsquo;s management. Our responsibility is to express
an opinion on these financial statements based on our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In our opinion, the consolidated financial statements referred
to above present fairly in all material respects, the financial position of CUI Global, Inc. as of December 31, 2012 and 2011 and
the results of its operations and its cash flows for the years ended December 31, 2012 and 2011 in conformity with accounting principles
generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">/s/ LIGGETT, VOGT &amp; WEBB,
P.A.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Certified Public Accountants </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Boynton Beach, Florida</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">February 19, 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CUI Global, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Consolidated Balance Sheets </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Years Ended December 31, 2012
and 2011 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,<BR> 2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">December 31,<BR> 2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Current Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; color: black; text-align: left; padding-left: 9pt">Cash and cash equivalents</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">3,039,840</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">176,775</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Trade accounts receivable, net of allowance of $130,000 and $125,000, respectively</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,965,926</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,694,641</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Inventories, net of allowance of $250,000 and $240,000, respectively</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,843,905</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,563,111</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Prepaid expenses and other</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">378,885</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">683,101</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 27pt">Total current assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,228,556</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">8,117,628</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Property and equipment, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,016,219</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">910,810</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Other assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Investment - equity method</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">258,244</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">198,621</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Other Intangible assets, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">8,618,524</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">8.967,041</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Deposits and other</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">11,360</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">92,216</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Notes receivable, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">501,422</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">529,706</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Debt offering costs, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">42,778</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">116,111</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 1pt; padding-left: 9pt">Goodwill</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">13,046,358</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">13,046,358</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total other assets</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">22,478,686</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">22,950,053</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; padding-left: 27pt">Total assets</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">36,723,461</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">31,978,491</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Liabilities and stockholders' equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accounts payable</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">2,496,881</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">2,114,029</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Preferred stock dividends payable</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">5,054</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-left: 9pt">Line of credit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">459,448</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,528,900</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accrued expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,142,839</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,197,395</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accrued compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">186,636</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">126,672</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Unearned revenue</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">371,541</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">70,755</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Note payable, current portion due</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,000,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Convertible note payable, related party, current portion due</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">35,000</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 27pt">Total current liabilities</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,657,345</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">9,077,805</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Long term note payable, related party, net of current portion due</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">7,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">10,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total long term liabilities</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">7,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">10,303,683</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total liabilities</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">11,961,028</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">19,381,488</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Commitments and contingencies</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Stockholders' equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Preferred stock, par value $0.001; 0 and 10,000,000 shares authorized at December 31, 2012 and 2011, respectively</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Convertible Series A preferred stock, 0 and 5,000,000 shares authorized, 0 and 50,543 shares issued and outstanding liquidation preference of $0 and $50,543 at December 31, 2012 and December 31, 2011, respectively</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">51</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Convertible Series B preferred stock, 0 and 30,000 shares authorized, and no shares outstanding at December 31, 2012 and December 31, 2011, respectively</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Convertible Series C preferred stock, 0 and 10,000 shares authorized, and no shares outstanding at December 31, 2012 and December 31, 2011, respectively</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock, par value $0.001; 325,000,000 and 325,000,000 shares authorized and 10,883,280 and 7,134,856 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,883</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,315</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">100,947,708</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">86,217,169</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accumulated deficit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(76,171,822</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(73,645,501</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated other comprehensive gain (loss)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(24,336</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">17,969</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total stockholders' equity</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">24,762,433</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">12,597,003</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; padding-left: 27pt">Total liabilities and stockholders' equity</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">36,723,461</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">31,978,491</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CUI Global, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Consolidated Statements of Operations
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Years Ended December 31, 2012
and 2011 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold">Revenues:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; color: black; text-align: left; padding-left: 9pt">Product Sales</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">41,031,050</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">38,877,698</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Revenue from freight</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">53,539</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">60,628</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 0.25in">Total revenue</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">41,084,589</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">38,938,326</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold">Cost of revenues</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">25,707,893</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">24,133,073</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Gross profit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">15,376,696</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,805,253</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Selling, general and administrative</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">16,221,373</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,347,853</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Research and development</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">791,332</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">716,321</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Bad debt</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">65,763</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">82,192</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Impairment of intangible, trademark and trade name V-Infinity</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">278,428</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 0.25in">Total operating expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">17,356,896</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">14,146,366</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; font-weight: bold; text-align: left; padding-bottom: 1pt">Income (loss) from continuing operations</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(1,980,200</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">658,887</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Other income (expense)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Other income</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">95,069</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">53,657</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Other expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(18,567</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(38,678</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Gain on sale of technology rights</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">143,636</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Earnings from equity investment</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">59,623</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">41,472</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Interest expense - amortization of debt offering costs and debt discount</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(73,333</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(334,747</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Interest expense</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(575,199</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(918,189</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Total other income (expense), net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(512,407</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,052,849</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Loss from continuing operations before taxes</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,492,607</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(393,962</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Provision for taxes</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">33,714</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">29,810</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Consolidated loss from continuing operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,526,321</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(423,772</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Income (loss) from discontinued operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">(Loss) from discontinued operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(160,153</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Gain on divestment of Comex Electronics</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">603,034</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net income from discontinued operations</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">442,881</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Consolidated Net income (loss)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,526,321</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">19,109</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Less: Net income from discontinued operations - noncontrolling interest</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">67,872</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net (loss) allocable to common stockholders</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(2,526,321</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(48,763</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Basic and diluted (loss) per common share from continuing operations</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(0.25</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(0.06</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Basic and diluted income per common share from discontinued operations - attributable to CUI Global, Inc.</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">0.05</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Basic and diluted (loss) per common share</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(0.25</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(0.01</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Basic weighted average common and common equivalents shares outstanding</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">10,175,989</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">7,249,180</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CUI Global, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Consolidated Statements of Comprehensive
Income and Loss </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Years Ended December 31, 2012
and 2011 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; color: black; font-weight: bold; text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Net (loss) allocable to common stockholders</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; color: black; text-align: right">(2,526,321</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; color: black; text-align: right">(48,763</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left">Other comprehensive income (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Foreign currency translation adjustment</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(42,305</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">68,779</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold; text-align: left; padding-bottom: 2.5pt">Comprehensive income (loss)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(2,568,626</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">20,016</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CUI Global, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Consolidated Statements of Changes in
Stockholders&rsquo; Equity </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Years Ended December 31, 2012
and 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 7pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">Series&nbsp;A&nbsp;Preferred&nbsp;Stock&nbsp;and</TD><TD STYLE="color: black">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">Common&nbsp;Stock&nbsp;and</TD><TD STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">Preferred&nbsp;Stock&nbsp;Issuable</TD><TD STYLE="color: black">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">Series&nbsp;B&nbsp;Preferred&nbsp;Stock</TD><TD STYLE="color: black">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">Series&nbsp;C&nbsp;Preferred&nbsp;Stock</TD><TD STYLE="color: black">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">Common&nbsp;Stock&nbsp;Issuable</TD><TD STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 28%; color: black; padding-bottom: 2.5pt">Balance, December 31, 2010</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">50,543</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">51</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">7,136,523</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">7,137</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Warrants and options granted for services and compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for options and warrants exercised in exchange for cash and accrued compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">166,936</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">167</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for services and compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,957</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">11</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Fractional Shares that were Rounded Up as a Result of the Reverse-Split</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">97</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Noncontrolling interest divestment of Comex Electronics Ltd.</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Net loss for the year ended December 31, 2011</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Less Non-controlling interest</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Other comprehensive gain</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Balance, December 31, 2011</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">50,543</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">51</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">7,314,513</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">7,315</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Warrants and options granted for services and compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for options and warrants exercised in exchange for cash and accrued compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,071</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for the conversion of Preferred Stock and accrued preferred stock dividends</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(50,543</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(51</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">9,661</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">9</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Issuance of common stock</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,359,887</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,360</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for services and compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">188,096</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">188</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for royalties</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,052</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Fractional Shares that were Rounded Up as a Result of the Reverse-Split</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Net loss for the year ended December 31, 2012</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Other comprehensive (loss)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Balance, December 31, 2012</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">10,883,280</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">10,883</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<!-- Field: Page; Sequence: 104; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 7pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center">Total</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center">Additional</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center">Subscription</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center">Accumulated</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center">Noncontrolling</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center">Accumulated&nbsp;Other</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center">Stockholders'</TD><TD NOWRAP STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Paid-in&nbsp;capital</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Receivable</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Interest</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Comprehensive&nbsp;Income&nbsp;(Loss)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Equity&nbsp;(Deficit)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 46%; color: black; padding-bottom: 2.5pt">Balance, December 31, 2010</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">85,939,480</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">(73,596,738</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">(346,344</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">(50,810</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; color: black; text-align: right">11,952,776</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Warrants and options granted for services and compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">166,367</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">166,367</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for options and warrants exercised in exchange for cash and accrued compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">49,833</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">50,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for services and compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">61,489</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">61,500</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Fractional Shares that were Rounded Up as a Result of the Reverse-Split</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Noncontrolling interest divestment of Comex Electronics Ltd.</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">278,472</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">278,472</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Net loss for the year ended December 31, 2011</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(48,763</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(48,763</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Less Non-controlling interest</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">67,872</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">67,872</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Other comprehensive gain</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">68,779</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">68,779</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Balance, December 31, 2011</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">86,217,169</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(73,645,501</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">17,969</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">12,597,003</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Warrants and options granted for services and compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">232,785</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">232,785</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for options and warrants exercised in exchange for cash and accrued compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,011</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,021</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for the conversion of Preferred Stock and accrued preferred stock dividends</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">5,095</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">5,053</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Issuance of common stock</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,525,903</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,529,263</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for services and compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">957,108</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">957,296</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock issued for royalties</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,637</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">6,638</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Fractional Shares that were Rounded Up as a Result of the Reverse-Split</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Net loss for the year ended December 31, 2012</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,526,321</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,526,321</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Other comprehensive (loss)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(42,305</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(42,305</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Balance, December 31, 2012</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">100,947,708</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(76,171,822</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(24,336</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">24,762,433</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CUI Global, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Consolidated Statements of Cash Flows
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Years Ended December 31, 2012
and 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">CASH FLOWS FROM OPERATING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; color: black; text-align: left">Net (loss) - attributable to common stockholders</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">(2,526,321</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">(48,763</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -9pt; padding-left: 9pt">Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Stock based compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,190,081</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">227,867</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -9.35pt; padding-left: 18.7pt">Non-cash interest expense, including amortization of beneficial conversion value, warrant related debt discounts and intrinsic value of convertible debt and amortization of debt discount and amortization of debt offering costs</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">73,333</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">334,747</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Earnings in equity investment</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(59,623</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(41,472</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Bad debt expense</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">65,763</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">82,192</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Amortization of technology rights</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">26,510</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">245,144</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Amortization of patent costs</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">664</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">333</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Amortization of website development</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">13,718</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">4,328</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Amortization of intangible, trademark and trade name V-Infinity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">109,540</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Impairment of intangible, trademark and trade name V-Infinity</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">278,428</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Inventory reserve</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">75,995</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Gain on sale of technology rights</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(143,636</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Loss on disposal of assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,563</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Net income - noncontrolling interest in discontinued operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">67,872</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-left: 9pt">Depreciation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">579,861</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">520,959</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">(Increase) decrease in assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Trade accounts receivable</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,337,048</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">107,902</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-left: 9pt">Inventory</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,290,794</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">96,535</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Prepaid expenses and other current assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">285,690</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(335,302</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Deposits and other assets</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">80,856</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(29,001</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Increase (decrease) in liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accounts payable</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">382,852</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">356,347</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accrued expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(47,919</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(391,289</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Accrued compensation</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">59,964</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(272,341</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Unearned revenue</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">300,786</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">725</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">NET CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(1,803,659</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">860,705</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">NET CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">22,141</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Investment in patents</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(6,646</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Investment in other intangible assets, net</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(80,343</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(37,418</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Proceeds from Notes receivable</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">46,808</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">63,506</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Proceeds from sales of technology rights</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">425,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Purchase of property and equipment</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(685,269</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(422,970</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">NET CASH PROVIDED BY (USED IN) CONTINUING INVESTING ACTIVITIES</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(718,804</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">21,472</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 27pt">NET CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">195,278</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Payments to demand notes payable, net of proceeds</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,069,452</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(20,879</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Payments to notes and loans payable, net of proceeds</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(4,000,000</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(481,326</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Proceeds from (payments to) convertible notes payable, related party</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(35,000</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">35,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Payments on notes and loans payable, related party</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(3,000,000</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(300,000</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 0.25in">Proceeds from sales of common stock, and exercise of warrants and options, net of offering costs</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">13,532,285</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">50,000</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">NET CASH PROVIDED BY (USED IN) CONTINUING FINANCING ACTIVITIES</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">5,427,833</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(717,205</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 27pt">NET CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(648,218</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">EFFECT OF EXCHANGE RATE CHANGES ON CASH</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(42,305</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">68,779</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Cash and cash equivalents at beginning of year</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">176,775</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">373,823</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Cash and cash equivalents at end of period</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">3,039,840</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">176,775</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">2,863,065</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(197,048</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B STYLE="font-weight: bold">(continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">For the years ended<BR> December 31,</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; color: black; text-align: left; padding-bottom: 2.5pt">Income taxes paid</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; color: black; text-align: right">72,630</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; color: black; text-align: right">39,264</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Interest paid</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">597,814</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">917,216</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; text-indent: -9pt; padding-left: 9pt">SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Amortization of debt offering costs</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">73,333</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">334,747</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Royalties paid in common stock</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">6,638</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Conversion of accrued liabilities to common stock</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">5,054</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Conversion of preferred stock to common stock</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">51</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -9.35pt; padding-left: 9.35pt">Common stock issued for consulting services and compensation and accrued liabilities payable in common stock</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">957,295</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">61,500</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CUI Global, Inc. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to Consolidated Financial Statements
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2012 and 2011 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>1.</B></TD><TD><B>NATURE OF OPERATIONS AND BASIS OF PRESENTATION </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">CUI Global Inc. (&quot;the Company&quot;) is a platform
company dedicated to maximizing shareholder value through the acquisition, development and commercialization of new, innovative
technologies. Through its subsidiaries, CUI Global has built a diversified portfolio of industry leading technologies that touch
many markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">CUI defines its products into three categories: electronic
components including connectors, speakers, buzzers and control solutions including encoders and sensors; power solutions and test
and measurement including the Vergence GasPT2 . These offerings provide a technology architecture that addresses power and related
accessories as well as test and measurement capabilities to industries ranging from consumer electronics to defense and alternative
energy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">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. The operations of CUI Japan are not affected
by this divestment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>2.</B></TD><TD><B>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Use of Estimates </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates in 2012 and 2011 include estimates used to review the Company&rsquo;s long-lived assets
for impairment, allowances for uncollectible accounts, inventory valuation, valuations of non-cash capital stock issuances and
the valuation allowance on deferred tax assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Principles of Consolidation </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The consolidated financial statements for 2012 include
the accounts of CUI Global, Inc. and its wholly owned subsidiaries CUI, Inc. and CUI Japan. The consolidated financial statements
for 2011 include the accounts of CUI Global, Inc. and its wholly owned subsidiaries CUI, Inc. and CUI Japan and the discontinued
operations of Comex Electronics through June 30, 2011. Significant intercompany accounts and transactions have been eliminated
in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Fair Value of Financial Instruments </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">FASB Accounting Standards Codification No. 825 (&ldquo;FASB
ASC 825&rdquo;), &ldquo;Financial Instruments&rdquo;, requires disclosures of information about the fair value of certain financial
instruments for which it is practicable to estimate that value. For purposes of this disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than
in a forced sale or liquidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Management believes the carrying amounts of the short-term
financial instruments, including cash and cash equivalents, accounts receivable, restricted cash, prepaid expense and other assets,
accounts payable, accrued liabilities, notes payable, deferred compensation and other liabilities reflected in the accompanying
balance sheet approximate fair value at December 31, 2012 and 2011 due to the relatively short-term nature of these instruments.
As of December 31, 2012 and 2011, the Company does not have financial assets or liabilities that are measured at fair value on
a recurring basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Cash and Cash Equivalents </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Cash includes deposits at financial institutions with
maturities of three months or less. The Company at times has cash in banks in excess of FDIC insurance limits and places its temporary
cash investments with high credit quality financial institutions. At December 31, 2012 and 2011, the Company had $2,724,922 and
$0 balances at financial institutions which were in excess of the FDIC insured limits. However, at December 31, 2012 the Company
held $64,497 in Japanese foreign bank accounts and $421 in European foreign bank accounts. At December 31, 2011 the Company held
$71,995 in Japanese foreign bank accounts and $62,664 in European foreign bank accounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Accounts Receivable and Allowance for Uncollectible Accounts
</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Accounts receivable consist of the receivables associated
with the revenue derived from product sales. An allowance for uncollectible accounts is recorded to allow for any amounts that
may not be recoverable, based on an analysis of prior collection experience, customer credit worthiness and current economic trends.
Based on management&rsquo;s review of accounts receivable, an allowance for doubtful accounts of $130,000 and $125,000 was recorded
at December 31, 2012 and 2011, respectively. The reserve in both periods takes into account aged receivables that management believes
should be specifically reserved for as well as historic experience with bad debts to determine the total reserve appropriate for
each period. Receivables are determined to be past due based on the payment terms of original invoices. The Company grants credit
to its customers, with standard terms of Net 30 days. The Company routinely assesses the financial strength of its customers and,
therefore, believes that its accounts receivable credit risk exposure is limited. Additionally, the Company maintains a foreign
credit receivables insurance policy that covers many of its receivable balances in effort to further reduce credit risk exposure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Inventory </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Inventories consist of finished and un-finished products
and are stated at the lower of cost or market; using the first-in, first-out (FIFO) method as a cost flow convention. At December
31, 2012 and 2011 inventory is valued, net of allowances, at $4,843,905 and $3,563,111, respectively. The allowances for inventory
were $250,000 and $240,000 at December 31, 2012 and 2011, respectively. At December 31, 2012, CUI had finished goods of $4,675,032,
raw materials of $365,242, and work in process of $53,631.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Furniture, Equipment and Software </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Furniture, equipment and software are recorded at
cost and include major expenditures, which increase productivity or substantially increase useful lives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Maintenance, repairs and minor replacements are charged
to expenses when incurred. When furniture and equipment is sold or otherwise disposed of, the asset and related accumulated depreciation
are removed from this account, and any gain or loss is included in the statement of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The cost of furniture, equipment and software is depreciated
over the estimated useful lives of the related assets. Depreciation is computed using the straight-line method for financial reporting
purposes. The estimated useful lives and accumulated depreciation for furniture, equipment and software are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 50%; border-collapse: collapse; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 40%; padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 25%">&nbsp;</TD>
    <TD STYLE="width: 35%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Estimated</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Useful Life </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Furniture and equipment </FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">3 to 7 years </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Software </FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">3 to 5 years </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Long-Lived Assets </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Long-lived assets and certain identifiable assets
related to those assets are periodically reviewed for impairment whenever circumstances and situations change such that there is
an indication that the carrying amounts may not be recoverable. <FONT STYLE="color: black">In performing the review for recoverability,
the future cash flows expected to result from the use of the asset and its eventual disposition are estimated. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment
loss is recognized as the excess of the carrying amount over the fair value. Otherwise, an impairment loss is not recognized. Management
estimates the fair value and the estimated future cash flows expected. Any changes in these estimates could impact whether there
was impairment and the amount of the impairment. </FONT>There were $278,428 and $0 of impairment expenses recorded by the Company
in 2012 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Identifiable Intangible Assets </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Intangible assets are stated at cost net of accumulated
amortization and impairment. The fair value for intangible assets acquired through acquisitions is measured at the time of acquisition
utilizing the following inputs, as needed:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 23%">&nbsp;</TD>
    <TD STYLE="width: 3%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">1. </FONT></TD>
    <TD STYLE="width: 74%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Inputs used to measure fair value are unadjusted quote prices available in active markets for the identical assets or liabilities if available. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 23%">&nbsp;</TD>
    <TD STYLE="width: 3%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2. </FONT></TD>
    <TD STYLE="width: 74%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">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. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 23%">&nbsp;</TD>
    <TD STYLE="width: 3%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">3. </FONT></TD>
    <TD STYLE="width: 74%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">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&rsquo;s estimates of market participant assumptions. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 23%">&nbsp;</TD>
    <TD STYLE="width: 3%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4. </FONT></TD>
    <TD STYLE="width: 74%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Expert appraisal and fair value measurement as completed by third party experts. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Intangible assets with a determinable finite life,
other than goodwill, including technology rights and patents&nbsp;are amortized over an estimated useful life of 15 years or their estimated
useful life if less than 15 years. Technology rights are amortized over a twenty year life and are reviewed for impairment annually.
Patent costs are amortized over the life of the patent. Any patents not approved will be expensed at that time. Intangible assets
are reviewed for impairment annually during the second quarter and whenever circumstances and situations change such that there
is an indication that the carrying amounts may not be recoverable. <FONT STYLE="color: black">Through this review of all known
events and circumstances, management concluded that an impairment charge of $278,428 was necessary regarding the Intangible, trademark
and trade name V-Infinity during 2012. The analysis completed in 2012 determined that there was no other impairment necessary
during 2012 to other intangible assets. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Goodwill Assets </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As detailed in ASC 350 Intangibles-Goodwill and Other
subsection 20, the Company tests for goodwill impairment in the second quarter of each year and whenever events or changes in circumstances
indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As detailed in ASC 350-20-35-3A, in performing its
testing for goodwill impairment, management has completed a qualitative analysis to determine whether it was more likely than not
that the fair value of a reporting unit is less than its carrying amount, including goodwill. To complete this review, management
followed the steps in ASC 350-20-35-3C to evaluate the fair values of goodwill and considered all known events and circumstances
that might trigger an impairment of goodwill. The analysis completed in both 2012 and 2011, determined that there was no impairment
necessary to goodwill assets. Through the reviews completed in 2012 and 2011, management concluded that there were no events or
circumstances that triggered an impairment (and there was no expectation that a reporting unit or a significant portion of a reporting
unit would be sold or otherwise disposed of in the following year), therefore, no further analysis was necessary to prepare for
goodwill impairment beyond the steps in 350-20-35-3C in accordance with ASU 2011-08.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">CUI Global has adopted ASU 2011-08, which simplifies
how an entity is required to test goodwill for impairment. The ASU allows an entity to first assess qualitative factors to determine
whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this ASU, CUI is not required to calculate
the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than
not that its fair value is less than its carrying amount. The ASU includes a number of factors to consider in conducting the qualitative
assessment. We adopted ASU 2011-08 during the year ended December 31, 2012. The adoption of ASU 2011-08 did not have an impact
on our consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Investment &ndash; Equity Method </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Through the acquisition of CUI, Inc. the Company obtained
352,589 common shares <FONT STYLE="color: black">(representing a 11.54% interest at December 31, 2012 and 2011, respectively) </FONT>in
Test Products International, Inc., hereafter referred to as TPI. TPI is a provider of handheld test and measurement equipment.
CUI Global enjoys a close association with this affiliate through common Board of Director membership and participation, that allows
for a significant amount of influence over affiliate business decisions. Accordingly, for financial statement purposes, the Company
accounts for its investment in this affiliated entity under the equity method. A summary of the unaudited financial statements
of the affiliate for the years ended December 31, 2012 and 2011 are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; color: black; text-align: left">Current assets</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">6,509,736</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">5,532,030</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 1pt">Non-current assets</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">540,518</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">577,335</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Total Assets</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">7,050,254</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">6,109,365</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Current liabilities</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">3,272,360</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">2,696,409</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Non-current liabilities</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,203,826</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,355,370</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Stockholders' equity</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">2,574,068</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">2,057,586</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Total Liabilities and Stockholders' Equity</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">7,050,254</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">6,109,365</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Revenues</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">12,538,711</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">12,280,892</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Operating income</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">757,484</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">598,691</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Net profit</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">516,482</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">359,254</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Company share of Net Profit at 11.54%</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">59,623</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">41,472</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Equity investment in affiliate</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">258,244</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">198,621</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Stock-Based Compensation </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The Company accounts for stock based compensation
using FASB Accounting Standards Codification No. 718 (&ldquo;FASB ASC 718&rdquo;), &ldquo;Compensation &ndash; Stock Compensation&rdquo;.
FASB Codification No. 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded
as an expense over the related vesting period. The statement also requires the recognition of compensation expense for the fair
value of any unvested stock option awards outstanding at the date of adoption. Employee stock compensation is recorded at fair
value using the Black Scholes Pricing Model. The underlying assumptions used in the Black Scholes Pricing Model by the Company
are taken from publicly available sources including, volatility is calculated using historic stock price information from online
finance websites such as Google Finance and Yahoo Finance, the stock price on the date of grant is obtained from online finance
websites such as those previously noted, appropriate discount rates are obtained from the United States Federal Reserve economic
research and data website and other inputs are determined based on previous experience and related estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">See Note 13 STOCK-BASED EMPLOYEE COMPENSATION for additional
disclosure and discussion of the employee stock plan and activity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Common stock, stock options and common stock warrants
issued to other than employees or directors are recorded on the basis of their fair value, as required by FASB ASC 505, which is
measured as of the date required by FASB ASC 505, &ldquo;Equity &ndash; Based Payments to Non-Employees&rdquo;. In accordance with
FASB ASC 505, the stock options or common stock warrants are valued using the Black-Scholes option pricing model on the basis of
the market price of the underlying common stock on the &ldquo;valuation date,&rdquo; which for options and warrants related to
contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the
vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period
over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense
is computed under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the
end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date
is reflected in the expense recorded in the subsequent period in which that change occurs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Revenue Recognition </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The recognition of revenues requires judgment, including
whether a sale includes multiple elements, and if so, whether vendor-specific objective evidence (VSOE) of fair value exists for
those elements. Customers receive certain elements of CUI Global products over a period of time. These elements include licensing
rights to manufacture and sell our proprietary patent protected products. The ability to identify VSOE for those elements and the
fair value of the respective elements could materially impact the amount of earned and unearned revenue. CUI Global does not have
any history as to the costs expected to be incurred in granting licensing rights relating to its products. Therefore, revenues
may be recorded that are not in proportion to the costs expected to be incurred in performing these services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Revenues from warranty and maintenance activities
are recognized ratably over the term of the warranty and maintenance period and the unrecognized portion is recorded as deferred
revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Revenues in connection with electronic devices, component,
and test and measurement equipment are recognized at the time the product is shipped to the customer, collectability is reasonably
assumed, the price is fixed and determinable and persuasive evidence of arrangement exists.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Shipping and Handling Costs </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Amounts billed to customers in sales transactions
related to shipping and handling represent revenues earned for the goods provided and are included in sales, and were $53,539 and
$60,628 for the years ended December 31, 2012 and 2011, respectively. The Company expenses inbound shipping and handling costs
as cost of revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Warranty Reserves </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">A warranty reserve liability is recorded based on
estimates of future costs on sales recognized. There was no warranty reserve recorded at December 31, 2012 or 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Advertising </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The costs incurred for producing and communicating
advertising are charged to operations as incurred. Advertising expense for the years ended December 31, 2012 and 2011 was $872,250
and $837,584, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Income Taxes </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Income taxes are accounted for under the asset and
liability method of FASB Accounting Standards Codification No. 740 (&ldquo;FASB ASC 740&rdquo;), &ldquo;Income Taxes&rdquo;. Under
FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized as income in the period that includes the enactment date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Valuation allowances have been established against
deferred tax assets due to uncertainties in the Company&rsquo;s ability to generate sufficient taxable income in future periods
to make realization of such assets more likely than not. An income tax benefit has not been recognized for its operating losses
generated during 2012 and 2011 based on uncertainties concerning the ability to generate taxable income in future periods. There
was no income tax receivable at December 31, 2012 and 2011. In future periods, tax benefits and related deferred tax assets will
be recognized when management considers realization of such amounts to be more likely than not.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The Company&rsquo;s Federal and State tax returns
for the years 2007-2012 remain open to examination by the tax authorities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Net Loss Per Share </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In accordance with FASB Accounting Standards Codification
No. 260 (&ldquo;FASB ASC 260&rdquo;), &ldquo;Earnings Per Share&rdquo;, basic net loss per share is computed by dividing the net
loss available to common stockholders for the period by the weighted average number of common shares outstanding during the period.
Diluted net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of
common and common equivalent shares outstanding during the period. Common equivalent shares outstanding as of December 31, 2012
and 2011, which consist of options, warrants, convertible notes and convertible preferred stock, have been excluded from the diluted
net loss per common share calculations because they are anti-dilutive. Accordingly, diluted net loss per share is the same as basic
net loss per share for 2012 and 2011. The following table summarizes the potential common stock shares at December 31, 2012 and
2011, which may dilute future earnings per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; color: black; text-align: left">Convertible preferred stock</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">9,266</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Warrants and options, vested</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">262,952</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">211,861</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Convertible debt</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">6,863</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">262,952</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">227,990</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Foreign Currency Translation </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The financial statements of the Company's foreign
offices have been translated into U.S. dollars in accordance with FASB ASC 830, &ldquo;Foreign Currency Matters&rdquo; (FASB ASC
830). All balance sheet accounts have been translated using the exchange rate in effect at the balance sheet date. Income statement
amounts have been translated using an appropriately weighted average exchange rate for the year. The translation gains and losses
resulting from the changes in exchange rates during 2012 and 2011 have been reported in accumulated other comprehensive income,
except for gains and losses resulting from the translation of intercompany receivables and payables, which are included in earnings
for the period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Segment Reporting </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">For the year ended December 31, 2012 and 2011, the
Company operates in one operating segment based on the activities of the company in accordance with the ASC 280-10. <FONT STYLE="color: black">Operating
segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly
by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.
</FONT>The Company does not disaggregate profit and loss information on a segment basis for internal management reporting purposes
to our chief operating decision maker group which consists of our Chief Executive Officer, Chief Financial Officer and Chief Operating
Officer, and therefore such information is not presented.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The 10-K filing for the year ended 2011 presented
five operating segments based on the products offered, which included: External Power, Internal Power, Industrial Controls, Discontinued
Operations and Other. Management determined that presenting these as a consolidated segment is the best presentation as the business
activities of CUI Global are not organized on the basis of differences related to products, services or geography. The Company&rsquo;s
chief operating decision maker looks at the operations as a whole when making operating decisions and allocating resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Reclassification </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Certain amounts from the prior period have been reclassified
to conform to the current period presentation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Recent Accounting Pronouncements </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-align: justify">In June, 2011, the FASB issued
ASU No. 2011-05, which amends ASC Topic 220, Comprehensive Income. Under the amendment, an entity has the option to present the
total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required
to present each component of net income along with total net income, each component of other comprehensive income along with a
total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the
components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU
do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must
be reclassified to net income. The amendments in this ASU have been applied retrospectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In December 2011, FASB issued Accounting Standards
Update 2011-11, Balance Sheet - Disclosures about Offsetting Assets and Liabilities&rdquo; to enhance disclosure requirements relating
to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets
and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that
are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective
and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures,
as such, the adoption of this standard did not have a material impact on our results of operations, cash flows or financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In July 2012, the FASB issued updated guidance on
the periodic testing of indefinite-lived intangible assets, other than goodwill, for impairment. This updated guidance will allow
companies the option to first assess qualitative factors to determine if it is more-likely-than-not that an indefinite-lived intangible
asset might be impaired and whether it is necessary to perform the quantitative impairment test required under current accounting
standards. This guidance is applicable for reporting periods beginning after September 15, 2012. This updated guidance did not
have a material impact on our results of operations, cash flows or financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>3.</B></TD><TD><B>PROPERTY AND EQUIPMENT, NET </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Property and equipment is summarized as follows at
December 31, 2012 and 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Building</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; color: black">Equipment</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">2,577,681</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">2,193,817</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Computers and software</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">883,408</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">778,985</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">3,461,089</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,972,802</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Less accumulated depreciation</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(2,444,870</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(2,061,992</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">1,016,219</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">910,810</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Depreciation expense for the years ended December
31, 2012 and 2011 was $579,861 and $520,959, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>4.</B></TD><TD><B>GOODWILL AND OTHER INTANGIBLE ASSETS </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">At December 31, 2012, the gross carrying amount and
accumulated amortization of intangible assets, other than goodwill, are as follows:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 93%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Gross<BR> Assets</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Accumulated <BR> Amortization</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Net</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; color: black; text-align: left">Trademarks and tradename</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">5,988,256</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">(109,540</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">5,878,716</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Customer lists</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,857,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,857,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Technology rights</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">303,664</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(77,779</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">225,885</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Technology &ndash; patent pending</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">551,559</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">551,559</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Other intangibles assets</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">154,470</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(49,106</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">105,364</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Total</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">8,854,949</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(236,425</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">8,618,524</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">At December 31, 2011, the gross carrying amount and
accumulated amortization of intangible assets, other than goodwill, are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 93%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Gross<BR> Assets</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Accumulated <BR> Amortization</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Net</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; color: black; text-align: left">Trademarks and tradename</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">6,266,684</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">6,266,684</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Customer lists</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,857,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">1,857,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Technology rights</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">303,664</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(51,269</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">252,395</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Technology &ndash; patent pending</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">551,559</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">551,559</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Other intangibles assets</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">74,127</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(34,724</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">39,403</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Total</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">9,053,034</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(85,993</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">8,967,041</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Amortization expenses from continuing operations
for the years ended December 31, 2012 and 2011&nbsp;amounted to approximately $150,432 and $258,805, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of December 31, 2012 and 2011, the carrying amount
of goodwill was $13,048,474. The estimated fair value of our goodwill could change if the Company is unable to achieve operating
results at the levels that have been forecasted, the market valuation of our business decreases based on transactions involving
similar companies, or there is a permanent, negative change in the market demand for the services offered by the Company. These
changes could result in an impairment of the existing goodwill balance that could require a material non-cash charge to our results
of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>Trademarks and tradename </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of December 31, 2012, $4,892,856 of costs related
to CUI and $1,095,400 of costs related to the V-Infinity trademarks and trade names have been capitalized. The Intangible, trademark
and trade name CUI was determined to have an indefinite life and is reviewed regularly for impairment by management, which includes
an annual test for impairment. During 2012, management determined that an impairment of $278,428 related to the Intangible, trademark
and trade name V-Infinity was necessary. As a result of this evaluation and the impairment, management determined the trademark
and trade name V-Infinity no longer has an indefinite life, and will instead be amortized over the estimated remaining useful life
of 5 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>Customer lists </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of December 31, 2012, CUI Global has $1,857,000
of capitalized costs related to Intangible, customer list. Intangible, customer list is reviewed regularly for impairment by management.
The customer lists were determined to have an indefinite life and are not amortized but tested annually for impairment. Among other
factors, this review includes consideration of the revenues and related cash flows associated with customers that existed at the
time of the acquisition of the Intangible, customer list. This review determined that the total net revenues and related cash flows
associated with customers that existed at the time of the acquisition of the intangible, customer list have increased as compared
with their pre-acquisition comparable revenues and maintains a back log of customer orders indicating that this will continue based
on historical company experience.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>Technology rights </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of December 31, 2012, CUI Global has $303,664 of
capitalized costs related to technology rights. Technology rights are amortized over a twenty year life. In an effort to concentrate
our business focus on our core product development and marketing, in December 2011, 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 in 2011 of $143,636.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>Technology &ndash; patents pending </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of December 31, 2012, CUI Global has $551,559 of
capitalized costs related to Intangible, patent pending technology. Intangible, patent pending technology is reviewed regularly
for impairment by management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><I>Debt Offering Costs </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of December 31, 2012, $220,000 of debt offering
costs related to payments issued in efforts to secure debt financing for the Company have been capitalized. The debt offering costs
are amortized over the life of the applicable loan. The net balance of debt offering costs as of December 31, 2012 is $42,778.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>5.</B></TD><TD><B>NOTES PAYABLE </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Notes payable is summarized as follows at December
31, 2012 and 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 93%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center">December 31,</TD><TD STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; color: black; text-align: left">(a) Term Note - bank</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">4,000,000</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">(b) Acquisition Note Payable</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">7,303,683</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">10,303,683</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">(c) Convertible Note Payable - related party</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">35,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.4in"></TD><TD STYLE="width: 0.25in">(a)</TD><TD>In August 2010, the Company replaced the $4,000,000 cash loan from Commerce Bank of Oregon with a $4,000,000 term note through
the Business Credit division of Wells Fargo Capital Finance, Wells Fargo Bank, National Association, with a July 31, 2012 maturity
date, paying interest only at an interest rate equal to the daily three month LIBOR plus 4.00% and secured by personal letters
of credit from a related party. <FONT STYLE="color: black">In February 2012, the Company utilized $4,000,000 from the 2012 equity
raises to repay the principal balance in full. The balance remaining at December 31, 2012 and 2011 on the term note with Wells
Fargo was $0 and $4,000,000, respectively.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.4in"></TD><TD STYLE="width: 0.25in">(b)</TD><TD><FONT STYLE="color: black">A promissory note utilized to fund the acquisition of CUI, Inc. was a $14,000,000 promissory note
to International Electronic Devices, Inc. (formerly CUI, Inc.), 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 (May 15, 2011), with no prepayment penalty,
an annual success fee of 2.3%, and the right of first refusal to the note payee, International Electronic Devices, Inc., relating
to any private capital raising transactions of CUI Global during the term of the note. In September 2010, the Company negotiated
an amendment to this note which provided forgiveness of the principal balance of $1,588,063 and forgiveness of accrued interest
of $724,729, as well as an extension of the maturity date to May 15, 2018. The total forgiveness of debt and accrued interest of
$2,312,792 was recorded as additional paid in capital due to the related party nature. In exchange for this amendment, the Company
agreed to make principal payments totaling $1,500,000 as follows: $1,200,000 before December 31, 2010 and an additional $300,000
in January 2011. Additionally, the Company agreed to assign a note receivable owed to CUI Inc. from TPI in the amount of $192,508
to IED during the first quarter of 2011. In February 2012, the Company utilized proceeds from the sale of equity to repay $3,000,000
toward the principal balance of the IED note payable. </FONT>At December 31, 2012, the current portion of this note is $0, the
long term balance is $7,303,683.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.4in"></TD><TD STYLE="width: 0.25in">(c)</TD><TD><FONT STYLE="color: black">In July 2011, a CUI Global officer provided a short term convertible loan of $35,000 to the Company
with interest at 6% per annum, and convertible at $5.10 per common share. The balance of this loan was paid in full during 2012
following the receipt of proceeds from the equity raise. The balance remaining at December 31, 2012 and 2011 was $0 and $35,000,
respectively. </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt">The following table details the maturity of the notes
payable for CUI Global, Inc. as of December 31, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Thereafter</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 30%; color: black; text-align: left">Notes Payable Maturities:</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 7%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 7%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 7%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 7%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 7%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 7%; color: black; text-align: right">7,303,683</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 7%; color: black; text-align: right">7,303,683</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>6.</B></TD><TD><B>LINE OF CREDIT </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">At December 31, 2012, CUI, Inc. had a $4,000,000 revolving
working capital line of credit with the Business Credit division of Wells Fargo Capital Finance, part of Wells Fargo Bank, National
Association (NYSE: WFC), interest payable monthly at the daily three month LIBOR plus 3.25% (3.56% at December 31, 2012). At December
31, 2012 the current borrowing capacity under the credit facility was $3,579,305 considering any current restrictions on the amount
that could be borrowed (borrowings may be limited by the amount of trade receivables, inventory and other items), but without considering
any amounts currently outstanding under the facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Effective April 3, 2012, the Wells Fargo Line of Credit
expiration was extended to July 31, 2015 and the interest rate reduced to the Daily Three Month LIBOR plus 3.25%. At December 31,
2012 and 2011, the balance outstanding on the line of credit was $459,448 and $1,528,900, respectively. The Line of Credit is secured
by all of the Company&rsquo;s accounts, documents, equipment, general intangibles, goods, instruments, inventory, investment property,
letter-of-credit rights, letters of credit and all cash and cash equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>7.</B></TD><TD><B>COMMITMENTS AND CONTINGENCIES </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Legal Matters </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The Company may be involved in certain legal actions
arising from the ordinary course of business. While it is not feasible to predict or determine the outcome of these matters, we
do not anticipate that any of these matters, or these matters in the aggregate, will have a material adverse effect on the financial
position or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Commissions, Royalty and License Fee Agreements </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Royalty and license fees are paid in accordance with
their related agreements, either on a monthly or quarterly basis. As of December 31, 2012, $32,303 was accrued for royalty and
license fees payable, and is reported as a current liability in accrued expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.45in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>External Sales Representative Commissions </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Commissions to external sales representatives are
paid in accordance with their related agreements, either on a monthly or annual basis. As of December 31, 2012, $236,366 was accrued
for commissions to external sales representatives, and is reported as a current liability in accrued expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Employment Agreements </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of the year ended December 31, 2012, the following
employment agreements were in place:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Chief Executive Officer, General Counsel, Director:
This employment agreement expires August 1, 2015. The CEO is eligible for annual bonuses and stock option grants. <FONT STYLE="color: black">Said
contract provides, in relevant part, for an annual salary of $350,000 and bonus provisions for each calendar year. Bonuses are
approved quarterly based on the various factors, including a thorough evaluation of current performance. All 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
15 <SUP>th </SUP>day of each month. At December 31, 2012 and 2011, there was an accrual of $53,542 and $13,542, respectively, for
compensation owed to Mr. Clough. In conjunction with Mr. Clough&rsquo;s contract extension, he also received a Board approved Stock
Option Plan, which entitles him to receipt of a $6.00 option to purchase 330,000 shares of the Company&rsquo;s common stock. Said
options vest on a monthly basis during the course of Mr. Clough&rsquo;s employment term. Mr. Clough's employment agreement shall
not be terminated by any change of control of CUI Global. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">President, Chief Operating Officer, Director: This
employment agreement expires May 15, 2014. The President is eligible for annual bonuses and stock option grants. <FONT STYLE="color: black">Said
contract provides, in relevant part, for an annual salary of $205,000 and bonus provisions for each calendar year, beginning with
2008, in which the CUI Global yearend 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 15 <SUP>th </SUP>day of each month. At December 31, 2012 and 2011 there was an accrual of $8,542 and $12,083, respectively,
for compensation owed to Mr. McKenzie. Mr. McKenzie's employment agreement shall not be terminated by any change of control of
CUI Global. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Chief Financial Officer: This employment agreement
expires May 15, 2014. The CFO is eligible for annual bonuses and stock option grants. <FONT STYLE="color: black">Mr. Ford is employed
under a three year employment contract with the company, which was recently extended to May 15, 2014 and provides, in relevant
part, for an annual salary of $195,000 and bonus provisions for each calendar year, beginning with 2010, in which the CUI Global
yearend 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 15 <SUP>th </SUP>day
of each month. At December 31, 2012 and 2011 there was an accrual of $8,125 and $0, respectively, for compensation owed to Mr.
Ford. Mr. Ford's employment agreement shall not be terminated by any change of control of CUI Global. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Leases </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt; text-indent: 0.3pt">As an integrated part of the
CUI asset acquisition, the CUI Global, Inc. corporate offices were relocated to the CUI location at 20050 SW 112th Avenue, Tualatin,
Oregon 97062. CUI and CUI Global occupy the 61,380 square feet of offices and warehouse premises under a ten year non-cancelable
lease agreement beginning September 1, 2006 with Barakel, LLC (a related party) at a base monthly rent subject to periodic base
payment increases plus real property taxes, utilities, insurance and common area maintenance charges. During the year ended December
31, 2012, the monthly base rent was $40,250 in accordance with the lease schedule. <FONT STYLE="color: black">During the period
January 1 through August 31, 2011, the monthly base rent was $40,000 and increased in accordance with the lease schedule to $40,250
for the period September 1 through December 31, 2011. </FONT>Barakel, LLC is controlled by James McKenzie, majority owner of CUI,
Inc. prior to acquisition and Matt McKenzie, COO.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt; text-indent: 0.3pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt; text-indent: 0.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt; text-indent: 0.3pt">The Company also leased office
space in Malmo, Sweden pursuant to a renewable lease which terminated January 31, 2011. In addition to the base rent of (subject
to periodic base lease payment increases), the Company was responsible for property taxes, maintenance and related VAT taxes. During
the year ended December 31, 2012 and 2011, the monthly base rent was approximately $0 and $1,386, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt; text-indent: 0.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt; text-indent: 0.3pt">Additionally, subsequent to the
acquisition of CUI Japan and Comex Electronics, the Company had leased spaces in Tokyo, Japan and owned a small manufacturing facility
on leased land in Nagano, Japan. The CUI Japan leased space in Tokyo, Japan expired January 31, 2012 and there was no rent expense
for this space in 2012. CUI Japan subleased space from Comex Electronics during 2012 on a month to month basis, with monthly base
rent of approximately $1,253.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt; text-indent: 0.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt; text-indent: 0.3pt">The discontinued operations of
Comex Electronics had leased space in Tokyo, Japan with expirations between May 7, 2011 and September 9, 2011. In conjunction with
these leases, Comex Electronics also leased parking spaces which leases expired December 31, 2010 and became a month to month agreement.
Additionally, the discontinued operations of Comex Electronics had a land lease in Nagano with an expiration of August 11, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt">Rental expense was $552,655 and $592,573 in 2012
and 2011, respectively, and is included in selling, general and administrative on the statement of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2016</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Thereafter</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 34%; color: black; text-align: left">Operating Leases:</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 8%; color: black; text-align: right">484,000</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 8%; color: black; text-align: right">486,000</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 8%; color: black; text-align: right">487,000</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 8%; color: black; text-align: right">326,000</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 8%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 8%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Consulting Agreements </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In January 2010, the Company entered into a consulting
agreement with Terry Williams, former GL Industrial Services Project Director, to serve as the Company&rsquo;s Project Director
and Lead Engineer for the GASPT2 technology. The consultant will be compensated a base monthly fee and will receive commissions
on sales of the GASPT2 products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In September 2010, the Company entered into an agreement
for strategic investor communications services to be provided through March 2011. For these services, the consultant was paid a
fee of $25,000 in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, the agreement was extended through June
2012. During 2012 and 2011, the consultant was paid fees of $6,750 and $29,750, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In September 2010, the Company entered into an agreement
with a consulting firm to provide strategic investor marketing services for a period of one year. For these services, the consultant
is to be paid $3,000 per month as well as $84,000 in common stock compensation. $42,000 of the common stock compensation was earned
in 2010 for which the consultant received 7,000 shares of common stock at $6.00 per share. The remaining $42,000 is to be priced
at the ten day trailing average closing price at the time of the issuance when earned in 2011. The remaining $42,000 common shares
were earned March 2011, for which the consultant received 5,957 common shares at $7.05 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In February 2011, the Company engaged a consultant
firm for marketing and website development services. For these services, the consultant was paid $41,925 during 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In March 2011, the Company engaged a consultant firm
to provide services related to customs and duties classification for imported products. During 2011, this consultant was paid $36,588.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In April 2011, the Company engaged a consultant firm
to provided strategic investor marketing services. For these services, the consultant received $8,000 per month. For these services
which were completed in 2011, the consultant was paid $32,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In June 2011, the Company engaged Merriman Capital,
Inc. to act as exclusive placement agent to CUI Global, Inc. For these services, the consultant would receive a cash financing
completion fee of 7.5% of the total amount of capital received by the Company from the sale of its securities to investors during
the agreement period. No fees were earned during 2011. Fees paid to Merriman in 2012 were recorded as reductions to additional
paid in capital associated with the equity raises.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In June 2011, the Company engaged a consultant firm
to provide website support and marketing production services. This consultant was paid $56,809 during 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In December 2011, the Company issued 5,000 shares
of common stock to a former consultant in consideration for the release of a claim on intellectual property with a fair value of
$19,500 recorded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2012, the Company engaged a consultant firm
to assist in the development and design of websites. For these services, the consultant firm was paid $135,008 during the year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2012, the Company engaged a consultant firm
to assist in printed circuit board layout design related to new products. For these services, the consultant firm was paid $130,706
during the year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><FONT STYLE="color: black">In March 2012, </FONT><FONT STYLE="color: #161616">15,000
shares of common stock were issued in consideration for strategic investor marketing services rendered for the benefit of the company.
A $69,450 consulting expense was recorded in relation to this transaction based on the fair market value of the stock on the date
of grant. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On each of April 5, May 7, June 6, July 2, August
1, September 7, October 1 and November 1, 2012, the company issued 13,500 shares of common stock to a consultant in consideration
for strategic investor marketing services rendered for the benefit of the company. A $569,970 consulting expense was recorded in
relation to these issuances based on the fair market value of the stock on the dates of the grants. In addition, the consultant
was paid $110,000 for their services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In June and October 2012, 1,000 and 2,500 shares of
common stock, respectively, were issued to a consultant in consideration for strategic investor marketing services rendered for
the benefit of the company and $19,275 of consulting expense was recorded in relation to these issuances based on the fair market
value of the stock on the dates of the grant. Additionally, the consultant was paid $11,000 for their services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In July 2012, the Company engaged a consultant firm
to provide strategic investor marketing services. For these services the consultant was paid $65,000 during 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>8.</B></TD><TD><B>STOCKHOLDERS&rsquo; EQUITY </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Convertible Preferred Series A </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">5,000,000 shares of preferred stock were designated
as new Series A Convertible Preferred Stock (&ldquo;Series A&rdquo;). The Series A is convertible to common shares on a six-for-one
basis, is due dividends at $0.10 per share as authorized by the Board, has a liquidation value of $1.00 per share and has equivalent
voting rights as common shares on a share for share basis. Once the Series A shares have been issued, they cannot be reissued.
Effective September 17, 2012 the Board of Directors passed a resolution eliminating and discontinuing all Series A Convertible
Preferred Series stock and required that all preferred stock shall be returned to the Company treasury. As of December 31, 2012,
no shares of Series A Convertible Preferred Stock are issued nor outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Convertible Preferred Stock Series B </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On February 3, 2004, the Board of Directors designated
30,000 shares of preferred stock as Series B Convertible Preferred Stock (&ldquo;Series B&rdquo;). The Series B is convertible
to common shares on a one thousand-for-one ratio, is due dividends at $1 per share payable quarterly as authorized by the Board,
and the dividends are cumulative. Series B has a liquidation value of $240 per share and has voting rights of one thousand votes
per Series B share. Once the Series B shares have been issued, they cannot be reissued. Effective September 17, 2012 the Board
of Directors passed a resolution eliminating and discontinuing all Series B Convertible Preferred Series stock and required that
all preferred stock shall be returned to the Company treasury. As of December 31, 2012 and 2011, no shares of Series B Convertible
Preferred Stock are issued nor outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Convertible Preferred Stock Series C </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The Company authorized for issuance 10,000 shares
of preferred stock, designated as Series C Preferred Stock (&ldquo;Series C&rdquo;), as the result of a previously negotiated investment
plan with a specific investment group. The agreement was fulfilled in 2011 and the group no longer retains rights to the convertible
preferred stock Series C. Effective September 17, 2012 the Board of Directors passed a resolution eliminating and discontinuing
all Series C Convertible Preferred Series stock and required that all preferred stock shall be returned to the Company treasury.
During 2012 and 2011, there were no shares of Series C convertible preferred stock issued and no shares were outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Common Stock Dividend Restrictions </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of December 31, 2012, there are no restrictions
on common stock dividends. As of December 31, 2011, there was a restriction on the common stock dividends as any cumulative preferred
stock dividends are required to be paid prior to any common stock dividends being paid. Also, at December 31, 2012, retained earnings
were not restricted upon involuntary liquidation, however at December 31, 2011, retained earnings would be restricted upon an involuntary
liquidation by the cumulative unpaid preferred dividends to the preferred stockholders and for the $1 per share Series A and $240
per share Series B liquidation preferences.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Common Stock Issuances </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, the 1,667 issuable shares listed on the
balance sheet as of December 31, 2010 were issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, two former employees completed cashless
exercises of their options for which 269 shares of common stock were issued. The Company did not receive funds from these options
exercises as they were cashless.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, 5,957 shares of common stock were issued
pursuant to a consultant agreement for strategic investor marketing services. The shares were priced at $7.05 per share based on
the ten day trailing average closing price at the time of the issuance in accordance with the agreement and a $42,000 consulting
expense was recorded in relation to this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, a member of the Board of Directors exercised
23,333 warrants which he previously received in exchange for a personal guarantee of a bank note provided on behalf of the Company
in May 2008. The Company received $7,000 from the exercise of these warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, a beneficial owner of more than 5% of
the outstanding common stock, exercised 10,000 warrants which he previously received in exchange for a personal guarantee of a
bank note provided on behalf of the Company in May 2008. The Company received $3,000 from the exercise of these warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, a beneficial owner of more than 10% of
the outstanding common stock, exercised 133,333 warrants which he previously received in exchange for a personal guarantee of a
bank note provided on behalf of the Company in May 2008. The Company received $40,000 from the exercise of these warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, 5,000 shares of common stock were issued
to a former consultant in consideration for the release of a claim on intellectual property with a fair value related expense of
$19,500 recorded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Effective February 17, 2012, the issued and outstanding
shares of the Company&rsquo;s $0.001 par value common stock were reverse split at a ratio of one for thirty (1:30) as a part of
our plan to up-list our common stock on to the NASDAQ Stock Market. All fractional shares resulting from the reverse split were
rounded up to the next full numbers. As a result of the rounding up effect, 97 additional shares of common stock were issued that
are included in the S-1 registration statement. The company received no monetary consideration for these 97 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During February 2012 our Form S-1 registration statement
became effective that allowed us to sell 2,222,222 shares of common stock to our underwriter. We received $8,913,302 in net proceeds
from this sale after related costs for this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Our Form S-1 registration statement included 333,333
shares of common stock that were sold in March 2012 to our underwriter pursuant to the over-allotment provision of our underwriting
contract. We received $1,387,499 in net proceeds from this sale after related costs for this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Also in March 2012, pursuant to stock purchase agreement,
we sold to seven investors a total of 570,000 shares of common stock at $4.50 per share. We received $2,253,008 in net proceeds
from this sale after related costs for this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; color: #161616">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; color: #161616">During March 2012, a beneficial owner
of approximately 8%, exercised 10,071 warrants he previously received in relation to a note provided to the Company which has since
been paid in full. The company received $3,021 from this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><FONT STYLE="color: black">March 20, 2012, </FONT><FONT STYLE="color: #161616">15,000
shares of common stock were issued in consideration for strategic investor marketing services rendered for the benefit of the company.
A $69,450 consulting expense was recorded in relation to this transaction based on the fair market value of the stock on the date
of grant. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On each of April 5, May 7, June 6, July 2, August
1, September 7, October 1 and November 1, 2012, the company issued 13,500 shares of common stock to a consultant in consideration
for strategic investor marketing services rendered for the benefit of the company. A $569,970 consulting expense was recorded in
relation to these issuances based on the fair market value of the stock on the dates of the grants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Between April 4-12, 2012, 57,000 shares of common
stock were issued in relation to common stock bonuses granted to officers and employees. 50,750 of these common shares were issued
to three officers with a fair value of $243,600 in accordance with their employment agreement bonus provisions. Two employees were
awarded a total of 6,250 common shares with a fair value total of $30,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On April 12, 2012, a holder of 2,500 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $250 into common shares. For these conversions, the holder received 458 common shares based
upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On May 4, 2012, a holder of 45,000 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $4,500 into common shares. For these conversions, the holder received 8,645 common shares
based upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On May 30, 2012, a holder of 3,043 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $304 into common shares. For these conversions, the holder received 558 common shares based
upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On June 21, 2012, 1,000 shares of common stock were
issued to a consultant in consideration for strategic investor marketing services rendered for the benefit of the company and a
$6,450 consulting expense was recorded in relation to these issuances based on the fair market value of the stock on the date of
the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On June 28 and 29, July 2, 3, 16 and 27, 2012, we
sold 234,332 shares of common stock to nine investors at $4.50 per share pursuant to stock purchase agreements net proceeds of
$975,455 after related costs for this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On September 7, 2012, 1,052 shares of common stock
were issued as a royalty to James McKenzie, majority owner of CUI, Inc. prior to the May 2008 asset acquisition by CUI Global.
The shares were valued at $6,638.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On September 27, 2012, 4,596 shares of common stock
were issued to an employee as a bonus. These shares were expensed at a fair value of $25,000 as of the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On October 16, 2012, 2,500 shares of common stock
were issued to a consultant in consideration for strategic investor marketing services rendered for the benefit of the company
and a $12,825 consulting expense was recorded in relation to these issuances based on the fair market value of the stock on the
date of the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Non-Employee Stock Warrants </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2012 and 2011, no warrants were issued by the
Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">A summary of the warrants issued to non-employees
for services as of December 31, 2012 and 2011 and changes during the years is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Number of <BR> Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Weighted <BR> Average <BR> Exercise <BR> Price</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Number of <BR> Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Weighted <BR> Average <BR> Exercise <BR> Price</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; color: black">Balance at beginning of period</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">10,071</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">0.30</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">416,634</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">3.58</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Granted</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Exercised</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(10,071</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.30</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(166,667</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">0.30</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Forfeited (expired)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(239,896</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">6.00</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Balance at end of period</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">10,071</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">0.30</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Warrants exercisable at end of period</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">10,071</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">0.30</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-indent: -9.35pt; padding-left: 9.35pt">Weighted average fair value of warrants granted during the period</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During 2011, warrants to purchase 239,896 shares of
common stock expired during the year and are recorded as forfeited in the table above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The following table summarizes information about non-employee
stock warrants outstanding and exercisable that were issued for services at December 31, 2012 and 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="14" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Warrants Outstanding </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Warrants Exercisable </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Range of </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Number </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Outstanding at </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">December 31, </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2012 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Remaining </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Contractual</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Life </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Number </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable at </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">December 31, </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2012 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 11%; padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 14%; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 14%; padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.00 Years </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 14%; padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 15%; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 15%; padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.00 Years </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="14" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Warrants Outstanding </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Warrants Exercisable </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Range of </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Number </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Outstanding at </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">December 31, </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2011 </FONT></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Remaining </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Contractual <BR>
Life </FONT></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Number </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable at </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">December 31, </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2011 </FONT></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 11%; padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.30 </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 14%; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">10,071 </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 14%; padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.62 Years </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 14%; padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.30 </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 15%; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">10,071 </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 15%; padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.30 </FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">10,071 </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.62 Years </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.30 </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">10,071 </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.30 </FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Employee Stock Options and Warrants </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">All options and warrants issued are presented at post
reverse quantities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On May 16, 2008 the Company&rsquo;s Board of Directors
adopted the Waytronx, Inc. 2008 Equity Incentive Plan (the &ldquo;Equity Incentive Plan&rdquo;) and authorized 1,500,000 shares
of Common Stock to fund the Plan. At the 2008 Annual Meeting of Shareholders held on September 15, 2008, the Equity Incentive Plan
was approved by the Company shareholders. At the 2009 Annual Meeting of Shareholders held on September 29, 2009, the shareholders
approved an amendment to the 2008 Equity Incentive Plan to increase the number of common shares issuable under the plan from 1,500,000
to 3,000,000. All of these shares have been registered under Form S-8.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The 2008 Equity Incentive Plans is intended to: (a)
provide incentive to employees of the Company and its affiliates to stimulate their efforts toward the continued success of the
Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the
Company; (b) encourage stock ownership by employees, directors and independent contractors by providing them with a means to acquire
a proprietary interest in the Company by acquiring shares of Stock or to receive compensation which is based upon appreciation
in the value of Stock; and (c) provide a means of obtaining and rewarding employees, directors, independent contractors and advisors.
The 2008 Equity Incentive Plans provide for the issuance of incentive stock options (ISOs) and Non Statutory Options (NSOs) to
employees, directors and independent contractors of the Company. The Board shall determine the exercise price per share in the
case of an ISO at the time an option is granted and such price shall be not less than the fair market value or 110% of fair market
value in the case of a ten percent or greater stockholder. In the case of an NSO, the exercise price shall not be less than the
fair market value of one share of stock on the date the option is granted. Unless otherwise determined by the Board, ISOs and
NSOs granted under the both plans have a maximum duration of 10 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><FONT STYLE="color: black">On January 5, 2009 the
Company Board of Directors received and approved a written report and recommendations of the Compensation Committee which included
a </FONT>detailed executive equity compensation report and market analysis <FONT STYLE="color: black">and the recommendations of
</FONT>Compensia, Inc., a management consulting firm that provides executive compensation advisory services to compensation committees
and senior management of knowledge-based companies. The Compensation Committee used the report and analysis as a basis for its
formal written recommendation to the board. Pursuant to a January 8, 2009 board resolution the 2009 <FONT STYLE="color: black">Equity
Incentive Plan (Executive), a Non-Qualified Stock Option Plan, was created and funded with 4,200,000 shares of $0.001 par value
common stock. The Compensation Committee was appointed as the Plan Administrator to manage the plan. On October 11, 2010, CUI Global
authorized an additional 3,060,382 options under the 2009 Equity Incentive Plan (Executive). On September 21, 2012, CUI Global
authorized an additional 330,000 options under the 2009 Equity Incentive Plan (Executive). </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The 2009 Equity Incentive Plan (Executive) provides
for the issuance of Incentive Non Statutory Options to attract, retain and motivate executive and management employees and directors
and to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management
employees and directors based upon the value of the Company&rsquo;s stock and to provide these individuals with an incentive to
maximize the success of the Company and further the interest of the shareholders. The Administrator of the plan is authorized to
determine the exercise price per share at the time the option is granted, but the exercise price shall not be less than the fair
market value on the date the option is granted. Stock options granted under the 2009 Plan have a maximum duration of 10 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">At December 31, 2012, there are 1,328,833 shares of
common stock available under the 2008 Equity Incentive Stock Plan and 378,151 available under the 2009 Equity Incentive Plan (Executive).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">During the years ended 2012 and 2011, the Company
recorded compensation expense of $232,785 and $166,367, respectively, for stock options that the requisite service was performed
during the year. The compensation expense is recorded over the vesting period based upon fair market value of the options using
the Black Scholes option model in accordance with FASB ASC 718 as discussed in section Employee Stock Options and Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">A summary of the warrants and options issued to employees
and directors as of December 31, 2012 and 2011 and changes during the year are presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Number of <BR> Warrants<BR> and <BR> Options</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Weighted <BR> Average<BR> Exercise <BR> Price</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Number of <BR> Warrants<BR> and <BR> Options</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Weighted <BR> Average <BR> Exercise<BR> Price</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; color: black">Balance at beginning of period</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">259,299</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">7.75</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">293,372</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">7.45</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Exercised</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,000</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">5.70</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Expired</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(3,000</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">5.33</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(33,073</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">2.81</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Forfeited</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 1pt">Granted</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">425,842</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">5.68</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Balance at end of period</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">682,141</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">6.47</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">259,299</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">7.75</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 1pt">Exercisable</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">262,952</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">7.31</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">201,790</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">7.44</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As of December 31, 2012 and 2011, there were 419,189
and 57,509, respectively, non-vested warrants and options issued to employees and directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The weighted average fair value of warrants and options
granted during the periods are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 80%; border-collapse: collapse; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2012 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2011 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 68%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise price lower than the market price </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise price equaled the market price </FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD NOWRAP STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4.56 - $4.58 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise price exceeded the market price </FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">6.00 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The fair value of warrants and options granted during
2012 was estimated on the dates of the grants using the following assumptions: dividend yield of 0%, expected volatilities of 84%
- 91%, risk-free interest rates of 0.27%, and expected lives of 2 years. There were no warrants and options granted during 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The following tables summarize information about employee
stock warrants and options outstanding at December 31, 2012 and 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="14" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Warrants and Options Outstanding December 31, 2012 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Warrants and Options </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable December 31, 2012 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Range of </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Number </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Outstanding at </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">December 31, </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2012 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Remaining </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Contractual</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Life </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Number </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable at </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">December 31, </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2012 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4.56 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">84,675 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">1.15 Years </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 14%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4.56 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">- </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 15%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4.56 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4.58 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">10,167 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.14 Years </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4.58 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">10,167 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4.58 </FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">5.70 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">39,750 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">0.37 Years </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">5.70 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">39,750 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">5.70 </FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">6.00 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">330,000 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">4.70 Years </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">6.00 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">27,500 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">6.00 </FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.50 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">124,573 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">1.10 Years </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.50 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">124,573 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.50 </FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">9.00 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">92,976 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">1.06 Years </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">9.00 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">60,962 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">9.00 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">682,141 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">8.52 Years </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">6.47 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">262,952 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.31 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="14" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Warrants and Options Outstanding December 31, 2011 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Warrants and Options </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable December 31, 2011 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Range of </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Number </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Outstanding at </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">December 31, </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2011 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Remaining </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Contractual</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Life </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Number </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercisable at </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">December 31, </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">2011 </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Weighted </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Average </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Exercise Price </FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">5.70 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">41,750 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">1.17 Years </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 14%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">5.70 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">41,750 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="width: 15%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">5.70 </FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.50 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">124,573 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">3.37 Years </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.50 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">117,372 </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.50 </FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">9.00 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">92,976 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">3.15 Years </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">9.00 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">42,668 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">9.00 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">259,299 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.69 Years </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.75 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">201,790 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ </FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.44 </FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>9.</B></TD><TD><B>RELATED PARTY TRANSACTIONS </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">As an integrated part of the CUI asset acquisition,
the CUI Global, Inc. corporate offices were relocated to the CUI location at 20050 SW 112th Avenue, Tualatin, Oregon 97062. CUI
and CUI Global occupy the 61,380 square feet of offices and warehouse premises under a ten year non-cancelable lease agreement
beginning September 1, 2006 with Barakel, LLC (a related party) at a base monthly rent subject to periodic base payment increases
plus real property taxes, utilities, insurance and common area maintenance charges. During the year ended December 31, 2012, the
monthly base rent was $40,250 in accordance with the lease schedule. <FONT STYLE="color: black">During the period January 1 through
August 31, 2011, the monthly base rent was $40,000 and increased in accordance with the lease schedule to $40,250 for the period
September 1 through December 31, 2011. </FONT>Barakel, LLC is controlled by James McKenzie, who was a majority owner of CUI, Inc.
prior to acquisition and Matt McKenzie, COO.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The Company recorded investment income of $59,623
and $41,472 during 2012 and 2011, respectively, related to its interest in Test Products International (&ldquo;TPI&rdquo;). During
2011, the Company assigned a note receivable from TPI with a balance of $192,508 to IED, Inc. toward the principal owed on notes
payable. For further details regarding TPI, please see Note 2 discussion Investment &ndash; Equity Method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In September 2010, the Company negotiated an amendment
to the $14,000,000 seller&rsquo;s promissory note to International Electronic Devices, Inc., of which a related party and two corporate
officers, one of whom is also a director, are principals in the corporate note holder. This amendment provided forgiveness of the
principal balance of $1,588,063 and forgiveness of accrued interest of $724,729, as well as an extension of the maturity date to
May 15, 2018. The total forgiveness of debt and accrued interest of $2,312,792 was recorded as additional paid in capital in 2010.
In exchange for this amendment, the Company agreed to make principal payments totaling $1,500,000 as follows: $1,200,000 before
December 31, 2010 and an additional $300,000 in January 2011. Additionally, the Company agreed to assign a note receivable owed
to CUI Inc. from TPI in the amount of $187,208 to IED during the first quarter of 2011. During 2010, $200,000 of the $1,200,000
in principal that was due before December 31, 2010 was settled for 33,333 shares of common stock at a conversion price of $6.00
per share. <FONT STYLE="color: black">A related party and two corporate officers, one of whom is also a director are principals
in the corporate note holder and each received shares from this transaction. During 2012 and 2011, the Company made regular interest
payments on this seller&rsquo;s promissory note in accordance with the terms of the note. Additionally, during 2012, the Company
repaid $3,000,000 of the principal balance from proceeds received through the equity issuances. </FONT>At December 31, 2012, the
balance of this note is $7,303,683 and is held in long term notes payable, related party.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In April 2011, a member of the Board of Directors
exercised 23,333 warrants at $0.30 per share which he previously received in exchange for a personal guarantee of a bank note provide
don behalf of the Company in May 2008. The Company received $7,000 of proceeds from this warrant exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In May 2011, a beneficial owner of more than 5% of
the outstanding common stock, exercised 10,000 warrants at $0.30 per share which he previously received in exchange for a personal
guarantee of a bank note provided on behalf of the Company in May 2008. The Company received $3,000 from this warrant exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Also in May 2011, a beneficial owner of approximately
8% of the outstanding common stock, exercised 133,333 warrants at $0.30 per share which he previously received in exchange for
a personal guarantee of a bank note provided on behalf of the Company in May 2008. The Company received $40,000 from this warrant
exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In July 2011, a CUI Global officer provided a short
term convertible loan of $35,000 to the Company which accrues interest at 6% per annum, convertible at $0.17 per common share.
The balance of this loan was repaid in full during 2012. At December 31, 2012 and 2011, the balance of this loan was $0 and $35,000,
respectively, and is included in Convertible notes payable, related party, current portion due. There was no beneficial conversion
on the convertible note as the conversion price was equal to the fair value on the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In March 2012, a beneficial owner of approximately
8% of the outstanding common stock exercised 10, 071 warrants at $0.30 per share which he previously received in relation to a
note provided to the Company which has since been paid in full. The Company received $3,021 from this warrant exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>10.</B></TD><TD><B>DISCONTINUED OPERATIONS </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">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. The Company&rsquo;s continuing operations focus on the development, manufacturing and sale of electrical components.
There were no discontinued operations in 2012. Revenue and expenses allocated to discontinued operations for the year ended December
31, 2011 were limited to revenue and expenses that were directly related to the operations of Comex Electronics, or that were eliminated
as a result of the sale of the subsidiary. As a result, certain continuing indirect costs that were previously allocated to Comex
were not allocated to discontinued operations. It is expected that the Company and Comex Electronics will continue a business relationship.
Comex Electronics is a customer of CUI Global and also a vendor to CUI Global that provides manufacturing and other services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The results of operations from discontinued operations
are set forth below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 86%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">For the year ended<BR> December 31,</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center">2012</TD><TD STYLE="color: black">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center">2011</TD><TD STYLE="color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; color: black; text-align: left">Total revenues</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">1,280,485</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 1pt">Cost of revenues</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">1,146,443</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Gross profit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">134,042</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Selling, general, administrative and other</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">294,195</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">(Loss) from discontinued operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(160,153</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Gain on sale of Comex Electronics</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">603,034</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Net profit (loss) from discontinued operations</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">442,881</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Less net profit (loss) from discontinued operations - noncontrolling interest</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">67,872</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Net profit (loss) from discontinued operations allocable to common stocholders</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">375,009</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>11.</B></TD><TD><B>INCOME TAXES </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The Company recognized losses for both financial and
tax reporting purposes during each of the periods in the accompanying consolidated statements of operations. Accordingly, no provision
for income taxes and/or deferred income taxes payable has been provided for in the accompanying consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">An income tax benefit has not been recognized for
operating losses generated in prior periods based on uncertainties concerning the ability to generate taxable income in future
periods. At December 31, 2012, the Company had available net operating loss carry-forwards which expire in various years through
the year ending December 31, 2032; however, because the Company has incurred significant operating losses, utilization of the tax
loss carry-forwards are not assured. The increase in the valuation allowance for the year ended December 31, 2012 was approximately
$481,000. As a result, the non-current deferred income tax asset arising from these net operating loss carry-forwards and from
other temporary differences are not recorded in the accompanying balance sheets because a valuation allowance was established to
fully reserve such assets due to the uncertainty of the Company&rsquo;s realization of this benefit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">After consideration of all the evidence management
has determined that a full valuation allowance is necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">In future periods, tax benefits and related deferred
tax assets will be recognized when management considers realization of such amounts to be more likely than not.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The Company&rsquo;s tax expense differs from the &ldquo;expected&rdquo;
tax expense for the periods ended December 31, 2012 and 2011, computed by applying the Federal Corporate tax rate of 34% to loss
before taxes, as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; color: black; text-align: left">Computed "expected" tax benefit</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 14%; color: black; text-align: right">(800,084</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 14%; color: black; text-align: right">(16,579</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">State tax benefit, net of federal effect</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(166,285</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,124</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Change in valuation allowance</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">480,742</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(98,800</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 1pt">Non-deductible expenses</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(435,030</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">147,313</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">(920,657</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">29,810</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">For the periods ended December 31, 2012 and 2011,
the tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities were as
follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Deferred tax assets (liabilities)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; color: black; text-align: left">Intangible assets</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 14%; color: black; text-align: right">(8,046,564</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 14%; color: black; text-align: right">(8,153,358</TD><TD STYLE="width: 1%; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Property and equipment</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">634,354</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">634,354</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Net operating loss carryforwards</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">20,699,678</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">20,376,785</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Contribution and other carryforwards</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">292,692</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">241,637</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Inventory and accounts receivable reserves</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">139,999</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">139,999</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt">Valuation allowance</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(13,720,159</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(13,239,417</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">Net deferred tax assets</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>12.</B></TD><TD><B>CONCENTRATIONS </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; color: #161616">During 2012, 59% of revenues were
derived from five customers at 47%, 4%, 3%, 3%, and 2%. During 2011, 55% of revenues were derived from six customers at 41%, 4%,
3%, 3%, 2% and 2%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The Company&rsquo;s major product lines in 2012 and
2011 were external power, internal power and industrial controls.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">At December 31, 2012, of the gross trade accounts
receivable from continuing operations totaling $5,095,926, 57% was due from six customers: 37%, 8%, 3%, 3%, 3% and 3%. At December
31, 2011, of the gross trade accounts receivable from continuing operations totaling $3,819,641, 53% was due from eight customers:
21%, 9%, 7%, 5%, 4%, 3%, 2% and 2%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><B>13.</B></TD><TD><B>STOCK-BASED EMPLOYEE COMPENSATION </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">Stock options granted are presented post reverse split
using the 30 to 1 reverse split ratio.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">On May 16, 2008, the Board of Directors approved the
CUI Global, Inc. 2008 Equity Incentive Plan (&ldquo;2008 Plan&rdquo;) and authorized 1,500,000 shares of the Company&rsquo;s common
stock to fund the Plan. At the 2008 Annual Meeting of Shareholders the Equity Incentive Plan was approved by the Company shareholders.
The 2008 Plan provides for the issuance of stock options to attract, retain and motivate employees, to encourage employees, directors
and independent contractors to acquire an equity interest in the Company, to make monetary payments to certain employees based
upon the value of the Company&rsquo;s stock, and provide employees, directors and independent contractors with an incentive to
maximize the success of the Company and further the interest of the shareholders. The 2008 Plan provides for the issuance of Incentive
Stock Options and Non Statutory Options. The Administrator of the plan shall determine the exercise price per share at the time
the option is granted, but the exercise price shall not be less than the fair market value on the date the option is granted. Stock
options granted under the 2008 Plan have a maximum duration of 10 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">At the 2009 Annual Meeting of Shareholders held on
September 29, 2009, the shareholders approved an amendment to the 2008 Equity Incentive Plan to increase the number of common shares
issuable under the plan from 1,500,000 to 3,000,000. All of these shares have been registered under Form S-8.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in"><FONT STYLE="color: black">On January 5, 2009 the
Company Board of Directors received and approved a written report and recommendations of the Compensation Committee which included
a </FONT>detailed executive equity compensation report and market analysis <FONT STYLE="color: black">and the recommendations of
</FONT>Compensia, Inc., a management consulting firm that provides executive compensation advisory services to compensation committees
and senior management of knowledge-based companies. The Compensation Committee used the report and analysis as a basis for its
formal written recommendation to the board. Pursuant to a January 8, 2009 board resolution the <FONT STYLE="color: black">2009
Equity Incentive Plan (Executive), a Non-Qualified Stock Option Plan, was created and funded with 4,200,000 shares of $0.001 par
value common stock. The Compensation Committee was appointed as the Plan Administrator to manage the plan. October 11, 2010, CUI
Global authorized an additional 3,060,382 options under the 2009 Equity Incentive Plan (Executive). </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The 2009 Equity Incentive Plan (Executive) provides
for the issuance of Incentive Non Statutory Options to attract, retain and motivate executive and management employees and directors
and to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management
employees and directors based upon the value of the Company&rsquo;s stock and to provide these individuals with an incentive to
maximize the success of the Company and further the interest of the shareholders. The Administrator of the plan is authorized to
determine the exercise price per share at the time the option is granted, but the exercise price shall not be less than the fair
market value on the date the option is granted. Stock options granted under the 2009 Plan have a maximum duration of 10 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The fair value of each stock option is estimated on
the date of grant using a Black Scholes Pricing Model. The fair value of warrants and options granted during 2012 was estimated
on the dates of the grants using the following assumptions: dividend yield of 0%, expected volatilities of 84% - 91%, risk-free
interest rates of 0.27%, and expected lives of 2 years. During the year ended December 31, 2011, the Company did not grant any
stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The following information is presented post reverse
split for the stock option activity for the year ended December 31, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: right">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Number of <BR> Shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Weighted <BR> Average <BR> Exercise<BR> Price</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Weighted <BR> Average <BR> Remaining <BR> Contract<BR> Life</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD NOWRAP STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">Aggregate <BR> Intrinsic<BR> Value</TD><TD NOWRAP STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; color: black">Outstanding at December 31, 2010</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right">293,372</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">7.45</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; color: black; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">8.37 Years </FONT></TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 10%; color: black; text-align: right">66,544</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Exercised</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(1,000</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">5.70</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Expired</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(33,073</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">2.81</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Forfeited</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 1pt">Granted</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Outstanding at December 31, 2011</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">259,299</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">7.75</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">7.69 Years </FONT></TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Exercised</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Expired</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(3,000</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">5.33</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Forfeited</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 1pt">Granted</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">425,842</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">5.68</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">6.00 Years </FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; padding-bottom: 2.5pt">Outstanding at December 31, 2012</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">682,141</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">6.47</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">8.52 Years </FONT></TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: right">88,000</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; padding-bottom: 1pt">Outstanding exercisable at December 31, 2012</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">262,952</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">7.31</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">6.98 Years </FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; color: black; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: right">9,252</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">The weighted average fair value of warrants and options
granted during the periods are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.4in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Exercise price lower than the market price</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black">Exercise price equaled the market price</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">$ 4.56 - $4.58 </FONT></TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 62%; color: black">Exercise price exceeded the market price</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 16%; color: black; text-align: right">6.00</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 16%; color: black; text-align: right">-</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in">&nbsp;</P>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">INDEPENDENT AUDITOR&rsquo;S REPORT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shareholders and Board of Directors</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Orbital Gas Systems Limited</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying balance
sheets of Orbital Gas Systems Limited as of June 30, 2012 and 2011, and the related profit and loss accounts, statements of total
recognized gains and losses, note of historical cost profits and losses, reconciliation of net cash flow to movement in net funds,
reconciliation of movements in shareholders&rsquo; funds, and statements of cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements
based on our audit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with
auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Orbital Gas Systems Limited as of June 30,
2012 and 2011, and the results of its operations and cash flows for the years then ended in conformity with accounting principles
generally accepted in the United Kingdom.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Generally accepted accounting principles
in the United Kingdom vary in certain significant respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United States of America (&ldquo;U.S. GAAP&rdquo;) would
have affected the results of operations of the company for the years ended June 30, 2012 and 2011 to the extent summarized in Note
22 to the financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">/s/ BAKER TILLY VIRCHOW KRAUSE, LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Minneapolis, Minnesota</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">March 2, 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Orbital Gas Systems Limited</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase">Profit and Loss Account</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>















<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; font-style: normal; text-align: right">Note</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; font-style: normal; text-align: right">2012</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; font-style: normal; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">TURNOVER &ndash; CONTINUING OPERATIONS</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">1</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">13,997,850</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">13,751,265</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Cost of sales</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">(7,808,629</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(8,844,758</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">GROSS PROFIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">6,189,221</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,906,507</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Distribution costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(282,498</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(239,807</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Administrative expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">(3,640,460</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(3,687,610</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">OPERATING PROFIT &ndash; CONTINUING OPERATIONS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">2,266,263</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">979,090</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest receivable and similar income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">21,697</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,184</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Interest payable and similar charges</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">3</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">(4,822</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(836</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;4-5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">2,283,138</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">992,438</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Taxation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">6</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">(493,617</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(206,224</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">PROFIT FOR THE FINANCIAL YEAR</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 2.5pt">15</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">1,789,521</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">786,214</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<!-- Field: Page; Sequence: 130; Value: 31 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Orbital Gas Systems Limited</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Profit for the financial year</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">1,789,521</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">786,214</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Unrealised deficit on revaluation of properties</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(42,547</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE FINANCIAL YEAR</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">1,789,521</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">743,667</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTE OF HISTORICAL COST PROFITS AND LOSSES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 0.5pt solid">for the years ended 30 June
2012 and 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">2,283,138</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">992,438</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Difference between a historical cost depreciation charge and the actual depreciation charge calculated on the revalued amount</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">2,768</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(878</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">HISTORICAL COST PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">2,285,906</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">991,560</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: right">&nbsp;</TD><TD STYLE="text-decoration: none; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">HISTORICAL COST PROFIT FOR THE YEAR RETAINED AFTER TAXATION</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">1,792,289</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">785,336</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<!-- Field: Page; Sequence: 131; Value: 31 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Orbital Gas Systems Limited</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BALANCE SHEET</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; font-style: normal; text-align: right">Note</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">2011</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">FIXED ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 35%; text-align: left">Tangible assets</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">7</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">865,834</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">735,819</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Stocks</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">386,937</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">683,034</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Debtors</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">3,927,279</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,899,231</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Cash at bank and in hand</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">3,883,485</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,393,293</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">8,197,701</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,975,558</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">CREDITORS: Amounts falling due within one year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">11</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(6,294,482</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(7,813,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">NET CURRENT ASSETS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">1,903,219</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">162,558</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">TOTAL ASSETS LESS CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">2,769,053</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">898,377</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CREDITORS: Amounts falling due after more than one year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(70,080</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">PROVISION FOR LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">13</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(28,268</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(17,193</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET ASSETS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">2,670,705</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">881,184</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CAPITAL AND RESERVES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Called up share capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">3,817</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,817</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Revaluation reserve</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">87,940</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">85,172</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Capital redemption reserve</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">1,183</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,183</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Profit and loss account</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">2,577,765</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">791,012</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">SHAREHOLDERS&rsquo; FUNDS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">2,670,705</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">881,184</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Orbital Gas Systems Limited</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CASH FLOW STATEMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; font-style: normal; text-align: right">Note</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">16</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">(228,288</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">2,430,757</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">RETURNS ON INVESTMENTS AND SERVICING OF FINANCE</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17</TD><TD STYLE="text-align: left">a</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">16,875</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,348</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>TAXATION</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(190,344</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(133,287</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">CAPITAL EXPENDITURE</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">17</TD><TD STYLE="text-align: left; padding-bottom: 1pt">b</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">(39,482</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(96,118</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(441,239</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,214,700</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">FINANCING</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">17</TD><TD STYLE="text-align: left; padding-bottom: 1pt">c</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">(68,569</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(35,781</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">(DECREASE)/INCREASE IN CASH IN THE YEAR</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">(509,808</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">2,178,919</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; font-style: normal; text-align: right">Note</TD><TD STYLE="font-weight: bold; font-style: normal">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right"><B>&pound;</B></TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&pound;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">(DECREASE)/INCREASE IN CASH IN THE YEAR</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">(509,808</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">2,178,919</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">New finance leases</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(181,576</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Change in net debt resulting from cash flows</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">68,569</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">35,781</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">MOVEMENT IN NET DEBT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(622,815</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,214,700</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">NET FUNDS AT START OF YEAR</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">4,388,852</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,174,152</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET FUNDS AT END OF YEAR</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 2.5pt">18</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">3,766,037</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">4,388,852</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Orbital Gas Systems Limited</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">PROFIT FOR THE FINANCIAL YEAR</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">1,789,521</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">786,214</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other recognised gains and losses relating to the year</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(42,547</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">NET ADDITION TO SHAREHOLDERS&rsquo; FUNDS</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">1,789,521</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">743,667</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Opening shareholders&rsquo; funds</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">881,184</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">137,517</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">CLOSING SHAREHOLDERS&rsquo; FUNDS</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 2.5pt double">2,670,705</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">881,184</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Orbital Gas Systems Limited</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ACCOUNTING POLICIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 1pt solid"></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">AUTHORIZATION OF NON-STATUTORY FINANCIAL
STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The financial statements of Orbital Gas
Systems Limited (&ldquo;Orbital&rdquo; or &ldquo;the company&rdquo;) were authorised for issue by the Board of Directors and the
balance sheet was signed on the board&rsquo;s behalf by a director. Orbital is a private limited company incorporated and domiciled
in England and Wales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">PRINCIPAL ACTIVITIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The principal activity of the company during
the year was that of the supply and installation of gas control systems.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">BASIS OF ACCOUNTING</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The financial statements have been prepared
under the historical cost convention, modified to include the revaluation of freehold properties, and in accordance with applicable
United Kingdom accounting standards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The financial statements present information
about the company as an individual undertaking and not about its group, as the company has taken advantage of the exemption provided
by section 402 of the Companies Act 2006 not to prepare consolidated financial statements as the directors consider that the company&rsquo;s
subsidiary be excluded from consolidation on the grounds of it being immaterial for purpose of true and fair view. The subsidiary
company is a dormant company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The financial statements are presented
in Sterling.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">BASIS OF PREPARATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The directors are constantly reviewing
resource competence and availability and believe that the company has adequate current resources to continue in operational existence
for at least the next twelve months. Thus they continue to adopt the going concern basis of accounting in preparing the annual
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TANGIBLE FIXED ASSETS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Tangible fixed assets are stated at cost
or valuation net of depreciation and any provision for impairment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation is provided on all tangible
fixed assets except for freehold land at rates calculated to write each asset down to its estimated residual value over its expected
useful life, as follows:-</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 60%; border-collapse: collapse; margin-left: 0.75in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 55%; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Freehold property</FONT></TD>
    <TD STYLE="width: 45%; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">- 2% on cost</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Improvements to freehold property</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">- 10% on cost</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Plant and machinery</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">- 20% on cost</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Fixtures and fittings</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">- 10%-33% on cost</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Computer equipment</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">- 33% on cost</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Motor vehicles</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">- 25% on cost</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Freehold properties are revalued in accordance
with FRS 15 with a full valuation carried by professionally qualified Chartered Surveyors on an existing use open market value
basis, in accordance with the Statement of Assets Valuation Practice No. 4 and the Guidance Notes of the Royal Institution of Chartered
Surveyors every five years and an interim valuation is carried out in year three.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">IMPAIRMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fixed assets are reviewed for impairment
if events or changes in circumstances indicate that the carrying amount may not be recoverable or as otherwise required by relevant
accounting standards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shortfalls between the carrying value of
fixed assets and their recoverable amounts, being the higher of net realisable value and value-in-use, are recognised as impairments.
Impairments of revalued assets, except those caused by a clear consumption of economic benefit, are recognised in the statement
of total recognised gains and losses until the carrying amount reaches depreciated historic cost. All other impairment losses are
recognised in the profit and loss account.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Orbital Gas Systems Limited</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ACCOUNTING POLICIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 1pt solid"></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">STOCKS AND WORK IN PROGRESS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Stocks are stated at the lower of cost
and net realisable value. In determining the cost of raw materials, consumables and goods purchased for resale, the weighted average
purchase price is used.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For work in progress and finished goods,
cost is taken as production cost, which includes an appropriate proportion of attributable overheads.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">LONG TERM CONTRACTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Long term contracts are assessed on a contract
by contract basis and reflected in the profit and loss account by recording turnover and related costs as contract activity progresses.
Turnover is ascertained in a manner appropriate to the stage of completion of the contract, and credit taken for profit earned
to date when the outcome of the contract can be assessed with reasonable certainty. In respect of contracts where the degree of
work completed is certified by either a third party or the customer then turnover is recognised based on these work certificates.
In respect of contracts where work certificates are not obtained then turnover is recognised based on a percentage of completion
against the contract value. Percentage completion is measured on the basis of costs incurred to the year end against the estimated
total costs of the contract. The amount by which turnover exceeds payments on account is classified as &quot;amounts recoverable
on contracts&quot; and included in debtors; to the extent that payments on account exceed relevant turnover and long term contract
balances, the excess is included as a creditor. The amount of long term contracts, at cost net of amounts transferred to cost of
sales, less provision for foreseeable losses and payments on account not matched with turnover, is included within stocks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">DEFERRED TAXATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred tax is recognised in respect of
all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result
in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.
Timing differences are differences between the company&rsquo;s taxable profits and its results as stated in the financial statements
that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised
in the financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred tax is measured at the average
tax rates that are expected to apply in the years in which timing differences are expected to reverse, based on tax rates and laws
that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">FOREIGN CURRENCIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Assets and liabilities in foreign currencies are translated
into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into
sterling at the rate of exchange ruling at the date of transaction. All differences are taken to the profit and loss account.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">LEASED ASSETS AND OBLIGATIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Where assets are financed by leasing agreements
that give rights approximating to ownership (&quot;finance leases&quot;), the assets are treated as if they had been purchased
outright. The amount capitalised is the present value of the minimum lease payments payable during the lease term. The corresponding
leasing commitments are shown as obligations to the lessor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Lease payments are treated as consisting
of capital and interest elements, and the interest is charged to the profit and loss account in proportion to the remaining balance
outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All other leases are &ldquo;operating leases&rdquo;
and the annual rentals are charged to profit and loss on a straight line basis over the lease term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">RETIREMENT BENEFITS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The company operates a defined contribution
scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The amount
charged to the profit and loss account in respect of pension costs is the contributions payable in the year. Differences between
contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">ACCOUNTING POLICIES</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt; border-bottom: Black 1pt solid"></TD></TR>
</TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">RESEARCH AND DEVELOPMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Research and development is written off
to the profit and loss account as it is incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">INVESTMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fixed asset investments are stated at cost.
Provision is made for any impairment in the value of fixed asset investments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TURNOVER</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Turnover is recognised at the fair value
of the consideration received or receivable for sale of goods and/or services in the ordinary nature of the business.&nbsp; Turnover
is shown net of Value Added Tax, of goods sold and services provided to external customers and, in the case of long term contracts,
credit is taken appropriate to the stage of completion when the outcome of the contract can be assessed with reasonable certainty.
In respect of contracts where the degree of work completed is certified by either a third party or the customer then turnover is
recognised based on these work certificates. In respect of contracts where work certificates are not obtained then turnover is
recognised based on a percentage of completion against the contract value. Percentage completion is measured on the basis of costs
incurred to the year end against the estimated total costs of the contract.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">CASH AND CASH EQUIVALENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cash for the purpose of the cash flow statement
comprises cash in hand and deposits repayable on demand less overdrafts repayable on demand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">1</TD><TD>TURNOVER</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD>The company&rsquo;s turnover and profit before taxation were all derived from its principal activity.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD>In the year to 30 June 2012, 2% of the company&rsquo;s turnover was derived from markets outside the United Kingdom (2011:
3%).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">2</TD>
    <TD STYLE="text-align: left; vertical-align: top"> INTEREST RECEIVABLE AND SIMILAR INCOME</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left; padding-bottom: 2.5pt">Bank interest</TD><TD STYLE="width: 1%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">21,697</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; text-align: right">14,184</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">3</TD>
    <TD STYLE="text-align: left; vertical-align: top"> INTEREST PAYABLE AND SIMILAR CHARGES</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left; padding-bottom: 2.5pt">Finance leases</TD><TD STYLE="width: 1%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">4,822</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; text-align: right">836</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">4</TD>
    <TD STYLE="text-align: left; vertical-align: top"> PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Profit on ordinary activities before taxation is stated after charging/(crediting):</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Depreciation and amounts written off tangible fixed assets:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-left: 9pt">Charge for the year:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left; padding-left: 0.25in">Owned assets</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">53,124</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">33,089</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-left: 0.25in">Leased assets</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">54,465</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,551</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Profit on disposal of tangible fixed assets</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(16,546</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,350</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">(Profit)/loss on foreign exchange</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(235</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,625</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Operating lease rentals:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-left: 9pt">Land and buildings</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">8,974</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-left: 9pt">Plant and machinery</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">117,947</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">82,649</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 0.25in"></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<!-- Field: Page; Sequence: 138; Value: 31 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">5</TD>
    <TD STYLE="text-align: left; vertical-align: top"> EMPLOYEES</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012 <BR>Number</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011 <BR>Number</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">The average monthly number of persons (including directors) employed by the company during the year was:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%">Management</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">10</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">9</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>Service</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">27</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">Administration</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">39</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">33</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">76</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">63</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">Staff costs for the above persons:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left">Wages and salaries</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">4,241,649</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">4,097,003</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Social security costs</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">498,777</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">442,366</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other pension costs</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">81,688</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,074</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">4,822,114</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,611443</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top">DIRECTORS&rsquo; REMUNERATION</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%">Emoluments</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">1,981,379</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">2,199,427</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Money purchase pension contributions</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">17,500</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16,558</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">1,998,879</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,215,985</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD>The number of directors to whom retirement benefits were accruing was as follows:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012 <BR>Number</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011 <BR>Number</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left; padding-bottom: 2.5pt">Money purchase schemes</TD><TD STYLE="width: 1%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">2</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; text-align: right">2</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: right">Highest paid director</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%">Emoluments</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">1,576,474</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">1,803,269</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Money purchase pension contributions</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">10,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,475</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">1,586,474</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,812,744</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<!-- Field: Page; Sequence: 139; Value: 31 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">6</TD>
    <TD> TAXATION</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">2011</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Current tax:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 41%; text-align: left">UK corporation tax on profits of the year</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">482,542</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">190,354</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Adjustments in respect of previous years</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Total current tax</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">482,542</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">190,351</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Deferred tax:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Origination and reversal of timing differences</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">12,398</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,966</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Adjustment in respect of prior years</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(1,323</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(93</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total deferred tax</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">11,075</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,873</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Tax on profit on ordinary activities</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">493,617</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">206,224</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top">Factors affecting tax charge for year:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">The tax assessed for the year is lower (2011: lower) than the standard rate of corporation tax in the UK 25.5% (2011: 27.5%). The differences are explained below:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left; padding-bottom: 1pt">Profit on ordinary activities before tax</TD><TD STYLE="width: 1%; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; font-weight: bold; text-align: right">2,283,138</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">992,438</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Profit on ordinary activities multiplied by standard rate of corporation tax in the UK 25.5% (2011: 27.5%)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">582,262</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">272,934</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-style: italic">Effects of:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Expenses not deductible for tax purposes</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">10,826</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,619</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Fixed asset timing differences</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(13,174</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16,888</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Research and development tax credits</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(97,372</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(56,466</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Marginal relief</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">-</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,845</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Adjustment in respect of previous year</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Current tax charge for the year</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">482,542</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">190,351</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">7</TD><TD>TANGIBLE FIXED ASSETS</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Freehold <BR>property <BR>&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Plant <BR>and <BR>machinery<BR>&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Fixtures <BR>and <BR>fittings <BR>&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Computer<BR> equipment<BR>&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Motor<BR> vehicles <BR>&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Total <BR>&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">Cost or valuation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 33%; text-align: left">At beginning of year</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">550,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">200,774</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">245,317</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">111,145</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">227,887</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">1,335,123</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>Additions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,080</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,834</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,602</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,833</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">194,867</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">241,216</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>Disposals</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,250</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(112,114</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(118,364</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">Reclassification</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,847</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,847</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">At end of year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">559,080</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">218,358</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">237,072</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">132,825</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">310,640</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,457,975</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-style: italic">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">At beginning of year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">172,060</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">140,994</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">91,039</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">195,211</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">599,304</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Charged in the year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,826</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,106</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,274</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,917</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">55,466</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">107,589</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>Disposals</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,250</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(108,502</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(114,752</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">Reclassification</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,960</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,960</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">At end of year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,826</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">177,916</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">155,308</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">109,916</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">142,175</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">592,141</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-style: italic">Net book value</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">At 30 June 2012</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">552,254</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">40,442</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">81,764</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">22,909</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">168,465</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">865,834</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">At 30 June 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">550,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">28,714</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">104,323</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,106</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">32,676</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">735,819</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">Cost or valuation at 30 June 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>Cost</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,080</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">218,358</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">237,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">132,825</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">310,640</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">907,975</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">Valuation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">550,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">550,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">559,080</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">218,358</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">237,072</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">132,825</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">310,640</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,457,975</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD STYLE="text-align: justify">Included in the cost or valuation of freehold property is freehold land of &pound;275,000 (2011:
&pound;275,000) which is not depreciated. If the freehold property had not been revalued, they would have been included at the
following historical cost:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; padding-bottom: 2.5pt">Cost</TD><TD STYLE="width: 1%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">609,992</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; text-align: right">600,913</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Aggregate depreciation</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">175,497</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">165,903</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Value of land in freehold property</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD STYLE="text-align: justify">On 23 May 2011 the freehold land and buildings were revalued by Butters John Bee, Chartered Surveyors.
The open market value of the freehold interest in the property free from encumbrance, with the benefit of full possession is &pound;550,000.
The valuation has been carried out with the guidance notes issued by The Royal Institute of Chartered Surveyors for Asset Valuations.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD STYLE="text-align: justify">The net book value of motor vehicles held under hire purchase contracts is &pound;146,913 (2011:
&pound;31,245) and the depreciation charged on these assets was &pound;54,465 (2011: &pound;38,551).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">8</TD><TD STYLE="text-align: justify">FIXED ASSET INVESTMENTS</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The company&rsquo;s investments
at the balance sheet date in share capital of companies include the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 85%; border-collapse: collapse; margin-left: 0.5in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60%; font-style: italic">&nbsp;</TD>
    <TD STYLE="width: 2%; font-style: italic; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 23%; font-style: italic; text-align: justify"><I>Class and %</I></TD>
    <TD STYLE="width: 2%; font-style: italic; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 13%; font-style: italic; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-style: italic"><I>Name of company</I></TD>
    <TD STYLE="font-style: italic; text-align: justify">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: justify"><I>of shares held</I></TD>
    <TD STYLE="font-style: italic; text-align: justify">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: justify"><I>Activity</I></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: justify">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: justify">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: justify">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Orbital Gas (Process and Instrumentation) Limited</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">100% Ordinary</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Dormant</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The subsidiary company is registered
in England and Wales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The carrying value of these investments
is &pound;nil (2011: &pound;nil).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">9</TD>
    <TD STYLE="text-align: left; vertical-align: top"> STOCKS</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left">Raw materials and consumables</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">154,975</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">193,389</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Work in progress</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">231,962</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">489,645</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">386,937</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">683,034</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">10</TD>
    <TD STYLE="text-align: left; vertical-align: top"> DEBTORS</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Due within one year:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left">Trade debtors</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">3,015,418</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">1,736,961</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Amounts recoverable on contracts</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">872,654</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,122,377</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">Prepayments</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">39,207</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">39,893</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">3,927,279</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,899,231</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">11</TD>
    <TD STYLE="text-align: left; vertical-align: top"> CREDITORS: Amounts falling due within one year</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left">Obligations under finance leases and hire purchase contracts</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">47,368</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">4,441</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Payments received on account</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">302,352</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">425,832</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Trade creditors</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">1,557,231</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,705,085</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Amounts owed to group undertakings</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">134,030</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">134,030</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Corporation tax</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">482,552</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">190,354</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Other taxation and social security</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">650,747</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">902,329</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">Accruals</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">3,120,202</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,450,929</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">6,294,482</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,813,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">11</TD><TD STYLE="text-align: justify">CREDITORS: Amounts falling due within one year (continued)</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">The bank facility is secured
by a fixed and floating charge on all assets of the company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">The company also has guarantees
and bonds to third parties in place issued by the National Westminster Bank Plc of &pound;420,353 at 30 June 2012 (2011: &pound;156,983).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">12</TD>
    <TD STYLE="text-align: left; vertical-align: top"> CREDITORS: Amounts falling due after more than one year</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left; padding-bottom: 2.5pt">Obligations under finance leases and hire purchase contracts</TD><TD STYLE="width: 1%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">70,080</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">The maturity of obligations under
finance leases and hire purchase contracts is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left">Within one year</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">47,368</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">4,441</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Between one and two years</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">50,088</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">In more than two but no more than five years</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">19,992</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">117,448</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,441</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">13</TD>
    <TD STYLE="text-align: left; vertical-align: top"> PROVISIONS FOR LIABILITIES</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Deferred<BR> taxation <BR>&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 78%; text-align: left">At beginning of year</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">17,193</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Charge during the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,075</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">At end of year</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">28,268</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">2011</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">Provided</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">Unprovided</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Provided</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Unprovided</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 45%; text-align: left">Provision for deferred tax has been made as follows:</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Excess of tax allowances over depreciation</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">28,268</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,193</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">14</TD>
    <TD STYLE="text-align: left; vertical-align: top"> SHARE CAPITAL</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left">Allotted, called up and fully paid:</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">3,817 ordinary shares of &pound;1 each</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">3,817</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,817</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">15</TD>
    <TD STYLE="text-align: left; vertical-align: top"> RESERVES</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Profit and<BR>loss&nbsp;account<BR>&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Revaluation<BR>reserve<BR>&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Capital<BR>redemption<BR>reserve<BR>&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Total<BR>&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 45%">At 1 July 2011</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">791,012</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">85,172</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">1,183</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">877,367</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Profit for the year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,789,521</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,789,521</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Revaluation reserve transfer</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,768</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,768</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">At 30 June 2012</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">2,577,765</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">87,940</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">1,183</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">2,666,888</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">16</TD>
    <TD STYLE="text-align: left; vertical-align: top"> RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left">Operating profit</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">2,266,263</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">979,090</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Depreciation charges</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">107,589</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">71,640</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Profit on disposal of fixed assets</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(16,546</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,350</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Decrease/(increase) in stocks</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">296,097</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(276,039</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">(Increase)/decrease in debtors</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(1,028,048</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">403,668</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">(Decrease)/increase in creditors</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(1,853,643</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,254,748</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(228,288</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,430,757</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White; text-align: left; vertical-align: top">17</TD>
    <TD STYLE="text-align: left; vertical-align: top"> ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">2012<BR>
&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">2011<BR>
&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">a</TD>
    <TD STYLE="text-align: left"> RETURNS ON INVESTMENTS AND SERVICING OF FINANCE</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 63%; text-align: left">Interest received</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">21,697</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">14,184</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Interest element of hire purchase payments</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(4,822</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(836</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET CASH INFLOW FOR RETURNS ON INVESTMENTS AND SERVICING OF FINANCE</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">16,875</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,348</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">b</TD>
    <TD STYLE="text-align: left"> CAPITAL EXPENDITURE</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Purchase of tangible fixed assets</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(59,640</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(98,468</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Sale of tangible fixed assets</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">20,158</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,350</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET CASH OUTFLOW FOR CAPITAL EXPENDITURE</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(39,482</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(96,118</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">c</TD>
    <TD STYLE="text-align: left"> FINANCING</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Capital element of finance lease repayments</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(68,569</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(35,781</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET CASH OUTFLOW FROM FINANCING</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(68,569</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(35,781</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">18</TD><TD STYLE="text-align: justify">ANALYSIS OF CHANGES IN NET FUNDS</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">At 1 July<BR> 2011</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">New&nbsp;finance<BR> leases</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">Cash flow</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">At 30 June<BR> 2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">Net cash:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 45%; text-align: left; padding-bottom: 1pt">Cash at bank and in hand</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; border-bottom: Black 1pt solid; text-align: right">4,393,293</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; border-bottom: Black 1pt solid; text-align: right">(509,808</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="width: 1%; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; border-bottom: Black 1pt solid; font-weight: bold; text-align: right">3,883,485</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>Debt:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Finance leases</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,441</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(181,576</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">68,569</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(117,448</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,388,852</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(181,576</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(441,239</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">3,766,037</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">19</FONT></TD><TD STYLE="text-align: justify">OPERATING LEASE COMMITMENTS</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD STYLE="text-align: justify">At 30 June the company had annual commitments under non-cancellable leases as follows:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center">2012</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center">2011</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="background-color: White">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: right">Land and<BR> buildings</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: right">Plant and<BR> machinery</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: right">Total</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: right">Land and<BR> buildings</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: right">Plant and<BR> machinery</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: right">Total</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right">&pound;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&pound;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 33%; text-align: left">Other operating leases expiring within 1 year</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-weight: bold; text-align: right">9,081</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-weight: bold; text-align: right">30,336</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-weight: bold; text-align: right">39,417</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other operating leases expiring between 2 and 5 years</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">11,559</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">11,559</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,896</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">34,545</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">45,441</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">9,081</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">41,895</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">50,976</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,896</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">34,545</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">45,441</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">20</TD><TD STYLE="text-align: justify">CAPITAL COMMITMENTS</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD STYLE="text-align: justify">There were no capital commitments (2011: &pound;nil) at the end of the financial year.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">21</TD><TD STYLE="text-align: justify">PENSION COMMITMENTS</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD STYLE="text-align: justify">The company operates a defined contribution pension scheme.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"></TD><TD STYLE="text-align: justify">The pension cost charge represents contributions payable by the company and amounted to &pound;81,688
(2011: &pound;72,074). There were no outstanding or prepaid contributions at either the beginning or end of the financial year.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 18pt; text-align: justify"><FONT STYLE="font-size: 18pt">Orbital Gas Systems Limited</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>NOTES TO THE FINANCIAL STATEMENTS</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">for the years ended 30 June 2012 and 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">22</TD><TD STYLE="text-align: justify">U.S. GAAP RECONCILIATION</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">Management performed an analysis
of the differences between U.K. GAAP and U.S. GAAP. Based upon this review, the following is the U.S. GAAP reconciliation of the
Orbital financial statements prepared under U.K. GAAP:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="color: black; font-weight: bold; text-align: center">For the Year Ended June 30,</TD><TD STYLE="color: black; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; color: black; font-weight: bold">&nbsp;</TD><TD STYLE="color: black; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="color: black; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; color: black; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Profit and<BR> Loss <BR></TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Shareholders<BR>Funds</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Profit and<BR> Loss <BR></TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="color: black; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="color: black; font-weight: bold; text-align: center">Shareholders<BR> Funds</TD><TD STYLE="color: black; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">RESULTS UNDER U.K. GAAP</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 7%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 45%; color: black; text-align: left; padding-left: 9pt">Profit for the financial year</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&pound;</TD><TD STYLE="width: 9%; color: black; text-align: right">1,789,521</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">&pound;</TD><TD STYLE="width: 9%; color: black; text-align: right">786,214</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Surplus on Shareholders Funds</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&pound;</TD><TD STYLE="color: black; text-align: right">2,670,705</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&pound;</TD><TD STYLE="color: black; text-align: right">881,184</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">U.S. GAAP REPORTING ADJUSTMENTS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; padding-left: 9pt">Reversal of revaluation reserve</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(87,940</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">-</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(85,172</TD><TD STYLE="color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accrual for paid time off</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(54,000</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(54,000</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(46,000</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">(46,000</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left; padding-bottom: 2.5pt">RESULTS UNDER U.S. GAAP</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&pound;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">1,735,521</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&pound;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">2,528,765</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&pound;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">740,214</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: left">&pound;</TD><TD STYLE="border-bottom: Black 2.5pt double; color: black; text-align: right">750,012</TD><TD STYLE="padding-bottom: 2.5pt; color: black; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">U.K. GAAP allows for the revaluation of fixed assets. The Company has over time recorded a surplus balance
in the revaluation reserve account. U.S. GAAP does not allow for the revaluation of fixed assets and therefore this balance has
been reversed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">U.K. GAAP does not contain provisions for the accrual
for vacation or paid time off. U.S. GAAP requires that an employer accrue for employees compensation of future absences that have
been earned and are payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="tlogo1.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">7,000,000 Shares of Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 14pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Prospectus</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: center">, 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 16pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Craig-Hallum Capital Group</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 13. Other Expenses of Issuance and Distribution.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth all costs and expenses, other
than the underwriting discounts and commissions payable by us, in connection with the offer and sale of the common stock being
registered. <FONT STYLE="color: black">All amounts shown are estimates except for the SEC registration fee and the FINRA filing
fee.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 82%; color: black; text-align: left">SEC registration fee</TD><TD STYLE="width: 1%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 15%; color: black; text-align: right">5,984</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">FINRA filing fee</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">$</TD><TD STYLE="color: black; text-align: right">7,081</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Printing and engraving expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 10pt; color: black">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Legal fees and expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 10pt; color: black">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left">Accounting fees and expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 10pt; color: black">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left">Transfer agent fees and expenses</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 10pt; color: black">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black">Miscellaneous</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">&nbsp;<FONT STYLE="font-size: 10pt; color: black"></FONT></TD><TD STYLE="color: black; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: center">Total</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 10pt; color: black">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left">*</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 9.35pt">*</TD><TD STYLE="text-align: justify">To be provided by amendment.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 14. Indemnification of Directors and Officers.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Colorado General Corporation Act, as revised, provides that
if so provided in the articles of incorporation, the corporation shall eliminate or limit the personal liability of a director
to the corporation or to its shareholders for monetary damages for breach of fiduciary duty as a director; except that any such
provision shall not eliminate or limit the liability of a director to the corporation or to its shareholders for monetary damages
for any breach of the director's duty of loyalty to the corporation or to its shareholders, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, unlawful distributions, or any transaction from which the
director directly or indirectly derived an improper personal benefit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Articles of Incorporation and Bylaws provide that a person
who is performing his or her duties shall not have any liability by reason of being or having been a director of the corporation
and that the Company shall indemnify and advance expenses to a director or officer in connection with a proceeding to the fullest
extent permitted or required by and in accordance with the indemnification sections of Colorado statutes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The above discussion of our Articles of Incorporation and the
General Corporation Law of Colorado is only a summary and is qualified in its entirety by the full text of each of the foregoing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 15. Recent Sales of Unregistered Securities.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Following is a list of all securities we sold within the past
three years which were not registered under the Securities Act. The Company relied on Section 4(2) of the Securities Act of 1933
as the basis for an exemption from registration for the following issuances. Unless noted otherwise, the proceeds were used for
working capital and general corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2010 Sales of Unregistered Securities </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Common Stock Issued During 2010 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">471,136 shares of common stock were issued to two investors
who converted their promissory notes totaling $1,250,000 and related accrued interest of $242,560 to common equity at $3.168 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">33,333 shares of common stock were issued as part of
the settlement of the $4,900,000 convertible promissory note and $850,500 in accrued interest on this note related to the acquisition
of CUI, Inc. The shares were valued at $70,000 in accordance with the convertible promissory note stated conversion rate of $2.10
per share. Two corporate officers, one of whom is also a director are principals in the corporate note holder and each received
shares from this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">631,314 shares of common stock were issued to four
standby letter of credit guarantors who converted $2,000,000 of their letters of credit to common equity at $3.168 per share. Two
directors, one former corporate officer and a shareholder with more than 5% beneficial ownership in the Company participated in
this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">33,333 shares of common stock were issued to three
investors who exercised warrants at $0.30 per share. The Company received proceeds of $10,000. One director, one former director
and one former corporate officer participated in this transaction. These warrants were granted to the Standby Letter of Credit
guarantors as a bonus inducement to participate in the Letter of Credit guarantee that was used to secure the term loan necessary
for the acquisition of CUI, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">1,786 shares of common stock were issued to an investor
in consideration for a warrant exercise at $6.00 per share. The Company received proceeds of $10,718.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">22,222 shares of common stock were issued to a limited
liability company investor that converted $100,000 of its promissory note to common equity at $4.50 per share in accordance with
the convertible note terms. A former officer of CUI Global is a principal in the limited liability company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">7,000 shares of common stock were issued for services
performed by a consultant. $42,000 of consulting expense was recorded in relation to this transaction based on the fair market
value of the stock on the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">1,810 shares of common stock were issued in relation
to the exercise of 2008 Equity Incentive Plan options at $5.70 per share with proceeds of $9,500. The Company received no cash
payment for 144 of these shares because the options were exercised through a cashless exercise election.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">3,333 shares of common stock were issued to an employee
as a bonus. These shares were valued at $28,000 as of the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">236,667 shares of common stock were sold at $6.00 per
share pursuant to stock purchase agreements with proceeds of $1,420,000. 1,667 of these shares were issuable at December 31, 2010;
the 1,667 issuable shares were issued in 2011. One director and a former corporate officer participated in this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">33,333 shares of common stock were issued as settlement
of $200,000 of principal on a promissory note related to the acquisition of CUI, Inc. The conversion rate was $6.00 per share.
Two corporate officers, one of whom is also a director are principals in the corporate note holder and each received shares from
this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Warrants and Options Issued During 2010 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16.1pt">Fully vested options for the purchase of 9,167 shares
of its 2008 Equity Incentive Plan common stock at $5.70 per share to nine employees with an expiration of June 15, 2020. If all
options are exercised the Company could receive $52,250.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">Under the 2009 Equity Incentive Plan (Executive) 19,800
options that vest October 11, 2011 were issued to directors to purchase restricted common stock at $9.00 per share and 82,213 options
were issued to officers and employees that vest over four years, 25% at year one and thereafter in equal monthly installments.
The employees include two directors who are also employees and officers and one officer. The options expire October 11, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Series A and Series B Convertible Preferred Stock Issued
During 2010 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16.1pt">There were no shares of Series A or Series B Convertible
Preferred Stock issued during 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Series C Preferred Stock Issued During 2010 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">There were no shares of Series C Convertible Preferred
Stock issued during 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2011 Sales of Unregistered Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Common Stock Issued During 2011 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On January 6, 2011, the 1,667 issuable shares listed
on the balance sheet as of December 31, 2010 were issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On February 7 and 10, 2011, two former employees
completed cashless exercises of their options for which 269 shares of common stock were issued. The Company did not receive funds
from these options exercises as they were cashless.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On March 11, 2011, 5,957 shares of common stock were
issued pursuant to a consultant agreement for strategic investor marketing services. The shares were priced at $7.05 per share
based on the ten day trailing average closing price at the time of the issuance in accordance with the agreement and a $42,000
consulting expense was recorded in relation to this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On April 19, 2011, a member of the Board of Directors
exercised 23,333 warrants which he previously received in exchange for a personal guarantee of a bank note provided on behalf of
the Company in May 2008. The Company received $7,000 from the exercise of these warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On May 4, 2011, a beneficial owner of more than 5%
of the outstanding common stock, exercised 10,000 warrants which he previously received in exchange for a personal guarantee of
a bank note provided on behalf of the Company in May 2008. The Company received $3,000 from the exercise of these warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On May 15, 2011, a beneficial owner of more than
10% of the outstanding common stock exercised 133,333 warrants which he previously received in exchange for a personal guarantee
of a bank note provided on behalf of the Company in May 2008. The Company received $40,000 from the exercise of these warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On December 27, 2011, 5,000 shares of common stock
were issued to a former consultant in consideration for the release of a claim on intellectual property with a related expense
of $19,500 recorded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Warrants and Options Issued During 2011 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">There were no warrants or options issued
during 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Series A and Series B Convertible Preferred Stock Issued
During 2011 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16.1pt">There were no shares of Series A or Series B Convertible
Preferred Stock issued during 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Series C Preferred Stock Issued During 2011 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">There were no shares of Series C Convertible Preferred
Stock issued during 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2012 Sales of Unregistered Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Common Stock Issued During 2012 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Effective February 17, 2012, the issued and outstanding
shares of the Company&rsquo;s $0.001 par value common stock were reverse split at a ratio of one for thirty (1:30). All fractional
shares resulting from the reverse split were rounded up to the next full numbers. As a result of the rounding up effect, 97 additional
shares of common stock were issued that are included in the S-1 registration statement. The Company received no monetary consideration
for these 97 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; color: #161616">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; color: #161616">March 16, 2012, 10,071 shares of
common stock were issued in relation to a warrant exercise. The Company received $3,021 from this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; color: #161616">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">March 20, 2012, <FONT STYLE="color: #161616">15,000
shares of common stock were issued in consideration for strategic marketing services rendered for the benefit of the Company. A
$69,450 consulting expense was recorded in relation to this transaction based on the fair market value of the stock on the date
of grant.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; color: #161616">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Between April 4-12, 2012, 57,000 shares of common
stock were issued in relation to common stock bonuses granted to officers and employees. 50,750 of these common shares were issued
to three officers with a fair value of $243,600 in accordance with their employment agreement bonus provisions. Two employees were
awarded a total of 6,250 common shares with a fair value total of $30,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On April 12, 2012, a holder of 2,500 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $250 into common shares. For these conversions, the holder received 458 common shares based
upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On May 4, 2012, a holder of 45,000 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $4,500 into common shares. For these conversions, the holder received 8,645 common shares
based upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On May 30, 2012, a holder of 3,043 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $304 into common shares. For these conversions, the holder received 558 common shares based
upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On June 21, 2012, 1,000 shares of common stock were
issued to a consultant in consideration for strategic investor marketing services rendered for the benefit of the Company and a
$6,450 consulting expense was recorded in relation to these issuances based on the fair market value of the stock on the date of
the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On June 28 and 29, July 2, 3, 16 and 27, 2012, 234,332
shares of common stock were sold to investors at $4.50 per share pursuant to stock purchase agreements with proceeds of $1,054,500
before related costs from this transaction of $79,045 which were recorded as reductions of additional paid in capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On September 7, 2012, 1,052 shares of common stock
were issued as a royalty to James McKenzie, majority owner of CUI, Inc. prior to the May 2008 asset acquisition by CUI Global.
The shares were valued at $6,638.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On September 27, 2012, 4,596 shares of common stock
were issued to an employee as a bonus. These shares were expensed at a fair value of $25,000 as of the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On each of April 5, May 7, June 6, July 2, August
1, September 7, October 1 and November 1, 2012, the Company issued 13,500 shares of common stock to a consultant in consideration
for strategic investor marketing services rendered for the benefit of the Company. A $569,970 consulting expense was recorded in
relation to these issuances based on the fair market value of the stock on the dates of the grants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On October 16, 2012, 2,500 shares of common stock
were issued to a consultant in consideration for strategic investor marketing services rendered for the benefit of the Company
and a $12,825 consulting expense was recorded in relation to these issuances based on the fair market value of the stock on the
date of the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Warrants and Options Issued During 2012 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">During April 2012, 84,675 options to purchase restricted
common stock were issued to officers and directors under the 2009 Equity Incentive Plan (Executive) with the following assumptions:
exercise price of $4.56 per share, volatility of 90%, risk free interest rate of 0.27% and a term of 2 years. The 19,800 director
related options vest one year from the date of grant while the 64,875 officer options have a four year vesting period with 25%
vesting one year from date of grant and monthly thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">During May 2012, 11,167 fully vested options were
granted to employees under the 2008 Equity Incentive Plan to purchase common stock with the following assumptions: exercise price
of $4.58 per share, volatility of 91%, risk-free interest rate of 0.27% and a term of 2 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">During September 2012, 330,000 options to purchase
common stock were issued to an officer under the 2009 Equity Incentive Plan (Executive) with the following assumptions: exercise
price of $6.00 per share, volatility of 84%, risk-free interest rate of 0.27% and a term of 2 years. The 330,000 options vest in
equal monthly installments over the course of forty-eight consecutive months beginning September 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Series A and Series B Convertible Preferred Stock Issued
During 2012 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were no shares of Series A or Series B Convertible Preferred
Stock issued during 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Series C Preferred Stock Issued During 2012 </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16pt">There were no shares of Series C Convertible Preferred
Stock issued during 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Note:</B> Effective September 17, 2012, the Board of Directors
passed a resolution eliminating and discontinuing all Series A and B Convertible Preferred and Series C Preferred stock. As of
December 31, 2012, no shares of Series B and Series C Convertible Preferred Stock are issued or outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Shares Eligible for Future Sale </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2012, we had outstanding 10,883,280 shares
of common stock. Of these shares, 8,636,820 shares are freely tradable without restriction or limitation under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The 2,246,460 shares of common stock held by existing shareholders
as of December 31, 2012 that are &quot;restricted&quot; within the meaning of Rule 144 adopted under the Securities Act (the &quot;Restricted
Shares&quot;), may not be sold unless they are registered under the Securities Act or sold pursuant to an exemption from registration,
such as the exemption provided by Rule 144 promulgated under the Securities Act. The Restricted Shares were issued and sold by
us in private transactions in reliance upon exemptions from registration under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective September 17, 2012, the Board of Directors passed
a resolution eliminating and discontinuing all Series A and B Convertible Preferred and Series C Preferred stock and requiring
that all preferred stock shall be returned to the Company treasury. As of December 31, 2012, no shares of Series B and Series C
Convertible Preferred Stock are issued or outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 16. Exhibits and Financial Statement Schedules.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See the Exhibit&nbsp;Index following the signature page.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 17. Undertakings.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The undersigned registrant hereby undertakes <FONT STYLE="text-underline-style: none; color: windowtext">that</FONT>:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-indent: -0.25in"> i.&nbsp;&nbsp;&nbsp;<FONT STYLE="text-underline-style: none; color: windowtext">For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. </FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: -21pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-indent: -0.25in"> ii.&nbsp;&nbsp;<FONT STYLE="text-underline-style: none; color: windowtext">For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act of 1933, as amended and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of
1933, as amended and will be governed by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S-1
and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Tualatin, State of Oregon on March 6, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="font-weight: bold">CUI Global, Inc.</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 40%">&nbsp;</TD>
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 45%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-bottom: 1pt">By:</TD>
    <TD STYLE="padding-left: 9pt; border-bottom: Black 1pt solid">/s/ William J. Clough, Esq.</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-left: 9pt; border-bottom: Black 1pt solid">/s/ Daniel N. Ford</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;William J. Clough, Esq.,</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 20pt">&nbsp;Daniel N. Ford,</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">&nbsp;Chief Executive Officer/President</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Financial Officer and</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Principal Financial and Accounting</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Officer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the capacities and on the dates indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 31%; text-align: center; border-bottom: Black 1pt solid">Name</TD>
    <TD STYLE="width: 6%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 31%; border-bottom: Black 1pt solid">Title</TD>
    <TD STYLE="width: 6%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 26%; border-bottom: Black 1pt solid">Date </TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0; border-bottom: Black 1pt solid; text-align: center">*</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD>March 6, 2013</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">Colton R. Melby</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0; border-bottom: Black 1pt solid; text-align: center">*</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Executive Officer,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">William J. Clough</TD>
    <TD>&nbsp;</TD>
    <TD>President, and Director</TD>
    <TD>&nbsp;</TD>
    <TD>March 6, 2013</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0; border-bottom: Black 1pt solid; text-align: center">*</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD>March 6, 2013</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">Thomas A. Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0; border-bottom: Black 1pt solid; text-align: center">*</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD>March 6, 2013</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">Sean P. Rooney</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0; border-bottom: Black 1pt solid; text-align: center">*</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD>March 6, 2013</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">Corey Lambrecht</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0; border-bottom: Black 1pt solid; text-align: center">*</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD>March 6, 2013</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">Matthew M McKenzie</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 50%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%">BY:</TD>
    <TD STYLE="padding-left: 0; border-bottom: Black 1pt solid; text-align: left; width: 90%">/s/ William J. Clough, Esq.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">William J. Clough</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 9pt">Attorney-in-Fact</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">*</TD><TD>Signed on individual&rsquo;s behalf by attorney-in-fact</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>Exhibit
Index</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following exhibits are included as part of this Form S-1.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exhibit No.</FONT></TD>
    <TD STYLE="width: 88%; padding-left: 0.5in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Description</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1.1<SUP>*</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Form of Underwriting Agreement<FONT STYLE="color: blue"><U></U></FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2.1<SUP>7</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Orbital Gas Systems Limited Share Purchase Agreement dated March
    3, 2013.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.1<SUP>8</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Composite Articles of Incorporation of the Company, as currently in effect.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.2<SUP>1</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Bylaws of the Company.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.1<SUP>2</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Form of Warrant to Purchase Restricted Common Stock.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5.1<SUP>*</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Opinion regarding legality.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.32<SUP>4</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amendment to $14,000,000 Promissory Note between IED, Inc. and the Company, dated September 1, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.33<SUP>4</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Agreement for Accord and Satisfaction of an Undisputed Debt between IED, Inc. and the Company, dated April 1, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.34<SUP>8</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Agreement for the sale of certain intellectual property rights, dated September 2, 2011. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.35<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amendment to Divestment Agreement Regarding Stock Sale and Purchase Agreement between CUI Global, Inc. (formerly Waytronx, Inc.), Kunio Yamagih and Others on July 1, 2009, dated April 13, 2012. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.37<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Memorandum of Understanding with Ericsson Inc., dated July 7, 2011. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.38<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">BPS-5 License Agreement by and between California Power Research, Inc. and the Company, dated March 5, 2010. Confidential portion(s) of this document have been redacted pursuant to protection as &quot;confidential&quot; under Exemption 4 of the Freedom of Information Act, 5 U.S.C. &sect; 552(b)(4). </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.39<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Patent License Agreement by and between Power-One, Inc. and CUI, Inc., dated September 18, 2009. Confidential portion(s) of this document have been redacted pursuant to protection as &quot;confidential&quot; under Exemption 4 of the Freedom of Information Act, 5 U.S.C. &sect; 552(b)(4). </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.40<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Licensing Agreement between AnderMotion Technologies LLC and the Company, dated April 20, 2009. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.41<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Gas Quality Inferential Measurement Device (GasPT) License Agreement between GL Industrial Services UK Ltd and the Company, dated December 1, 2009. Confidential portion(s) of this document have been redacted pursuant to protection as &quot;confidential&quot; under Exemption 4 of the Freedom of Information Act, 5 U.S.C. &sect; 552(b)(4). </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.42<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Distributor Agreement by and between Orbital Gas Systems Ltd and the Company, dated October 21, 2011. Confidential portion(s) of this document have been redacted pursuant to protection as &quot;confidential&quot; under Exemption 4 of the Freedom of Information Act, 5 U.S.C. &sect; 552(b)(4). </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.43<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Distributor Agreement by and between Socrate s.p.a. and the Company, dated January 16, 2012. Confidential portion(s) of this document have been redacted pursuant to protection as &quot;confidential&quot; under Exemption 4 of the Freedom of Information Act, 5 U.S.C. &sect; 552(b)(4).</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.44<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Manufacturing Agreement by and between Agilent Technologies Singapore International and CUI Inc., dated November 1, 2011. Confidential portion(s) of this document have been redacted pursuant to protection as &quot;confidential&quot; under Exemption 4 of the Freedom of Information Act, 5 U.S.C. &sect; 552(b)(4). </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.45<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exclusive Distributor Agreement by and between Digi-Key Corporation and CUI Inc., dated April 1, 2009.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.46<SUP>5</SUP></FONT></TD>
    <TD STYLE="width: 88%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Contract Manufacturing Agreement <FONT STYLE="color: windowtext">between
    </FONT>Ingenion Design Ltd.<FONT STYLE="color: windowtext"> and the Company, dated March 18, 2011.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.47<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Amended and Restated Letter</FONT> Agreement
    <FONT STYLE="color: windowtext">between The</FONT> Belleau Wood Group<FONT STYLE="color: windowtext"> and the Company, dated
    June 5, 2012.</FONT> Confidential portion(s) of this document have been redacted pursuant to protection as &quot;confidential&quot;
    under Exemption 4 of the Freedom of Information Act, 5 U.S.C. &sect; 552(b)(4).<FONT STYLE="color: windowtext"> </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.48<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Lease Agreement <FONT STYLE="color: windowtext">between</FONT>
    Barakel<FONT STYLE="color: windowtext"> LLC and CUI Inc., dated September 1, 2006.</FONT> </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.49<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Credit and Security Agreement<FONT STYLE="color: windowtext"> between
    Wells Fargo Bank, National Association, and CUI, Inc., dated July 26, 2010.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.50<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Revolving Note for $4,000,000 between Wells
    Fargo Bank, National Association, and CUI, Inc., dated July 26, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.51<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Security Agreement between Wells Fargo Bank,
    National Association, and the Company, dated July 26, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.52<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Subordination Agreement between Wells Fargo
    Bank, National Association, and International Electronic Devices, Inc., dated May 27, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.53<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Term Note for $4,000,000 between Wells Fargo
    Bank, National Association, and CUI Inc., dated August 23, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.54<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Patent and Trademark Security Agreement<FONT STYLE="color: windowtext">.
    between Wells Fargo Bank, National Association, and the Company, dated July 28, 2010.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.55<SUP>6</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">First Amendment to Credit and Security Agreement<FONT STYLE="color: windowtext">.
    by and between Wells Fargo Bank, National Association, and CUI, Inc., dated January 25, 2011.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.56<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Second Amendment to Credit and Security Agreement<FONT STYLE="color: windowtext">
    by and between Wells Fargo Bank, National Association, and CUI, Inc., dated April 12, 2011.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.57<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Third Amended</FONT> to Credit and Security
    Agreement<FONT STYLE="color: windowtext"> by and between Wells Fargo Bank, National Association, and CUI, Inc., dated May
    24, 2011.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.58<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Fourth Amendment to Credit and Security Agreement<FONT STYLE="color: windowtext">.
    by and between Wells Fargo Bank, National Association, and CUI, Inc., dated November 29, 2011.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.59<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Fifth Amendment to Credit and Security Agreement<FONT STYLE="color: windowtext">.
    by and between Wells Fargo Bank, National Association, and CUI, Inc., dated December 21, 2011.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.60<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Employment Agreement<FONT STYLE="color: windowtext">, dated May
    15, 2008, and Addendum A, dated July 1, 2010, by and between</FONT> Daniel N. Ford and <FONT STYLE="color: windowtext">the
    Company.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.61<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Employment Agreement, dated May 15, 2008, and
    </FONT>Addendum A<FONT STYLE="color: windowtext">&quot;,</FONT> dated July 1, <FONT STYLE="color: windowtext">2010, by and
    between</FONT> Matthew M. McKenzie and <FONT STYLE="color: windowtext">the Company.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.62<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Employment Agreement, dated October 2005, Addendum
    A, dated June 1, 2007, Addendum B, dated May 15, 2008, Addendum C, dated July 1, 2010, and Addendum D, dated August 1, 2012,
    by and between</FONT> William J. Clough<FONT STYLE="color: windowtext"> and the Company</FONT>.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.63<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amendment to <FONT STYLE="color: windowtext">$14,000,000 Promissory
    Note between</FONT> IED, Inc.<FONT STYLE="color: windowtext"> and the Company, dated</FONT> September 1, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.64<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amendment to <FONT STYLE="color: windowtext">$14,000,000 Promissory
    Note between</FONT> IED, Inc.<FONT STYLE="color: windowtext">, and the Company, dated</FONT> December 1, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.65<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amendment to <FONT STYLE="color: windowtext">Secured Promissory
    Notes between OnScreen Technologies, Inc. and</FONT> Central Finance LLC, dated September 30, 2010.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.66<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">General Release between CUI, Inc. and the Company,
    </FONT>dated December 15, 2011.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.67<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Promissory <FONT STYLE="color: windowtext">Note (Unsecured) by
    the Company for the benefit of</FONT> Daniel N. Ford, <FONT STYLE="color: windowtext">dated July 28, 2011.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.68<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Purchase <FONT STYLE="color: windowtext">/</FONT>Sales Agreement
    <FONT STYLE="color: windowtext">between</FONT> Tensility International Corporation<FONT STYLE="color: windowtext"> and the
    Company, dated November 3, 2010.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.69<SUP>5</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">&quot;Finders</FONT> Fee<FONT STYLE="color: windowtext">&quot;
    </FONT>Agreement <FONT STYLE="color: windowtext">between</FONT> Test Products International, Inc.<FONT STYLE="color: windowtext">,
    </FONT>James McKenzie<FONT STYLE="color: windowtext"> and the Company, dated October 28, 2011.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.70<SUP>6</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Sixth Amendment to Credit and Security Agreement<FONT STYLE="color: windowtext">.
    by and between Wells Fargo, National Association, and CUI, Inc., dated April 3, 2012.</FONT></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">10.71<SUP>6</SUP></FONT></TD>
    <TD STYLE="width: 88%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Seventh Amendment to Credit and Security Agreement<FONT STYLE="color: windowtext">.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">by and between Wells Fargo, National Association,
    and CUI, Inc., dated December 7, 2012.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">21.1<SUP>3</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Subsidiaries of the Company. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">23.1<SUP>8</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Consent of Liggett, Vogt &amp; Webb, P. A., Independent Registered
    Public Accounting Firm</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">23.2<SUP>8</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Consent of Baker Tilly Virchow Krause, LLP,
    Independent Auditors.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">23.3<SUP>*</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Consent of <FONT STYLE="color: windowtext">Counsel</FONT> included
    with Exhibit 5.1 above.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">24.1<SUP>8</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">Powers of Attorney</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">101<SUP>*</SUP></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: windowtext">XBRL related documents.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Footnotes to Exhibit Index:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">1.</TD><TD>Incorporated by reference to our Registration Statement
                                                                       on Form SB-2/A filed with the Commission on October 26,
                                                                       2001.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: windowtext">2.</FONT></TD><TD>Incorporated
                                                                                                              by reference to
                                                                                                              <FONT STYLE="color: windowtext">the
                                                                                                              Post-Effective Amendment
                                                                                                              No. 1 to </FONT>Form
                                                                                                              <FONT STYLE="color: windowtext">S</FONT>-<FONT STYLE="color: windowtext">3
                                                                                                              </FONT>filed with
                                                                                                              the Commission on
                                                                                                              <FONT STYLE="color: windowtext">August
                                                                                                              17, 2009.</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">3.</TD><TD>Incorporated by reference to our Report on Form 10-K
                                                                       filed with the Commission on April 1, 2010.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">4.</TD><TD>Incorporated by reference to our Report on Form 10-K
                                                                       filed with the Commission on March 31, 2011.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">5.</TD><TD>Incorporated by reference to our Report on Form 8-K
                                                                       filed with the Commission on January 18, <FONT STYLE="color: windowtext">2013.</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: windowtext">6.</FONT></TD><TD>Incorporated
                                                                                                              by reference to
                                                                                                              our Report on Form
                                                                                                              8-K filed with the
                                                                                                              Commission on February
                                                                                                              <FONT STYLE="color: windowtext">15,
                                                                                                              2013.</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">7.</TD><TD>Incorporated by reference to our Report on Form 8-K filed
with the Commission on March 6,<FONT STYLE="color: windowtext"> 2013. </FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">8.</TD><TD>Filed herewith.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">*</TD><TD>To be filed by amendment.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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[{"type": "S-1", "sequence": "1", "filename": "v337003_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1812217}]
{"company-data": {"conformed-name": "CUI Global, Inc.", "cik": "0001108967", "assigned-sic": "7310", "irs-number": "841463284", "state-of-incorporation": "CO", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-187059", "film-number": "13668105"}, "business-address": {"street1": "20050 SW 112 AVENUE", "city": "TUALATIN", "state": "OR", "zip": "97062", "phone": "(503) 612-2300"}, "mail-address": {"street1": "20050 SW 112 AVENUE", "city": "TUALATIN", "state": "OR", "zip": "97062"}, "former-company": [{"former-conformed-name": "Waytronx, Inc.", "date-changed": "20080131"}, {"former-conformed-name": "ONSCREEN TECHNOLOGIES INC", "date-changed": "20040719"}, {"former-conformed-name": "NEW MILLENNIUM MEDIA INTERNATIONAL INC", "date-changed": "20000310"}]}
As filed with the Securities and Exchange
Commission on March 6, 2013.
Registration No. 333-____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CUI Global, Inc.
(Exact name of registrant as specified
in its Charter)
Colorado
5065
84-1463284
(State or jurisdiction
(Primary Standard Industrial
(I.R.S. Employer
of incorporation or
Classification Code Number)
Identification No.)
organization)
20050 SW 112th Avenue
Tualatin, Oregon 97062
(503) 612-2300
(Address and Telephone Number of Principal
Executive Offices)
William J. Clough, President
CUI Global, Inc.
20050 SW 112th Avenue
Tualatin, Oregon 97062
(503) 612-2300
(Name, Address and
Telephone Number of Agent for Service)
Copies of all communications to:
Michael T. Cronin, Esq.
Johnson, Pope, Bokor, Ruppel &
        Burns, LLP
911 Chestnut Street,
Clearwater, Florida 33756
Telephone:  (727) 461-1818
Facsimile:    (727)
        462-0365
(Issuer's Counsel)
W. Morgan Burns
Matthew Kuhn
Faegre Baker Daniels LLP
90 South Seventh Street
Minneapolis, Minnesota 55402
Telephone:  (612) 766-7000
Facsimile:    (612)
        766-1600
(Underwriter's Counsel)
Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after the Registration Statement becomes effective.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box:
¨
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering.
¨
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated filer" and "smaller reporting company" in Rule 12b2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
Smaller reporting company
x
CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be
registered
Amount
to be
registered
(1)
Proposed
maximum
offering
price per
share (2)
Proposed
maximum
aggregate
offering price
(1)(2)
Amount of
registration
fee (3)
Common Stock, par value $0.001
8,050,000
$
5.45
$
43,872,500
$
5,984.21
(1)
Includes 1,050,000 shares of common stock that the underwriters
                                                                 may purchase from us upon exercise of the over-allotment option.
(2)
Estimated
                                                                                                                                    solely
                                                                                                                                    for
                                                                                                                                    the
                                                                                                                                    purpose
                                                                                                                                    of
                                                                                                                                    calculating
                                                                                                                                    the
                                                                                                                                    registration
                                                                                                                                    fee
                                                                                                                                    pursuant
                                                                                                                                    to
                                                                                                                                    Rule
                                                                                                                                    457
                                                                                                                                    (c)
                                                                                                                                    of
                                                                                                                                    the
                                                                                                                                    Securities
                                                                                                                                    Act
based
                                                                                                                                    on
                                                                                                                                    the
                                                                                                                                    average
                                                                                                                                    of
                                                                                                                                    the
                                                                                                                                    high
                                                                                                                                    and
                                                                                                                                    low
                                                                                                                                    trading
                                                                                                                                    prices
                                                                                                                                    for
                                                                                                                                    the
                                                                                                                                    Registrant's
                                                                                                                                    common
                                                                                                                                    stock
                                                                                                                                    as
                                                                                                                                    reported
                                                                                                                                    by
                                                                                                                                    the
                                                                                                                                    NASDAQ
                                                                                                                                    Capital
                                                                                                                                    Market
                                                                                                                                    on
                                                                                                                                    February
                                                                                                                                    27,
                                                                                                                                    2013.
(3)
Paid
                                                                 herewith.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
The
    information in this prospectus is not complete and may be changed. The securities may not be sold until the registration statement
    filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and
    is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Preliminary
    Prospectus
Subject
    to Completion, Dated March 6, 2013
7,000,000 Shares of Common Stock
We are offering 7,000,000 shares of our common stock at a public
offering price of $     per share. Our common stock is currently quoted on the NASDAQ Capital Market tier of The NASDAQ Stock
Market under the symbol "CUI".
On February 27, 2013, the
last reported sale price of our common stock on the NASDAQ Capital Market was $5.51 per share.
We expect to deliver the shares of our common stock to purchasers
on or about	, 2013.
Investing in our common stock involves a high degree
of risk. See "Risk Factors" beginning on page 17
.
The underwriter is offering the shares of our common stock
on a "firm commitment basis."
Per Share
Total
Offering price
$
$
Underwriting discount (1)
$
$
Proceeds to CUI Global, before expenses
$
$
The Company has granted the underwriter
a 30 day option to purchase up to 1,050,000 additional shares of common stock to cover over-allotments, if any.
(1)
In
addition to the underwriting discount, we agreed to reimburse the underwriter for its reasonable out-of-pocket accountable fees
and disbursements in connection with this offering, which are estimated to be $75,000. We also granted the underwriter a right
of first refusal to serve as our exclusive placement agent, lead managing underwriter or exclusive financial advisor in connection
with future financing or merger or acquisition transactions we might undertake on or before September 30, 2013.
See "Underwriting"
for information regarding underwriter's compensation.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Craig-Hallum Capital Group
Prospectus dated March   ,
2013
TABLE OF CONTENTS
Prospectus Summary
1
The Offering
9
Summary of Historical and Pro Forma Combined Financial
    Data
11
Risk Factors
17
Special
    Note Regarding Forward-Looking Statements
31
Use
    of Proceeds
32
Dividend
    Policy
33
Price Range of Our Common Stock
33
Capitalization
33
Selected Consolidated Financial Information
34
Unaudited Pro Forma Condensed Combined Financial
    Information
37
Management's Discussion and Analysis of Financial Condition and Results
    of Operations
46
Description
    of Business
57
Directors and Executive Officers
69
Executive Compensation
73
Director Compensation
81
Security Ownership of Certain Beneficial Owners
    and Management
82
Transactions with Related Persons, Promoters and Certain Control Persons
84
Description
    of Capital Stock and Related Stockholder Matters
85
Transfer
    Agent and Registrar
88
Indemnification
    of Directors and Officers
88
Underwriting
88
Interests of Named Experts and Counsel
92
Disclosure of Commission Position on Indemnification
    for Securities Act Liabilities
93
Where You Can Find Additional Information
93
Index
    to Consolidated Financial Statements
F-1
i
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this
prospectus. Neither we nor the underwriter has authorized anyone to provide you with information different from that contained
in this prospectus. We and the underwriter are offering to sell, and seeking offers to buy, shares of our common stock only in
jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.
Neither we nor the underwriter has done anything that would
permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required,
other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves
about and observe any restrictions relating to the offering of the sales of common stock and the distribution of this prospectus
outside of the United States.
This prospectus contains estimates and other statistical data
made by independent parties and by us relating to market size and growth and other industry data. This information involves a
number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently
verified the accuracy or completeness of the data contained in these industry publications and other reports. The industry in
which we operate is subject to risks and uncertainty due to a variety of factors, including those described in the "Risk
Factors" section of this prospectus. These and other factors could cause results to differ materially from those expressed
in these publications and reports.
Novum®, V-Infinity®, Solus®, Vergence®, AMT®,
CUI Global®, the CUI Global logo, GasPT2 and other trademarks or service marks of CUI Global, Inc. appearing in this prospectus
are the property of CUI Global, Inc. or its subsidiaries. Trade names, trademarks and service marks of other companies appearing
in this prospectus are the property of their respective owners.
On February 17, 2012 we effected a one share for thirty shares
(1:30) reverse split of our common stock. Except as otherwise indicated, all of the share and per share information referenced
throughout this prospectus has been adjusted to reflect this reverse stock split.
ii
PROSPECTUS SUMMARY
This summary highlights selected information contained in
greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing
in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed
under "Risk Factors" and our historical and pro forma consolidated financial statements and related notes and the
historical consolidated financial statements of Orbital Gas Systems Limited and related notes included elsewhere in this prospectus,
before making an investment decision. References to "we," "our," "us," the "Company,"
or "CUI Global" refer to CUI Global, Inc., a Colorado corporation, and its subsidiaries unless the context requires
otherwise. References to "CUI" refer to CUI, Inc., a Colorado corporation, our wholly owned subsidiary.
WHO WE ARE
We are a specialized provider of power management and other
electromechanical components for electronic devices and equipment. We offer both standardized products and customized solutions
to our customer base, which includes a number of well-known industrial and technology companies. Our product portfolio is extensive and we are dedicated to, and focused on growing it further by acquiring,
developing, and commercializing innovative electronic technologies and products.
We have more than 24 years of experience in the electronics
industry. We use that experience to identify and acquire or license forward-looking, market-ready technologies. Small product
engineering firms, individual entrepreneurs, and a variety of other sources comprise our potential pool of acquisition targets
and technology licensing partners. These entities often possess exciting technologies, but lack the necessary manufacturing, distribution,
and financial resources to commercialize their ideas. We possess these capabilities and can serve as a value-added partner in
commercialization, developing supplier-customer relationships, and providing liquidity to the technology owner. We believe we
have a track record of acquiring or licensing, and then commercializing advanced, market-ready technologies due to our management
team's history of doing so, as well as to the marketing, sales, research and development and engineering resources that
we are willing to dedicate to commercializing new products.
After we identify potential market-ready technologies, we put
considerable effort into our due diligence process to verify that demand for the technology exists, that the technology will have
synergies with our diverse product portfolio, and that the technology will achieve its intended design capabilities when integrated
into our customers' products. If we are successful in completing an acquisition, we assign a team of engineers, market specialists,
and sales executives to implement our commercialization strategy. Our "end-to-end" strategy incorporates branding;
conducting market and product surveys to determine demand, the potential customer base, and target geographic and end markets;
and identifying appropriate commercialization partners. We utilize contract manufacturers located in mainland China, Japan, South
Korea, Taiwan, and the United Kingdom for production.
1
Our current platform is focused on three primary market segments:
§
Power
                                                                                                               Supply Units.
Our power supply
                                                                                                               units products
                                                                                                               include our embedded
                                                                                                               and external industrial
                                                                                                               power supplies,
                                                                                                               as well as our
                                                                                                               Novum Advanced
                                                                                                               Power and Solus
                                                                                                               Power Topology
                                                                                                               brands. Novum products,
                                                                                                               which consist of
                                                                                                               digital power modules,
                                                                                                               offer customers in the networking and telecommunications industries cost-saving programmable power chips. Solus products
                                                                                                               enhance the Novum
                                                                                                               line capabilities
                                                                                                               by providing a
                                                                                                               more efficient
                                                                                                               power supply source
                                                                                                               that is scalable
                                                                                                               to serve numerous
                                                                                                               customer needs.
                                                                                                               Our internal and
                                                                                                               external power
                                                                                                               products and related
                                                                                                               component sales
                                                                                                               accounted for approximately
                                                                                                               88% of our revenues
                                                                                                               during our fiscal
                                                                                                               year ended December
                                                                                                               31, 2012;
§
Electronic
                                                                                                               Components.
Our electronic
                                                                                                               components products
                                                                                                               include a variety
                                                                                                               of proprietary
                                                                                                               motion control
                                                                                                               devices. We focus
                                                                                                               on the original
                                                                                                               equipment manufacturer
                                                                                                               ("OEM")
                                                                                                               market and attempt
                                                                                                               to provide higher
                                                                                                               levels of support,
                                                                                                               customer service
                                                                                                               and a constantly
                                                                                                               expanding product
                                                                                                               line in order to
                                                                                                               further differentiate
                                                                                                               ourselves from
                                                                                                               our competitors;
                                                                                                               and
§
Test
                                                                                                               and Measurement.
Our test
                                                                                                               and measurement
                                                                                                               products include
                                                                                                               probes and other
                                                                                                               test devices, as
                                                                                                               well as our inferential
                                                                                                               gas metering technology,
                                                                                                               the GasPT2 device,
                                                                                                               which we have branded
                                                                                                               under the name
                                                                                                               Vergence.
We conduct our operations globally, and as of December 31,
2012 we had sixty-two full-time and seven part-time employees located in the United States and Japan. We utilize a hybrid marketing
strategy that incorporates both direct and third-party sales channels. Our customer base is diverse and consists of smaller customers,
a broad group of OEM customers and several industrial technology conglomerates. Further, we have a significant customer and channel
partner relationship with Digi-Key Corporation ("Digi-Key"), an authorized distributor of electronic components for
more than 550 industry suppliers. As a percentage of our total gross revenues, sales to Digi-Key were approximately 47% and 41%
as of December 31, 2012 and December 31, 2011, respectively. Digi-Key sells our product to thousands of customers globally.
OUR MARKETS AND OUR OPPORTUNITY
Power Supply Units
We offer a portfolio of both commoditized and emerging power
supply units for networking and telecommunications related applications. The market for our products evolves in response to technological
innovations and corresponding changes in our customers' requirements for their product offerings. These changes occur rapidly.
Thus, although our historic business was a commoditized electromechanical parts distribution business, in recent years, we have
focused our business on the acquisition or licensing, development, and commercialization of new and innovative electronic technologies
and products in order to better serve our customer base.
Our Novum and Solus lines are our newest and most exciting
power supply products and are marketed primarily to networking and telecommunications companies. Earning design wins from OEMs
in these sectors is extremely important and competitive, and the design cycle often lasts between 18 and 24 months. OEMs typically
conduct a partial product line redesign every nine months, creating a recurring revenue opportunity for component suppliers like
ourselves. Once an OEM grants a supplier a design win, however, the test period for future designs decreases significantly, and
it is often difficult to displace incumbent suppliers without offering a product that significantly improves or outperforms existing
technologies. We have received positive industry and customer feedback regarding our Novum and Solus lines, and we believe that
major OEM product revamps will offer us the opportunity to potentially displace our competitors. Our products are intended to
serve the following vital functions for our customers' end-products: enhanced design flexibility, size reductions,
power efficiency improvements, greater power density, reduced electro-magnetic interference, faster transient response, reduced
power output and quicker turn-on times.
2
According to IMS Research, an independent provider of market
research and consultancy to the global electronics industry, the total global market for digital power components is expected
to quadruple to $15 billion between 2012 and 2017. As we gain traction in these product lines and capture OEM design wins, we
believe our power supply units will continue to be a significant source of our revenue.
Electronic Components
The market for electronic components,
like the market for power management devices, is driven by the needs of our OEM customers, as well as increases in the functionality
of the end-products in which our components are used. Other key factors driving innovation include product size reduction, cost
reduction, time to market, energy efficiency, and reliability. We offer a variety of buzzers, connectors, encoders, microphones,
speakers, and thermal management solutions for products such as
home theater equipment, insulin machines and defibrillators
.
While the breadth of our electronic component portfolio is extensive, we are focused on operating as a niche provider of high-quality
products.
Our AMT modular encoder, a device that is used in motion control
systems, allows for breakthroughs in selectable resolution, shaft-adaptation and convenient mounting solutions to bring ease of
installation, installed component reduction and economies of scale in purchasing. AMT has been awarded several design wins from
motion control OEMs that offer a wide range of products, including cash machines and other robotic devices.
Test and Measurement
We believe our most significant opportunity exists in our test
and measurement technology line, specifically for our inferential gas metering technology, the GasPT2 device, which we currently
market under the Vergence brand name. The GasPT2 device is a low-cost, and we believe a highly disruptive, solution to measuring
natural gas quality in pipelines and in stationary gas turbines that are used for power generation and industrial machine drives.
Natural gas quality is typically tested at pipeline
interchanges, off-takes, and delivery points (together, "test sites"), and today, standard quality test practices
utilize large, expensive gas chromatograph systems to analyze energy content. Sometimes, given the size of these systems,
they are constructed several miles away from actual test sites.
Because natural gas is a
mixture of several gases, namely methane, propane, nitrogen and carbon dioxide, quality is determined by the relative
concentrations of each individual gas in any given delivery and is indicative of energy content. Total energy consumption, or
the quantity that customers ultimately pay for, is then a function of natural gas quality (total energy content) and volume
of gas used.
Gas chromatographs are housed in bulky, closet-like enclosures,
and may be located on- or off-site of pertinent test sites. According to a 2012 Emerson Process Management report, gas chromatograph
natural gas quality tests typically last between 12 and 40 minutes, and testing frequency varies from as often as possible
to once per day. Because natural gas flows through a pipeline at speeds of up to 25 miles per hour, standard quality readings
conducted by gas chromatographs are not in real-time and may not accurately reflect actual energy consumption by an end customer.
Additionally, gas chromatograph instruments can cost between $15,000 and $40,000, and the total installation cost for the instrument
and related accessories can exceed $200,000. Annual maintenance expenses may also be more than $10,000.
3
Our GasPT device introduces a potentially disruptive, low-cost
solution to replace gas chromatograph systems. It is significantly less expensive, and dramatically smaller than gas chromatograph
systems. Our device costs approximately $50,000, fully installed, and is contained within a weather-proof enclosure that sits
on top of the pipeline. It also eases the installation burden associated with gas chromatograph systems, as it can be connected
in a process that typically requires less than 90 minutes of pipeline downtime.
Further, the GasPT2 device can complete natural gas quality
tests in as few as five seconds, without sacrificing accuracy or precision measures. Tests performed have verified that our device
typically measures natural gas quality within 0.04% accuracy, while industry standards require accuracy within 0.5%. The device
measures several physical properties of natural gas flow, including thermal conductivity, the speed of the sound of gas flow,
and carbon dioxide content. Using these measurements, it infers the natural gas quality mixture, and calculates other relevant
quality characteristics, such as calorific value, Wobbe index, relative density, and compression factor.
We believe the market opportunity for our GasPT2 device is
significant, both from the perspective of replacing installed gas chromatographs, as well as creating new markets where gas chromatographs
were either previously impractical or too expensive to install.
We expect that natural gas pipeline off-takes and stationary
gas turbines will be our initial target markets for the GasPT2 device. In North America, this total market amounts to more than
300,000 miles of pipeline and 30,000 associated entry and off-take points according to the US Energy Information Administration,
representing a market opportunity of more than $600 million. In Europe, this total market amounts to more than 200,000 miles of
pipeline and 20,000 associated entry and off-take points according to the 2010 edition of Natural Gas Systems of Europe, representing
a market opportunity of more than $400 million. Further, this market includes approximately 50,000 stationary gas turbines world-wide
according to the November-December 2009 issue of Gas Turbine World, representing a market opportunity of more than $1 billion.
We will continue to use our extensive market knowledge, as well as the new distribution relationships we develop, in order to
strive to discover additional market opportunities.
OUR BUSINESS STRENGTHS
High Quality Customer Base
As of December 31, 2012, our products
touch more than 50,000 customers located in over 50 countries. We primarily serve customers in the computing, consumer
device, energy, networking, and telecommunications sectors, as well as several industrial technology conglomerates. We have
established OEM relationships with a number of our larger customers and believe we are well positioned to enter into
additional OEM partnerships as we gain design wins in the future. Our strategic third-party distribution relationship with
Digi-Key is a strong and significant relationship that we plan to continue to leverage for growth. Additionally, we have
entered into partnerships and product roll-out and test agreements. Our Novum line is currently working in partnership with
Ericsson to develop a line of multi-source digital point of load products based on their BMR46X series module. Further, our
GasPT2 device is currently installed in approximately 30 locations with more than 12 partners, including SNAM RETE Gas
(Italy); GASUNIE (The Netherlands); National Grid (UK); Scotia Gas (Ireland); and Wales & West (UK). It is in testing
phases with more than 10 large-scale customers globally, including Repsol and Enagas in Spain; GazSystems in Poland;
TransCanada in North America; Energy Transfer Partners (ETP) in the US; the Pipeline Research Counsel International (PRCI),
which represents 69 of the largest companies in the natural gas industry, including Kinder-Morgan, Williams Pipeline, Shell
Pipeline, Chevron Pipeline, BP USA, and more; and GE-ENERGY in Houston, Texas.
4
Comprehensive Technology and Product Portfolio
We offer more than 20,000 unique products. Our customers are
attracted to the breadth of our product offering, and often consider us to be an important niche supplier for the products that
they bring to the marketplace. We plan to work together with our customer base to continue to develop or acquire additional innovative
market-ready technologies and products in order to stay ahead of our competition. These efforts reduce our dependency on internal
research and development costs. We believe our knowledge of the marketplace for niche technologies and components provides us
with a significant advantage over other suppliers in our space.
Experienced Management Team
We are led by a management team and board of directors that
each possess substantial experience in our industries. Our President and Chief Executive Officer, William J. Clough, has been
with the company for more than six years. Mr. Clough has extensive legal and SEC experience and is an inventor of one of our early
patented thermal management technologies. Along with his other responsibilities, Mr. Clough spearheads our Vergence brand.
Our
Chief Financial Officer, Daniel N. Ford, has been with us for more than five years and possesses a wealth of accounting experience,
including his tenure with KPMG LLP. Mr. Ford has helped us reach a position of profitability, efficiency and forward thinking,
transforming many of our accounting, inventory management and vendor relations processes
. Our Chief Operating Officer,
Matthew M. McKenzie has an extensive background in the electronics industry, as well as expertise in distribution, sales, and
supply chain management.
Global Reach and Hybrid Marketing Strategy
We conduct operations globally, with employees located in the
United States and Japan. Further, we have outsourced manufacturing relationships in mainland China, Japan, South Korea, Taiwan,
and the United Kingdom, and our relationship with Digi-Key reaches customers globally. We utilize a hybrid marketing and sales
strategy, consisting of our internal sales and marketing team, as well as our third-party distribution relationships. Our internal
sales and marketing team focuses on larger, OEM customers, while we direct smaller customers to utilize our third-party distribution
channel. We believe that the global reach of our operations and distribution capabilities for our products will help our businesses
grow and mitigate the risks associated with operations concentrated in one geographic region.
OUR STRATEGY
Our historic business was a commoditized electromechanical
parts distribution business, however, in recent years, we have focused our business on the acquisition and/or licensing, development
and commercialization of new and innovative electronic technologies and products. As our business continues to evolve along with
that of our customers, we must continue to identify, acquire or license, and commercialize novel technologies that enhance our
customers' market position.
Our Novum Advanced Power, Solus Power Topology and Vergence
GasPT2 device have enabled us to transform ourselves into a technology incubator dedicated to rapidly commercializing market-ready
technologies.
5
In that regard, we have implemented a planned strategy to increase
our name recognition as a technology company. Our plan includes:
§
Increasing
                                                                                                                our customer base
                                                                                                                by redirecting
                                                                                                                our customers
                                                                                                                into the right
                                                                                                                channel, including
                                                                                                                by handling smaller
                                                                                                                customer fulfillment
                                                                                                                through our distribution
                                                                                                                partner, Digi-Key,
                                                                                                                and focusing our
                                                                                                                efforts on larger
                                                                                                                OEM business;
§
Identifying
                                                                                                                large gas utility
                                                                                                                companies that
                                                                                                                represent likely
                                                                                                                opportunities
                                                                                                                for large batch
                                                                                                                sales of our Vergence
                                                                                                                GasPT2 device,
                                                                                                                as opposed to
                                                                                                                single unit sales;
§
Developing
                                                                                                                a collaborative
                                                                                                                relationship with
                                                                                                                our customers
                                                                                                                to identify and
                                                                                                                supply them with
                                                                                                                products that
                                                                                                                will fuel our
                                                                                                                growth;
§
Growing the
                                                                                                                brand presence
                                                                                                                of our products,
                                                                                                                which we will
                                                                                                                attempt to do
                                                                                                                by capturing the
                                                                                                                attention of industry
                                                                                                                heads at selected
                                                                                                                trade show events;
§
Developing
                                                                                                                and acquiring
                                                                                                                new technologies
                                                                                                                to grow our sales;
                                                                                                                and
§
Growing our
                                                                                                                global sales and
                                                                                                                distribution capabilities.
RECENT DEVELOPMENTS
Acquisition of Orbital Gas Systems Limited
On March 3, 2013, we entered into a definitive 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"), including all of its operations which are located in the United Kingdom. The
purchase price for the acquisition of Orbital is 17,000,000 British pounds sterling ("£"), subject to
purchase price adjustments, 100% of which is payable in cash. To secure indemnification obligations, 5.0% of the purchase
price, or £850,000, will be held in escrow to and through December 1, 2013. The purchase price is approximately $25.8
million, based on the Wall Street Journal published exchange rate on New York closing on February 27, 2013 of $1.5158 per
pound sterling.
Orbital is the largest natural gas systems integrator in the
U.K. and is a key partner of ours for commercializing our GasPT2 device. For over 25 years, Orbital has developed its portfolio
of products, solutions, services and resources to offer a diverse range of personalized gas engineering solutions to the gas utilities,
power generation, emissions, manufacturing and automotive industries. We believe that adding Orbital's operations will provide
a strengthened platform for us to enter new and attractive natural gas quality analysis markets and provide enhanced customer
and geographic diversification, resulting in additional domestic and international sales.
For fiscal years 2012 and 2011, Orbital generated revenues
from continuing operations of £13,997,850 and £13,751,265, respectively. For its fiscal years 2012 and 2011, Orbital
generated income before taxes and U.S. GAAP adjustments of £2,283,138 and £992,438, respectively. As of December 31,
2012, based upon unaudited financial statements, Orbital had cash and cash equivalents of £5,678,794.
6
We intend to finance the consideration paid to the shareholder
of Orbital with the net proceeds from this offering. Although we have entered into a share purchase agreement in connection with
the Orbital acquisition, we cannot guarantee when, or whether, the acquisition will be completed. We do, however, currently anticipate
that the acquisition will be consummated by the end of April 2013. The share purchase agreement contains a number of important
conditions that must be satisfied before we can complete the acquisition, namely:
§
We
                                                                                                                have raised sufficient
                                                                                                                funds to complete
                                                                                                                the transaction
                                                                                                                through either
                                                                                                                a debt or equity
                                                                                                                offering pursuant
                                                                                                                to the standard
                                                                                                                U.S. regulatory
                                                                                                                authority for
                                                                                                                publicly-traded
                                                                                                                U.S. companies;
§
We
                                                                                                                and Orbital's
                                                                                                                owner have signed
                                                                                                                the escrow letter
                                                                                                                called for by
                                                                                                                the share purchase
                                                                                                                agreement and
                                                                                                                have procured
                                                                                                                the escrow agent's
                                                                                                                signature and
                                                                                                                delivery of the
                                                                                                                bank instruction
                                                                                                                letter to the
                                                                                                                escrow bank; and
§
We
                                                                                                                and Orbital's
                                                                                                                owner agree in
                                                                                                                writing to the
                                                                                                                "closing
                                                                                                                free cash,"
                                                                                                                as defined in
our share
                                                                                                                purchase agreement.
We believe the acquisition will provide us with immediate credibility
in the natural gas industry. By acquiring Orbital, we will acquire a company that has operated successfully in the natural gas
industry for over 25 years. In addition, Orbital is a leading provider of natural gas infrastructure and high-tech solutions to
National Grid, the national gas transmission company in the U.K. and one of the most respected specialist gas engineering companies
in the world. We will also acquire access to Orbital's proprietary VE-Probe, which, by allowing us to acquire a sample gas
in as few as two seconds as opposed to the industry standard time of five to ten minutes, enables us to reduce our total sample-analysis
turnaround to fewer than five seconds. We believe this turnaround time is far faster than the turnaround time of any other technology
currently available to the gas industry.
Entry Into a Distribution Agreement with Future Electronics,
Inc.
On February 19, 2013, we announced that we entered into a new
distribution agreement with Future Electronics, Inc., which is a leader and innovator in the distribution and marketing of electronic
components. This agreement allows Future to leverage their experience and resources to launch our product portfolio to a global
market and a diverse customer base. In selecting Future as a global distribution partner, we recognized the strength of Future's
demand creation programs and its robust field support resources which will add greater reach for our Novum product line, as well
as its broad portfolio of standard power supplies and board level components. Under the terms of the agreement, Future will now
begin a phased rollout of products from our Power Supply and Electronic Components groups with stock available immediately for
many items.
Design News Golden Mousetrap Awards Finalist
On January 31, 2013, we announced
that Design News, a leading technical publication for design engineers, named our NDM2Z series point of load modules as a finalist
for its Golden Mousetrap Awards, an award that recognizes engineering innovation and creativity in product design. The NDM2Z sets
industry benchmarks in efficiency and current density, helping address the growing need to reduce energy use at the board level.
This was our third product from the
Novum Advanced Power group to receive industry recognition in the past three months.
Also in January 2013, Electronic Products chose our NSM2P "No-Bus" digital point of load series as a 2012 Product
of the Year. Previously, in November 2012, our NDM2P digital point of load series was named to EDN's "Hot 100 Products
of 2012: Power."
7
SUMMARY OF RISKS RELATED TO OUR BUSINESS
Our business and our ability to execute our business strategy
are subject to a number of risks that you should be aware of before you decide to buy our common stock. In particular you should
consider the following risks which are discussed more fully in "Risk Factors."
§
There
                                                                                                                is no assurance
                                                                                                                we will achieve
                                                                                                                profitability;
§
We
                                                                                                                have expanded
                                                                                                                our business activities
                                                                                                                and these activities
                                                                                                                may not be successful
                                                                                                                and may divert
                                                                                                                our resources
                                                                                                                from our existing
                                                                                                                business activities;
§
We
                                                                                                                are a relatively
                                                                                                                small specialty
                                                                                                                component and
                                                                                                                solutions business
                                                                                                                and face formidable
                                                                                                                competition;
§
We
                                                                                                                depend on third-party
                                                                                                                manufacturers
                                                                                                                and suppliers
                                                                                                                for the production
                                                                                                                of our products
                                                                                                                and will need
                                                                                                                this parties to
                                                                                                                scale-up their
                                                                                                                operations for
                                                                                                                us to grow our
                                                                                                                business and achieve
                                                                                                                profitability;
§
Our
                                                                                                                revenues depend
                                                                                                                on a few major
                                                                                                                customers;
§
Acquisitions,
                                                                                                                including our
                                                                                                                acquisition of
                                                                                                                Orbital Gas Systems
                                                                                                                Limited, may not
                                                                                                                be completed or,
                                                                                                                if completed,
                                                                                                                could result in
                                                                                                                operational difficulties,
                                                                                                                increased expenses,
                                                                                                                and other harmful
                                                                                                                consequences;
§
We
                                                                                                                will need to grow
                                                                                                                our organization,
                                                                                                                and we may encounter
                                                                                                                difficulties in
                                                                                                                managing this
                                                                                                                growth, which
                                                                                                                could disrupt
                                                                                                                our operations;
§
Our
                                                                                                                operating results
                                                                                                                will vary over
                                                                                                                time and such
                                                                                                                fluctuations could
                                                                                                                cause the market
                                                                                                                price of our common
                                                                                                                stock to decline;
§
Risks
                                                                                                                related to foreign
                                                                                                                operations; and
§
Market
                                                                                                                acceptance of
                                                                                                                new innovative
                                                                                                                technologies such
                                                                                                                as the Vergence
                                                                                                                GasPT2 device.
CORPORATE INFORMATION
CUI Global, Inc., formerly known as Waytronx, Inc., is a Colorado
corporation organized on April 21, 1998. Our principal place of business is located at 20050 SW 112 Avenue, Tualatin, Oregon 97062,
phone (503) 612-2300. Our website is www.cuiglobal.com.
Effective May 16, 2008, CUI Global, Inc. acquired the assets
and liabilities of CUI, Inc., a Tualatin, Oregon based provider of electronic components. Through this acquisition, the Company
obtained an 11.54% ownership interest in Test Products International, Inc., a provider of handheld test and measurement equipment.
Effective July 1, 2009, CUI Global acquired all of Comex Instruments,
Ltd, which we subsequently rebranded, CUI Japan and 49% of Comex Electronics, Ltd. CUI Japan is a Japanese based provider of test
and measurement, power and electronic components for original equipment manufacturer. 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, payable monthly beginning January 2012.
8
THE OFFERING
Common Shares Offered by Us
7,000,000 shares
Common Shares to be Outstanding Immediately After this Offering
17,883,280 shares
Offer Price
$
Over-allotment Option
We have granted to the underwriter an option, which
is exercisable within 30 days from the date of this prospectus, to purchase up to 1,050,000 additional common shares to cover over-allotments,
if any.
Use of Proceeds
We intend to use the net proceeds from this offering for the purchase
    of all outstanding capital shares of Orbital Gas Systems Limited, payment of long-term debt, and for working capital and general
    corporate purposes. See "Use of Proceeds."
Dividend Policy
We do not currently pay nor contemplate paying dividends. See "Dividend
    Policy."
Risk Factors
Investing in our common shares involves a high degree of risk.
    You should read and consider the information set forth under the heading "Risk Factors" beginning on page 17 and
    all other information included in this prospectus before deciding to invest in our common shares.
Trading Market
Our common shares are listed on the NASDAQ Capital Market under
    the symbol "CUI."
The number of our common shares that will be issued and outstanding
immediately after this offering is based on 10,883,280 common shares outstanding as of December 31, 2012, and excludes:
§
682,141 shares
                                                                                                                of common stock
                                                                                                                issuable upon
                                                                                                                the exercise of
                                                                                                                outstanding options
                                                                                                                to purchase our
                                                                                                                common stock at
                                                                                                                a weighted average
                                                                                                                exercise price
                                                                                                                of $6.47 per share
                                                                                                                as of December
                                                                                                                31, 2012;
§
1,979,083
                                                                                                                shares of our
                                                                                                                common stock reserved
                                                                                                                for future awards
                                                                                                                under our equity
                                                                                                                compensation plans
                                                                                                                as of December
                                                                                                                31, 2012; and
§
A number of
                                                                                                                our shares of
                                                                                                                common stock with
                                                                                                                a value of up
                                                                                                                to $1,993,363
                                                                                                                potentially issuable
                                                                                                                to James McKenzie
                                                                                                                as of December
                                                                                                                31, 2012 pursuant
                                                                                                                to a finder's
                                                                                                                fee arrangement
                                                                                                                with him.
9
Unless otherwise noted, the information in this prospectus
assumes:
§
No exercise
                                                                                                                of the underwriter's
                                                                                                                over-allotment
                                                                                                                option to purchase
                                                                                                                up to 1,050,000
                                                                                                                additional shares
                                                                                                                of our common
                                                                                                                stock;
§
The number
                                                                                                                of shares of common
                                                                                                                stock sold in
                                                                                                                this offering
                                                                                                                is the same as
                                                                                                                the number on
                                                                                                                the cover of this
                                                                                                                prospectus; and
§
A price per
                                                                                                                share to the public
                                                                                                                in this offering
                                                                                                                of  $5.51, which was the
                                                                                                                closing price
                                                                                                                of our common
                                                                                                                stock on the NASDAQ
                                                                                                                Capital Market
                                                                                                                on February 27,
                                                                                                                2013.
10
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth the summary unaudited pro forma
combined financial data of CUI Global, Inc. and Orbital Gas Systems Limited for the years ended December 31, 2012 and 2011. This
information has been prepared by our management and gives pro forma effect to (a) the completion of the Orbital acquisition, (b)
the sale of 7,000,000 shares of our common stock in this offering at an assumed offering prices of $5.51 per share, the last reported
sale price of our common stock on the NASDAQ Capital Market on February 27, 2013, less estimated underwriting discounts and commissions
and estimated offering expenses, and (c) the application of the proceeds from this offering, in each case as if they occurred
on January 1, 2011 for income statement purposes and December 31, 2012 for balance sheet purposes.
The financial statements and other
financial information in this prospectus related to
Orbital Gas Systems Limited
have been prepared
in accordance with United Kingdom generally accepted accounting principles ("U.K. GAAP"). U.K. GAAP differs in some
material respects from U.S. generally accepted accounting principles ("U.S. GAAP"), and as a result, the historical
financial statements and other financial information of
Orbital Gas Systems Limited
may not
be comparable to our historical financial statements. For a discussion of material differences between U.K. GAAP and U.S. GAAP
as they relate to
Orbital Gas Systems Limited
, see Note 22 to the financial statements of
Orbital
Gas Systems Limited
included elsewhere in this prospectus.
The fiscal year of CUI Global, Inc. ends on December
31, and the fiscal year of Orbital Gas Systems Limited ends on June 30. The pro forma data has been prepared from, and should
be read in conjunction with, our audited annual financial statements and accompanying notes for years ended December 31,
2012 and 2011, the audited financial statements and accompanying notes of Orbital for the years ended June 30, 2012 and
2011, prepared in accordance with U.K. GAAP reconciled to U.S. GAAP, included elsewhere in this prospectus, and selected
unaudited interim financial information of Orbital for the six months ended December 31, 2012 and 2011. For more information on
the assumptions made in preparing this pro forma financial data, see "Unaudited Pro Forma Condensed Combined
Financial Information." This information is for illustrative purposes only. The companies may have performed
differently had they always have been combined. The historical and pro forma results do not necessarily indicate results that
may be expected for any future period.
Where applicable, the amounts in the following
tables related to the acquisition price are converted from British pound sterling to U. S. dollars based on the Wall Street
Journal published exchange rate on New York closing on February 27, 2013 of $1.5158 per British pound sterling. For
converting the fiscal year statements of operations amounts related to Orbital, the following average exchange rates were
used, as published by Oanda Corporation: $1.5768 average per British pound sterling for the six months January to June 2012,
$1.5926 average per British pound sterling for the six months July to December 2012, $1.6160 average per British pound
sterling for the six months January to June 2011 and $1.5919 average for the British pound sterling for the six months July
to December 2011. The amounts included on the balance sheets related to Orbital were converted, based on the following
exchange rates published by Oanda Corporation, $1.6153 per British pound sterling at December 31, 2012 and $1.5453 per
British pound sterling at December 31, 2011.
11
December 31,
2012
2011
Statement of Operations Data:
Revenue
$
63,981,573
$
62,271,825
Operating expenses
24,066,331
20,698,034
Income from operations
1,956,381
2,675,040
Net income
511,399
1,660,699
Earnings per share
Basic
$
0.03
$
0.12
Diluted
$
0.03
$
0.12
Other Data:
Adjusted EBITDA (1)
$
4,567,140
$
4,454,657
December 31,
2012
Balance Sheet Data:
Cash and cash equivalents
$
20,379,440
Total assets
78,047,679
Total debt, including current portion
17,450,002
Total stockholders' equity
60,597,677
(1)
Adjusted EBITDA is the net income before interest expense, income
                                                                 taxes, equity compensation, depreciation, impairment expenses
                                                                 and amortization. We believe that Adjusted EBITDA                                                                  is useful
                                                                 as an indicator of our performance. Our
                                                                 management uses Adjusted EBITDA, in conjunction with traditional
                                                                 U.S. GAAP measures, as part of our overall assessment of our
                                                                 performance. We use this non- U.S. GAAP measure in internal management
                                                                 reports used to monitor and make decisions about our business.
                                                                 The principal limitations of Adjusted EBITDA as a performance
                                                                 measure are that it excludes significant adjustments for one-time expenses and gains required
                                                                 under U.S. GAAP, and that our definition of Adjusted EBITDA may
                                                                 be different than similar-sounding non- U.S. GAAP measures used
                                                                 by other the companies. To mitigate these limitations, we present
                                                                 our U.S. GAAP results along with the non- U.S. GAAP measure,
                                                                 reconcile Adjusted EBITDA to the net income and recommend that investors
                                                                 not give undue weight to it. We believe that Adjusted EBITDA
                                                                 provides investors useful information by allowing them to view
                                                                 the business through the eyes of management.
12
The reconciliation of pro forma Adjusted EBITDA to
pro forma net income, is as follows:
For the Years Ended
December 31,
2012
2011
Net income
$
511,399
$
1,660,699
Income tax expense
972,654
350,255
Impairment of intangible, trademark and trade name V-Infinity
278,428
-
Interest expense - amortization of debt offering costs and debt discount
73,333
334,747
Interest expense
584,914
920,802
Stock based compensation expense
1,190,081
227,867
Depreciation and amortization
956,331
960,287
Adjusted EBITDA
$
4,567,140
$
4,454,657
SUMMARY CONSOLIDATED FINANCIAL DATA – CUI Global,
Inc.
The following tables set forth our summary consolidated financial
data. The summary consolidated financial data for the years ended December 31, 2012 and 2011 are derived from our audited consolidated
financial statements appearing elsewhere in this prospectus. The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," our financial
statements and the related notes included elsewhere in this prospectus.
For the Years Ended
December 31,
2012
2011
Statement of Operations Data:
Revenue
$
41,084,589
$
38,938,326
Operating expenses
17,356,896
14,146,366
Income (loss) from operations
(1,980,200
)
658,887
Net (loss) allocable to common stockholders
(2,526,321
)
(48,763
)
Basic and diluted (loss) per common share
$
(0.25
)
$
(0.01
)
Other Data:
Adjusted EBITDA (1)
354,727
2,232,614
Balance Sheet Data:
Cash and cash equivalents
3,039,840
176,775
Total assets
36,723,461
31,978,491
Total liabilities
11,961,028
19,381,488
Total stockholders' equity
24,762,433
12,597,003
(1)
Adjusted EBITDA is the net  (loss) allocable to common stockholders before interest expense, income
                                                                 taxes, equity compensation, depreciation, impairment expenses
                                                                 and amortization. We believe that Adjusted EBITDA                                                                  is useful
                                                                 as an indicator of our performance. Our
                                                                 management uses Adjusted EBITDA, in conjunction with traditional
                                                                 U.S. GAAP measures, as part of our overall assessment of our
                                                                 performance. We use this non- U.S. GAAP measure in internal management
                                                                 reports used to monitor and make decisions about our business.
                                                                 The principal limitations of Adjusted EBITDA as a performance
                                                                 measure are that it excludes significant adjustments for one-time expenses and gains required
                                                                 under U.S. GAAP, and that our definition of Adjusted EBITDA may
                                                                 be different than similar-sounding non- U.S. GAAP measures used
                                                                 by other companies. To mitigate these limitations, we present
                                                                 our U.S. GAAP results along with the non- U.S. GAAP measure,
                                                                 reconcile Adjusted EBITDA to the net (loss) allocable to common stockholders, and recommend that investors
                                                                 not give undue weight to it. We believe that Adjusted EBITDA
                                                                 provides investors useful information by allowing them to view
                                                                 the business through the eyes of management.
13
The reconciliation of CUI Global, Inc. Adjusted EBITDA
to net (loss) allocable to common stockholders, is as follows:
For the Years Ended
December 31,
2012
2011
Net (loss) allocable to common stockholders
$
(2,526,321
)
$
(48,763
)
Provision for taxes
33,714
29,810
Impairment of intangible, trademark and trade name V-Infinity
278,428
-
Interest expense - amortization of debt offering costs
    and debt discount
73,333
334,747
Interest expense
575,199
918,189
Stock based compensation
1,190,081
227,867
Depreciation and amortization
730,293
770,764
Adjusted EBITDA
$
354,727
$
2,232,614
14
SUMMARY CONSOLIDATED FINANCIAL DATA – Orbital
Gas Systems Limited
The following table sets forth summary consolidated financial
data of Orbital Gas Systems Limited. You should read the following summary consolidated financial data in conjunction with the
consolidated financial statements and notes thereto of Orbital included elsewhere in this prospectus.
The fiscal year of CUI Global, Inc. ends on December 31,
and the fiscal year of Orbital Gas Systems Limited ends on June 30. The summary consolidated financial information presented
has been derived from the audited financial statements and accompanying notes of Orbital for the years ended June 30, 2012
and 2011, prepared in accordance with U.K. GAAP reconciled to U.S. GAAP, included elsewhere in this prospectus, and selected
unaudited interim financial information of Orbital for the six months ended December 31, 2012 and 2011, and reflects Orbital Gas
Systems Limited financial information as of calendar years ended December 31, 2012 and 2011. Orbital's historical
results do not necessarily indicate results that may be expected for any future period.
For a discussion of material differences between U.K. GAAP
and U.S. GAAP as they relate to Orbital Gas Systems Limited, see Note 22 to the financial statements of Orbital Gas Systems Limited
included elsewhere in this prospectus.
Where applicable, the amounts in the following tables related
to the acquisition price are converted from British pound sterling to U. S. dollars based on the Wall Street Journal published
exchange rate on New York closing on February 27, 2013 of $1.5158 per British pound sterling. For converting the fiscal year statements
of operations amounts related to Orbital, the following average exchange rates published by Oanda Corporation: $1.5768 average
per British pound sterling for the six months January to June 2012, $1.5926 average per British pound sterling for the six months
July to December 2012, $1.6160 average per British pound sterling for the six months January to June 2011 and $1.5919 average
for the British pound sterling for the six months July to December 2011. The amounts included on the balance sheets related to
Orbital were converted, based on the following exchange rates published by Oanda Corporation, $1.6153 per British pound sterling
at December 31, 2012 and $1.5453 per British pound sterling at December 31, 2011.
15
For the Years Ended
December 31,
2012
2011
Statement of Operations Data:
Revenue
$
23,017,544
$
23,360,136
Operating expenses
6,659,995
6,506,305
Income from operations
3,986,581
2,066,153
Net income
3,087,720
1,759,462
Other Data:
EBITDA (1)
$
4,212,413
$
2,222,043
Balance Sheet Data:
Cash and cash equivalents
$
9,172,956
Total assets
14,606,492
Total debt, including current portion
7,588,974
Total stockholders' equity
7,017,518
(1)
EBITDA is net income before interest expense, income taxes,
                                                                 depreciation and, amortization. We believe that EBITDA is useful
                                                                 as an indicator of ongoing operating performance. Our management
                                                                 uses EBITDA, in conjunction with traditional U.S. GAAP measures,
                                                                 as part of the overall assessment of performance. We use this
                                                                 non-U.S. GAAP measure in internal management reports used to
                                                                 monitor and make decisions about our business. To mitigate these
                                                                 limitations, we present Orbital's U.S. GAAP results along
                                                                 with the non-U.S. GAAP measure, reconcile EBITDA to net income, and
                                                                 recommend that investors not give undue weight to it. We believe
                                                                 that EBITDA provides investors useful information by allowing
                                                                 them to view the business through the eyes of management, facilitating
                                                                 comparison of results across historical periods and across companies,
                                                                 and providing a focus on the underlying operating performance
                                                                 of the business.
The reconciliation of Orbital Gas Systems Limited
EBITDA to net income, is as follows:
For the Years Ended
December 31,
2012
2011
Net income
$
3,087,720
$
1,759,462
Provision for taxes
938,940
320,445
Interest expense
9,715
2,613
Depreciation and amortization
176,038
139,523
EBITDA
$
4,212,413
$
2,222,043
16
RISK FACTORS
An investment in our common stock involves a significant degree
of risk. You should carefully consider the following risk factors and all other information contained in this prospectus before
purchasing our common stock. If any of the risks discussed in this prospectus actually occur, our business, financial condition
and results of operations could be materially and adversely affected. If this were to happen, the price of our shares could decline
significantly and you may lose all or a part of your investment. The risk factors described below are not the only ones that may
affect us.
Risks Related to Our Business
and Products
Historically,
we have generated losses from operations and we may need additional funding in the future.
Historically, we have not generated sufficient revenues from
operations to self-fund our capital and operating requirements.
For
the year ended 2012, we had a net loss of $2,526,321 and our accumulated deficit as of December 31, 2012 was $76,171,822. If we
are not able to generate sufficient income and cash flows from operations to fund our operations and growth plans
, we may
seek additional capital from equity and debt placements
or corporate
arrangements. Additional capital may not be available on terms favorable to us, or at all. If we raise additional funds by issuing
equity securities, our shareholders may experience dilution. Debt financing, if available, may involve restrictive covenants or
security interests in our assets. If we raise additional funds through collaboration arrangements with third parties, it may be
necessary to relinquish some rights to technologies or products. If we are unable to raise adequate funds or generate them from
operations, it may have to delay, reduce the scope of, or eliminate some or all of its growth plans or liquidate some or all of
our assets
.
There is no assurance we will achieve profitability.
For the year ended 2012, we had a net loss of $2,526,321. There
is no assurance that we will achieve
or sustain profitability. If
we fail to achieve or sustain profitability, the price of our common stock could fall and our ability to raise additional capital
could be adversely affected.
We have expanded our business activities and these activities
may not be successful and may divert our resources from our existing business activities
.
Our historic business was a commoditized electromechanical
parts distribution business. In recent years, we have focused our business on the acquisition, development and commercialization
of new and innovative electronic technologies/products. We may not be successful in acquiring technologies that are commercially
viable. We may fail to successfully develop or commercialize technologies that we acquire. Research, development and commercialization
of such acquired technologies may disproportionately divert our resources from our other business activities.
If our manufacturers
or our suppliers are unable to provide an adequate supply of products, our growth could be limited and our business could be harmed
.
We rely on third parties to supply components for and to manufacture
our products. In order to grow our business to achieve profitability, we will need our manufacturers and suppliers to increase,
or scale-up, production and supply by a significant factor over current levels. There are technical challenges to scaling-up capacity
that may require the investment of substantial additional funds by our manufacturers or suppliers and hiring and retaining additional
management and technical personnel who have the necessary experience. If our manufacturers and suppliers are unable to do so,
we may not be able to meet the requirements to grow our business to anticipated levels. We also may represent only a small portion
of our supplier's or manufacturer's business and if they become capacity constrained they may choose to allocate their available
resources to other customers that represent a larger portion of their business.
17
Our international operations are subject to increased
risks which could harm our business, operating results and financial condition
.
Our ability to manage our business and conduct our operations
internationally requires considerable management attention and resources and is subject to a number of risks, including the following:
•
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.
In addition, compliance with complex foreign and U.S. laws
and regulations that apply to our international operations increases our cost of doing business in international venues and could
expose us or our employees to fines and penalties. These numerous and sometimes conflicting laws and regulations include import
and export requirements, content requirements, trade restrictions, tax laws, sanctions, internal and disclosure control rules,
data privacy requirements, labor relations laws, U.S. laws such as the Foreign Corrupt Practices Act and local laws prohibiting
corrupt payments to governmental officials. Violations of these laws and regulations could result in fines, civil and criminal
penalties against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.
Any such violations could include prohibitions on our ability to offer our products and services in one or more countries and
could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain
employees, our business and our operating results.
Our revenues depend on a key customers.
The Company's major product lines in 2012 and 2011 were
external power, internal power and industrial controls.
During 2012, 59% of revenues were derived from five customers
at 47%, 4%, 3%, 3% and 2%. During 2011, 55% of revenues were derived from six customers at 41%, 4%, 3%, 3%, 2% and 2%.
18
At December 31, 2012, of the gross trade accounts receivable
from continuing operations totaling $5,095,926, 57% was due from six customers: 37%, 8%, 3%, 3%, 3% and 3%. At December 31, 2011,
of the gross trade accounts receivable from continuing operations totaling $3,819,641, 53% was due from eight customers: 21%,
9%, 7%, 5%, 4%, 3%, 2% and 2%.
There is no assurance that we will continue to maintain all
of our existing key customers in the future. Should we, for any reason, discontinue our business relationship with any one of
these key customers, the impact to our revenue stream would be substantial.
We rely on third party distributors to generate a substantial
part of our revenue and, if we fail to expand and manage our distribution channels, our revenues could decline and our growth
prospects could suffer.
We derive a substantial portion of our revenues from sales
of our electronic component products through distributors and we expect that sales through these distributors will represent a
substantial portion of our revenues for the foreseeable future. Our ability to expand our distribution channels depends in part
on our ability to educate our distributors about our products, which are complex. Many of our distributors have established relationships
with our competitors. If our distributors choose to place greater emphasis on products and services of their own or those offered
by our competitors, our ability to grow our business and sell our products may be adversely affected. If our distributors do not
effectively market and sell our products, or if they fail to meet the needs of our customers, then our ability to grow our business
and sell our products may be adversely affected. The loss of one or more of our larger distributors, who may cease marketing our
products with limited or no notice and our possible inability to replace them, could adversely affect our sales. Our failure to
recruit additional distributors or any reduction or delay in their sales of our products or conflicts between distributor sales
and our direct sales and marketing activities could materially and adversely affect our results of operations.
We are a relatively small specialty component and solutions
business and face formidable competition.
We define our specialty solutions business into three categories:
PSU
(power supply units) that includes our Novum digital power and Solus advanced power;
Test and Measurement
equipment
that includes our Vergence GasPT2; and
Components
including our AMT modular encoder. We are a relatively small company
with limited capitalization in comparison to many of our international competitors. Because of our size and capitalization, we
believe that we have not yet established sufficient market awareness in the specialty electronic component and solutions business
that is essential to our continued growth and success in all of our markets. We face formidable competition in every aspect of
our specialty component and solutions business from other companies
many of whom have greater name recognition, more resources and broader product offerings than ours.
We
also
expect competition to intensify in the future.
For example,
the market for our electronic components and our inferential natural gas monitoring device, the Vergence GasPT2,
is emerging
and is characterized by rapid technological change, evolving industry standards, frequent new product introductions and shortening
product life cycles. Our future success in keeping pace with technological developments and achieving product acceptance depends
upon our ability to enhance our current products and to continue to develop and introduce new product offerings and enhanced performance
features and functionality on a timely basis at competitive prices.
Our
inability, for technological or other reasons, to enhance, develop, introduce or deliver compelling products in a timely manner,
or at all, in response to changing market conditions, technologies or customer expectations, could have a material adverse effect
on our operating results and growth prospects. Our ability to compete successfully will depend in large measure on our ability
to maintain a technically skilled development and engineering staff and to adapt to technological changes and advances in the
industry, including providing for the continued compatibility of our products with evolving industry standards and protocols and
competitive environments.
19
Acquisitions could result in operating difficulties,
dilution and other harmful consequences.
We continue our process of integrating recent acquisitions
into our own business model and we expect to continue to evaluate and enter into discussions regarding a wide array of potential
strategic transactions. These transactions could be material to our financial condition and results of operations. The process
of integrating an acquired company, business or technologies may create unforeseen operating difficulties and expenditures. The
areas where we face risks include:
·
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.
Our failure to address these risks or other problems encountered
in connection with our past or future acquisitions could cause us to fail to realize the anticipated benefits of such acquisitions
incur unanticipated liabilities and harm our business generally.
For
example, a majority of Orbital Gas Systems Limited's revenues for each of its last two fiscal years has come from one customer.
If we complete the Orbital acquisition and fail to continue to do business with Orbital's primary customer at substantially similar
or greater levels than recent historical levels, our financial condition, results of operations and growth prospects would be
significantly harmed.
Future acquisitions could also result in dilutive issuances
of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, write-offs of goodwill,
or
reductions to our tangible net worth
any of which could harm our
business,
financial condition
, results of operations and prospects
.
Also, the anticipated benefit of many of our acquisitions may not materialize.
20
We will need to grow our organization and we may encounter
difficulties in managing this growth.
As of December 31, 2012, the Company, together with its consolidated
subsidiaries, had sixty-two full-time and seven part-time employees. If we acquire Orbital we will have approximately one hundred
thirty-nine fulltime employees and seven part time employees. We expect to experience significant growth in the number of our
employees and the scope of our operations. To manage our anticipated future growth, we must continue to implement and improve
our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified
personnel. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities
and devote a substantial amount of time to managing these growth activities. Due to our limited resources, we may not be able
to effectively manage the expansion of our operations or recruit and train additional qualified personnel, which may result in
weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced
productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert
financial resources from other projects, such as the development of new products. If our management is unable to effectively manage
our expected growth, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced
and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize new
products including the Vergence GasPT2, Novum digital power and Solus advanced power and compete effectively will depend, in part,
on our ability to effectively manage any future growth.
Our operating results will vary over time and such fluctuations
could cause the market price of our common stock to decline.
Our operating results may fluctuate significantly due to a
variety of factors, many of which are outside of our control. Because revenues for any future period are not predictable with
any significant degree of certainty, you should not rely on our past results as an indication of our future performance. If our
revenues or operating results fall below the expectations of investors or securities analysts or below any estimates we may provide
to the market, the price of our common shares would likely decline substantially. Factors that could cause our operating results
and stock price to fluctuate include:
·
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.
Our operating expenses will increase as we make further
expenditures to enhance and expand our operations in order to support additional growth in our business and national stock market
reporting and compliance obligations.
Historically, we limited our investment in operations, but
in the future we expect our operations and marketing investments to increase substantially to support our anticipated growth and
as a result of our recent listing on the NASDAQ Stock Market. We are making significant investments in using more professional
services and expanding our operations outside the United States. We intend to make additional investments in personnel and continue
to expand our operations to support anticipated growth in our business. In addition, we may determine the need in the future to
build a direct sales force to market and sell our products or provide additional resources or cooperative funds to our distributors.
Such changes to our existing sales model would likely result in higher selling, general and administrative expenses as a percentage
of our revenues. We expect our increased investments to adversely affect operating income in the short term while providing long
term benefit.
21
Our business depends on a strong brand and failing to
maintain and enhance our brand would hurt our ability to expand our base of distributors, customers and end-users.
We believe that we have not yet established sufficient market
awareness in the electronic component market. Market awareness of our capabilities and products is essential to our continued
growth and our success in all of our markets. We expect the brand identity that we have developed through CUI, Vergence, GasPT2,
Novum, AMT, Solus, and CUI Japan to significantly contribute to the success of our business. Maintaining and enhancing these brands
and any brands we might acquire, such as Orbital Gas Systems,
is critical to expanding our base of distributors, customers and end-users. If we fail to maintain and enhance our brands, or
if we incur excessive expenses in this effort, our business, operating results and financial condition will be materially and
adversely affected. Maintaining and enhancing our brands will depend largely on our ability to be a technology leader and continue
to provide high-quality products, which we may not do successfully.
New entrants and the introduction of other distribution
models in our markets may harm our competitive position.
The markets for development, distribution and sale of our products
are rapidly evolving. New entrants seeking to gain market share by introducing new technology and new products may make it more
difficult for us to sell our products and could create increased pricing pressure, reduced profit margins, increased sales and
marketing expenses or the loss of market share or expected market share, any of which may significantly harm our business, operating
results and financial condition.
Adverse conditions in the global economy and disruption
of financial markets may significantly restrict our ability to generate revenues or obtain debt or equity financing.
The global economy continues to experience volatility and uncertainty
and governments in many countries continue to evaluate and implement
spending cuts designed to reduce budget deficits. These
conditions
and
deficit reduction measures
could reduce demand for our products and services
,
including through reduced government infrastructure projects,
which would significantly jeopardize our ability to achieve
our sales targets. These conditions could also affect our potential strategic partners, which, in turn, could make it more difficult
to execute a strategic collaboration. Moreover, volatility and disruption of financial markets could limit our customers'
ability to obtain adequate financing or credit to purchase and pay for our products and services in a timely manner, or to maintain
operations and result in a decrease in sales volume. General concerns about the fundamental soundness of domestic and international
economies may also cause customers to reduce purchases. Changes in governmental banking, monetary and fiscal policies to restore
liquidity and increase credit availability may not be effective. Economic conditions and market turbulence may also impact our
suppliers' ability to supply sufficient quantities of product components in a timely manner, which could impair our ability
to fulfill sales orders. It is difficult to determine the extent of the economic and financial market problems and the many ways
in which they may affect our suppliers, customers, investors and business in general. Continuation or further deterioration of
these financial and macroeconomic conditions could significantly harm sales, profitability and results of operations.
22
Our subsidiary and certain suppliers are in Japan and
located in areas subject to natural disasters or other events that could stop us from having our products made or shipped or could
result in a substantial delay in our production or development activities.
We have research, development and manufacturing resources in
Japan. The risk of earthquakes, typhoons and other natural disasters in this geographic area is significant due to the proximity
of major earthquake fault lines. Despite precautions taken by us and our third-party providers, over which we have no control,
a natural disaster or other unanticipated problems at our location in Japan or a third-party provider could cause interruptions
in the products that we provide. Earthquakes, fire, flooding or other natural disasters could result in the disruption of our
development, manufacturing, assembly, testing or shipping capacity. Any disruption resulting from these events could cause significant
delays in product development or shipments of our products until we are able to shift our development, manufacturing, assembly
or testing from the affected contractor to another third party vendor or our research and development activities to another location.
We cannot assure you that alternative capacity could be obtained on favorable terms, if at all.
Defects in our products could harm our reputation and
business.
Our electronic products are complex and have contained and
may contain undetected defects or errors, especially when first introduced or when new versions are released. Defects in our products
may lead to product returns and require us to implement design changes or updates.
Any defects or errors in our electronic products, or the perception
of such defects or errors, could result in:
·
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.
We and our contract manufacturers purchase some components,
subassemblies and products from a limited number of suppliers. The loss of any of these suppliers may substantially disrupt our
ability to obtain orders and fulfill sales as we design and qualify new components.
We rely on third party components and technology to build and
operate our products and we rely on our contract manufacturers to obtain the components, subassemblies and products necessary
for the manufacture of our products. Shortages in components that we use in our products are possible and our ability to predict
the availability of such components is limited. If shortages occur in the future, as they have in the past, our business, operating
results and financial condition would be materially adversely affected. Unpredictable price increases of such components due to
market demand may occur. While components and supplies are generally available from a variety of sources, we and our contract
manufacturers currently depend on a single or limited number of suppliers for several components for our products. If our suppliers
of these components or technology were to enter into exclusive relationships with other providers of electronic components or
were to discontinue providing such components and technology to us and we were unable to replace them cost effectively, or at
all, our ability to provide our products would be impaired. Therefore, we may be unable to meet customer demand for our products,
which would have a material adverse effect on our business, operating results and financial condition.
23
We depend on key personnel and will need to recruit new
personnel as our business grows
.
As a small company, our future success depends in a large part
upon the continued service of key members of our senior management team who are critical to the overall management of CUI Global
and our subsidiary companies, CUI, Inc. and CUI Japan (formerly Comex Instruments, Ltd.), including our intended acquisition of
Orbital Gas Systems Limited, as well as the development of our technologies, our business culture and our strategic direction.
The loss of any of our management or key personnel could seriously harm our business and we do not maintain any key-person life
insurance policies on the lives of these critical individuals.
We
also do not have an agreement not to compete with William J. Clough, our President and CEO
.
If we are successful in expanding our product and customer
base, we will need to add additional key personnel as our business continues to grow. If we cannot attract and retain enough qualified
and skilled staff, the growth of the business may be limited. Our ability to provide services to customers and expand our business
depends, in part, on our ability to attract and retain staff with professional experiences that are relevant to technology development
and other functions the Company performs. Competition for personnel with these skills is intense. We may not be able to recruit
or retain the caliber of staff required to carry out essential functions at the pace necessary to sustain or expand our business.
We believe our future success will depend in part on the following:
·
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.
Risks Related to Our Intellectual Property and Technology
If we fail to protect our intellectual property rights
adequately, our ability to compete effectively or to defend ourselves from litigation could be impaired.
We rely primarily on patent, copyright, trademark and trade
secret laws, as well as confidentiality and non-disclosure agreements and other methods, to protect our proprietary technologies
and know-how. Given the costs of obtaining patent protection, we may choose not to protect certain innovations that later turn
out to be important. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained
will be insufficient or that an issued patent may be deemed invalid or unenforceable. We license a significant amount of our underlying
intellectual property from third parties, i. e., AMT Encoder Technology, Novum Digital Point of Load Technology, Solus Advanced
Power Topology Technology and Vergence GasPT2 Technology. The loss of our rights as a licensee under any of these or future technology
licensing arrangements could have a material adverse impact upon our financial position and results of operations.
Monitoring unauthorized use of our intellectual property is
difficult and costly. Unauthorized use of our intellectual property may occur in the future without our knowledge. The steps we
have taken may not prevent unauthorized use of our intellectual property. Further, we may not be able to detect unauthorized use
of, or take appropriate steps to enforce our intellectual property rights. Our competitors may also independently develop similar
technology. Our failure to effectively protect our intellectual property could reduce the value of our technology in licensing
arrangements or in cross-licensing negotiations and could impair our ability to compete. Any failure by us to meaningfully protect
our intellectual property could result in competitors offering products that incorporate our most technologically advanced features,
which could seriously reduce demand for our products.
24
We may in the future need to initiate infringement claims or
litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive and time-consuming and may divert the efforts
of our technical staff and managerial personnel, which could result in lower revenues and higher expenses, whether or not such
litigation results in a determination favorable to us.
Confidentiality agreements with employees and others
may not adequately prevent disclosure of our trade secrets and other proprietary information.
We have devoted substantial resources to the development of
our proprietary technology and trade secrets. In order to protect our proprietary technology and trade secrets, we rely in part
on confidentiality agreements with our key employees, licensees, independent contractors and other advisors. These agreements
may not effectively prevent disclosure of our trade secrets and may not provide an adequate remedy in the event of unauthorized
disclosure of our trade secrets. We may have difficulty enforcing our rights to our proprietary technology and trade secrets,
which could have a material adverse effect on our business, operating results and financial condition. In addition, others may
independently discover trade secrets and proprietary information and in such cases we could not assert any trade secret rights
against such parties. Costly and time consuming litigation could be necessary to determine and enforce the scope of our proprietary
rights and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
If a third party asserts that we are infringing on its
intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation and our business
may be adversely affected.
The technology industry is characterized by the existence of
a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other
violations of intellectual property rights. Third parties may assert patent and other intellectual property infringement claims
against us or the parties from whom we license our technological rights in the form of lawsuits, letters or other forms of communication.
These claims, whether or not successful, could:
·
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.
As a result, any third-party intellectual property claims against
us could increase our expenses and adversely affect our business. Even if we have not infringed any third parties' intellectual
property rights, we cannot be sure our legal defenses will be successful and even if we are successful in defending against such
claims, our legal defense could require significant financial resources and management time. Finally, if a third party successfully
asserts a claim that our products infringe its proprietary rights, royalty or licensing agreements might not be available on terms
we find acceptable or at all and we may be required to pay significant monetary damages to such third party.
25
If our contract manufacturers do not respect our intellectual
property and trade secrets, our business, operating results and financial condition could be materially adversely affected.
Because most of our contract manufacturers operate outside
the United States, where prosecution of intellectual property infringement and trade secret theft is more difficult than in the
United States, certain of our contract manufacturers, their affiliates, their other customers or their suppliers may attempt to
use our intellectual property and trade secrets to manufacture our products for themselves or others without our knowledge. Although
we attempt to enter into agreements with our manufacturers to preclude them from using our intellectual property and trade secrets,
we may be unsuccessful in monitoring and enforcing our intellectual property rights. Although we take steps to stop counterfeits,
we may not be successful and customers who purchase these counterfeit goods may have a bad experience and our brand may be harmed.
If such an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our products at
competitive prices and to be the sole provider of our products may be adversely affected and our business, operating results and
financial condition could be materially and adversely affected.
Risks Related to Our Common Stock
Our common stock price may be volatile, which could result
in substantial losses for individual shareholders.
The market price for the Company's common stock is volatile
and subject to wide fluctuations in response to factors, including the following, some of which are beyond our control, which
means our market price could be depressed and could impair our ability to raise capital:
·
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;
·
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.
26
These factors may materially and adversely affect the market
price of our common stock, regardless of our performance. In addition, the stock market in general and the market for technology
companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of
our common stock, regardless of our actual operating performance. Additionally, because our stock is thinly trading, there is
a disparity between the bid and the asked price that may not be indicative of the stock's true value.
Offers or availability for sale of a substantial number
of shares of our common stock may cause the price of our common stock to decline.
Sales of a significant number of shares of our common stock
in the public market could harm the market price of our common stock and make it more difficult for us to raise funds through
future offerings of common stock. Upon the effectiveness of the registration statement of which this prospectus forms a part,
7,000,000 shares of our common stock will become freely tradable. In addition, approximately 8,636,820 shares of our common stock
are freely tradable prior to the effective date of this registration statement. As these shares and as additional shares of our
common stock become available for resale in the public market, the supply of our common stock will increase, which could decrease
the price of our common stock.
We have never paid dividends on our common stock and
do not expect to pay any in the foreseeable future.
Potential purchasers should not expect to receive a return
on their investment in the form of dividends on our common stock. The Company has
never
paid cash dividends
on its common stock and the Company does not expect to pay dividends in the foreseeable future.
We currently anticipate that we will retain future earnings
for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for
the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into
account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and
the terms of any credit agreements that we may be a party to at the time.
Our
ability to pay dividends on our common stock is limited by our existing line of credit, and may be further restricted by the terms
of any of our future debt or preferred securities.
Accordingly, investors must rely on sales of their own common stock
after price appreciation, which may never occur, as the only way to realize their investment. Investors seeking cash dividends
should not purchase shares.
There is a limited public trading market for our common
stock so you may not be able to resell your stock and may not be able to turn your investment into cash.
Our common stock is currently traded on the NASDAQ Stock Market
under the trading symbol "CUI". Our shares of common stock are thinly traded. Due to the illiquidity, the market price
may not accurately reflect our relative value. There can be no assurance that there will be an active market for our shares of
common stock either now or in the future. Because our common stock is thinly traded, a large block of shares traded can lead to
a dramatic fluctuation in the share price and investors may not be able to liquidate their investment in us at all or at a price
that reflects the value of the business.
27
Risks Relating to Shareholder Rights
Our board of directors has the authority, without shareholder
approval, to issue preferred stock with terms that may not be beneficial to existing common shareholders and with the ability
to affect adversely shareholder voting power and perpetuate their control over us.
Although we do not have any preferred stock outstanding presently,
our Articles of Incorporation allow us to issue shares of preferred stock without any vote or further action by our shareholders.
Our board of directors has the authority to issue preferred stock without further shareholder approval, including large blocks
of preferred stock as well as the authority to fix and determine the relative rights and preferences of preferred stock. As a
result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred
right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of
common stock or other preferred shareholders and the right to the redemption of the shares, together with a premium, prior to
the redemption of our common stock.
Preferred stock could be used to dilute a potential hostile
acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred shares may have the effect of
making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control or an
unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to and
assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including
voting rights, of the holders of our common stock and preferred stock.
Our Articles of Incorporation limits director liability,
thereby making it difficult to bring any action against them for breach of fiduciary duty.
The Company is a Colorado corporation. As permitted by Colorado
law, the Company's Articles of Incorporation limits the liability of directors to the Company or its shareholders for monetary
damages for breach of a director's fiduciary duty, with certain exceptions. These provisions may discourage shareholders from
bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by
shareholders on behalf of the Company against a director.
Our charter
documents and outstanding note to IED, Inc. may inhibit a takeover that shareholders consider favorable.
Provisions of our Articles of Incorporation and Bylaws may
delay or discourage transactions involving an actual or potential change in control of the Company, including transactions in
which shareholders might otherwise receive a premium for their shares, or transactions that our shareholders might otherwise deem
to be in their best interests. These provisions:
•
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.
Our operating subsidiary, CUI, Inc. (formerly Waytronx Holding,
Inc.), also issued a note to IED, Inc. (formerly CUI, Inc.) in connection with our acquisition of CUI, Inc. The note provides
that, for so long as any obligations are outstanding under the note, IED will have a right to match any bona fide offer from a
third party to acquire CUI, Inc. by any means. This matching right could discourage third parties from making an offer to acquire
us, which would involve indirectly acquiring CUI, Inc., or from acquiring CUI, Inc. directly, in a transaction our shareholders
might find advantageous because any such offer could be matched by IED and result in the third party utilizing time and resources
to formulate an offer without being able to complete a transaction.
28
Risks Related to Our Acquisition of Orbital Gas Systems
As a private
company, Orbital Gas Systems may not have in place a system of internal control over financial reporting that is adequate to manage
that business effectively as part of a public company.
If we complete the Orbital Gas Systems acquisition, we will
acquire the shares of a private company that has not previously been subject to financial reporting on the basis of U.S. GAAP,
and has not been subject to periodic reporting as a public company. There can be no assurance that Orbital Gas Systems has in
place a system of internal control over financial reporting that is required for public companies. Establishing, testing and maintaining
an effective system of internal control over financial reporting requires significant resources and time commitments on the part
of our management and our finance and accounting staff, may require additional staffing and infrastructure investments, and would
increase our costs of doing business. Moreover, if we discover aspects of the Orbital Gas Systems internal controls that need
improvement, we cannot be certain that our remedial measures will be effective. Any failure to implement required new or improved
controls, or difficulties encountered in their implementation could harm our operating results or increase our risk of material
weakness in internal controls.
If we do not
complete the Orbital Gas Systems acquisition the market price of our common stock may decline.
If we do not complete the Orbital Gas Systems acquisition,
we will have incurred significant transaction costs, including an investment of a substantial amount of management time, without
realizing any of the expected benefits. Moreover, our attention to the acquisition may have cost us opportunities to pursue other
potentially beneficial opportunities. If we do not complete the acquisition, the market price of our common stock may decline
if the current market price reflects an assumption that the acquisition will be completed.
A significant portion of our unaudited pro forma total
assets consists of goodwill, which is subject to a periodic impairment analysis, and a significant impairment determination in
any future period could have an adverse effect on our results of operations even without a significant loss of revenue or increase
in cash expenses attributable to such period.
We will have goodwill totaling approximately $26.8 million
if the acquisition is successful. We will be required to evaluate this goodwill for impairment based on the fair value of the
operating business units to which this goodwill relates, at least once a year. This estimated fair value could change if we are
unable to achieve operating results at the levels that have been forecasted, the market valuation of those business units decreases
based on transactions involving similar companies, or there is a permanent, negative change in the market demand for the services
offered by the business units. These changes could result in an impairment of the existing goodwill balance that could require
a material non-cash charge to our results of operations.
29
Our operating results may be affected by fluctuations
in foreign currency exchange rates, which may affect our operating results in U.S. dollar terms.
A portion of our revenue arises from our international operations
and we anticipate that, as we grow, our revenues from international operations will increase. Revenues generated and expenses
incurred by our international operations are often denominated in local currencies. As a result, our consolidated U.S. dollar
financial statements are subject to fluctuations due to changes in exchange rates as revenues and expenses of our international
operations are translated from local currencies into U.S. dollars. In addition, our financial results are subject to changes in
exchange rates that impact the settlement of transactions. The Company does not undertake any hedges to protect against adverse
foreign currency exposure.
Risks Related to This Offering
We may allocate
the net proceeds from this offering in ways that you and other stockholders may not approve.
We intend to use the net proceeds from this offering for the
purchase of the entire issued share capital of Orbital Gas System Limited, an independent specialist gas control and instrumentation
solutions provider located in the United Kingdom; pay down a portion of our existing long term debt; and working capital and general
corporate purposes. Because of the number and variability of factors that will determine our use of the proceeds from this offering,
their ultimate use may vary from the currently intended use. If, for any reason, we are not able to complete the acquisition of
Orbital Gas Systems Limited, we may allocate the net proceeds from this offering for general corporate purposes or in ways that
you may not approve. As such, our management will have discretion in the application of the net proceeds from this offering and
could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our common stock.
For a further description of our intended use of the proceeds of the offering, see "Use of Proceeds."
The large number of authorized, but not issued common
shares leaves an opportunity for dilution of your proportionate ownership of the company.
The Company currently has authorized 325,000,000 shares of
common stock of which, as of December 31, 2012, 10,883,280 shares are issued and outstanding. The Company, presently, has no shares
of preferred stock outstanding. An issuance of additional shares will have the effect of diluting the current shareholders' percentage
of ownership. We may seek additional capital through a combination of private and public equity offerings, debt financings and
other strategic arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your
rights as a stockholder. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements
that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures
or declaring dividends. If we raise additional funds through other strategic arrangements with third parties, we may have to relinquish
valuable rights to our technologies, future revenue streams or grant licenses on terms that are not favorable to us.
If securities analysts do not publish research or reports
about our business or if they publish negative evaluations of our stock, the price of our stock could decline.
After listing our common stock on the NASDAQ Stock Market,
we have become more visible to security and financial analysts which subject us to additional financial and legal compliance scrutiny.
Such additional scrutiny could affect any research or reports that industry or financial analysts publish about us or our business
which, in turn, could affect the trading price for our common stock. If one or more of the analysts who may elect to cover us
downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease coverage
of our Company, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.
30
Our
ability
to use U.S. net operating loss carry forwards might be limited, including as a result of this offering
.
As of December 31, 2012, we had net operating loss carry forwards
of approximately $20.7 million. These loss carry forwards expire in various years through the year ending December 31, 2032. To
the extent these net operating loss carry forwards are available, we intend to use them to reduce the corporate income tax liability
associated with our operations. Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount
of net operating loss carry forwards that might be used to offset taxable income when a corporation has undergone significant
changes in stock ownership. Due to changes in ownership, some of our net operating loss carry forwards might be limited. In addition,
future changes in ownership, including as a result of the issuance of common stock in this offering, could further limit the availability
of our net operating loss carry forwards. To the extent our use of net operating loss carry forwards is significantly limited,
our income could be subject to corporate income tax earlier than it would if we were able to use net operating loss carry forwards,
which could result in lower profits.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains "forward-looking statements"
within the meaning of the federal securities laws,
including the Private
Securities Litigation Reform Act of 1995,
which involve substantial risks and uncertainties. All statements contained in
this prospectus other than statements of historical fact, including statements of estimated and projected revenue, margins, costs,
expenditures, cash flows, growth rates, financial results,
acquisition
activity
and prospects are forward-looking statements. You can generally identify forward-looking statements by terminology
such as "may," "could," "should," "expects," "plans," "projects,"
"intends," "anticipates," "believes," "estimates," "predicts," "potential,"
"pursue," "target," or "continue," or the negative of these terms or other similar expressions
that concern our strategy, plans or intentions, although not all forward-looking statements contain these words. We have based
these forward-looking statements largely on our historical performance, our current expectations and projections about future
events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and
long-term business operations and objectives, and financial needs.
These forward-looking statements are subject to a number of
risks, uncertainties and assumptions that we believe are reasonable, including those described in the "Risk Factors"
section. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is
not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent
to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this
prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking
statements.
The forward-looking statements made in this prospectus relate
only to events as of the date on which the statements are made. We undertake no obligation to publicly update or revise any forward-looking
statement as a result of new information, future events or otherwise, except as required by law.
31
USE OF PROCEEDS
We estimate that the net proceeds of this offering to us will
be approximately $35,935,244, after deducting underwriting discounts and commissions and our estimated offering expenses. Our
estimate of the net proceeds is based on an assumed offering price of $5.51 per share, which was the closing price of our common
stock on the NASDAQ Capital Market on February 27, 2013, and assumes the number of shares we sell in this offering is the
same as set forth on the cover page of this prospectus. A $1.00 increase or decrease in the assumed public offering price would
increase or decrease the estimated net proceeds we receive from this offering by approximately $6,580,000 assuming the number
of shares we sell in this offering, as set forth on the cover of this prospectus, remains the same and after deducting estimated
underwriter discounts and commissions and offering expenses.
We
intend to use the net proceeds from this offering as follows: first for the £17 million (approximately
$25.8 million,
based on the Wall Street Journal published exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound
sterling)
purchase of the entire issued share capital of Orbital Gas
Systems Limited, an independent specialist gas control and instrumentation solutions provider located in the United Kingdom; second,
to pay down approximately $2 million of our debt incurred in connection with our May 15, 2008 acquisition of CUI, Inc., which
has an interest rate of 6% per annum and matures on May 15, 2018; and the remainder of the proceeds for working capital and general
corporate purposes. If we do not consummate the Orbital Gas Systems Limited acquisition, we intend to use the net proceeds of
this offering for general corporate purposes, including repayment of $2 million of our existing indebtedness.
Pending the
uses
of proceeds
as described above, we plan to invest all or a substantial portion of the net proceeds in a variety of capital
preservation investments, including short and intermediate-term interest-bearing obligations, investment-grade instruments, certificates
of deposit or guaranteed obligations of the United States government.
The estimated sources and uses of funds for the Orbital acquisition
and the repayment of $2 million of existing debt, assuming these transactions had closed on December 31, 2012, are shown in the
table below. Actual amounts will vary from estimated amounts depending on several factors:
Sources
Uses
Common stock offered hereby (1)
$
38,570,000
Purchase of Orbital (2)
$
25,768,600
Repayment of existing indebtedness (3)
2,000,000
Transactions costs (4)
2,634,756
Total sources
$
38,570,000
Total uses
$
30,403,356
(1) Gross proceeds based on an assumed offering price of $5.51
per share, the last reported sale price of our common stock on the NASDAQ Capital Market on February 27, 2013.
(2) Purchase price of £17 million, converted at US$1.5158
per pound sterling, based on the Wall Street Journal published exchange rate as of the New York market close on February 27, 2013.
The U.S. dollar purchase price is subject to foreign exchange fluctuation between now and the closing of the acquisition purchase.
(3) Indebtedness to be repaid of $2 million in aggregate principal
amount of our currently outstanding note payable, bearing interest at 6.0% per annum and due May 15, 2018.
(4) Reflects our estimate of fees and expenses
associated with the Orbital Gas Systems Limited acquisition and expenses associated with this offering, including estimated
underwriter discounts and commissions assuming the sale of all shares of our common stock as reflected on the cover page at
an assumed offering price of  $5.51 per share, the last reported sale price of our common stock on the NASDAQ Capital
Market on February 27, 2013.
32
DIVIDEND POLICY
The Company has
never paid
cash dividends
on its common stock, and the Company does not expect to pay dividends in the foreseeable future.
Our
ability to pay dividends on our common stock is limited by our existing line of credit, and may be further restricted by the terms
of any of our future debt or preferred securities.
We currently expect to retain future earnings to finance
the growth and development of our business. The timing, amount and form of future dividends, if any, will depend on, among
other things, our future results of operations and cash flows; our general financial condition and future prospects; our
capital requirements and surplus; contractual restrictions; the amount of distributions, if any, received by us from our
subsidiaries; and other factors deemed relevant by our board of directors. Any future dividends on our common shares would be
declared by and subject to the discretion of our board of directors.
PRICE RANGE OF OUR COMMON STOCK
Our common stock
began
trading
on the NASDAQ Stock Market under the trading symbol "CUI"
on August 17, 2011. Prior to that, the our common stock was traded on the OTC Bulletin Board (OTC:BB)
. The following table
sets forth
for the quarters indicated
, the high and low
sales
prices of our common stock
on the NASDAQ Stock Market for the
periods it has been listed on that exchange, and the high and low bid prices
as reported by the National Quotation Bureau
for the periods from January 1, 2011 through December 31, 2012. The
high and low bid prices
and reflect inter-dealer prices without retail mark-up, markdown or commission and may not represent
actual transactions. The 2011 prices have been adjusted to account for the one for thirty (1:30) reverse split that became effective
February 17, 2012.
Year
Quarter
High Bid
Low Bid
2011
First Quarter
$
8.70
$
5.40
Second Quarter
$
7.05
$
3.90
Third Quarter
$
6.30
$
2.40
Fourth Quarter
$
6.45
$
3.15
2012
First Quarter
$
6.90
$
4.50
Second Quarter
$
7.00
$
3.81
Third Quarter
$
7.48
$
5.06
Fourth Quarter
$
6.40
$
4.34
On February 27, 2013, the last reported sale price of our common
stock on the NASDAQ Capital Market was $5.51 per share. As of February 27, 2013, we had 3,000 holders of record of our common
stock. The actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial
owners, but whose shares are held in street name by brokers and other nominees.
CAPITALIZATION
The following table sets forth our cash, cash equivalents and
capitalization as of December 31, 2012:
1.
On an actual basis; and
2.
On a pro forma as adjusted basis to give effect to the Orbital
                                                                Gas Systems Limited acquisition, the indebtedness we expect to
                                                                repay, and the sale of 7,000,000 share of our common stock in
                                                                this offering at an assumed offering price of $5.51, the last
                                                                reported sale price of our common stock on the NASDAQ Capital
                                                                Market on February 27, 2013, less estimated underwriting discounts
                                                                and commissions and offering expenses.
33
This offering is not contingent upon the closing of the
Orbital Gas Systems Limited acquisition. If the Orbital acquisition is not consummated, our pro forma cash and cash
equivalents would have been approximately $37.0 million (based on an assumed price to the public of $5.51 per share), the $2
million repayment towards the existing long term note payable would be completed and total capitalization would reflect the
significant transaction costs we have incurred in connection with the Orbital acquisition, and this offering. If we are
unable to complete the Orbital acquisition, the net proceeds of this offering may be used in the discretion of management for
working capital and other general corporate purposes.
This capitalization table should be read in conjunction with
our "Selected Consolidated Financial Information," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere
in this prospectus.
As of December 31, 2012
Actual
Pro Forma as
Adjusted
Cash and cash equivalents
$
3,039,840
$
20,379,440
Line of credit
459,448
459,448
Long term notes payable, related party, net of current portion due
7,303,683
5,303,683
Total long term liabilities
7,303,683
5,303,683
Stockholders' equity:
Common stock, par value $0.001; 325,000,000 shares authorized; 10,883,280 shares issued and outstanding, actual and 17,883,280 shares issued and outstanding, pro forma as adjusted
10,883
17,883
Additional paid-in capital
100,947,708
136,875,952
Accumulated deficit
(76,171,822
)
(76,171,822
)
Accumulated other comprehensive (loss)
(24,336
)
(24,336
)
Total stockholders' equity
24,762,433
60,697,677
Total capitalization
$
35,565,404
$
86,840,248
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Presentation of Financial Information
The financial statements and other financial information in
this prospectus related to the results of operations of the Orbital Gas Systems Limited business have been prepared in accordance
with U.K. GAAP. U.K. GAAP differs in some material respects from U.S. GAAP, and as a result, the historical financial statements
and other financial information for Orbital may not be comparable to our historical financial statements. For a discussion of material
differences between U.K. GAAP and U.S. GAAP as they related to Orbital, see Note 22 to the  financial statements of
Orbital Gas Systems Limited included elsewhere in this prospectus.
34
CUI Global, Inc.
The following tables set forth our selected consolidated financial
data. The selected consolidated financial data for the years ended December 31, 2012 and 2011 are derived from our audited consolidated
financial statements appearing elsewhere in this prospectus. The data set forth below should be read in conjunction with " Management's Discussion and Analysis of Financial Condition and Results of Operations," our financial
statements and the related notes included elsewhere in this prospectus.
For the Years Ended
December 31,
2012
2011
Statement of Operations Data:
Revenue
$
41,084,589
$
38,938,326
Operating expenses
17,356,896
14,146,366
Income (loss) from operations
(1,980,200
)
658,887
Net (loss) allocable to common stockholders
(2,526,321
)
(48,763
)
Basic and diluted (loss) per common share
$
(0.25
)
$
(0.01
)
Other Data:
Adjusted EBITDA (1)
354,727
2,232,614
Balance Sheet Data:
Cash and cash equivalents
3,039,840
176,775
Total assets
36,723,461
31,978,491
Total liabilities
11,961,028
19,381,488
Total stockholders' equity
24,762,433
12,597,003
(1)
Adjusted EBITDA is the net   (loss) allocable to common stockholders before interest expense, income taxes, equity
                                                                compensation, depreciation, impairment                                                                 expenses and
                                                                amortization. We believe that Adjusted EBITDA is useful as an indicator of our performance. Our management uses Adjusted
                                                                EBITDA, in conjunction with traditional U.S. GAAP measures, as part of our overall
                                                                assessment of our performance. We use this non- U.S. GAAP measure in internal management reports used to monitor and make
                                                                decisions about our business. The principal limitations of Adjusted EBITDA as a performance measure are that it excludes
                                                                significant adjustments for one-time expenses and gains required under U.S. GAAP, and that our definition of Adjusted EBITDA
                                                                may be                                                                 different than
                                                                similar-sounding non- U.S. GAAP measures used                                                                 by other
                                                                companies. To mitigate these limitations, we present our GAAP results
                                                                along with the non- U.S. GAAP measure, reconcile Adjusted EBITDA to the net (loss) allocable to common stockholders, and recommend that
                                                                investors                                                                 not give
                                                                undue                                                                                                          weight to it.
                                                                We believe that Adjusted EBITDA provides
                                                                investors useful information by allowing them to view the business
                                                                through the eyes of management.
35
The reconciliation of CUI Global, Inc. Adjusted EBITDA to net
(loss) allocable to common stockholders, is as follows:
For the Years Ended
December 31,
2012
2011
Net (loss) allocable to common stockholders
$
(2,526,321
)
$
(48,763
)
Provision for taxes
33,714
29,810
Impairment of intangible, trademark and trade name V-Infinity
278,428
-
Interest expense - amortization of debt offering costs and debt discount
73,333
334,747
Interest expense
575,199
918,189
Stock based compensation
1,190,081
227,867
Depreciation and amortization
730,293
770,764
Adjusted EBITDA
$
354,727
$
2,232,614
Orbital Gas Systems Limited
The following table sets forth
selected
consolidated financial information
of Orbital Gas Systems Limited. You should read the following
selected
consolidated financial information
in conjunction with the consolidated financial statements and notes
thereto of Orbital included elsewhere in this prospectus.
The fiscal year of CUI
Global, Inc. ends on December 31, and the fiscal year of Orbital Gas Systems Limited ends on June 30. The
selected
consolidated financial information
presented has been derived from the audited
financial statements and accompanying notes of Orbital for the years ended June 30, 2012 and 2011, prepared in accordance
with U.K. GAAP reconciled to U.S. GAAP, included elsewhere in this prospectus, and selected unaudited interim financial
information of Orbital for the six months ended December 31, 2012 and 2011, and reflects Orbital Gas Systems Limited financial
information as of calendar years ended December 31, 2012 and 2011.
Orbital's historical results do not
necessarily indicate results that may be expected for any future period.
For a discussion of material differences
between U.K. GAAP and U.S. GAAP as they relate to
Orbital Gas Systems Limited
, see Note 22 to
the financial statements of
Orbital Gas Systems Limited
included elsewhere in this prospectus.
Where applicable, the amounts in the following tables related
to the acquisition price are converted from British pound sterling to U. S. dollars based on the Wall Street Journal published
exchange rate on New York closing on February 27, 2013 of $1.5158 per British pound sterling. For converting the fiscal year statements
of operations amounts related to Orbital, the following average exchange rates published by Oanda Corporation: $1.5768 average
per British pound sterling for the six months January to June 2012, $1.5926 average per British pound sterling for the six months
July to December 2012, $1.6160 average per British pound sterling for the six months January to June 2011 and $1.5919 average for
the British pound sterling for the six months July to December 2011. The amounts included on the balance sheets related to Orbital
were converted, based on the following exchange rates published by Oanda Corporation, $1.6153 per British pound sterling at December
31, 2012 and $1.5453 per British pound sterling at December 31, 2011.
36
For the Years Ended
December 31,
2012
2011
Statement of Operations Data:
Revenue
$
23,017,544
$
23,360,136
Operating expenses
6,659,995
6,506,305
Income from operations
3,986,581
2,066,153
Net income
3,087,720
1,759,462
Other Data:
EBITDA (1)
$
4,212,413
$
2,222,043
Balance Sheet Data:
Cash and cash equivalents
$
9,172,956
Total assets
14,606,492
Total debt, including current portion
7,588,974
Total stockholders' equity
7,017,518
(1)
EBITDA is net income before interest expense, income taxes, depreciation and, amortization. We believe that EBITDA is
                                                            useful as an indicator of ongoing operating performance. Our management uses EBITDA, in conjunction with traditional U.S.
                                                            GAAP measures, as part of the overall assessment of performance. We use this non-U.S. GAAP measure in internal management
                                                            reports used to monitor and make decisions about our business. To mitigate these limitations, we present Orbital's
                                                            U.S.                                                             GAAP results along with the non-U.S. GAAP measure,
                                                            reconcile EBITDA to net income, and recommend that investors not give undue
                                                            weight to it. We believe that EBITDA provides investors useful information by allowing them to view the business through the
                                                            eyes of management, facilitating comparison of results across historical periods and across companies, and providing a focus
                                                            on the underlying operating performance of the business.
The reconciliation of Orbital Gas Systems
Limited EBITDA to net income, is as follows:
For the Years Ended
December 31,
2012
2011
Net income
$
3,087,720
$
1,759,462
Provision for taxes
938,940
320,445
Interest expense
9,715
2,613
Depreciation and amortization
176,038
139,523
EBITDA
$
4,212,413
$
2,222,043
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On March 3, 2013,
we agreed to acquire Orbital
Gas Systems Limited ("Orbital") for £17 million, which
based on the Wall Street Journal
published exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound sterling
, is $ 25,768,600
(subject to foreign exchange rate fluctuations). The acquisition includes all of Orbital's issued and outstanding shares.
We anticipate that this acquisition will be consummated during
the second quarter of 2013. Although
we have entered into a share purchase agreement in connection with the proposed Orbital acquisition, we cannot guarantee when,
or whether, the acquisition will be completed. The share purchase agreement contains a number of important conditions that must
be satisfied before we can complete the acquisition.
37
The unaudited pro forma financial information has been compiled
from underlying audited financial statements of Orbital Gas Systems Limited prepared in accordance with U.K. GAAP and reconciled
to U.S. GAAP for the purpose of such presentation, and selected unaudited interim financial information of Orbital for the six
months ended December 31, 2012.
The unaudited pro forma condensed combined financial information
combine the historical consolidated statements of operations of CUI Global, Inc., giving effect to (a) the completion of the Orbital
acquisition, b) the sale of 7,000,000 shares of our common stock in this offering at an assumed offering prices of $5.51 per share,
the last reported sale price of our common stock on the NASDAQ Capital Market on February 27, 2013, less estimated underwriting
discounts and commissions and estimated offering expenses, and (c) the application of the proceeds from this offering, in each
case as if they occurred on January 1, 2011 for income statement purposes and December 31, 2012 for balance sheet purposes. The
unaudited pro forma condensed combined information should be read in conjunction with the accompanying notes to the unaudited pro
forma condensed combined financial information, the historical financial statements of CUI Global, Inc. and Orbital Gas Systems
Limited and "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
all of which are included elsewhere in this prospectus.
The Orbital Gas Systems Limited acquisition will be treated
as a purchase by CUI Global, Inc., with CUI Global, Inc. acquiring the entity. The unaudited pro forma condensed combined financial
information will differ from our final acquisition accounting for a number of reasons, including the fact that our purchase price
allocation and estimates of fair value are preliminary and subject to change when our formal valuation and other studies are finalized,
fluctuation in foreign exchange rates impacting the agreed upon purchase price, and variation in the actual proceeds and expenses
associated with this offering. Additionally, changes in Orbital's working capital, including the results of operations from
December 31, 2012 through the date the acquisition is completed, will change the amount of goodwill. The differences that will
occur between the preliminary estimates and the final acquisition accounting could have a material impact on the accompanying unaudited
pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information
is presented for informational purposes only. It has been prepared in accordance with the regulations of the SEC and is not necessarily
indicative of what our financial position or results of operations actually would have been had we completed the Orbital acquisition
at the dates indicated, nor does it purport to project the future financial position or operating results of the combined company.
The unaudited pro forma condensed combined statement of operations does not reflect any revenue or cost savings from synergies
that may be achieved with respect to the combined companies.
The fiscal year of CUI Global, Inc. ends on December 31, and
the fiscal year of Orbital Gas Systems Limited ends on June 30. The unaudited pro forma condensed combined financial information
presented herein combines the results of operations of CUI Global for the years ended December 31, 2012 and 2011 with the results
of operations of Orbital for the years ended December 31, 2012 and 2011, utilizing Orbital's audited results of operations
for the years ended June 30, 2012 and 2011, prepared in accordance with U.K. GAAP and reconciled to U.S. GAAP, and Orbital's
interim period results for the six months ended December 31, 2012 and 2011.
38
CUI Global has incurred, and will continue to incur,
certain non-recurring expenses in connection with the Orbital acquisition. These expenses are currently estimated to be less
than $100,000. In addition CUI Global estimates the fees and expenses of approximately $220,556 in connection with this
offering, excluding underwriter discounts and commissions. These estimated expenses are reflected in the unaudited pro forma condensed
combined balance sheet as of December 31, 2012 and 2011, as an adjustment to cash and equity, but are not reflected in the
unaudited pro forma condensed combined statements of operations for the years ended December 31, 2012 and 2011, as they are
not expected to have a continuing impact on operations.
39
Unaudited Pro Forma Condensed Combined
Balance Sheet
As of December 31, 2012
CUI Global,
Inc.
Orbital Gas
Systems
Limited (a)
Pro Forma
Adjustments
Pro Forma
Consolidated (a)
Current assets:
Cash and cash equivalents
$
3,039,840
$
9,172,956
$
8,166,644
b
$
20,379,440
Trade receivables, net
4,965,926
3,388,744
(100,000
)c
8,254,670
Inventory, net
4,843,905
873,892
-
5,717,797
Prepaid expenses and other
378,885
-
-
378,885
Total current assets
13,228,556
13,435,592
8,066,644
34,730,792
-
Property, plant and equipment, net
1,016,219
1,170,900
-
2,187,119
-
Other assets:
-
Investment - equity method
258,244
-
-
258,244
Other intangible assets, net
8,618,524
-
5,000,000
d
13,518,524
(100,000
)k
Deposits and other
11,360
-
-
11,360
Notes receivable, net
501,422
-
-
501,422
Debt offering costs, net
42,778
-
-
42,778
Goodwill
13,046,358
-
13,751,082
d
26,797,440
Total other assets
22,478,686
-
18,651,082
41,129,768
Total assets
$
36,723,461
$
14,606,492
$
26,717,726
$
78,047,679
Liabilities and stockholders' equity:
Current liabilities:
-
Accounts payable
$
2,496,881
$
1,886,735
$
(100,000
)c
$
4,283,616
Line of credit
459,448
-
-
459,448
Accrued expenses
1,142,839
5,142,225
-
6,285,064
Accrued compensation
186,636
14,537
-
201,173
Unearned revenue
371,541
545,477
-
917,018
Total current liabilities
4,657,345
7,588,974
(100,000
)
12,146,319
Long term note payable, related party, net of current portion due
7,303,683
-
(2,000,000
)e
5,303,683
Total long term liabilities
7,303,683
-
(2,000,000
)
5,303,683
Total liabilities
11,961,028
7,588,974
(2,100,000
)
17,450,002
Commitments and contingencies
Total stockholders' equity
24,762,433
7,017,518
35,935,244
f
60,597,677
(7,017,518
)g
(100,000
)k
Total liabilities and stockholders' equity
$
36,723,461
$
14,606,492
$
26,717,726
$
78,047,679
See accompanying notes to unaudited pro
forma condensed combined financial information.
40
Unaudited Pro Forma Condensed Combined
Statement of Operations
For the Year Ended December 31, 2012
CUI Global,
Inc.
Orbital Gas
Systems
Limited
Pro Forma
Adjustments
Pro Forma
Consolidated
Total revenue
$
41,084,589
$
23,017,544
$
(120,000
)h
$
63,981,573
(560
)i
Cost of revenues
25,707,893
12,370,968
(120,000) h
37,958,861
Gross profit
15,376,696
10,646,576
-
26,022,712
Operating expenses:
Selling, general and administrative
16,221,373
6,659,995
(560
)i
22,930,808
50,000
k
Research and development
791,332
-
-
791,332
Bad debt
65,763
-
-
65,763
Impairment of intangible, trademark and trade name V-Infinity
278,428
-
-
278,428
Total operating expenses
17,356,896
6,659,995
49,440
24,066,331
Income (loss) from continuing operations
(1,980,200
)
3,986,581
(49,440
)
1,956,381
Other income (expense):
Other income
95,069
50,057
-
145,126
Other expense
(18,567
)
(263
)
-
(18,830
)
Earnings from equity investment
59,623
-
-
59,623
Interest expense - amortization of debt offering costs and debt discount
(73,333
)
-
-
(73,333
)
Interest expense
(575,199
)
(9,715
)
-
(584,914
)
Total other income (expense), net
(512,407
)
40,079
-
(472,328
)
Income (loss) from continuing operations before taxes
(2,492,607
)
4,026,660
(49,440
)
1,484,053
Provision for taxes
33,714
938,940
-
972,654
Consolidated net income (loss)
$
(2,526,321
)
$
3,087,720
$
(49,440
)
$
511,399
Earnings per share:
Basic
$
(0.25
)
$
0.03
Diluted
$
(0.25
)
$
0.03
Shares used to compute earnings per share:
Basic
10,175,989
7,000,000
17,175,989
Diluted
10,175,989
7,000,953
17,176,942
See accompanying notes to unaudited pro
forma condensed combined financial information.
41
For the Year Ended December 31, 2011
CUI Global,
Inc.
Orbital Gas
Systems
Limited
Pro Forma
Adjustments
Pro Forma
Consolidated
Total revenue
$
38,938,326
$
23,360,136
$
(26,637
)j
$
62,271,825
Cost of revenues
24,133,073
14,787,678
(22,000
)j
38,898,751
Gross profit
14,805,253
8,572,458
(4,637
)
23,373,074
Operating expenses:
Selling, general and administrative
13,347,853
6,506,305
(4,637
)j
19,899,521
50,000
k
Research and development
716,321
-
-
716,321
Bad debt
82,192
-
-
82,192
Total operating expenses
14,146,366
6,506,305
45,363
20,698,034
Income from continuing operations
658,887
2,066,153
(50,000
)
2,675,040
Other income (expense):
Other income
53,657
17,316
-
70,973
Other expense
(38,678
)
(949
)
-
(39,627
)
Gain on sale of technology rights
143,636
-
-
143,636
Earnings from equity investment
41,472
-
-
41,472
Interest expense - amortization of debt offering costs and debt discount
(334,747
)
-
-
(334,747
)
Interest expense
(918,189
)
(2,613
)
-
(920,802
)
Total other income (expense), net
(1,052,849
)
13,754
-
(1,039,095
)
Income (loss) from continuing operations before taxes
(393,962
)
2,079,907
(50,000
)
1,635,945
Provision for taxes
29,810
320,445
-
350,255
Consolidated income (loss) from continuing operations
$
(423,772
)
$
1,759,462
$
(50,000
)
$
1,285,690
Income (loss) from discontinued operations:
(Loss) from discontinued operations
$
(160,153
)
$
-
$
-
$
(160,153
)
Gain on divestment of Comex Electronics
603,034
-
-
603,034
Net income from discontinued operations
$
442,881
$
-
$
-
$
442,881
Consolidated Net income
$
19,109
$
1,759,462
$
(50,000
)
$
1,728,571
Less: Net income from discontinued operations - noncontrolling interest
$
67,872
$
-
$
67,872
Net income (loss) allocable to common stockholders
$
(48,763
)
$
1,759,462
$
(50,000
)
$
1,660,699
Earnings per share:
Basic
$
(0.01
)
$
0.12
Diluted
$
(0.01
)
$
0.12
Shares used to compute earnings per share:
Basic
7,249,180
7,000,000
14,249,180
Diluted
7,249,180
7,017,951
14,267,131
See accompanying notes to unaudited pro
forma condensed combined financial information.
42
Notes to Unaudited Pro Forma Condensed Combined Financial
Information for CUI Global, Inc. and Orbital Gas Systems Limited
1.
Description of Transaction
On March 3, 2013, we agreed to acquire the Orbital Gas Systems
Limited business by purchasing its entire issued share capital for £17 million, which based on the Wall Street Journal published
exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound sterling, is $25,768,600, subject to possible
closing adjustments and foreign currency fluctuations. The acquisition includes all of Orbital's operations, which are located
in the United Kingdom. We expect that this acquisition will be consummated in during the second quarter of 2013.
2.
Basis of Presentation
The unaudited pro forma condensed combined financial information has been
compiled from underlying audited financial statements of Orbital Gas Systems Limited prepared in accordance with U.K. GAAP and
reconciled to U.S. GAAP for the purpose of such presentation, and selected unaudited interim financial information of Orbital for
the six months ended December 31, 2012.
The unaudited pro forma condensed combined financial
information combine the historical consolidated statements of operations of CUI Global, Inc., giving effect to (a) the completion
of the Orbital acquisition, (b) the sale of 7,000,000 shares of our common stock in this offering at an assumed offering prices
of $5.51 per share, the last reported sale price of our common stock on the NASDAQ Capital Market on February 27,2013, less estimated
underwriting discounts and commissions and estimated offering expenses, and (c) the application of the proceeds from this offering,
in each case as if they occurred on January 1, 2011 for income statement purposes and December 31, 2012 for balance sheet purposes.
The unaudited pro forma condensed combined financial information should be read in conjunction with these notes to the unaudited pro forma
condensed combined financial information, the historical financial statements of CUI Global, Inc. and Orbital Gas Systems Limited
and "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
all of which are included elsewhere in this prospectus.
The Orbital Gas Systems Limited acquisition will be
treated as a purchase by CUI Global, Inc., with CUI Global, Inc. acquiring the entity. The unaudited pro forma condensed combined
financial information will differ from our final acquisition accounting for a number of reasons, including the fact that our purchase
price allocation and estimates of fair value are preliminary and subject to change when our formal valuation and other studies
are finalized, fluctuation in foreign exchange rates impacting the agreed upon purchase price, and variation in the actual proceeds
and expenses associated with this offering. Additionally, changes in Orbital's working capital, including the results of
operations from December 31, 2012 through the date the acquisition is completed, will change the amount of goodwill. The differences
that will occur between the preliminary estimates and the final acquisition accounting could have a material impact on the accompanying
unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial
information is presented for informational purposes only. It has been prepared in accordance with the regulations of the SEC and
is not necessarily indicative of what our financial position or results of operations actually would have been had we completed
the Orbital acquisition at the dates indicated, nor does it purport to project the future financial position or operating results
of the combined companies. The unaudited pro forma condensed combined statement of operations does not reflect any revenue or cost
savings from synergies that may be achieved with respect to the combined companies.
43
The fiscal year of CUI Global, Inc. ends on December
31, and the fiscal year of Orbital Gas Systems Limited ends on June 30. The unaudited pro forma condensed combined financial information
presented herein combines the results of operations of CUI Global for the years ended December 31, 2012 and 2011 with the results
of operations of Orbital for the years ended December 31, 2012 and 2011, utilizing Orbital's audited results of operations
for the years ended June 30, 2012 and 2011 and Orbital's unaudited interim period results for the six months ended December
31, 2012.
For the unaudited pro forma
condensed combined balances, the purchase price of
£17 million, which
based on the Wall
Street Journal published exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound sterling
,
is $25,768,600,
subject to possible closing adjustments and foreign currency fluctuations, has been
allocated to the fair values of assets and liabilities acquired as of December 31, 2012. The allocation of the purchase price is
preliminary, pending the completion of various analyses and the finalization of estimates. An appraisal will be performed to assist
management in determining the fair value of acquired assets and liabilities, including identifiable intangible assets, in order
to allocate the estimated $18,988,096 to goodwill and identifiable intangible assets. The final purchase price allocation may result
in a materially different allocation than that presented in this unaudited pro forma condensed combined financial information.
Cash and cash equivalents
$
9,172,956
Trade receivables
3,388,744
Inventory
873,892
Property, plant and equipment
1,170,900
Intangible, technology
500,000
Intangible, customer relationships
1,500,000
Intangible, trademark and trade name
3,000,000
Goodwill
13,751,082
Assumed liabilities
7,588,974
Purchase price
$
25,768,600
Identifiable intangible assets:
The intangible,
technology is expected to be treated as a finite lived asset based upon initial review of Orbital's business, with an estimated
10 year amortization life. Customer relationships are expected to be treated as a infinite lived asset based upon the initial
review of Orbital's customer history, thus they will not be amortized. Trademark and trade name intangibles will not be
amortized as they are deemed to have indefinite useful lives. Intangibles will be reviewed for impairment at least annually (more
frequently if certain indicators are present). In the event that management determines that the value of an intangible asset has
become impaired, an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made
will be recognized.
44
Goodwill:
Goodwill represents the excess of
the purchase price over the fair value of the underlying net tangible and intangible assets. Goodwill will not be amortized, but
instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event that
management determines that the value of goodwill has become impaired, an accounting charge for the amount of impairment during
the fiscal quarter in which the determination is made will be recognized.
3.
Accounting
                                                                                           Principles
Upon completion of the acquisition, CUI Global will review
Orbital's accounting policies. As a result of that review it may become necessary to adjust the combined entity's
financial statements to conform to those accounting policies that are determined to be more appropriate for the combined entity.
The unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.
4.
Pro Forma Adjustments
The following are the descriptions of the unaudited
pro forma condensed combined balance sheet and statement of operations adjustments:
(a)
The unaudited pro forma condensed combined balance sheet combines
                                                             the audited historical consolidated balance sheet of CUI Global as
                                                             of December 31, 2012 and the unaudited historical consolidated balance
                                                             sheet of Orbital as of December 31, 2012 and gives effect to the
                                                             acquisition as if it had been completed on December 31, 2012. CUI
                                                             Global's fiscal year end is December 31, and Orbital's
                                                             fiscal year end is June 30. Accordingly, the unaudited historical
                                                             results of Orbital for the year ended December 31, 2012, is derived
                                                             from the audited historical results for the year ended June 30, 2012
                                                             less the unaudited six months ended December 31, 2011 plus the unaudited
                                                             six months ended December 31, 2012. The unaudited pro forma condensed
                                                             combined statement of operations for the year ended December 31,
                                                             2012 combines the audited results of CUI Global for the fiscal year
                                                             ended December 31, 2012 and the unaudited results of Orbital for
                                                             the twelve months ended December 31, 2012 and gives effect to the
                                                             acquisition as if it had been completed on January 1, 2012.
Where applicable, the amounts in the following tables
related to the acquisition price are converted from British pound sterling to U.S. dollars based on the Wall Street Journal published
exchange rate on New York closing on February 27, 2013 of $1.5158 per British pound sterling. For converting the fiscal year statements
of operations amounts related to Orbital, the following average exchange rates published by Oanda Corporation: $1.5768 average
per British pound sterling for the six months January to June 2012, $1.5926 average per British pound sterling for the six months
July to December 2012, $1.6160 average per British pound sterling for the six months January to June 2011 and $1.5919 average
for the British pound sterling for the six months July to December 2011. The amounts included on the balance sheets related to
Orbital were converted, based on the following exchange rates published by Oanda Corporation, $1.6153 per British pound sterling
at December 31, 2012 and $1.5453 per British pound sterling at December 31, 2011.
(b)
Net change in cash relates to the estimated net proceeds from the offering of $35,935,244, assuming the sale of 7,000,000 shares
of our common stock in this offering at an assumed offering prices of $5.51 per share, the last reported sale price of our common
stock on the NASDAQ Capital Market on February 27, 2013, less estimated underwriting discounts and commissions and estimated offering
expenses, less the purchase price of Orbital of $25,768,600, less the $2,000,000 repayment of note payable.
(c)
Adjustment to remove intercompany trade receivable and accounts payable balances of $100,000 existing prior to acquisition.
45
(d)
Adjustment representing the allocation of the purchase price in excess of the tangible assets. The allocation of the purchase
price is preliminary pending the completion of various analyses and the finalization of estimates. An appraisal will be performed
to assist management in determining the fair value of acquired assets and liabilities, including identifiable intangible assets,
in order to allocate the estimated $18,751,082 to goodwill and identifiable intangible assets as follows: $500,000 to intangible,
technology, $1,500,000 to intangible, customer relationships, $3,000,000 to intangible, trademark and trade name, and $13,751,082
to goodwill. The final purchase price allocation may result in a materially different allocation that that presented in this unaudited
pro forma condensed combined financial information.
(e)
Adjustment representing the $2,000,000 repayment of long term note payable to be completed following the offering.
(f)
We intend to issue 7,000,000 shares of common stock in this offering to fund the purchase price of the Orbital Gas Systems
                                                             Limited acquisition, repay $2,000,000 of long term note payable and provide funds for ongoing operating and investing
                                                             activities. Net proceeds from this offering are anticipated to be $35,935,244, assuming the sale of all 7,000,000 shares of
                                                             our common stock in this offering at an assumed offering price of $5.51 per share, the last reported sale price of our common
                                                             stock on the NASDAQ Capital Market on February 27, 2013, including estimated underwriting discounts and commissions and
                                                             estimated offering expenses.
(g)
Elimination of historical Orbital Gas Systems Limited balances related to equity.
(h)
Entry to eliminate sales and related cost of revenues activity between CUI and Orbital of $120,000.
(i)
Entry to eliminate sales and related selling, general and administrative expense activity between CUI and Orbital of $560.
(j)
Entry to eliminate sales of $26,637, cost of revenues of $22,000, and selling, general and administrative expense of $4,637
activities between CUI and Orbital.
(k)
Entry to recognize the estimated amortization for each of the presented periods assuming amortization of the intangible, technology
over the estimated 10 year life.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Important Note about Forward-Looking Statements
The following discussion and analysis
of
our financial condition and results of operations
should be read in conjunction with
the
section titled "Selected Financial Data" and
our
audited
financial statements
and related notes appearing
elsewhere in this
prospectus.
Our actual results could differ materially from those anticipated
in
the forward-looking statements included in this discussion as a result of certain factors, including, but not limited to, those
discussed in "Risk Factors" and "Special Note Regarding Forward-Looking Statements" included elsewhere in this
prospectus
.
Financial Impact of the Orbital Gas Systems Limited Acquisition
The Orbital Gas Systems Limited acquisition will be accounted
for as a purchase. As a result, the excess of the purchase price over net assets acquired and liabilities assumed is recorded as
goodwill. Purchase price allocated to property, including inventory, equipment, trade names and other identifiable intangible assets
acquired, will result in an increase in the cost of sales and depreciation and amortization expense with respect to Orbital Gas
Systems Limited following the consummation of the Orbital Gas Systems Limited acquisition. The amount of depreciation and amortization
will be based on the amount of the purchase price allocated and the estimated useful lives of the respective assets. See "Unaudited
Pro Forma Condensed Combined Financial Information."
46
We also expect to incur certain non-recurring expenses in connection
with the consummation of the Orbital acquisition, including this offering. We currently estimate these expenses to be approximately
$100,000. Although we do not have any cost savings initiatives planned in connection with the acquisition, we may opportunistically
take actions from time to time that will result in material cost or operating synergies as a result of acquiring Orbital. In turn,
we may also incur corresponding restructuring and other non-recurring charges that would impact net income in the periods in which
they are taken. No assurances can be given as to timing or that we will be able to achieve any cost or operating synergies as a
result of the acquisition, or that the corresponding restructuring and other non-recurring charges will not be greater than expected.
We believe the Orbital acquisition will significantly increase
our presence in the natural gas industry. Pro forma for the year ended 2012, 64% of our net sales would have been from our CUI
Power Supply Units, Electronic Components, and Test and Measurement product lines, excluding Vergence GasPT2 revenues, and 36%
of our net sales would have been from Orbital's systems integration related revenues, including the Vergence GasPT2. Pro
forma for the year ended 2011, 63% of our net sales would have been from our CUI Power Supply Units, Electronic Components, and
Test and Measurement product lines, excluding Vergence GasPT2 revenues, and 37% of our net sales would have been from Orbital's
systems integration related revenues, including the Vergence GasPT2. With the addition of Orbital, we expect our Adjusted EBITDA
and net income to improve. Our pro forma Adjusted EBITDA for the years ended December 31, 2012 and 2011 would have been $4,567,140
and $4,454,657. This in turn, is expected to also increase our net income and earnings per share. We expect to invest in Orbital
to maintain the current infrastructure and to increase capacity to meet the demand of existing and new customers.
Overview
CUI Global, Inc. is dedicated to maximizing shareholder value
through the acquisition, development and commercialization of innovative companies and technologies.  From its GasPT2
platform targeting the energy sector, to its subsidiary CUI, Inc.'s digital power platform targeting the networking and telecommunications
industries, CUI Global has built a diversified portfolio of industry leading technologies that touch many markets.
In May 2008, CUI Global formed a wholly owned subsidiary that
acquired the assets of CUI, Inc., a technology company dedicated to the development, commercialization and distribution of new,
innovative electro-mechanical products. Over the past 20 years, CUI has become a recognized name in electronic components worldwide
in the areas of power, interconnect, motion control, and sound.  In that time, the Company has been able to leverage
many long-standing relationships in Asia to create a flexible, responsive business model that ultimately benefits CUI customers.  Today,
the Company believes its technology platforms, including Novum Advanced Power, Solus Power Topology and AMT Capacitive Encoders,
will position CUI, Inc. to be a global leader in the fields of power electronics and motion control.  Through the acquisition
of CUI, Inc., the Company obtained 352,589 common shares of Test Products International, Inc. ("TPI"), a provider of
handheld test and measurement equipment, representing an 11.54% interest in TPI.
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. As of December 31, 2012, the Comex Electronics
note receivable was current in accordance with the agreed terms. The operations of CUI Japan are not affected by this divestment.
As such, the operations of Comex Electronics are reported as discontinued operations for the current and comparable periods. CUI
Global will continue to maintain its 100% ownership of CUI Japan.
47
For the years ended December 31, 2012 and 2011, the Company
has identified a single operating segment based on the activities of the Company in accordance with the ASC 280-10-50-1 for which
the operating results are regularly reviewed by the Company's chief operating decision makers.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that have a
significant impact on the results the Company will report in the Company's financial statements. Some of the Company's accounting
policies require the Company to make difficult and subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. Actual results may differ from these estimates under different assumptions or conditions.
Long-Lived Assets
Long-lived assets and certain identifiable assets related to
those assets are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication
that the carrying amounts may not be recoverable. In performing the review for recoverability, the future cash flows expected to
result from the use of the asset and its eventual disposition are estimated. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized as the excess of
the carrying amount over the fair value. Otherwise, an impairment loss is not recognized. Management estimates the fair value and
the estimated future cash flows expected. Any changes in these estimates could impact whether there was impairment and the amount
of the impairment. There were $278,428 and $0 of impairment expenses recorded by the Company in 2012 and 2011.
Stock-Based Compensation
The Company accounts for stock based compensation using FASB
Accounting Standards Codification No. 718 ("FASB ASC 718"), "Compensation – Stock Compensation."
FASB ASC No. 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense
over the related vesting period. The statement also requires the recognition of compensation expense for the fair value of any
unvested stock option awards outstanding at the date of adoption. Employee stock compensation is recorded at fair value using the
Black Scholes Pricing Model. The underlying assumptions used in the Black Scholes Pricing Model by the Company are taken from publicly
available sources, including: volatility is calculated using historic stock price information from online finance websites such
as Google Finance and Yahoo Finance; the stock price on the date of grant is obtained from online finance websites such as those
previously noted; appropriate discount rates are obtained from the United States Federal Reserve economic research and data website;
and other inputs are determined based on previous experience and related estimates. See Note 13 of Notes to Consolidated Financial
Statements, Stock-Based Employee Compensation for additional disclosure and discussion of the employee stock plan and activity.
48
Common stock, stock options and common stock warrants issued
to other than employees or directors are recorded on the basis of their fair value, as required by FASB ASC 505, which is measured
as of the date required by FASB ASC 505, "Equity – Based Payments to Non-Employees." In accordance with FASB
ASC 505, the stock options or common stock warrants are valued using the Black-Scholes option pricing model on the basis of the
market price of the underlying common stock on the "valuation date," which for options and warrants related to contracts
that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting
date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which
services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed
under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the end of the
period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected
in the expense recorded in the subsequent period in which that change occurs.
Revenue Recognition
The recognition of the Company's revenues requires judgment,
including whether a sale includes multiple elements and, if so, whether vendor-specific objective evidence (VSOE) of fair value
exists for those elements. Customers may receive certain elements of our products over a period of time. These elements could include
licensing rights to manufacture and sell our proprietary patent protected products. The ability to identify VSOE for those elements
and the fair value of the respective elements could materially impact the amount of earned and unearned revenue. The Company does
not have any history as to the costs expected to be incurred in granting licensing rights relating to its products. Therefore,
revenues may be recorded that are not in proportion to the costs expected to be incurred in performing these services.
Liquidity and Capital Resources
General
The Company's cash and cash equivalents balance at December
31, 2012
was
$3,039,840. During the
years
ended December 31,
2012 and December 31, 2011,
operations and
investment activities have been funded through cash from operations, proceeds from sales of equity and warrant exercises, and borrowings
from financial institutions.
Historically, the Company has not generated
sufficient revenues from operations to self-fund its capital and operating requirements. Following the equity raises closed in
2012 and subsequent reductions of debt coupled with the continued improvement in the Company's operations, management believes
the Company has sufficient resources and that it is generating significant revenues that it expects will provide the Company with
the ability to self-fund its capital and operating requirements. If that is not possible, the Company will seek additional working
capital from funding that will primarily include equity and debt placements.
49
Cash from Operations
Operating activities generated negative
cash flow of $1,803,659 during the year ended December 31, 2012 as compared with positive cash flow of $860,705 during the prior
year ended. This decrease is primarily the result of a larger net loss attributable to CUI Global, Inc. in 2012 of $
2,526,321
which included increased sales related travel for CUI, Inc. to manage third party sales representatives, reach new customers, maintain
existing customers, and promote new product lines including Novum and Solus, professional fees expenses related to engineering
support, testing fees and travel expenses related to the Vergence GasPT2 product as the Company increased the Vergence GasPT2 exposure
to customers in North America, parts of Europe and elsewhere, increased expenses associated with being a public company, such as
filing services and fees, professional fees, and listing fees among others, increased advertising costs for company products, increased
commissions to third party sales representatives related to the increase in sales, increased expenses associated with the growth
in operations at CUI Japan, operating costs associated with the newer technologies Novum and Solus and the overall growth of the
business in relation to revenues. Additional factors impacting the cash from operations include increases in trade accounts receivable,
inventory, accounts payable and unearned revenue of $1,337,048, $1,290,794, $382,852, and $300,786, respectively, and decreases
in prepaid expenses and other current assets of $280,917. The increase in trade accounts receivable is largely attributed to the
increased revenues in the fourth quarter of 2012, $11,890,762, as compared to $8,790,698 during the same period in 2011. The increase
in inventory is primarily related to the inventory on hand associated with the increased back log of customer orders at December
31, 2012 of $14,149,352 as compared with $9,244,748 at December 31, 2011 and increased inventory of GasPT2 units on hand at year
end to prevent potential shortages in 2013 associated with manufacturing and calibration lead times. The increase in accounts payable
is associated with the increase in inventory levels and fourth quarter activity during 2012 as well as timing in relation to payment
terms with vendors. The increase in unearned revenue is related to an increase in the accrual for potential returns from customers
and deposits received from customers for orders that have not been fulfilled as of December 31, 2012. The decrease in prepaid expenses
and other current assets is primarily related to decreases in prepayments for inventory purchases as compared to the prior year,
which will vary based on the products purchased and the vendors utilized.
During 2012 and 2011, the Company used stock and warrants as
a form of payment to certain vendors, consultants and employees. For 2012 and 2011, respectively, the Company recorded a total
of $1,190,081 and $227,867 for compensation and services expense including amortization of deferred compensation related to equity
given, or to be given, to employees and consultants for services provided. The large increase in 2012 is attributable to increased
stock compensation issued for stock issued to consultants for strategic investor marketing services, employee stock compensation
and options expenses.
During 2012, CUI Global recorded two significant non-cash entries
- $73,333 of non-cash interest expense, including amortization of debt offering costs and $278,428 for the impairment of intangible,
trademark and trade name V-Infinity. The intangible, trademark and trade name V-Infinity was determined to have a finite life and
an impaired value during 2012. As a result of this evaluation and the impairment, management determined the trademark and trade
name, V-Infinity, no longer has an indefinite life and will, instead, be amortized over the estimated remaining useful life of
5 years. During 2011, the Company recorded one significant non-cash entry - $334,747 of non-cash interest expense, including amortization
of debt offering costs. The decrease in the non-cash interest expense, including amortization of debt offering costs is the result
of the completion in mid-year 2011 of the amortization of the beneficial interest associated with debts from the CUI, Inc. acquisition
offset by an increase in the amortization of debt issuance costs associated with the Wells Fargo debts.
During 2012 the Company had no cash flows from discontinued
operating activities whereas in 2011, the Company had positive cash flow from discontinued operations of $22,141.
As the Company continues to focus on technology development
and product line additions during 2013, it will continue to fund research and development together with related sales and marketing
efforts for its technology platforms including the Vergence GasPT2, Novum Advanced Power, Solus Power Topology, AMT Capacitive
Encoders and its other electromechanical products.
50
Capital Expenditures and Investments
During the years ended 2012 and 2011, the Company invested $685,269
and $422,970, respectively, in fixed assets.  Among the larger investments in fixed assets were additions to equipment
and software for engineering and research and development, tooling for manufacturing, and regular computer equipment and software
upgrades for office personnel.
The Company anticipates further investment in fixed assets during
2013 in support of its on-going business and continued development of product lines and technologies.
The Company invested $0 and $6,646, respectively, in patent
costs during 2012 and 2011.  The Company expects its investment in patent costs will continue throughout 2013 as it invests
in patents to protect the rights to use its product and technology developments.
The Company invested $80,343 and $37,418, respectively in other
intangible assets during 2012 and 2011.  The 2012 investments were related to the new CUI Inc. website. The 2011 investments
were related to the new CUI Global and CUI Japan websites. The Company's websites are utilized to communicate with our investors,
customers, vendors and other stakeholders.
The Company expects its investment in other intangible
assets may continue throughout 2013.
During 2012 and 2011, CUI Global had proceeds from notes receivable
of $46,808 and $63,506, respectively.
Also during 2012 and 2011, the Company received proceeds of
$0 and $425,000, respectively, from the sale of technology rights. The 2011 proceeds of $425,000 were in relation to the sale of
our WayCool and WayFast patent portfolio to Olantra Fund X LLC.
There were no cash flows in 2012 associated with discontinued
investing activities. For the year ended December 31, 2011, there was $195,278 provided by discontinued investing activities.
Financing activities
During 2012, the Company received proceeds of $13,532,285 from
the sales of common stock, net of offering costs and from the exercise of warrants, $1,069,452 of payments were made against the
demand notes payable, $4,000,000 of payments were made against the term note with the Business Credit division of Wells Fargo Capital
Finance, Wells Fargo Bank, N.A., $3,000,000 was paid against the principal balance of the IED related party note payable associated
with the acquisition of CUI Inc., and $35,000 was utilized to repay a related party convertible note payable owed to an officer
of the Company.
Included in these equity financing transactions were the
following items, discussed in greater detail in  Note
8 of Notes
to Consolidated Financial Statements, Stockholders' Equity included elsewhere in this
prospectus
:
·
During February 2012, the issued and outstanding shares of the Company's common stock, $0.001 par value, were reverse
split at a ratio of one for thirty (1:30) as a part of our plan to up-list our common stock on to the NASDAQ Stock Market.
·
During February 2012 our Form S-1 registration statement became effective that allowed us to sell 2,222,222 shares of common
stock to our underwriter. We received $8,913,302 in net proceeds from this sale after related costs for this transaction.
·
Our Form S-1 registration statement included 333,333 shares of common stock that were sold in March 2012 to our underwriter
pursuant to the over-allotment provision of our underwriting contract. We received $1,387,499 in net proceeds from this sale after
related costs for this transaction.
·
Also in March 2012, pursuant to stock purchase agreement, we sold to seven investors a total of 570,000 shares of common stock
at $4.50 per share. We received $2,253,008 in net proceeds from this sale after related costs for this transaction.
51
·
During March 2012, a warrant holder exercised 10,071 warrants he previously received in relation to a note provided to the
Company which has since been paid in full. The Company received $3,021 from this transaction.
·
During June and July 2012, we sold 234,332 shares of common stock to nine investors at $4.50 per share pursuant to stock purchase
agreements with net proceeds of $975,455 after related costs for this transaction.
·
During 2011, $50,000 of proceeds was received from the exercise of warrants and options.
·
In February 2011, two former employees exercised options for 269 shares of common stock.
·
In April 2011, a director exercised a warrant for 23,333 shares of common stock.
·
In May 2011, an owner of 10% of the voting rights attached to outstanding shares exercised a warrant for 133,333 shares of
common stock.
·
Also in May 2011, an investor exercised a warrant for 10,000 shares of common stock.
·
CUI Global may raise additional capital needed to fund the further development and marketing of its products as well as payment
of its debt obligations.
Financing activities – related party activity
During 2012, a short term convertible loan from July 2011 of
$35,000, with interest accrued at 6% per annum, convertible at $5.10 per common share, was repaid to a CUI Global officer. There
was no beneficial conversion on the convertible note as the conversion price was equal to the fair value on the date of grant.
Pursuant to a September 1, 2010 agreement with the holder of
the $14,000,000 promissory note, IED, Inc., the Company paid $492,508 of the principal balance during the first quarter of 2011.
The revised terms set the interest rate at 6% per annum with monthly interest payments and a May 15, 2018 balloon payment. Please
see Note 9 of Notes to Consolidated Financial Statements, Related Party Transactions and Note 5 of Notes to Consolidated Financial
Statements, Notes Payable, Related Parties,
included in our audited
financial statements elsewhere in this prospectus
for further discussion of this transaction. During 2012 and 2011, $3,468,221
and $1,110,809, respectively, in principal and interest payments were made in relation to the promissory notes issued to related
party, IED, Inc. The 2012 payment utilized $3,000,000 from the equity sale proceeds for the repayment of principal. The 2011 payment
included a note receivable balance of $192,508 held by CUI Global that was conveyed to IED, Inc. and applied towards the promissory
note balance in accordance with a settlement agreement.
Recap of liquidity and capital resources
During 2012, the Company continued to improve its financial
strength with the equity raise in early 2012 and the significant reductions in debt, combined with the continued growth of revenues.
As a result of the financing activities completed in 2012, management believes the Company has sufficient resources and is generating
sufficient revenues to fund operations and meet its short term working capital requirements for the next twelve months.  As
of December 31, 2012 the Company had an accumulated deficit of $76,171,822.
As of December 31, 2012,
the Company had cash and cash equivalents of $3,039,840 and an unused availability under the asset based line of credit of $3,119,857
(available borrowing capacity of $3,579,305 less outstanding borrowings of $459,448).
The Company may seek to raise additional
capital for the continued development and commercialization of its various technology product lines, as well as to retire debt.
52
As of December 31, 2012 CUI, Inc. maintained a revolving working
capital line of credit with the Business Credit division of Wells Fargo Capital Finance, part of Wells Fargo Bank, National Association
(NYSE: WFC), granting borrowings of up to $4,000,000 with interest payable monthly at the Daily Three Month LIBOR plus 3.25%
(3.56% at December 31, 2012). At December 31, 2012, there was an outstanding balance of $459,448 on this line of credit.
The Company expects revenues to help cover the operating and
other expenses.  If revenues and cash on hand are not sufficient to cover all operating and other expenses, additional
funding may be required.  There is no assurance the Company will be able to raise such additional capital.  Any
failure to generate product sales in the expected time frame or to raise additional capital, if needed, will have a material adverse
effect on the Company.
Off-Balance Sheet Arrangements
As of December 31, 2012 the Company had no off-balance sheet
arrangements.
Results of Operations
The accompanying financial statements reflect the operations
of the Company for the fiscal years ended December 31, 2012 and 2011.
Revenue
During the year ended 2012, revenue was $41,084,589 and $38,938,326
for 2011. The growth in 2012 from 2011 is primarily due to management's decision to continue to push smaller sales through
the distribution sales channel and focus on larger value direct sales through CUI, Inc. as well as the continued expansion of CUI's
product offering and further penetration in the Japanese market through CUI Japan. This change resulted in a 4.7% decrease in the
total number of customer sales orders processed,
while total revenue increased $2,146,263, or 5.5%
for the year.
The Company introduced 207 new products during the year ended
2012. The continued product expansion and moving smaller sales through the distribution channel is expected to continue to result
in revenue growth in future periods as CUI's sales group and support staff continues to reach new customers, further expand
relationships with existing customers and while the Company introduces new products in efforts to have CUI products designed into
new projects.
Revenue for the year ended December 31, 2012 is comprised of
$39,802,620 from CUI products, $1,228,430 from CUI Japan products and $53,539 from freight. The revenue for the year ended December
31, 2011 is comprised of $38,366,403 from CUI products, $511,295 from CUI Japan products and $60,628 for freight.
During 2012, 59% of revenues were
derived from five customers at 47%, 4%, 3%, 3% and 2%. During 2011, 55% of revenues were derived from six customers at 41%, 4%,
3%, 3%, 2% and 2%.
The Company's major product lines in 2012 and 2011 were external power, internal power and industrial
controls.
Cost of revenue
Cost of revenue for the year ended December 31, 2012 and 2011
was $25,707,893 and $24,133,073, respectively.  The significant increase during 2012 compared to the prior year is primarily
the result of the overall growth in sales. As a percentage of sales, the cost of revenue remained relatively consistent at 62.5%
for 2012 compared with 62.0% in 2011.
53
Selling, General and Administrative Expenses
Selling, General and Administrative (SG&A) expenses include
such items as wages, consulting, general office expenses, business promotion expenses and public company costs, including legal
and accounting fees, insurance and investor relations.
SG&A expenses increased to $16,221,373 for the year ended
December 31, 2012 from $13,347,853 for the same period during 2011.  This increase of $2,873,520 is primarily the result
of an increase of $616,695 of stock compensation expense for issuances to consultants related to strategic investor marketing services,
an increase of $400,290 for public relations related expenses including travel, supplies, conferences, meetings and cash expenses
for strategic investor marketing services, $371,574 increase in sales related travel for CUI, Inc. related sales activity to manage
third party sales representatives, reach new customers, maintain existing customers, and promote new product lines including Novum
and Solus, $298,600 of stock compensation expenses for issuances to officers and employees as bonuses for achieving corporate goals,
$242,352 increase in expenses associated with professional fees related to engineering support, testing fees and travel expenses
related to the Vergence GasPT2 product as the Company increased the Vergence GasPT2 exposure to customers in North America, parts
of Europe and elsewhere, $177,039 increase in depreciation and amortization associated with investments in capital assets as well
as the amortization of the intangible, trademark and trade name V-Infinity which began in 2012, an increase of $130,206 in costs
associated with being a public company such as filing services and fees, professional fees, and listing fees among others, increase
in costs associated with an increase in advertising costs for Company products of $34,666, increased commissions to third party
sales representatives related to the increase in sales, growth in operations at CUI Japan associated with the increase revenues,
operating costs associated with the newer technologies Novum and Solus and the overall growth of the business in relation to revenues.  The
total dollar amount of SG&A as a percentage of total revenue increased to 39.5% for 2012 as compared to 34.3% in 2011.
The Company anticipates the amount of its sales and marketing
expenditures and general and administrative expenses will further increase in 2013 as the Company continues to grow its revenues,
launches its second distributor for the CUI, Inc. product lines during 2013, continues to work to penetrate the market with its
newer product lines including Vergence, Novum and Solus as well as seeks to continue to further its technology offerings. However,
management expects the SG&A as a percentage of total revenue to decrease in 2013 as the Company continues to increase total
revenue, particularly as the Vergence GasPT2 product line gains traction in the market place in conjunction with reductions in
stock compensation expenses for issuances to consultants in 2013.
Research and Development
The research and development costs are related to the various
technologies for which CUI Global has acquired licensing rights or is developing internally.  The expenditures for research
and development have been directed primarily towards the further development of Novum Advanced Power technologies including digital
POLs and the Solus Topology, AMT Capacitive Encoders and towards the development of the Vergence GasPT2. Research and development
costs were $791,332 and $716,321 for the year ended December 31, 2012 and 2011, respectively. The Company expects that 2013 research
and development expenses will be consistent with 2012 as the Company continues to expand its product offering and technologies
due to market acceptance and customer integration.
54
Impairment Loss
The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.  In
performing the review for recoverability, the future cash flows expected to result from the use of the asset and its eventual disposition
are estimated.  If the sum of the expected future cash flows (undiscounted and without interest charges) is less than
the carrying amount of the asset, an impairment loss is recognized as the excess of the carrying amount over the fair value.  Otherwise,
an impairment loss is not recognized.  Management estimates the fair value and the estimated future cash flows expected.  Any
changes in these estimates could impact whether there was impairment and the amount of the impairment.  There were $278,428
and $0 of impairment expenses recorded by the Company in 2012 and 2011.
Bad Debt
Bad debt expense decreased to $65,763 for the year ended December
31, 2012 from $82,192 for the same period ended 2011.  The bad debt expense for both 2012 and 2011 represents less than
1/2% of total revenues. The bad debt expense for both periods relates to miscellaneous receivables which the Company has either
recorded an allowance for doubtful collections of the receivable or for which the Company has determined the balance to be uncollectible.
Other Income
During the years ended 2012 and 2011, the Company had other
income of $95,069 and $53,657, respectively. Other income for the year ended December 31, 2012, consisted of $49,475 of foreign
exchange gain, $30,620 of interest income, $12,000 of rental income, $2,636 of other income and of $338 in bad debt recoveries.
Other income for the year ended December 31, 2011, consisted of $18,688 in bad debt recoveries, $17,592 for interest income, $15,103
of foreign exchange gain and $2,274 in other income.
Investment Income
The Company recognized investment income on equity investment
in an affiliate of $59,623 for the year ended December 31, 2012 as compared with $41,472 for the same period ended 2011.
Financing Fees
During 2012, the Company incurred financing fees associated
with the equity raises of $1,590,259. These fees were offset against Additional Paid in Capital in relation to the equity proceeds.
During 2011, the Company did not incur financing fees.
Non-cash interest expense, amortization of beneficial
conversion value, amortization of debt offering costs, warrant related debt discounts debt and amortization of warrant related
debt discount
The Company recorded an expense of $73,333 and $334,747 during
2012 and 2011, respectively, for non-cash interest expenses, including amortization of debt offering costs.  The decrease
in this expense is primarily associated with the completion in 2011 of the amortization of the discounts on debt related to the
CUI Inc. acquisition in 2008.
Interest Expense
The Company incurred $575,199 and $918,189 of interest expense
during 2012 and 2011, respectively.  Interest expense is for interest on the secured and unsecured convertible notes,
secured and unsecured promissory notes, and bank working capital loans and term loans. The Company was able to reduce debts during
2012 through utilizing the proceeds from the sales of equity to repay the $4,000,000 term note with Wells Fargo, $3,000,000 towards
the IED, Inc. note payable, $35,000 on the related party convertible note payable, and reduce the demand notes payable on the Wells
Fargo Line of Credit by $1,069,452 which all contributed to the decrease in interest expenses for the year.
55
Income (loss) from Discontinued Operations
For the year ended December 31, 2012, there was no activity
related to discontinued operations.
During 2011, CUI Global recognized a loss from the discontinued
operations of Comex Electronics of $160,153, a gain on the divestment of Comex Electronics of $603,034 in discontinued operations,
and a net income from discontinued operations of $442,881.
Consolidated Net Loss
The Company had a net loss of $2,526,321 for the year ended
December 31, 2012 as compared to a net profit of $19,109 for the year ended December 31, 2011.  The decrease is primarily
the result of the following items discussed in the above sections: an increase in total revenues of $2,146,263, an increase in
cost of revenues of $1,574,820, an increase in selling, general and administrative expenses of $2,873,520, no gain on the sale
of technology rights in 2012 as compared to a gain of $143,636 in 2011, a decrease in amortization of debt offering costs, a decrease
in interest expense of $261,414, decreased interest expense of $342,990 and the full year in 2012 without the losses incurred in
relation to the operations of Comex Electronics divested in 2011 or the associated gain on the divestment of $603,034.
Recent Accounting Pronouncements
In June, 2011, the FASB issued Accounting Standards Update ("ASU")
No. 2011-05, which amends ASC Topic 220, Comprehensive Income. Under the amendment, an entity has the option to present the total
of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present
each component of net income along with total net income, each component of other comprehensive income along with a total for other
comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of
other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change
the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified
to net income. The amendments in this ASU have been applied retrospectively.
In December 2011, FASB issued ASU 2011-11, Balance Sheet - Disclosures
about Offsetting Assets and Liabilities" to enhance disclosure requirements relating to the offsetting of assets and liabilities
on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net
or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting
arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods
beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the adoption of this standard
did not have a material impact on our results of operations, cash flows or financial condition.
In July 2012, the FASB issued updated guidance on the periodic
testing of indefinite-lived intangible assets, other than goodwill, for impairment. This updated guidance will allow companies
the option to first assess qualitative factors to determine if it is more-likely-than-not that an indefinite-lived intangible asset
might be impaired and whether it is necessary to perform the quantitative impairment test required under current accounting standards.
This guidance is applicable for reporting periods beginning after September 15, 2012. This updated guidance did not have a material
impact on our results of operations, cash flows or financial condition.
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DESCRIPTION OF BUSINESS
WHO WE ARE
We are a specialized provider of power management and other
electromechanical components for electronic devices and equipment. We offer both standardized products and customized solutions
to our customer base, which includes a number of well-known industrial and technology companies. Our product portfolio is extensive,
and we are dedicated to, and focused on growing it further by acquiring, developing, and commercializing innovative electronic
technologies and products.
We have more than 24 years of experience in the electronics
industry. We use that experience to identify and acquire or license forward-looking, market-ready technologies. Small product engineering
firms, individual entrepreneurs, and a variety of other sources comprise our potential pool of acquisition targets and technology
licensing partners. These entities often possess exciting technologies, but lack the necessary manufacturing, distribution, and
financial resources to commercialize their ideas. We possess these capabilities and can serve as a value-added partner in commercialization,
developing supplier-customer relationships, and providing liquidity to the technology owner. We believe we have a track record
of acquiring, or licensing, and then commercializing advanced, market-ready technologies due to our management team's history
of doing so, as well as to the marketing, sales, research and development and engineering resources that we are willing to dedicate
to commercializing new products.
After we identify potential market-ready technologies, we put
considerable effort into our due diligence process to verify that demand for the technology exists, that the technology will have
synergies with our diverse product portfolio, and that the technology will achieve its intended design capabilities when integrated
into our customers' products. If we are successful in completing an acquisition, we assign a team of engineers, market specialists,
and sales executives to implement our commercialization strategy. Our "end-to-end" strategy incorporates branding;
conducting market and product surveys to determine demand, the potential customer base, and the target geographic and end markets;
and identifying appropriate commercialization partners. We utilize contract manufacturers located in mainland China, Japan, South
Korea, Taiwan, and the United Kingdom for production.
Our current platform is focused on three primary market segments:
§
Power Supply Units.
Our power supply units
                                                                                                               products include our embedded and external industrial power supplies, as well as our Novum Advanced Power and Solus Power
                                                                                                               Topology brands. Novum products, which consist of digital power modules, offer customers in the networking and
                                                                                                               telecommunications industries cost-saving programmable power chips. Solus products enhance the Novum line capabilities by
                                                                                                               providing a more efficient power supply source that is scalable to serve numerous customer needs. Our internal and external
                                                                                                               power products and related component sales accounted for approximately 88% of our revenues during our fiscal year ended
                                                                                                               December 31, 2012;
§
Electronic Components.
Our electronic components products
include a variety of proprietary motion control devices. We focus on the original equipment manufacturer ("OEM") market
and attempt to provide higher levels of support, customer service and a constantly expanding product line in order to further differentiate
ourselves from our competitors; and
57
§
Test and Measurement.
Our test and measurement products
include probes and other test devices, as well as our inferential gas metering technology, the GasPT2 device, which we have branded
under the name Vergence.
We conduct our operations globally, and as of December 31, 2012
we had sixty-two full-time and seven part-time employees located in the United States and Japan. We utilize a hybrid marketing
strategy that incorporates both direct and third-party sales channels. Our customer base is diverse and consists of smaller customers,
a broad group of OEM customers and several industrial technology conglomerates. Further, we have a significant customer and channel
partner relationship with Digi-Key Corporation ("Digi-Key"), an authorized distributor of electronic components for
more than 550 industry suppliers. As a percentage of our total gross revenues, sales to Digi-Key were approximately 47% and 41%
as of December 31, 2012 and December 31, 2011, respectively. Digi-Key sells our product to thousands of customers globally.
OUR MARKETS AND OUR OPPORTUNITY
Power Supply Units
We offer a portfolio of both commoditized and emerging power
supply units for networking and telecommunications related applications. The market for our products evolves in response to technological
innovations and corresponding changes in our customers' requirements for their product offerings. These changes occur rapidly.
Thus, although our historic business was a commoditized electromechanical parts distribution business, in recent years, we have
focused our business on the acquisition or licensing, development, and commercialization of new and innovative technologies and
products in order to better serve our customer base.
Our Novum and Solus lines are our newest and most exciting power
supply products and are marketed primarily to networking and telecommunications companies. Earning design wins from OEMs in these
sectors is extremely important and competitive, and the design cycle often lasts between 18 and 24 months. OEMs typically conduct
a partial product line redesign every nine months, creating a recurring revenue opportunity for component suppliers like ourselves.
Once an OEM grants a supplier a design win, however, the test period for future designs decreases significantly, and it is often
difficult to displace incumbent suppliers without offering a product that significantly improves or outperforms existing technologies.
We have received positive industry and customer feedback regarding our Novum and Solus lines, and we believe that major OEM product
revamps will offer us the opportunity to potentially displace our competitors. Our products are intended to serve the following
vital functions for our customers' end-products: enhanced design flexibility, size reductions, power efficiency improvements,
greater power density, reduced electro-magnetic interference, faster transient response, reduced power output and quicker turn-on
times.
According to IMS Research, an independent provider of market
research and consultancy to the global electronics industry, the total global market for digital power components is expected to
quadruple to $15 billion between 2012 and 2017. As we gain traction in these product lines and capture OEM design wins, we believe
our power supply units will continue to be a significant source of our revenue.
58
Electronic Components
The market for electronic components,
like the market for power management devices, is driven by the needs of our OEM customers, as well as increases in the functionality
of the end-products in which our components are used. Other key factors driving innovation include product size reduction, cost
reduction, time to market, energy efficiency, and reliability. We offer a variety of buzzers, connectors, encoders, microphones,
speakers, and thermal management solutions for products such as
home theater equipment, insulin machines and defibrillators
.
While the breadth of our electronic component portfolio is extensive, we are focused on operating as a niche provider of high-quality
products.
Our AMT modular encoder, a device that is used in motion control
systems, allows for breakthroughs in selectable resolution, shaft-adaptation and convenient mounting solutions to bring ease of
installation, installed component reduction and economies of scale in purchasing. AMT has been awarded several design wins from
motion control OEMs that offer a wide range of products, including cash machines and other robotic devices.
Test and Measurement
We believe our most significant opportunity exists in our test
and measurement technology line, specifically for our inferential gas metering technology, the GasPT2 device, which we currently
market under the Vergence brand name. The GasPT2 device is a low-cost, and we believe a highly disruptive, solution to measuring
natural gas quality in pipelines and in stationary gas turbines that are used for power generation and industrial machine drives.
Natural gas quality is typically tested at pipeline
interchanges, off-takes, and delivery points (together, "test sites"). Standard quality test practices utilize
large, expensive gas chromatograph systems to analyze energy content. Given the size of these systems, they are sometimes
constructed several miles away from where a gas sample is drawn.
Because natural gas is a
mixture of several gases, namely methane, propane, nitrogen and carbon dioxide, quality is determined by the relative
concentrations of each individual gas in any given delivery and is indicative of energy content. Total energy consumption, or
the quantity that customers ultimately pay for, is then a function of natural gas quality (total energy content) and volume
of gas used.
Gas chromatographs are housed in bulky, closet-like
enclosures, and may be located on- or off-site of pertinent test sites. According to a 2012 Emerson Process Management
report, gas chromatograph natural gas quality tests typically last between 12 and 40 minutes, and testing frequency varies
from as often as possible to once per day. Because natural gas flows through a pipeline at speeds of up to 25 miles per hour,
standard quality readings conducted by gas chromatographs are not in real-time and may not accurately reflect actual energy
consumption by an end customer. Additionally, gas chromatograph instruments can cost between $15,000 and $40,000, and the
total installation cost for the instrument and related accessories can exceed $200,000. Annual maintenance expenses may also
be more than $10,000.
We believe the market opportunity for our GasPT2 device is significant,
both from the perspective of replacing installed gas chromatographs, as well as creating new markets where gas chromatographs were
either previously impractical or too expensive to install. In addition to significant opportunities in the natural gas pipeline
space, we believe that quality testing stationary gas turbines presents another promising market. Depending on natural gas quality,
stationary gas turbines can be calibrated to operate more efficiently, and therefore longer, while simultaneously reducing carbon
emissions and other pollutants. Due to the gas chromatograph quality test period length, proper calibration is difficult to achieve.
Turbine operators attempt to manage this delay
by placing the monitoring station miles away from
the turbine, or by constructing large holding tanks to maintain the gas until an analysis can be completed. Our technology will
enable operators to place GasPT2 units right next to their turbines, and by interfacing our device with the machine's process
control software, calibration can be accomplished on a near real-time basis—thus allowing the turbines to run longer, more
efficiently and cleaner.
59
We expect that natural gas pipeline off-takes and stationary
gas turbines will be our initial target markets for the GasPT2 device. In North America, this total market amounts to more than
300,000 miles of pipeline and 30,000 associated entry and off-take points according to the US Energy Information Administration,
representing a market opportunity of more than $600 million. In Europe, this total market amounts to more than 200,000 miles of
pipeline and 20,000 associated entry and off-take points according to the 2010 edition of Natural Gas Systems of Europe, representing
a market opportunity of more than $400 million. Further, this market includes approximately 50,000 stationary gas turbines world-wide
according to the November-December 2009 issue of Gas Turbine World, representing a market opportunity of more than $1 billion.
We will continue to use our extensive market knowledge, as well as the new distribution relationships we develop, in order to strive
to discover additional market opportunities.
OUR PRODUCTS
Power Supply Units
Power
Our current power line, consists of external and embedded ac-dc
power supplies, dc-dc converters and basic digital point of load modules. This dynamic, broadly applicable product line accounts
for a significant portion of our current revenues and recent revenue growth.
Novum Advanced Power
We have developed the first fully featured digital point of
load dc-dc converter in the power market under our Novum Advanced Power line of products. It is a next generation product targeted
at the intermediate bus power architecture that is prolifically used in the networking and telecommunications markets. In September
of 2010 we released full production versions of two point of load modules. We were finalists for the prestigious Golden Mousetrap
Award and EDN Innovation Award for these parts in 2010.
With the shift towards smarter, smaller, and more energy efficient
power requirements, our engineers are seeking innovative solutions that allow them to keep pace with lower core voltages, faster
transient response needs and increasing thermal issues that they face in their designs. Our recently introduced Novum NDM2 modules
offer a full suite of digital features and specifically address these growing system complexities through intelligent power management.
The NDM2 series is our first product designed under the cooperation that we announced with Ericsson in July 2011. Our agreement
formalizes a mutual plan to offer a multi-source digital point of load platform based on Ericsson's BMR46X series. We anticipate
future plans to co-develop modules outside the existing range of 10~50A.
We have also developed a middle tier product line in order to
introduce our customer base to the benefits of utilizing digital power components in their products. It is a "smart module"
that offers the benefits of digital in the design cycle, but functions like a highly optimized analog unit when installed.
Solus Power Topology
Power topology is a key factor to consider when designing and
analyzing an integrated power system ("IPS"). It is a characteristic of an IPS that takes into account the number of
power sources included in a system, how they are connected with one another and with loads, and how the loads are connected between
themselves. Further, the topology of a system is obtained by determining the status of the system's circuit breakers.
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Through an exclusive Field of Use Agreement with California
Power Research, we licensed their BPS-5 topology, which we market under the brand Solus Power Topology. This price competitive
product allows for greater power efficiency, higher power density, reduced electro-magnetic interference, and faster transient
response time in our customers' end products. Further, it is broadly applicable to both dc-dc and ac-dc products. We believe
it will allow us to continue to develop a variety of new, industry leading products to service our broad customer base for the
next decade. Our first target product market for this technology is the intermediate bus architecture where digital point of load
modules are used.
Because Solus Topology is effective regardless of the power
control method utilized, it can operate with analog voltage mode control, analog current mode control, and various digital control
profiles. We believe that unique feature will allow us to implement the product in a wide variety of power supply product platforms.
Additionally, as large-scale networking and telecommunications companies convert to digital power, we believe our early entry into
the market, our unique Solus Topology, and our relationship with Ericsson should enhance our ability to penetrate this multi-billion
dollar market (according to IMS Research, an independent provider of market research and consultancy to the global electronics
industry).
Electronic Components
AMT Encoder
We have an exclusive agreement with AnderMotion Technologies
LLC to develop, sell and distribute the AMT encoder worldwide. The AMT series modular encoder is designed with proprietary, capacitive,
code-generating technology, as opposed to optical or magnetic encoding. This unique device allows breakthroughs in selectable resolution,
shaft-adaptation and convenient mounting solutions to bring ease of installation, and economies of scale in purchasing.
We are selling and distributing the AMT through various customers.
Moreover, the product is being marketed by multiple dc motor manufacturers. AMT has been awarded several design wins from motion
control OEMs that offer a wide range of products, including cash machines and robotic devices.
Other
We offer a variety of buzzers, connectors, encoders, microphones,
speakers, and thermal management solutions. While the breadth of our electronic component portfolio is extensive, we are focused
on operating as a niche provider of high-quality products. These products are found in a variety of OEM products, including motorized
car seats, home theater equipment, insulin machines, satellite radios and defibrillators
Test and Measurement
Vergence GasPT2
Through an exclusive licensing contract with GL Industrial Services
UK, Ltd. ("GL"), formerly British-based Advantica, Ltd., CUI Global owns exclusive rights to manufacture, sell and
distribute a gas quality inferential measurement device ("GasPT2") designed by GL on a worldwide basis, currently marketed
as the Vergence GasPT2.
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This device is a potentially disruptive, low-cost natural gas
quality measurement tool that is housed inside of a compact, weather-proof enclosure that sits on top of a pipeline. It can complete
a full sample and analysis cycle in fewer than five seconds, thus enabling near real-time gas quality testing. This device, fully
installed, costs approximately $50,000, significantly less than the current industry standard gas chromatograph, as discussed above.
Further, our customers will benefit from a streamlined installation process, which can be completed with less than 90 minutes of
pipeline downtime.
The GasPT2 device does not sacrifice accuracy or precision measures.
Tests performed have verified that our device typically measures natural gas quality within 0.04% accuracy, while industry standards
require accuracy within 0.5%. The device measures several physical properties of natural gas flow, including thermal conductivity,
the speed of the sound of gas flow, and carbon dioxide content. Using these measurements, it infers the natural gas quality mixture,
and calculates other relevant quality characteristics, such as calorific value, Wobbe index, relative density, and compression
factor.
It has been certified for use in fiscal monitoring by Ofgem
in the United Kingdom, the Polish Oil & Gas Company Department of Testing and Calibration in Warsaw, NOVA Chemical/TransCanada
in Canada, and SNAM RETE in Italy.
In 2011, the Company reached agreements with several European
and U.S.-based companies to place beta test units for both laboratory and infield testing. These companies included SNAM RETE in
Italy; National Grid in the United Kingdom; and GASUNIE in The Netherlands, among others. In early 2012, the company began the
delivery of beta units to North American companies for their own beta test programs. Additionally, in October and November 2012,
the GasPT2 device successfully passed first-phase testing by GE-ENERGY at its Turbine Test Facility in Houston, Texas.
We signed an exclusive, five-year agreement for distribution
in the United Kingdom with Orbital Gas Systems Limited, the largest specialty gas engineering company in England. In conjunction
with Orbital, we have introduced the combined Vergence GasPT2 device and Vergence VE-Probe to National Grid, the largest gas transmission
and distribution company in the U.K. In January 2012 we entered into a second five-year, exclusive distribution agreement with
an Italian company, SOCRATE s.p.a. for sales, marketing, distribution and servicing of our GasPT2 device in Italy and North Africa,
including Libya and Tunisia. The agreement calls for sales of as many as 2,000 to 3,000 units and is valued between $40 million
and $60 million over the five-year term.
We have entered into non-exclusive distribution agreements with
two North American companies, Energy Measurement Consulting (EMC) and MGlobal. For its part, in December 2012, EMC issued a purchase
order for scheduled delivery of 150 units in our fiscal year 2013.
The Company has also reached an agreement with BWG/Blue Flame,
a company based in Dubai, for exclusive representation in the Middle East, including the UAE, Qatar, and Saudi Arabia, among others.
BWG/Blue Flame are also in negotiations with several large Middle Eastern organizations to place the device in the Gulf Region,
as well as with representatives from Thailand, Romania, Turkey, and India for placement of the device.
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OUR BUSINESS STRENGTHS
High Quality Customer Base
As of December 31, 2012, our products touch more than 50,000
customers located in over 50 countries. We primarily serve customers in the computing, consumer device, energy, networking, and
telecommunications sectors, as well as several industrial technology conglomerates. We have established OEM relationships with
a number of our larger customers and believe we are well positioned to enter into additional OEM partnerships as we gain design
wins in the future. Our strategic third-party distribution relationship with Digi-Key is a strong and significant relationship
that we plan to continue to leverage for growth. Further, our GasPT2 device is currently installed in approximately 30 locations
with more than 12 partners, and it is in testing phases with more than 10 large-scale customers globally.
Comprehensive Technology and Product Portfolio
We offer more than 20,000 unique products. Our customers are
attracted to the breadth of our product offering, and often consider us to be an important niche supplier for the products that
they bring to the marketplace. We plan to work together with our customer base to continue to develop or acquire additional innovative
market-ready technologies and products in order to stay ahead of our competition. These efforts reduce our dependency on internal
research and development costs. We believe our knowledge of the marketplace for niche technologies and components provides us with
a significant advantage over other suppliers in our space.
Experienced Management Team
We are led by a management team and board of directors that
each possesses substantial experience in our industries. Our President and Chief Executive Officer, William J. Clough, has been
with the company for more than six years. Mr. Clough has extensive SEC experience and is an inventor of one of our early patented
thermal management technologies. Along with his other responsibilities, Mr. Clough spearheads our Vergence brand.
Our
Chief Financial Officer, Daniel N. Ford, has been with us for more than five years and possesses a wealth of accounting experience,
including his tenure with KPMG LLP. Mr. Ford has helped us reach a position of profitability, efficiency and forward thinking,
transforming many of our accounting, inventory management and vendor relations processes
. Our Chief Operating Officer, Matthew
M. McKenzie has an extensive background in the electronics industry, as well as expertise in distribution, sales, and supply chain
management.
Global Reach and Hybrid Marketing Strategy
We conduct operations globally, with employees located in the
United States and Japan. Further, we have outsourced manufacturing relationships in mainland China, Japan, South Korea, Taiwan,
and the United Kingdom, and our relationship with Digi-Key reaches customers globally. We utilize a hybrid marketing and sales
strategy, consisting of our internal sales and marketing team, as well as our third-party distribution relationships. Our internal
sales and marketing team focuses on larger, OEM customers, while we direct smaller customers to utilize our third-party distribution
channel. We believe that the global reach of our operations and distribution capabilities for our products will help our businesses
grow and mitigate the risks associated with operations concentrated in one geographic region.
OUR STRATEGY
Our historic business was a commoditized electromechanical parts
distribution business, however, in recent years, we have focused our business on the acquisition and/or licensing, development
and commercialization of new and innovative electronic technologies and products. As our business continues to evolve along with
that of our customers, we must continue to identify, acquire or license, and commercialize novel technologies that enhance our
customers' market position.
63
Our Novum Advanced Power, Solus Power Topology and Vergence
GasPT2 device have enabled us to transform ourselves into a technology incubator dedicated to rapidly commercializing market-ready
technologies.
In that regard, we have implemented a planned strategy to increase
our name recognition as a technology company. Our plan includes:
§
Increasing our customer base by redirecting our customers into the right channel, including by handling smaller customer fulfillment
through our distribution partner, Digi-Key, and focusing our efforts on larger OEM business;
§
Identifying large gas utility companies that represent likely opportunities for large batch sales of our Vergence GasPT2 device,
as opposed to single unit sales;
§
Developing a collaborative relationship with our customers to identify and supply them with products that will fuel our growth;
§
Growing the brand presence of our products, which we will attempt to do by capturing the attention of industry heads at selected
trade show events;
§
Developing and acquiring new technologies to grow our revenue base; and
§
Growing our global sales and distribution capabilities.
RECENT DEVELOPMENTS
Acquisition of Orbital Gas Systems Limited
On March
3
,
2013, we entered into a definitive 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,
including all of its
operations which are located in the United Kingdom. The purchase price for the acquisition of Orbital is £17,000,000, subject
to purchase price adjustments, 100% of which is payable in cash. To secure indemnification obligations, 5.0% of the purchase price,
or £850,000, will be held in escrow to and through December 1, 2013. The purchase price is approximately $25.8 million,
based on the Wall Street Journal published exchange rate as of the New York market close on February 27, 2013 of $1.5158 per pound
sterling.
Orbital is the largest specialty natural gas engineering company
in England and is a key partner of ours for commercializing our GasPT2 device. For over 25 years, Orbital has developed its portfolio
of products, solutions, services and resources to offer a diverse range of personalized gas engineering solutions to the gas utilities,
power generation, emissions, manufacturing and automotive industries. We believe that adding Orbital's operations will provide
a strengthened platform for us to enter new and attractive natural gas quality analysis markets and provide enhanced customer and
geographic diversification, resulting in additional domestic and international sales.
For fiscal years 2012 and 2011, Orbital generated
revenues from continuing operations of £13,997,850 and £13,751,265, respectively. For its fiscal years 2012 and
2011, Orbital generated income before taxes and U.S. GAAP adjustments of £2,283,138 and £992,438, respectively. As
of December 31, 2012, Orbital had cash and cash equivalents of £5,678,794.
We intend to finance the consideration paid to the shareholders
of Orbital with the net proceeds from this offering. Although we have entered into a share purchase agreement in connection with
the Orbital acquisition, we cannot guarantee when, or whether, the acquisition will be completed. We do, however, currently anticipate
that the acquisition will be consummated by the end of April 2013. The share purchase agreement contains a number of important
conditions that must be satisfied before we can complete the acquisition, namely:
64
§
We have raised sufficient funds to complete the transaction through either a debt or equity offering
pursuant to the standard U.S. regulatory authority for publicly-traded U.S. companies;
§
We and Orbital's owner have signed the escrow letter called for by the share purchase agreement
and have procured the escrow agent's signature and delivery of the bank instruction letter to the escrow bank; and
§
We and Orbital's owner agree in writing the "closing free cash," as defined in
our share purchase agreement.
We believe the acquisition will provide us with immediate credibility
in the natural gas industry. By acquiring Orbital, we will acquire a company that has operated successfully in the natural gas
industry for over 25 years. In addition, Orbital is a leading provider of natural gas infrastructure and high-tech solutions to
National Grid, the national gas transmission company in the U.K. and one of the most respected specialist gas engineering companies
in the world. We will also acquire access to Orbital's proprietary VE-Probe, which, by allowing us to acquire a sample gas
in as few as two seconds as opposed to the industry standard time of five to ten minutes, enables us to reduce our total sample-analysis
turnaround to fewer than five seconds. We believe this turnaround time is far faster than the turnaround time of any other technology
currently available to the gas industry.
Entry into a Distribution Agreement with Future Electronics,
Inc.
On February 19, 2013, we announced that we entered into a new
distribution agreement with Future Electronics, Inc. ("Future"), which is a leader and innovator in the distribution and marketing of electronic
components. This agreement allows Future to leverage their experience and resources to launch our product portfolio to a global
market and a diverse customer base. In selecting Future as a global distribution partner, we recognized the strength of Future's
demand creation programs and its robust field support resources which will add greater reach for our Novum product line, as well
as its broad portfolio of standard power supplies and board level components. Under the terms of the agreement, Future will now
begin a phased rollout of products from our Power Supply and Electronic Components groups with stock available immediately for
many items.
Design News Golden Mousetrap Awards Finalist
On January 31, 2013, we announced
that Design News, a leading technical publication for design engineers, named our NDM2Z series point of load modules as a finalist
for its Golden Mousetrap Awards, an award that recognizes engineering innovation and creativity in product design. The NDM2Z sets
industry benchmarks in efficiency and current density, helping address the growing need to reduce energy use at the board level.
This was our third product from the
Novum Advanced Power group to receive industry recognition in the past three months.
Also in January 2013, Electronic Products chose our NSM2P "No-Bus" digital point of load series as a 2012 Product of
the Year. Previously, in November 2012, our NDM2P digital point of load series was named to EDN's "Hot 100 Products
of 2012: Power."
65
ACQUISITION STRATEGY
We monitor our industry to identify potential acquisition targets,
both in the form of technology and potential strategic partners. In that regard, we are repeatedly approached by inventors and
others, most especially in the power industry, to assess and assist in commercialization and marketing of new technologies. These
contacts largely arise because of our reputation and successes with our Novum and Solus product lines. Moreover, much like CUI,
Inc. when we acquired it, there are many small, well-run electronics companies that become available due to the age or desires
of their founders. We will consider each of these potential opportunities as they arise with a careful analysis of the relevant
synergies between any potential acquisition and our current business, as well as with the potential for increased revenue and/or
market share.
RESEARCH AND DEVELOPMENT
We believe our future success depends in large part on our ability
to develop, commercialize and innovate our existing product lines, as well as identify, acquire or license, and commercialize additional
market-ready products and technologies. Further, we believe our ability to further develop our GasPT2 device will be a significant
factor in the future revenue and profitability growth of our business.
Our research and development costs were $791,332 and $716,321
for the years ended December 31, 2012 and December 31, 2011, respectively. Research and development costs are related to the various
technologies for which we have acquired licensing rights or are developing internally. Our expenditures for research and development
have been directed primarily towards the further development of Novum Advanced Power technologies, including digital point of load
power modules and the Solus Topology, AMT Capacitive Encoders and towards the development of the Vergence GasPT2 device. We expect
that research and development expenses will increase during our fiscal year 2013 as we continue to expand our product offering
and technologies, which we expect will gain further market acceptance and customer integration.
INTELLECTUAL PROPERTY LICENSE EVOLUTION
AMT Encoder Technology.
Upon the acquisition of CUI, Inc., we obtained the relationship
with the holder of the AMT encoder technology. Through an exclusive licensing contract with AnderMotion Technologies, LLC, signed
on or about April 20, 2009, we acquired exclusive rights to manufacture, sell and distribute motion control devices utilizing the
AMT encoder technology.
Novum Digital Point of Load Technology.
Through a non-exclusive licensing agreement with Power-One,
Inc., signed on or about September 18, 2009, we have access to Power-One's portfolio of Digital Power Technology patents
for incorporation into our new line of digital point of load power modules.
Solus Advanced Power Topology Technology.
Through an exclusive licensing contract with California Power
Research, Inc., signed on or about March 4, 2010, we acquired the exclusive rights to manufacture, market, sell, lease, maintain,
give over and dispose of licensed product using the BPS-5 advanced power topology technology.
Vergence GasPT2 Technology.
Through an exclusive licensing contract with GL Industrial Services
UK, Ltd. ("GL"), formerly British-based Advantica, Ltd., signed on or about January 4, 2010, we acquired exclusive
rights to manufacture, sell and distribute a gas quality inferential measurement device ("GasPT2") designed by GL on
a worldwide basis.
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INTELLECTUAL PROPERTY PROTECTION
We rely on various intellectual property laws and contractual
restrictions to protect our proprietary rights in products and services. These include confidentiality, invention assignment and
nondisclosure agreements with our key employees, contractors, suppliers and strategic partners. The confidentiality and nondisclosure
agreements with our key employees, contractors and suppliers are in perpetuity, or for a sufficient length of time so as to not
threaten exposure of proprietary information. We intend to pursue the registration of our trademarks and service marks in the United
States and internationally.
We license a significant amount of our underlying intellectual
property from third parties, i.e. AMT Encoder Technology, Novum Digital Point of Load Technology, Solus Advanced Power Topology
Technology and Vergence GasPT2 Technology. The loss of our rights as a licensee under any of these or future technology licensing
arrangements could have a material adverse impact upon our financial position and results of operations.
In an effort to concentrate our business focus on our core product
development and marketing, in December 2011, we conveyed our WayCool and WayFast patent portfolio to Olantra Fund X, LLC for a
cash payment of $500,000.
Under the Trademark Act of 1946, as amended, the United States
Patent and Trademark Office permitted our registration of the following trademarks that we actively maintain up to date: CUI INC,
CUI Europe, V-Infinity, AMT, Novum, CUI Global, Simple Digital, Vergence and Solus.
We continuously review and update our existing intellectual
property filings and file new documentation both domestically and internationally (Patent Cooperation Treaty) in a continuing effort
to maintain up to date protection of our intellectual property.
For those intellectual property applications pending, we cannot
assure that the registrations will be granted. Furthermore, we are exposed to the risk that other parties may claim that we infringe
on their existing patent and trademark rights, which could result in our inability to develop and market our products unless we
enter into licensing agreements with the technology owner, or could force us to engage in costly and potentially protracted litigation.
COMPETITIVE BUSINESS CONDITIONS
We operate a commoditized electromechanical parts distribution
business, as well as an emerging test and measurement business built around our GasPT2 device. In our electromechanical parts distribution
business, the industries in which we compete are very broad. We believe our market is highly fragmented, competitive, evolving
and subject to technological change. Our competitors vary in size and in the scope and breadth of products offered.
We believe the principal competitive factors in our electromechanical
parts business are efficiency of delivery and pricing. We believe our competitive advantages include:
§
Our strong relationship with Digi-Key, an authorized
distributor of electronic components for more than 550 industry suppliers, which maximizes our product exposure to new designs
and small to medium sized customers;
67
§
Our additional third-party external sales representative organization relationships that allow us to penetrate new and better
customers otherwise not readily available to us;
§
Our new products and technologies that are in development, which will allow us to compete on innovation and by entering into
strategic partnerships, as opposed to solely on price;
§
Our forward-looking and early focus on digitally-based controllers for power supply switching; and
§
Our focus on providing our OEM customers with greater levels of support, customer service, and a constantly expanding product
line.
Our GasPT2 device competes in a mature industry with established
competitors. There are significant investments being made into the natural gas extraction and transportation infrastructure globally.
We believe our competitive advantages are:
§
Our device is a comparably low-cost solution to measuring natural gas quality;
§
Our device is compact and sits directly on top of a natural gas pipeline;
§
Our device can provide a fast, accurate, and near real-time measurement of the physical properties of the gas flow to infer
gas quality characteristics; and
§
Our device requires minimal pipeline downtime to install.
DEPENDENCE ON A KEY CUSTOMER
Our major product lines in 2012 and 2011 were external power,
internal power and industrial controls.
During 2012, 59% of revenues were derived from five customers
at 47%, 4%, 3%, 3% and 2%. During 2011, 55% of revenues were derived from six customers at 41%, 4%, 3%, 3%, 2% and 2%. Our largest
customer for 2012 and 2011 was Digi-Key Corporation.
At December 31, 2012, of the gross trade accounts receivable
from continuing operations totaling $5,095,926, 57% was due from six customers: 37%, 8%, 3%, 3%, 3% and 3%. At December 31, 2011,
of the gross trade accounts receivable from continuing operations totaling $3,819,641, 53% was due from eight customers: 21%, 9%,
7%, 5%, 4%, 3%, 2% and 2%.
LEGAL PROCEEDINGS
We and our subsidiaries are not a party in any legal proceedings.
None of our directors, officers or affiliates, any owner of record, or beneficially of more than five percent of any class of our
voting securities, or any associate of any such of our directors, officers, affiliates or security holders is a party adverse to
us or any of our subsidiaries, or has a material interest adverse to us or any of our subsidiaries.
PHILANTHROPIC PHILOSOPHY
We have chosen that, in addition to sales commission, certain
sales representative firms will also receive a charity commission to be donated to charities of their choice. One of our core values
is generosity, which includes philanthropic giving. We give in our local community, and we want to also give in the communities
in which we do business.
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EMPLOYEES
As of December 31, 2012, we, together with our consolidated
subsidiaries, had sixty-two full-time and seven part-time employees. None of our employees are represented by a labor union. We
consider our relations with our employees to be good. We plan to add additional staff as needed to handle all phases of the growth
of our business. We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified
personnel.
PROPERTIES
As an integrated part of the acquisition of CUI, Inc., our corporate
offices were relocated to Tualatin, Oregon. We occupy the 61,380 square feet of offices and warehouse premises under a ten year
non-cancelable lease agreement beginning September 1, 2006 with Barakel, LLC (a related party) at a base monthly rent subject to
periodic base payment increases plus real property taxes, utilities, insurance and common area maintenance charges. Barakel, LLC
is controlled by James McKenzie, the majority owner of CUI, Inc. prior to acquisition and majority owner of IED, Inc., along with
Matt McKenzie, our COO, Corporate Secretary and Director.
CORPORATE INFORMATION
CUI Global, Inc., formerly known as Waytronx, Inc., is a Colorado
corporation organized on April 21, 1998. Our principal place of business is located at 20050 SW 112 Avenue, Tualatin, Oregon 97062,
phone (503) 612-2300. Our website is www.cuiglobal.com.
Effective May 16, 2008, CUI Global, Inc. acquired the assets
and liabilities of CUI, Inc., a Tualatin, Oregon based provider of electronic components. Through this acquisition, the Company
obtained an 11.54% ownership interest in Test Products International, Inc., a provider of handheld test and measurement equipment.
Effective July 1, 2009, CUI Global acquired all of Comex Instruments,
Ltd., which we subsequently rebranded, CUI Japan and 49% of Comex Electronics, Ltd. Both companies are Japanese based DSP providers
of digital to analog and analog to digital test and measurement systems and electronic components for original equipment manufacturer
research and development. 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, payable monthly beginning January 2012.
DIRECTORS AND EXECUTIVE OFFICERS
Our Bylaws permit the number of directors to be fixed by resolution
of the Board of Directors, but to be no less than one. The Board of Directors has set the maximum number of members to no more
than eight members. Directors are elected by a majority of the votes cast by the stockholders and have served two-year terms or
until their successors have been elected and qualified or until their earlier resignation or removal. Commencing with our next
annual meeting we intend to elect all of our directors simultaneously for a one year term or until their successors have been elected
and qualified, or their earlier resignation or removal. Currently, we have six directors, four of whom are "independent"
in accordance with applicable rules promulgated by the Securities and Exchange Commission and within the meaning of Rule
5605(a)(2)
of the NASDAQ Stock Market.
The Board of Directors has three standing committees: Audit
Committee, Compensation Committee and Nomination Committee, each of which has a written charter and/or statement of policy approved
by our board. Our board currently appoints the members of each committee. Copies of the current committee charters and/or statement
of policy for each committee are posted on our website at www.cuiglobal.com. No incumbent director attended fewer than 100% of
the total number of meetings held by the committees on which such director served.
69
The following are
officers and directors of the Company
with their ages as of December 31, 2012, and a list of the members of our three standing
committees: Audit Committee, Compensation Committee and Nomination Committee.
Name
Age
Position
Colton R. Melby*
55
Director, Chairman
William J. Clough
61
President/Chief Executive Officer, Director and General Counsel
Thomas A. Price*
69
Director
Matthew M. McKenzie
32
Director, Chief Operating Officer and Corporate Secretary
Sean P. Rooney*
41
Director
Corey A. Lambrecht*
43
Director
Daniel N. Ford
33
Chief Financial Officer
Audit Committee:
Sean P. Rooney*, Chairman
Thomas A. Price*, Deputy Chairman
Colton R. Melby*, Committee Member
Compensation Committee
Cory A. Lambrecht*, Chairman
Colton R. Melby*, Committee Member
Nominating
Committee
The Nominating Committee consists of the independent
directors of the Board of Directors.
* "independent director" within the meaning of
Rule
5605(a)(2)
of the Nasdaq Capital Market.
Business Experience of Directors and Executive Officers
Colton R. Melby, Chairman of the Board of Directors
Effective June 11, 2008, Colton Melby was appointed to the Board
of Directors and was elected by the Board of Directors to serve as Chairman of the Board of Directors. Mr. Melby continues to serve
as Chairman of the Board of Directors and at the 2012 Annual Meeting of Shareholders; Mr. Melby was reelected to a two year term
on the Board of Directors.
Mr. Melby has a 20 year background in aerospace manufacturing.
He spent 15 years as owner and chief executive officer of Metal Form, Inc., serving a customer base that included: Boeing, Bombardier,
Rockwell, Grumman, and Lockheed Martin, among others. One of Mr. Melby's more notable investments was the financing and purchase
of firearms-maker Smith & Wesson from London-based Tomkins PLC in 2001. Mr. Melby has investments in Earth 911, a recycling
company dedicated to green initiatives and green recycling.
William J. Clough, Esq., President/Chief Executive Officer,
Director and General Counsel of CUI Global, Inc. and Chief Executive Officer of CUI, Inc.
Mr. Clough was elected at the 2006 Annual Meeting of Shareholders
to serve a two year term on the Board of Directors. Mr. Clough continues to serve on the Board of Directors and was reelected at
the 2012 Annual Meeting of Shareholders to serve a third two year term.
70
Mr. Clough was appointed President and Chief Executive Officer
of CUI Global, Inc. September 13, 2007 at which time Mr. Clough stepped down as Executive Vice President of Corporate Development.
Effective May 16, 2008, CUI Global, Inc. formed a wholly owned subsidiary, Waytronx Holdings, Inc., to acquire the assets of CUI,
Inc. Along with this acquisition Mr. Clough was appointed Chief Executive Officer of Waytronx Holdings, Inc. (now renamed to CUI,
Inc.). Mr. Clough was a police officer for 16 years, working at the local, state and federal levels as a Federal Air Marshall in
Southern Europe and the Middle East, in 1985 and 1986. Mr. Clough received his Juris Doctorate, cum laude, from the University
of California, Hastings College of the Law in 1990. He is certified to practice law in state and federal courts in California,
Illinois, Hawaii and before the United States Supreme Court.
During late 2011 into early 2012, along with Company CFO, Daniel
Ford, Mr. Clough led the efforts to complete a successful equity raise; coupled with a re-structuring of the Company's capital
structure and up-listing the Company to the NASDAQ Capital Market in February 2012.
Thomas A. Price, Director
Mr. Price was elected at the 2008 Annual Meeting of Shareholders
to serve a one year term on the Board of Directors and was reelected at the 2011 Annual Meeting of Shareholders to serve a two
year term.
Mr. Price has more than 30 years of business and operational
management experience. He is the founder of Tom Price Dealership Group, a leading auto dealership with 11 franchises at six locations
across California. Mr. Price developed the multi-brand San Francisco Auto Repair Center and a conference facility in Larkspur,
California. Currently, Mr. Price is the owner of nine car dealerships in Northern California. He was Chairman of the Lexus National
Dealer Advisory Board and charter member of the J.D. Power Dealer Roundtable. The Price Family Dealerships are major sponsors of
Special Olympics of Marin, Dedication to Special Education, CASA/Advocates for Children, Marin Breast Cancer Council and the Golden
Gate Shootout.
Matthew M. McKenzie, President and Chief Operational Officer
of CUI, Inc., Chief Operational Officer, Corporate Secretary of CUI Global, Inc. and Director.
Matt McKenzie was elected to the Board of Directors at the 2008
Annual Meeting of Shareholders to serve a two year term and was reelected at the 2012 Annual Meeting of Shareholders to a two year
term on the Board of Directors.
Mr. McKenzie earned an MBA from George Fox University. He has
been working in various functions for CUI for over 10 years, gaining intimate knowledge of the business, its operations and its
opportunities for growth. Over the past several years, Mr. McKenzie has worked to position CUI, Inc. for growth through sales and
operation expansion as well as channel development and technology development. Mr. McKenzie initiated ISO 9001 certification, a
quality management system, provided structure to global logistics, including CUI's international partners, and implemented
CUI's ERP system, which allows for more visibility and analysis opportunities for CUI. He spearheads the research, development
and implementation of the Novum and Solus technologies.
Sean P. Rooney, Director
Mr. Rooney was elected at the 2008 Annual Meeting of Shareholders
to serve a one year term on the Board of Directors and was reelected at the 2011 Annual Meeting of Shareholders to serve a two
year term.
71
Mr. Rooney brings to the CUI Global board nearly 20 years of
financial management experience. He currently serves as Senior Director of Investments for Oppenheimer & Co. Inc., a leading
full service investment banking, securities and wealth management firm. Prior to joining Oppenheimer, he served in a similar capacity
at Maxim Group, a boutique investment bank in New York, and Investec Ernst & Company, an international specialist bank headquartered
in South Africa and the U.K. Through his many years of experience, Mr. Rooney has built a vast network of industry resources and
contacts.
Mr. Rooney graduated from C. W. Post University in 1993 with
a Bachelors of Arts degree in Business Administration. Mr. Rooney currently manages a clientele of high net worth investors, institutions
and foundations.
Corey A. Lambrecht, Director
Mr. Lambrecht was elected at the 2008 Annual Meeting of Shareholders
to serve a one year term on the Board of Directors and was reelected at the 2011 Annual Meeting of Shareholders to serve a two
year term.
Mr. Lambrecht is a 14+ year public company executive with
experience in strategic acquisitions, new business development, pioneering consumer products, corporate licensing and
interactive technology services. Mr. Lambrecht currently serves as the President of Earth911, Inc. and is a current
director of Guardian 8 Holdings and Carbon Credits International.  He previously served as Director of Sales for Leveraged
Marketing Associates, a worldwide leader in licensed brand extension strategies. While Executive Vice President for Smith
& Wesson Holding Corporation he was responsible for Smith & Wesson Licensing, Advanced Technologies and Interactive
Marketing divisions. He was the former President of A For Effort (sold to Freesoftwareclub.com), an interactive database
marketing company specializing in online content (advergaming) for clients such as the National Hockey League. 
Mr. Lambrecht's prior experience also includes Pre-IPO founder for Premium Cigars International and VP
Sales/Marketing for ProductExpress.com.
Daniel N. Ford, Chief Financial Officer of CUI Global
and CUI, Inc.
Mr. Ford has a background in accounting, including working at
KPMG. As CFO of CUI for in excess of five years, Mr. Ford moved CUI into a position of profitability, efficiency and forward thinking,
transforming many of CUI's accounting, inventory management and vendor relations processes. During 2012, along with Mr. Clough,
Mr. Ford facilitated the equity raise and uplisting to the NASDAQ Capital Market. Over the past five years, Mr. Ford has implemented
advanced internal fixed asset tracking, implemented a "real time" inventory system and participated in implementing
CUI's ERP system. His skills as a financier have allowed CUI to move to its current, 61,380 square foot building, to transition
its banking relationships to Wells Fargo National Association, as well as to acquire CUI and CUI Japan. Mr. Ford holds an MBA from
George Fox University.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Committee Members
The Compensation Committee of the Board of Directors is appointed
by the Board of Directors to discharge the Board's responsibilities with respect to all forms of compensation of the Company's
executive officers, to administer the Company's equity incentive plans and to produce an annual report on executive compensation
for use in the Company's Form 10-K. The Compensation Committee consists of two members of the board of directors, Messers Colton
R. Melby and Corey A. Lambrecht, both of whom are "independent directors" within the meaning of
Rule
5605(a)(2)
of the Nasdaq Capital Market.
Role of Committee
The Compensation Committee discharges the Board's responsibilities
relating to general compensation policies and practices and to compensation of our executives. In discharging its responsibilities,
the Compensation Committee establishes principles and procedures in order to ensure to the Board and the shareholders that the
compensation practices of the Company are appropriately designed and implemented to attract, retain and reward high quality executives
and are in accordance with all applicable legal and regulatory requirements. In this context, the Compensation Committee's
authority, duties and responsibilities are to:
•
Annually review the Company's philosophy regarding executive compensation.
•
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.
•
Establish and approve the Company's goals and objectives and associated measurement metrics relevant to compensation
of the Company's executive officers.
•
Establish and approve incentive levels and targets relevant to compensation of the executive officers.
•
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.
•
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.
•
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.
•
Administer and annually review the Company's incentive compensation plans and equity-based plans.
•
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.
•
Review and discuss with management, the Compensation Disclosure and Analysis (CD&A) and determine the Committee's
recommendation for the CD&A's inclusion in the Company's annual report filed on Form 10-K with the SEC.
73
Committee Meetings
Our Compensation Committee meets formally and informally as often as necessary to perform its duties and responsibilities. The Compensation Committee held three meetings during fiscal 2012. On an as requested basis, our Compensation Committee receives and reviews materials prepared by management, consultants or committee members, in advance of each meeting. Depending on the agenda for the particular meeting, these materials may include:
•
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.
Compensation Philosophy
General Philosophy
Our compensation philosophy is based on the premise of attracting,
retaining and motivating exceptional leaders, setting high goals, working toward the common objectives of meeting the expectations
of customers and stockholders and rewarding outstanding performance. Following this philosophy, in determining executive compensation,
we consider all relevant factors, such as the competition for talent, our desire to link pay with performance, the use of equity
to align executive interests with those of our stockholders, individual contributions, teamwork and performance, each executive's
total compensation package and internal pay equity. We strive to accomplish these objectives by compensating all employees with
total compensation packages consisting of a combination of competitive base salary and incentive compensation.
Pay for Performance
At the core of our compensation philosophy is our strong belief
that pay should be directly linked to performance. We believe in a pay for performance culture that places a significant portion
of executive officer total compensation as contingent upon, or variable with, individual performance, Company performance and
achievement of strategic goals including increasing shareholder value.
The performance based compensation for our executives may be
in the form of (i) annual cash incentives to promote achievement of, and accountability for, shorter term performance plans and
strategic goals and (ii) equity grants, designed to align the long-term interests of our executive officers with those of our
shareholders, by creating a strong and direct link between executive compensation and shareholder return over a multiple year
performance cycle. Long term incentive equity awards are granted in restricted stock or stock options. These awards generally
vest over a two to four year period. This opportunity for share ownership was provided in order to provide incentive and retain
key employees and align their interests with our long term strategic goals.
Base Compensation to be Competitive within Industry
A key component of an executive's total compensation
base salary is designed to compensate executives commensurate with their respective level of experience, scope of responsibilities,
sustained individual performance and future potential. The goal has been to provide for base salaries that are sufficiently competitive
with other similar-sized companies, both regionally and nationally, in order to attract and retain talented leaders.
74
Compensation Setting Process
Management's Role in the Compensation Setting Process.
Management plays a significant role in the compensation-setting
process. The most significant aspects of management's role are:
•
Assisting in establishing business performance goals and
                                                                    objectives;
•
Evaluating employee and Company performance;
•
CEO recommending compensation levels and awards for executive
                                                                    officers;
•
Implementing the Board approved compensation plans; and
•
Assistance in preparing agenda and materials for the Committee
                                                                    meetings.
The Chief Executive Officer generally attends the Committee
meetings; however, the Committee also regularly meets in executive session. The Chief Executive Officer makes recommendations
with respect to financial and corporate goals and objectives and makes non CEO executive compensation recommendations to the Compensation
Committee based on Company performance, individual performance and the peer group compensation market analysis. The Compensation
Committee considers and deliberates on this information and in turn makes recommendations to the Board of Directors, for the Board's
determination and approval of the executives' and other members of senior management's compensation, including base
compensation, short-term cash incentives and long-term equity incentives. The Chief Executive Officer's performance and
compensation is reviewed, evaluated and established separately by the Compensation Committee and ratified and approved by the
Board of Directors.
Setting Compensation Levels
To evaluate our total compensation is competitive and provides
appropriate rewards to attract and retain talented leaders, as discussed above, we may rely on analyses of peer companies performed
by independent compensation consultants and on other industry and occupation specific survey data available to us. Our general
benchmark is to establish both base salary and total compensation for the executive officers at the 50
th
percentile
of the peer group data, recognizing that a significant portion of executive officer total compensation should be contingent upon,
or variable with, achievement of individual and Company performance objectives and strategic goals, as well as being variable
with stockholder value. Further, while the objective for base salary is at the 50
th
percentile of the peer group data,
executives' base salaries are designed to reward core competencies and contributions to the Company and may be increased
above this general benchmark based on (i) the individual's increased contribution over the preceding year; (ii) the individual's
increased responsibilities over the preceding year; and (iii) any increase in median competitive pay levels.
Setting Performance Objectives
The Company's business plans and strategic objectives
are generally presented by management at the Company's annual board meeting. The board engages in an active discussion concerning
the financial targets, the appropriateness of the strategic objectives and the difficulty in achieving the same. In establishing
the compensation plan, our Compensation Committee then utilizes the primary financial objectives from the adopted business plan
and operating cash flow as the primary targets for determining the executive officers' short-term cash incentives and long
term equity incentive compensation. The Committee also establishes additional non-financial performance goals and objectives,
the achievement of which is required for funding of a significant portion, approximately twenty five percent, of the executive
officers' incentive compensation. In 2012, these non-financial performance goals and objectives included achieving accurate
financial reporting and timely SEC filings; demonstrating full compliance and superior performance in the Company's environmental,
health and safety practices; performing appropriate remediation activities
under
Sarbanes-Oxley Act of 2002 Section 404
and achieving successful testing of and compliance with
the
requirements
of the Sarbanes-Oxley Act
and general and
administrative expense management. In addition, the executive team was charged with positioning the Company for up-listing to
a national stock exchange and an equity raise in early 2012. Said funding to be used to enhance the Company's balance sheet;
pay down corporate debt; increase the Company's ability to rapidly bring its new products to market; and other appropriate
matters.
75
Annual Evaluation
The Chief Executive Officer recommends the actual incentive
award amounts for all other executives based on actual Company performance relative to the targets set as well as on individual
performance and recommends the executives' base salaries levels for the coming year. The Compensation Committee considers
these recommendations generally at the end of each fiscal year in determining its recommendations to the Board of Directors for
the final short-term cash incentive and long-term equity award amounts for each executive and for the executive's base salary
levels. The actual incentive amounts awarded to each executive are ultimately subject to the discretion of the Compensation Committee
and the Board of Directors.
Additional equity-based awards may be also granted to executives,
as well as other employees, upon commencement of employment, for promotions or special performance recognition or for retention
purposes, based on the recommendation of the Chief Executive Officer. In determining whether to recommend additional grants to
an executive, the Chief Executive Officer typically considers the individual's performance and any planned change in functional
responsibility.
Elements of Executive Compensation
Total Compensation
Total compensation for our executives consists of three elements:
(i) base salary; (ii) incentive cash award based on achieving specific performance targets as measured by cash flow and other
objectives and (iii) equity incentive award, which is also performance based and paid out over a future period in the form of
restricted stock or stock purchase options. Base salaries are the value upon which both the incentive compensation percentage
targets are measured against. For evaluation and comparison of overall compensation of the executives and to assist it in making
its compensation decisions, the Compensation Committee reviews an executive compensation summary, which sets forth for each executive:
current compensation and current equity ownership holdings as well as the projected value of each and all such compensation elements,
including distributions and dividends therefrom.
Base Salaries
Base salaries are designed to compensate executives commensurate
with their respective level of experience, scope of responsibilities and to reward sustained individual performance and future
potential. The goal has been to provide for base salaries that are sufficiently competitive with other similar-sized companies,
both regionally and nationally, in order to attract and retain talented leaders.
Incentive Compensation
Incentive compensation is intended to align compensation with
business objectives and performance and enable the Company to attract, retain and reward high quality executive officers whose
contributions are critical to short and long-term success of the Company. The executives' incentive awards are based upon
three key performance metrics: (i) the Company's EBIDTA; (ii) achievement of agreed-upon strategic and corporate performance
goals; and (iii) existing Employment Agreement.
76
The strategic and corporate performance goals are not intended
to be a specific agreed-upon goal, but rather a general objective. Management and the board of directors discuss these factors
and set objectives that are dynamic and change periodically. In setting these periodic goals, the board of directors discusses
with management the nature of the objective and management's proposed method of achieving the goal. These goals change throughout
the operational process because of changing dynamics such as economic conditions, current success of marketing, availability of
materials, availability of funding and overall momentum toward achieving the goal.
Incentive Plan Compensation
Incentive awards are paid out in cash, restricted common stock
or option awards. The incentive award targets for the executives are established at the beginning of the year, generally, as a
percentage of their base salary and the actual awards are determined at the following year's annual board of directors meetings
based on actual Company performance relative to established goals and objectives, as well as on evaluation of the executive's
relevant departmental and individual performance during the past year. In many instances the award of restricted common stock
vests over a four year term in equal periodic tranches. The award of restricted common stock purchased through options generally,
although not in every instance, vests immediately upon exercise of the option and generally has a validity of up to ten years
and a per share purchase price, of no less than, the fair market value of our common stock on the date of grant. The awards are
intended to serve as a means of incentive compensation for performance.
Retirement Plans
Our wholly owned subsidiary, CUI, Inc., maintains a 401(k)
plan. The Company has a 401(k) retirement savings plan that allows employees to contribute to the plan after they have completed
3 months of service and are 21 years of age. The Company matches the employee's contribution up to 6% of total compensation.
Total employer contributions, net of forfeitures, were $215,118 and $179,234, for 2012 and 2011, respectively.
Change in Control Agreements
Our executives are awarded protection upon a change in control
as specifically provided in their employment contracts.
Perquisites
The Company does not provide for any perquisites or any other
benefits for its senior executives that are not generally available to all employees.
Compensation Committee Charter
Our Compensation Committee Charter is posted on our website
at www.cuiglobal.com.
Summary Compensation Table
The following table sets forth the compensation paid and accrued
to be paid by the Company for the fiscal years 2012, 2011 and 2010 to the Company's Chief Executive Officer and two most
highly compensated executive officers of the Company.
77
SUMMARY COMPENSATION TABLE
Option
Non-equity
Stock
Awards
Incentive Plan
All Other
Name and
Awards
($)(10)
Compensation
Compensation
Principal Position
Year
Salary ($)
($)
(11)
($)
($)
Total ($)
William J. Clough,
CEO / President /
2012
337,500
(2)
160,080
(2)
848,599
(3)
204,920
(2)
17,860
1,568,959
Counsel / Director
(1)
2011
325,000
(2)
-
-
124,792
(2)
6,110
455,902
Daniel N. Ford,
2012
195,000
(5)
51,120
(5)
27,451
(6)
160,130
(5)
34,860
468,561
CFO (4)
2011
195,000
(5)
-
-
62,500
(5)
33,186
290,686
Matthew M.
McKenzie, COO /
2012
205,000
(8)
32,400
(8)
40,093
(9)
147,808
(8)
34,860
460,161
President of CUI
Inc. / Director (7)
2011
205,000
(8)
-
-
114,583
(8)
32,475
352,058
Footnotes:
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 $350,000 and bonus provisions for each calendar
                                                              year. 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 15
th
day of each month. During 2012, 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, 2012 and 2011, there was an accrual of $53,542 and
                                                              $13,542, respectively, for compensation owed to Mr. Clough.
3.
Effective April 16, 2012, Mr. Clough received a bonus option
                                                              to purchase 37,177 common shares as CEO and an additional 3,300
                                                              common shares as a director, 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. 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.
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 May 15, 2014 and provides,
                                                              in relevant part, for an annual salary of $195,000 and bonus provisions
                                                              for each calendar year, beginning with 2010, 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, 2012 and 2011 there was an accrual of $8,125 and $0, respectively,
                                                              for compensation owed to Mr. Ford.
78
6.
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 May 15, 2014 and provides,
                                                              in relevant part, for an annual salary of $205,000 and bonus provisions
                                                              for each calendar year, beginning with 2010, 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, 2012 and 2011 there was an accrual of
                                                              $8,542 and $12,083, respectively, for compensation owed to Mr. McKenzie.
9.
Effective April 16, 2012, Mr. McKenzie received a bonus option
                                                               to purchase 15,100 common shares as COO and an additional 3,300
                                                               common shares as a director, within ten years from date of issuance,
                                                               at a price of $4.56 per share that vests over 4 years: 25% at year
                                                               one and thereafter in equal monthly installments.
10.
As of December 31, 2012, William J. Clough, CEO/Director held
                                                               456,231 outstanding options, Matthew M. McKenzie, COO/Director
                                                               held 60,001 outstanding options and Daniel N. Ford, CFO held 37,794
                                                               outstanding options.
11.
Please see the disclosure of assumptions made in the valuation
                                                               of the option awards included in Note 8 of Notes to Consolidated
                                                               Financial Statements, Stockholders' Equity in the Company's
                                                               financial statements included elsewhere in this prospectus.
79
Outstanding Equity Awards At Fiscal Year End
The following table sets forth the outstanding equity awards
at December 31, 2012 to each of the named executive officers:
Name
Equity Incentive Plan
Awards: Number of Shares, Units or Other Rights That Have Vested (#)
Equity Incentive Plan
Awards: Number of Shares, Units or Other Rights That Have Not Vested (#)
Option
Exercise Price ($)
Option
Expiration
Equity Incentive Plan
Awards: Market or Payout Value of Shares, Units or Other Rights That Have Not Vested (1) ($)
William J. Clough (2)
37,177
-
7.50
1/1/2019
-
William J. Clough (2)
8,100
-
7.50
1/1/2019
-
Matthew M. McKenzie (2)
15,100
-
7.50
1/1/2019
-
Matthew M. McKenzie (2)
8,100
-
7.50
1/1/2019
-
Daniel N. Ford (2)
12,598
-
7.50
1/1/2019
-
William J. Clough (3)
20,912
16,265
9.00
10/11/2020
89,295
William J. Clough (3)
3,300
-
9.00
10/11/2020
-
Matthew M. McKenzie (3)
8,494
6,606
9.00
10/11/2020
36,267
Matthew M. McKenzie (3)
3,300
-
9.00
10/11/2020
-
Daniel N. Ford (3)
7,086
5,512
9.00
10/11/2020
30,261
William J. Clough (4)
-
37,177
4.56
4/16/2022
204,102
William J. Clough (4)
-
3,300
4.56
4/16/2022
18,117
Matthew M. McKenzie (4)
-
15,100
4.56
4/16/2022
82,899
Matthew M. McKenzie (4)
-
3,300
4.56
4/16/2022
18,117
Daniel N. Ford (4)
-
12,597
4.56
4/16/2022
69,158
William J. Clough (5)
27,500
302,500
6.00
9/21/2022
1,660,725
Footnotes:
1.
Calculated by multiplying the number of units by the CUI Global
                                                              closing market price ($5.49) as of December 31, 2012.
2.
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.
3.
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.
80
4.
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.
5.
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.
DIRECTOR COMPENSATION
For 2012, each of our non-employee directors received the following
compensation pursuant to our director compensation plan:
·
Cash Retainer
                                                                                                               - $23,750 annually
                                                                                                               for board members
                                                                                                               and $33,750 for
                                                                                                               the Chairman.
·
Initial, one
                                                                                                               time only, option
                                                                                                               to purchase 4,800
                                                                                                               common shares at
                                                                                                               an exercise price
                                                                                                               that is not less
                                                                                                               than the fair market
                                                                                                               value per share
in
                                                                                                               connection with
                                                                                                               appointment the
                                                                                                               board of directors
.
                                                                                                               The option vests
                                                                                                               over four years,
                                                                                                               25% after the first
                                                                                                               year, thereafter
                                                                                                               equally each month
                                                                                                               for the balance
                                                                                                               of the four year
                                                                                                               term.
·
Annual Option
                                                                                                               to purchase 3,300
                                                                                                               common shares at
                                                                                                               an exercise price
                                                                                                               that is not less
                                                                                                               than the fair market
                                                                                                               value per share
                                                                                                               at the date of
                                                                                                               grant. The option
                                                                                                               vests in full after
                                                                                                               one year.
·
Meeting fee:
                                                                                                               none.
Director Compensation Table
The following table sets forth the compensation of the non-employee
directors for the fiscal year ending December 31, 2012.
Name and Principal
Position
Year
Fees
earned or
paid in
cash ($)
(2)
Option
Awards
($) (1)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($)
Total ($)
Colton Melby, Chmn.
2012
33,750
7,191
-
-
-
40,941
Thomas A. Price
2012
23,750
7,191
-
-
-
30,941
Sean P. Rooney
2012
23,750
7,191
-
-
-
30,941
Corey Lambrecht
2012
23,750
7,191
-
-
-
30,941
Footnotes:
1.
Effective April 16, 2012, each director received an option to
                                                              purchase 3,300 common shares at a price of $4.56 per share that
                                                              vests one year after issuance. As of December 31, 2012, each non-employee
                                                              director held 14,700 options remaining outstanding of which 11,400
                                                              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 prospectus.
2.
Each director receives a cash retainer of $23,750 annually,
                                                              no meeting fee and the Chairman receives a cash retainer of $33,750
                                                              annually, no meeting fee.
81
Employment Agreements
During fiscal year 2012, three executive officers were employed
under employment agreements.
Those executive officers are:
·
Chief Executive
                                                                                                               Officer and General
                                                                                                               Counsel
·
President/Chief
                                                                                                               Operating Officer
                                                                                                               of CUI, Inc., a
                                                                                                               wholly owned subsidiary
                                                                                                               of CUI Global,
                                                                                                               Inc. and Chief
                                                                                                               Operating Officer
                                                                                                               of CUI Global,
                                                                                                               Inc.
·
Chief Financial
                                                                                                               Officer of CUI
                                                                                                               Global, Inc. and
                                                                                                               CUI, Inc., a wholly
                                                                                                               owned subsidiary
                                                                                                               of CUI Global,
                                                                                                               Inc.
To see the material terms of each named executive officer's
employment agreement, please see the footnotes to the Summary Compensation Table.
Compensation Committee Interlocks and Insider Participation
None of the members of the Company's Compensation Committee
is or has at any time during the last completed fiscal year been an officer or employee of the Company. None of the Company's
executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee,
of any entity that has one or more executive officers who served on the Company's board of directors or Compensation Committee
during the last completed fiscal year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of our voting shares as of February 25, 2013 by: (i) each shareholder known by us to be the beneficial owner
of 5% or more of the outstanding voting shares, (ii) each of our directors and executives and (iii) all directors and executive
officers as a group. Except as otherwise indicated, we believe that the beneficial owners of the voting shares listed below, based
on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community
property laws where applicable. Shares of common stock issuable upon exercise of options and warrants that are currently exercisable
or that will become exercisable within 60 days of February 25, 2013 have been included in the table.
Effective September 17, 2012, the Board of Directors passed
a resolution eliminating and discontinuing all Series A and B Convertible Preferred and Series C Preferred stock. No shares of
preferred stock are outstanding at the date of this prospectus.
82
BENEFICIAL INTEREST TABLE
Common Stock
Name and Address of Beneficial Owner (1)
Number
Percent of
Class (2)
Percent of All
Voting
Securities (3)
Percent of All
Voting
Securities
After Offering
(12)
Colton Melby (4)
388,021
3.56
%
3.56
%
2.17
%
William J. Clough (5)
153,514
1.39
%
1.39
%*
Thomas A. Price (6)
71,367
*
*
*
Sean P. Rooney (7)
20,473
*
*
*
Corey Lambrecht (8)
14,700
*
*
*
Matthew M McKenzie (9)
53,551
*
*
*
Daniel N. Ford (10)
36,939
*
*
*
Manchester Management Company, LLC (11)
691,665
6.36
%
6.36
%
3.87
%
Officers, Directors, Executives as Group
738,565
6.62
%
6.62
%
4.07
%
Footnotes:
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 10,883,280 shares of common stock
                                                              issued and outstanding at December 31, 2012 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 10,883,280 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 Chairman of the Board of Directors.
5.
Mr. Clough's common stock includes vested options to purchase
                                                              140,181 common shares. Mr. Clough is a Director 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 46,124
                                                              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 24,935
                                                               common shares. Mr. Ford is the Chief Financial Officer of CUI Global,
                                                               Inc.
11.
The
                                                                                                                                  securities
                                                                                                                                  are
                                                                                                                                  beneficially
                                                                                                                                  owned
                                                                                                                                  by
                                                                                                                                  both
                                                                                                                                  Manchester
                                                                                                                                  Management
                                                                                                                                  Company,
                                                                                                                                  LLC
                                                                                                                                  and
                                                                                                                                  James
                                                                                                                                  E.
                                                                                                                                  Besser
                                                                                                                                  per
                                                                                                                                  the
                                                                                                                                  Schedule
                                                                                                                                  13G/A
                                                                                                                                  filed
                                                                                                                                  February
                                                                                                                                  8,
                                                                                                                                  2013.
The
                                                                                                                                  address
                                                                                                                                  for
                                                                                                                                  Manchester
                                                                                                                                  Management
                                                                                                                                  Company,
                                                                                                                                  LLC
                                                                                                                                  and
                                                                                                                                  James
                                                                                                                                  E.
                                                                                                                                  Besser
                                                                                                                                  is
                                                                                                                                  131
                                                                                                                                  Charles
                                                                                                                                  Street,
                                                                                                                                  1st
                                                                                                                                  Floor,
                                                                                                                                  Boston,
                                                                                                                                  Massachusetts
                                                                                                                                  02114.
12.
Calculated on the basis of 10,883,280 shares of common stock
                                                               outstanding plus the 7,000,000 shares to be issued by this offering;
                                                               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.
83
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS
AND
CERTAIN CONTROL PERSONS
Except as set forth herein, none of the Company's directors
or officers nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached
to its outstanding shares, nor any immediate family member of any of the foregoing persons, since the beginning of fiscal year
2010, has any material interest, direct or indirect, in any transaction or in any presently proposed transaction where the amount
involved exceeds $120,000 which has or will materially affect the Company.
International Electronic Devices, Inc. and Other Affiliate
Related Matters
Effective May 16, 2008 the Company formed a wholly owned subsidiary
into which CUI, Inc., an Oregon corporation, merged all of its assets. The funding for this acquisition was provided by a bank
note, a seller's note and a convertible seller's note. Matthew McKenzie, COO, and Daniel Ford, CFO, each were partial
owners in CUI, Inc. prior to the acquisition and they each, along with James McKenzie, are shareholders in International Electronic
Devices, Inc. ("IED"). The seller's convertible note was satisfied in 2010.
The acquisition of CUI
,
Inc.
utilized a $14,000,000 seller's promissory note issued
by CUI, Inc. (formerly
Waytronx Holding, Inc.)
to IED,
seller of assets in the transaction
, 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, and 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 $1,500,000 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 2012 and 2011, $3,468,221 and $1,110,809, respectively,
in principal and interest payments were made in relation to the promissory notes issued to IED. The 2012 payment utilized $3,000,000
from the equity sale proceeds for the repayment of principal. The 2011 payment included a note receivable balance of $192,508
held by CUI Global that was conveyed to IED and applied towards the promissory note balance in accordance with a settlement agreement.
84
Leased Office and Warehouse
As an integrated part of the CUI asset acquisition, the CUI
Global, Inc. corporate offices were relocated to the CUI location at 20050 SW 112th Avenue, Tualatin, Oregon 97062. CUI and CUI
Global occupy the 61,380 square feet of offices and warehouse premises under a ten year, non-cancelable lease agreement beginning
September 1, 2006 with Barakel, LLC (a related party) at a base monthly rent subject to periodic base payment increases plus real
property taxes, utilities, insurance and common area maintenance charges. During the year ended December 31, 2012, the monthly
base rent was $40,250 in accordance with the lease schedule. During the period January 1 through August 31, 2011, the monthly
base rent was $40,000 and increased in accordance with the lease schedule to $40,250 for the period September 1 through December
31, 2011. Barakel, LLC is controlled by James McKenzie, majority owner of CUI, Inc. prior to acquisition and father of Matt McKenzie,
and Matt McKenzie, COO and Director of the Company.
Matters Relating to the Bank Note
The $6,000,000 bank note utilized in the acquisition of CUI
Inc., as noted above, was secured by personal guarantees in the form of Letters of Credit in favor of the Commerce Bank of Oregon
("Commerce Bank"). In consideration for posting the Letters of Credit, the Company issued to each individual who supplied
a Letter of Credit, warrants to purchase, within three years at a per share price of $0.30, one CUI Global common share for every
thirty dollars ($30) of the Letter of Credit. The warrants became fully vested at the second anniversary date. A former officer
of the Company, Clifford Melby, received a 10,000 share warrant which was exercised August 17, 2010; a former director, John Rouse,
received a 10,000 share warrant which was exercised December 16, 2010; a director, Colton Melby (through an entity in which Colton
Melby controls the investment decisions), received a 13,333 share warrant which was exercised August 18, 2010; a director, Thomas
A. Price, received a 23,333 share warrant which was exercised April 19, 2011; a former owner of 10% of the voting rights attached
to our outstanding shares, Kjell H. Qvale Survivors Trust, received a 133,333 share warrant which was exercised May 13, 2011;
and a 10,000 share warrant was issued to an individual investor, which was exercised May 4, 2011.
In August 2010, the Company received $2,000,000 in equity investment
for which the Company issued 631,314 shares of common stock at $3.168 per share. The $2,000,000 received was used to pay down
the $6,000,000 bank loan with Commerce Bank, bringing the net loan balance to $4,000,000. The 631,314 shares of common stock were
issued as follows: 284,091 to an investor, 126,263 to an entity controlled by a director, Colton Melby, 126,263 to a director,
Thomas A. Price, and 94,697 to a former officer of the Company.
DESCRIPTION OF CAPITAL STOCK
AND RELATED STOCKHOLDER MATTERS
Description of Securities
The Company's common stock is traded on The NASDAQ Stock
Market under the trading symbol "CUI." The Company currently has authorized 325,000,000 common shares, par value $0.001
per share and, as of December 31, 2012, the Company's issued and outstanding shares consisted of 10,883,280 shares of common
stock of which 8,636,820 shares are freely tradable without restriction or limitation under the Securities Act of 1933 (the "Securities
Act"). Effective September 17, 2012, the Board of Directors passed a resolution eliminating and discontinuing all Series A and B Convertible Preferred
and Series C Preferred stock. No shares of preferred stock are outstanding at the date of this prospectus. As of December 31,
2012, the Company had in excess of 3,000 beneficial shareholders of record.
For
a description of provisions of the Company's Articles of Incorporation and Bylaws that could delay, defer or prevent a change
of control, see "Risk Factors-Risks Relating to Shareholder Rights."
85
Common Stock
The holders of common stock are entitled to one vote per share
for each share on all matters to be voted on by the stockholders and do not have cumulative voting rights, pre-emptive rights
or other rights to subscribe for, or purchase additional shares of capital stock, and no conversion rights, redemption or sinking-fund
provisions. The Company may issue additional shares of common stock which could dilute its current shareholder's share value.
The holders of common stock are entitled to share ratably in
dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available
therefor. The Company has not paid any dividends to date. The Company intends to employ all available funds for the growth and
development of its business, and accordingly, does not intend to declare or pay any dividends in the foreseeable future.
Our ability to pay dividends on our common stock is limited by our existing line of credit, and may be further restricted by the
terms of any of our future debt or preferred securities.
The approximate 2,246,460 shares of common stock held by existing
shareholders as of December 31, 2012 that are "restricted" within the meaning of Rule 144 adopted under the Securities
Act (the "Restricted Shares"), may not be sold unless they are registered under the Securities Act or sold pursuant
to an exemption from registration, such as the exemption provided by Rule 144 promulgated under the Securities Act. The Restricted
Shares were issued and sold by us in private transactions in reliance upon exemptions from registration under the Securities Act
and may only be sold in accordance with the provisions of Rule 144 of the Securities Act, unless otherwise registered under the
Securities Act.
Other than as described herein, as of the date of this prospectus,
there are currently no plans, arrangements, commitments or understandings for the issuance of additional shares of common stock.
Preferred Stock
Effective September 17, 2012, the Board of Directors passed
a resolution eliminating and discontinuing all Series A and B Convertible Preferred and Series C Preferred stock. As of December
31, 2012, no shares of Series B and Series C Convertible Preferred Stock were outstanding.
Although we do not presently have any preferred stock outstanding
and at present the Company has no plans to issue any preferred stock, our Articles of Incorporation allow us to issue shares of
preferred stock without any vote or further action by our stockholders. Our board of directors has the authority to issue preferred
stock without further stockholder approval, including large blocks of preferred stock as well as the authority to fix and determine
the relative rights and preferences of preferred stock. As a result, our board of directors could authorize the issuance of a
series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive
dividend payments before dividends are distributed to the holders of common stock or other preferred stockholders and the right
to the redemption of the shares, together with a premium, prior to the redemption of our common stock or existing preferred shares.
The issuance of shares of preferred stock or the issuance of
rights to purchase such shares could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of
a series of preferred stock might impede a business combination by including class voting rights that would enable the holder
to block such a transaction or facilitate a business combination by including voting rights that would provide a required percentage
vote of the stockholders. In addition, under certain circumstances, the issuance of preferred stock could adversely affect the
voting power of the holders of the common stock.
86
Although the Company's board of directors is required
to make any determination to issue such preferred stock based on its judgment as to the best interests of the shareholders of
the Company, the board of directors could act in a manner that would discourage an acquisition attempt or other transaction that
some, or a majority, of the shareholders might believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then market price of such stock. The board of directors does not at present intend to seek stockholder
approval prior to any issuance of currently authorized stock, unless required by law or otherwise.
Employee Equity Incentive Plans
At December 31, 2012, the Company had outstanding the following
equity compensation plan information:
Plan Category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuances under
equity compensation
plans (excluding securities
reflected in column
Equity compensation plans approved by security holders
49,917
$
5.47
1,329,833
Equity compensation plans not approved by security holders
632,224
$
6.54
649,250
Total
682,141
$
6.47
1,979,083
Equity Compensation Plans Not Approved by Shareholders
The 2009 Equity Incentive Plan (Executive)
provides for the issuance of stock options to attract, retain and motivate executive and management employees and directors and
to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management employees
and directors based upon the value of the Company's stock and to provide these individuals with an incentive to maximize
the success of the Company and further the interest of the shareholders. The 2009 Plan provides for the issuance of Incentive
Non Statutory Options. The Administrator of the plan is authorized to determine the exercise price per share at the time the option
is granted, but the exercise price shall not be less than the fair market value on the date the option is granted. Stock options
granted under the 2009 Plan have a maximum duration of ten years.
The description of the Company's capital stock does not
purport to be complete and is subject to and qualified by its Articles of Incorporation, Bylaws, amendments thereto
,
which are filed as exhibits to the registration statement of which this prospectus is a part ,
and by the provisions of
applicable Colorado law.
87
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Computershare
Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, Colorado 80401.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado General Corporation Act, as revised, provides
that if so provided in the articles of incorporation, the corporation shall eliminate or limit the personal liability of a director
to the corporation or to its shareholders for monetary damages for breach of fiduciary duty as a director; except that any such
provision shall not eliminate or limit the liability of a director to the corporation or to its shareholders for monetary damages
for any breach of the director's duty of loyalty to the corporation or to its shareholders, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, unlawful distributions, or any transaction from which the
director directly or indirectly derived an improper personal benefit.
Our Articles of Incorporation and Bylaws provide that a person
who is performing his or her duties shall not have any liability by reason of being or having been a director of the corporation
and that the Company shall indemnify and advance expenses to a director or officer in connection with a proceeding to the fullest
extent permitted or required by and in accordance with the indemnification sections of Colorado statutes.
The above discussion of our Articles of Incorporation and the
General Corporation Law of Colorado is only a summary and is qualified in its entirety by the full text of each of the foregoing.
UNDERWRITING
The
underwriter
named below has agreed to buy, subject to the terms of the underwriting agreement, the number of shares of common stock listed
opposite its name below. The underwriter is committed to purchase and pay for all of the shares if any are purchased, other than
those shares covered by the over-allotment option we describe below. The underwriting agreement also provides that if the underwriter
defaults, this offering of our securities may be terminated.
Number
    of Shares of Common Stock
Underwriter
Craig-Hallum
    Capital Group LLC
The underwriter has advised us that it proposes to offer the
shares of common stock to the public at $ per share. The underwriter proposes to offer the shares to be sold in this offering
to certain dealers at the same prices less an aggregate concession of not more than $ for each share. After the offering, these
figures may be changed by the underwriter.
We have granted to the underwriter an option to purchase up
to an additional 1,050,000 shares of common stock from us at the same prices to the public, and with the same underwriting discount,
as set forth in the table below. The underwriter may exercise this option any time during the 30-day period after the date of
this prospectus, but only to cover over-allotments, if any. To the extent the underwriter exercises the option, the underwriter
will become obligated, subject to certain conditions, to purchase the shares for which it exercises the option.
88
The table below summarizes the underwriting discounts that
we will pay to the underwriter. These amounts are shown assuming both no exercise and full exercise of the over-allotment option.
In addition to the underwriting discount, we have agreed to reimburse the underwriter for its reasonable out-of-pocket accountable
fees and disbursements in connection with this offering, which are estimated to be $             . We also granted the underwriter a right
of first refusal to serve as our exclusive placement agent, lead managing underwriter or exclusive financial advisor in connection
with future financing or merger or acquisition transactions we undertake on or before September 30, 2013. In accordance with applicable
rules of the Financial Industry Regulatory Authority ("FINRA"), the underwriter does not have more than one opportunity
to waive or terminate the right of first refusal in consideration of any payment or fee, and any payment or fee to waive or terminate
the underwriter's right of first refusal must be paid in cash and have a value not in excess of the greater of 1% of the proceeds
in this offering (or, if greater, the maximum amount permitted by FINRA rules for compensation in connection with this offering)
or 5% of the underwriting discount or commission paid in connection with any future financing subject to right of first refusal
(including any overallotment option that may be exercised). The fees and expenses of the underwriter that we have agreed to reimburse
are not included in the underwriting discounts set forth in the table below.
The underwriter has not received and will not receive from
us any other item of compensation or value in connection with this offering considered by FINRA to be underwriting compensation
under its rule of fair price. The underwriting discount and other items of compensation the underwriter will receive were determined
through arms' length negotiations between us and the underwriter.
Total with no
Total with
Over-Allotment
Over-Allotment
Underwriting discount to be paid to the underwriter by us
$
$
We
estimate that
the total expenses of the offering, excluding
underwriting discounts and commissions, will be $             . This includes $             of fees and expenses of the underwriter.
We have agreed to indemnify the underwriter against certain
liabilities, including civil liabilities under the Securities Act of 1933, or to contribute to payments that the underwriter may
be required to make in respect of those liabilities.
Our directors and officers have agreed not to offer, sell,
agree to sell, directly or indirectly, or otherwise dispose of any shares of common stock or any securities convertible into or
exchangeable for shares of common stock without the prior written consent of the underwriter for a period of 90 days after the
date of this prospectus. These "lock-up" agreements are subject to limited exceptions, including with respect to Colton
Melby, the Chairman of our Board of Directors, an exception for non-elected or forced sales of our securities in connection with
a margin account maintained by him with a broker-dealer and for which shares of our common stock serve as collateral for the account.
We have agreed to certain restrictions on our ability to sell
additional shares of our common stock for a period of 90 days after the date of this prospectus. We have agreed not to offer,
sell, agree to sell, directly or indirectly, or otherwise issue or dispose of, any shares of common stock, securities convertible
into or exchangeable for shares of common stock, or any related security or instrument, without the prior written consent of the
underwriter. The agreement is subject to limited exceptions.
89
The 90-day lock-up period in all of the lock-up agreements
is subject to extension if (i) during the last 17 days of the lock-up period we issue an earnings release or material news or
a material event relating to us occurs or (ii) prior to the expiration of the lock-up period, we announce that we will release
earnings results during the 16-day period beginning on the last day of the lock-up period, in which case the restrictions imposed
in these lock-up agreements shall continue to apply until the expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event. The restrictions in the lock-up agreements can be waived
at any time in the sole discretion of the underwriter.
To facilitate the offering, the underwriter may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock during and after the offering. Specifically, the underwriter
may over-allot or otherwise create a short position in the common stock for its own account by selling more shares than have been
sold to it by us. The underwriter may elect to cover any such short position by purchasing shares of common stock in the open
market or by exercising the over-allotment option granted to the underwriter. In addition, the underwriter may stabilize or maintain
the price of the common stock by bidding for or purchasing shares of common stock in the open market and may impose penalty bids.
If penalty bids are imposed, selling concessions allowed to broker-dealers participating in the offering are reclaimed if shares
of common stock previously distributed in the offering are repurchased, whether in connection with stabilization transactions
or otherwise. The effect of these transactions may be to stabilize or maintain the market price of the common stock at a level
above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of the
common stock to the extent that it discourages resales of the common stock. The magnitude or effect of any stabilization or other
transactions is uncertain. These transactions may be effected on the NASDAQ Stock Market or otherwise and, if commenced, may be
discontinued at any time.
In connection with this offering, the underwriter (and selling
group members) may also engage in passive market making transactions in the common stock on the NASDAQ Stock Market. Passive market
making consists of displaying bids on the NASDAQ Stock Market limited by the prices of independent market makers and effecting
purchases limited by those prices in response to order flow. Rule 103 of Regulation M promulgated by the SEC limits the amount
of net purchases that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize
the market price of the common stock at a level above that which might otherwise prevail in the open market and, if commenced,
may be discontinued at any time.
The underwriter may facilitate the marketing of this offering
online directly or through one of its affiliates. In those cases, prospective investors may view offering terms and a prospectus
online and place orders online or through their financial advisors.
Selling Restrictions
European Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a "Relevant Member State") an offer to the public of any shares
of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member
State of any shares of our common stock may be made at any time under the following exemptions under the Prospectus Directive,
if they have been implemented in that Relevant Member State:
(a)
to
                                                                 any legal entity which is a qualified investor as defined in
                                                                 the Prospectus Directive;
90
(b)
to fewer than 100 or, if the Relevant Member State has implemented
                                                                 the relevant provision of the 2010 PD Amending Directive, 150,
                                                                 natural or legal persons (other than qualified investors as defined
                                                                 in the Prospectus Directive), as permitted under the Prospectus
                                                                 Directive, subject to obtaining the prior consent of the representatives
                                                                 for any such offer; or
(c)   in any
other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares of our common
stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the
Prospectus Directive.
For the purposes of this provision, the expression an "offer
to the public" in relation to any shares of our common stock in any Relevant Member State means the communication in any
form and by any means of sufficient information on the terms of the offer and any shares of our common stock to be offered so
as to enable an investor to decide to purchase any shares of our common stock, as the same may be varied in that Member State
by any measure implementing the Prospectus Directive in that Member State, the expression "Prospectus Directive" means
Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant
Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression "2010 PD Amending
Directive" means Directive 2010/73/EU.
United Kingdom
This prospectus and any other material in relation to the shares
described herein is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors
within the meaning of Article 2(1)(e) of the Prospective Directive ("qualified investors") that also (i) have professional
experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended (the "Order"), (ii) who fall within Article 49(2)(a) to (d) of the Order or (iii)
to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons").
The shares are only available to, and any invitation, offer or agreement to purchase or otherwise acquire such shares will be
engaged in only with, relevant persons. This prospectus and its contents are confidential and should not be distributed, published
or reproduced (in whole or in part) or disclosed by recipients to any other person in the United Kingdom. Any person in the United
Kingdom that is not a relevant person should not act or rely on this prospectus or any of its contents.
The distribution of this prospectus in the United Kingdom to
anyone not falling within the above categories is not permitted and may contravene the Order. No person falling outside those
categories should treat this prospectus as constituting a promotion to him, or act on it for any purposes whatever. Recipients
of this prospectus are advised that we, the underwriter and any other person that communicates this prospectus are not, as a result
solely of communicating this prospectus, acting for or advising them and are not responsible for providing recipients of this
prospectus with the protections which would be given to those who are clients of any aforementioned entities that is subject to
the Financial Services Authority Rules.
Italy
The offering of the shares of our common stock has not been
registered pursuant to the Italian securities legislation and, accordingly, we have not offered or sold, and will not offer or
sell, our common stock in the Republic of Italy in a solicitation to the public, and that sales of our common stock in the Republic
of Italy shall be effected in accordance with all Italian securities, tax and exchange control and other applicable laws and regulations.
In any case, our common stock cannot be offered or sold to any individuals in the Republic of Italy either in the primary market
or the secondary market.
91
We will not offer, sell or deliver any securities or distribute
copies of this prospectus or any other document relating to our common stock in the Republic of Italy except to "Professional
Investors", as defined in Article 31.2 of CONSOB Regulation No. 11522 of 2 July 1998 as amended ("Regulation No. 11522"),
pursuant to Article 30.2 and 100 of Legislative Decree No. 58 of 24 February 1998 as amended ("Decree No. 58"), or in
any other circumstances where an expressed exemption to comply with the solicitation restrictions provided by Decree No. 58 or
Regulation No. 11971 of 14 May 1999 as amended applies, provided, however, that any such offer, sale or delivery of our common
stock or distribution of copies of this prospectus or any other document relating to our common stock in the Republic of Italy
must be:
(a)
made
                                                             by investment firms, banks or financial intermediaries permitted
                                                             to conduct such activities in the Republic of Italy in accordance
                                                             with Legislative Decree No. 385 of 1 September 1993 as amended ("Decree
                                                             No. 385"), Decree No. 58, CONSOB Regulation No. 11522 and any
                                                             other applicable laws and regulations;
(b)
in
                                                             compliance with Article 129 of Decree No. 385 and the implementing
                                                             instructions of the Bank of Italy, pursuant to which the issue, trading
                                                             or placement of securities in Italy is subject to a prior notification
                                                             to the Bank of Italy, unless an exemption, depending, inter alia,
                                                             on the aggregate amount and the characteristics of our common stock
                                                             issued or offered in the Republic of Italy, applies; and
(c)
in
                                                             compliance with any other applicable notification requirement or
                                                             limitation which may be imposed by CONSOB or the Bank of Italy.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Legal Counsel
The legality of the issuance of the shares offered in this
prospectus will be passed on for us by Johnson, Pope, Boker, Ruppel & Burns, LLP.
No shareholder
of this firm owns any of our securities.
The underwriter has been represented by Faegre Baker Daniels LLP, Minneapolis,
Minnesota.
No expert or counsel named in this prospectus as having prepared
or having certified any part of this prospectus or having given an opinion upon the validity of the securities being registered
or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant
or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parent or subsidiaries
as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
Certifying Accountant
The financial statements of the Company
included
herein as of
December 31, 2012 and December 31, 2011,
and for each of the two fiscal years ended
December 31, 2012, have been audited by Liggett, Vogt & Webb, P. A., Independent
Registered Public Accounting Firm
, as set forth in its report thereon
appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting
and auditing.
The
financial statements of Orbital Gas Systems Limited included herein as of fiscal years ended June 30, 2012 and June 30, 2011 have
been audited by
Baker Tilly Virchow Krause, LLP,
Independent
Auditors, as set forth in its report thereon appearing elsewhere herein, and are included in reliance upon such report given on
the authority of such firm as experts in accounting and auditing.
92
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities may be invoked to
disclaim liability for damages arising under the Securities Act of 1933, as amended, or the Securities Act of 1934 (collectively,
the "Acts"), as amended, it is the position of the Securities and Exchange Commission that such indemnification is against
public policy as expressed in the Acts and are therefore, unenforceable.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 pursuant to the Securities Act of 1933, as amended, with respect to the offer, issuance and
sale of the shares of our common stock being registered herein. This Prospectus does not contain all of the information set forth
in the registration statement. For further information with respect to us and the shares of our common stock to be sold in this
offering, we make reference to the registration statement.
We
are subject to the informational requirements of the Securities Exchange Act of 1934 and are required to file annual, quarterly
and current reports, proxy statements and other information with the SEC.
You may read and copy all or any portion of the
registration statement or any other information, which we filed at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. The address for the SEC's public reference room in Washington, D.C. is U.S. Securities and Exchange
Commission, 100 "F" Street, N.E., Washington, DC 20549. You may request copies of these documents, upon payment of a
duplicating filing fee, by writing to the SEC. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are also available to you free of charge at the SEC's
web site at http://www.sec.gov and our Company website at www.CUIGlobal.com.
93
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
CUI Global, Inc.
Pages
Report of Independent Auditors
F-2
Consolidated Balance Sheets as of December 31, 2012 and 2011
F-3
Consolidated Statements of Operations for the Years Ended December 31,
2012
    and 2011
F-4
Consolidated Statements of Comprehensive Income and Loss for the Years
Ended
    December 31, 2012 and 2011
F-5
Consolidated Statement of Changes in Stockholders' Equity for the Years
Ended
    December 31, 2012 and 2011
F-6 - F-7
Consolidated Statement of Cash Flows for the Years Ended December 31, 2012 and 2011
F-8 – F-9
Notes to the Consolidated Financial Statements
F-10
Orbital Gas Systems Limited
Pages
Report of Independent Auditor's
F-31
Profit and Loss Account for the Years Ended June 30, 2012 and 2011
F-32
Statement of Total Recognized Gains and Losses for the Years Ended June 30, 2012 and 2011
F-33
Note of Historical Cost Profits and Losses for the Years Ended June 30, 2012 and 2011
F-33
Balance Sheet for as of June 30, 2012 and 2011
F-34
Cash Flow Statement for the Years Ended June 30, 2012 and 2011
F-35
Reconciliation of Movements in Shareholders' Funds
F-36
Accounting Policies and Notes to the Financial Statements
F-37
F-
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of:
CUI Global, Inc.
We have audited the accompanying consolidated
balance sheets of CUI Global, Inc. (the "Company") as of December 31, 2012 and 2011, and the related statements of
operations and comprehensive income and loss, stockholders' equity, and cash flows for the years ended December 31, 2012
and 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly in all material respects, the financial position of CUI Global, Inc. as of December 31, 2012 and 2011 and
the results of its operations and its cash flows for the years ended December 31, 2012 and 2011 in conformity with accounting principles
generally accepted in the United States of America.
/s/ LIGGETT, VOGT & WEBB,
P.A.
Certified Public Accountants
Boynton Beach, Florida
February 19, 2013
F-
2
CUI Global, Inc.
Consolidated Balance Sheets
For the Years Ended December 31, 2012
and 2011
December 31,
2012
December 31,
2011
Assets:
Current Assets:
Cash and cash equivalents
$
3,039,840
$
176,775
Trade accounts receivable, net of allowance of $130,000 and $125,000, respectively
4,965,926
3,694,641
Inventories, net of allowance of $250,000 and $240,000, respectively
4,843,905
3,563,111
Prepaid expenses and other
378,885
683,101
Total current assets
13,228,556
8,117,628
Property and equipment, net
1,016,219
910,810
Other assets:
Investment - equity method
258,244
198,621
Other Intangible assets, net
8,618,524
8.967,041
Deposits and other
11,360
92,216
Notes receivable, net
501,422
529,706
Debt offering costs, net
42,778
116,111
Goodwill
13,046,358
13,046,358
Total other assets
22,478,686
22,950,053
Total assets
$
36,723,461
$
31,978,491
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable
$
2,496,881
$
2,114,029
Preferred stock dividends payable
-
5,054
Line of credit
459,448
1,528,900
Accrued expenses
1,142,839
1,197,395
Accrued compensation
186,636
126,672
Unearned revenue
371,541
70,755
Note payable, current portion due
-
4,000,000
Convertible note payable, related party, current portion due
-
35,000
Total current liabilities
4,657,345
9,077,805
Long term note payable, related party, net of current portion due
7,303,683
10,303,683
Total long term liabilities
7,303,683
10,303,683
Total liabilities
11,961,028
19,381,488
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.001; 0 and 10,000,000 shares authorized at December 31, 2012 and 2011, respectively
-
-
Convertible Series A preferred stock, 0 and 5,000,000 shares authorized, 0 and 50,543 shares issued and outstanding liquidation preference of $0 and $50,543 at December 31, 2012 and December 31, 2011, respectively
-
51
Convertible Series B preferred stock, 0 and 30,000 shares authorized, and no shares outstanding at December 31, 2012 and December 31, 2011, respectively
-
-
Convertible Series C preferred stock, 0 and 10,000 shares authorized, and no shares outstanding at December 31, 2012 and December 31, 2011, respectively
-
-
Common stock, par value $0.001; 325,000,000 and 325,000,000 shares authorized and 10,883,280 and 7,134,856 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively
10,883
7,315
Additional paid-in capital
100,947,708
86,217,169
Accumulated deficit
(76,171,822
)
(73,645,501
)
Accumulated other comprehensive gain (loss)
(24,336
)
17,969
Total stockholders' equity
24,762,433
12,597,003
Total liabilities and stockholders' equity
$
36,723,461
$
31,978,491
See accompanying notes to financial statements
F-
3
CUI Global, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2012
and 2011
2012
2011
Revenues:
Product Sales
$
41,031,050
$
38,877,698
Revenue from freight
53,539
60,628
Total revenue
41,084,589
38,938,326
Cost of revenues
25,707,893
24,133,073
Gross profit
15,376,696
14,805,253
Operating expenses
Selling, general and administrative
16,221,373
13,347,853
Research and development
791,332
716,321
Bad debt
65,763
82,192
Impairment of intangible, trademark and trade name V-Infinity
278,428
-
Total operating expenses
17,356,896
14,146,366
Income (loss) from continuing operations
(1,980,200
)
658,887
Other income (expense)
Other income
95,069
53,657
Other expense
(18,567
)
(38,678
)
Gain on sale of technology rights
-
143,636
Earnings from equity investment
59,623
41,472
Interest expense - amortization of debt offering costs and debt discount
(73,333
)
(334,747
)
Interest expense
(575,199
)
(918,189
)
Total other income (expense), net
(512,407
)
(1,052,849
)
Loss from continuing operations before taxes
(2,492,607
)
(393,962
)
Provision for taxes
33,714
29,810
Consolidated loss from continuing operations
(2,526,321
)
(423,772
)
Income (loss) from discontinued operations
(Loss) from discontinued operations
-
(160,153
)
Gain on divestment of Comex Electronics
-
603,034
Net income from discontinued operations
-
442,881
Consolidated Net income (loss)
(2,526,321
)
19,109
Less: Net income from discontinued operations - noncontrolling interest
-
67,872
Net (loss) allocable to common stockholders
$
(2,526,321
)
$
(48,763
)
Basic and diluted (loss) per common share from continuing operations
$
(0.25
)
$
(0.06
)
Basic and diluted income per common share from discontinued operations - attributable to CUI Global, Inc.
$
-
$
0.05
Basic and diluted (loss) per common share
$
(0.25
)
$
(0.01
)
Basic weighted average common and common equivalents shares outstanding
10,175,989
7,249,180
See accompanying notes to financial statements
F-
4
CUI Global, Inc.
Consolidated Statements of Comprehensive
Income and Loss
For the Years Ended December 31, 2012
and 2011
2012
2011
Net (loss) allocable to common stockholders
$
(2,526,321
)
$
(48,763
)
Other comprehensive income (loss)
Foreign currency translation adjustment
$
(42,305
)
$
68,779
Comprehensive income (loss)
$
(2,568,626
)
$
20,016
See accompanying notes to financial statements
F-
5
CUI Global, Inc.
Consolidated Statements of Changes in
Stockholders' Equity
For the Years Ended December 31, 2012
and 2011
Series A Preferred Stock and
Common Stock and
Preferred Stock Issuable
Series B Preferred Stock
Series C Preferred Stock
Common Stock Issuable
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Balance, December 31, 2010
50,543
$
51
-
$
-
-
$
-
7,136,523
$
7,137
Warrants and options granted for services and compensation
-
-
-
-
-
-
-
-
Common stock issued for options and warrants exercised in exchange for cash and accrued compensation
-
-
-
-
-
-
166,936
167
Common stock issued for services and compensation
-
-
-
-
-
-
10,957
11
Fractional Shares that were Rounded Up as a Result of the Reverse-Split
-
-
-
-
-
-
97
-
Noncontrolling interest divestment of Comex Electronics Ltd.
-
-
-
-
-
-
-
-
Net loss for the year ended December 31, 2011
-
-
-
-
-
-
-
-
Less Non-controlling interest
-
-
-
-
-
-
-
-
Other comprehensive gain
-
-
-
-
-
-
-
-
Balance, December 31, 2011
50,543
$
51
-
$
-
-
$
-
7,314,513
$
7,315
Warrants and options granted for services and compensation
-
-
-
-
-
-
-
-
Common stock issued for options and warrants exercised in exchange for cash and accrued compensation
-
-
-
-
-
-
10,071
10
Common stock issued for the conversion of Preferred Stock and accrued preferred stock dividends
(50,543
)
(51
)
-
-
-
-
9,661
9
Issuance of common stock
-
-
-
-
-
-
3,359,887
3,360
Common stock issued for services and compensation
-
-
-
-
-
-
188,096
188
Common stock issued for royalties
-
-
-
-
-
-
1,052
1
Fractional Shares that were Rounded Up as a Result of the Reverse-Split
-
-
-
-
-
-
-
-
Net loss for the year ended December 31, 2012
-
-
-
-
-
-
-
-
Other comprehensive (loss)
-
-
-
-
-
-
-
-
Balance, December 31, 2012
-
$
-
-
$
-
-
$
-
10,883,280
$
10,883
F-
6
Total
Additional
Subscription
Accumulated
Noncontrolling
Accumulated Other
Stockholders'
Paid-in capital
Receivable
Deficit
Interest
Comprehensive Income (Loss)
Equity (Deficit)
Balance, December 31, 2010
$
85,939,480
$
-
$
(73,596,738
)
$
(346,344
)
$
(50,810
)
$
11,952,776
Warrants and options granted for services and compensation
166,367
-
-
-
-
166,367
Common stock issued for options and warrants exercised in exchange for cash and accrued compensation
49,833
-
-
-
-
50,000
Common stock issued for services and compensation
61,489
-
-
-
-
61,500
Fractional Shares that were Rounded Up as a Result of the Reverse-Split
-
-
-
-
-
-
Noncontrolling interest divestment of Comex Electronics Ltd.
-
-
-
278,472
-
278,472
Net loss for the year ended December 31, 2011
-
-
(48,763
)
-
-
(48,763
)
Less Non-controlling interest
-
-
-
67,872
-
67,872
Other comprehensive gain
-
-
-
-
68,779
68,779
Balance, December 31, 2011
$
86,217,169
$
-
$
(73,645,501
)
$
-
$
17,969
$
12,597,003
Warrants and options granted for services and compensation
232,785
-
-
-
-
232,785
Common stock issued for options and warrants exercised in exchange for cash and accrued compensation
3,011
-
-
-
-
3,021
Common stock issued for the conversion of Preferred Stock and accrued preferred stock dividends
5,095
-
-
-
-
5,053
Issuance of common stock
13,525,903
-
-
-
-
13,529,263
Common stock issued for services and compensation
957,108
-
-
-
-
957,296
Common stock issued for royalties
6,637
-
-
-
-
6,638
Fractional Shares that were Rounded Up as a Result of the Reverse-Split
-
-
-
-
-
-
Net loss for the year ended December 31, 2012
-
-
(2,526,321
)
-
-
(2,526,321
)
Other comprehensive (loss)
-
-
-
-
(42,305
)
(42,305
)
Balance, December 31, 2012
$
100,947,708
$
-
$
(76,171,822
)
$
-
$
(24,336
)
$
24,762,433
See accompanying notes to financial statements
F-
7
CUI Global, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2012
and 2011
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) - attributable to common stockholders
$
(2,526,321
)
$
(48,763
)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
Stock based compensation
1,190,081
227,867
Non-cash interest expense, including amortization of beneficial conversion value, warrant related debt discounts and intrinsic value of convertible debt and amortization of debt discount and amortization of debt offering costs
73,333
334,747
Earnings in equity investment
(59,623
)
(41,472
)
Bad debt expense
65,763
82,192
Amortization of technology rights
26,510
245,144
Amortization of patent costs
664
333
Amortization of website development
13,718
4,328
Amortization of intangible, trademark and trade name V-Infinity
109,540
-
Impairment of intangible, trademark and trade name V-Infinity
278,428
-
Inventory reserve
10,000
75,995
Gain on sale of technology rights
-
(143,636
)
Loss on disposal of assets
-
1,563
Net income - noncontrolling interest in discontinued operations
-
67,872
Depreciation
579,861
520,959
(Increase) decrease in assets:
Trade accounts receivable
(1,337,048
)
107,902
Inventory
(1,290,794
)
96,535
Prepaid expenses and other current assets
285,690
(335,302
)
Deposits and other assets
80,856
(29,001
)
Increase (decrease) in liabilities:
Accounts payable
382,852
356,347
Accrued expenses
(47,919
)
(391,289
)
Accrued compensation
59,964
(272,341
)
Unearned revenue
300,786
725
NET CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES
(1,803,659
)
860,705
NET CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES
-
22,141
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in patents
-
(6,646
)
Investment in other intangible assets, net
(80,343
)
(37,418
)
Proceeds from Notes receivable
46,808
63,506
Proceeds from sales of technology rights
-
425,000
Purchase of property and equipment
(685,269
)
(422,970
)
NET CASH PROVIDED BY (USED IN) CONTINUING INVESTING ACTIVITIES
(718,804
)
21,472
NET CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES
-
195,278
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to demand notes payable, net of proceeds
(1,069,452
)
(20,879
)
Payments to notes and loans payable, net of proceeds
(4,000,000
)
(481,326
)
Proceeds from (payments to) convertible notes payable, related party
(35,000
)
35,000
Payments on notes and loans payable, related party
(3,000,000
)
(300,000
)
Proceeds from sales of common stock, and exercise of warrants and options, net of offering costs
13,532,285
50,000
NET CASH PROVIDED BY (USED IN) CONTINUING FINANCING ACTIVITIES
5,427,833
(717,205
)
NET CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES
-
(648,218
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
(42,305
)
68,779
Cash and cash equivalents at beginning of year
176,775
373,823
Cash and cash equivalents at end of period
3,039,840
176,775
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
$
2,863,065
$
(197,048
)
(continued)
F-
8
For the years ended
December 31,
2012
2011
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid
$
72,630
$
39,264
Interest paid
$
597,814
$
917,216
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Amortization of debt offering costs
$
73,333
$
334,747
Royalties paid in common stock
$
6,638
$
-
Conversion of accrued liabilities to common stock
$
5,054
$
-
Conversion of preferred stock to common stock
$
51
$
-
Common stock issued for consulting services and compensation and accrued liabilities payable in common stock
$
957,295
$
61,500
See accompanying notes to financial statements
F-
9
CUI Global, Inc.
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
1.
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
CUI Global Inc. ("the Company") is a platform
company dedicated to maximizing shareholder value through the acquisition, development and commercialization of new, innovative
technologies. Through its subsidiaries, CUI Global has built a diversified portfolio of industry leading technologies that touch
many markets.
CUI defines its products into three categories: electronic
components including connectors, speakers, buzzers and control solutions including encoders and sensors; power solutions and test
and measurement including the Vergence GasPT2 . These offerings provide a technology architecture that addresses power and related
accessories as well as test and measurement capabilities to industries ranging from consumer electronics to defense and alternative
energy.
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. The operations of CUI Japan are not affected
by this divestment.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates in 2012 and 2011 include estimates used to review the Company's long-lived assets
for impairment, allowances for uncollectible accounts, inventory valuation, valuations of non-cash capital stock issuances and
the valuation allowance on deferred tax assets.
Principles of Consolidation
The consolidated financial statements for 2012 include
the accounts of CUI Global, Inc. and its wholly owned subsidiaries CUI, Inc. and CUI Japan. The consolidated financial statements
for 2011 include the accounts of CUI Global, Inc. and its wholly owned subsidiaries CUI, Inc. and CUI Japan and the discontinued
operations of Comex Electronics through June 30, 2011. Significant intercompany accounts and transactions have been eliminated
in consolidation.
Fair Value of Financial Instruments
FASB Accounting Standards Codification No. 825 ("FASB
ASC 825"), "Financial Instruments", requires disclosures of information about the fair value of certain financial
instruments for which it is practicable to estimate that value. For purposes of this disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than
in a forced sale or liquidation.
Management believes the carrying amounts of the short-term
financial instruments, including cash and cash equivalents, accounts receivable, restricted cash, prepaid expense and other assets,
accounts payable, accrued liabilities, notes payable, deferred compensation and other liabilities reflected in the accompanying
balance sheet approximate fair value at December 31, 2012 and 2011 due to the relatively short-term nature of these instruments.
As of December 31, 2012 and 2011, the Company does not have financial assets or liabilities that are measured at fair value on
a recurring basis.
F-
10
Cash and Cash Equivalents
Cash includes deposits at financial institutions with
maturities of three months or less. The Company at times has cash in banks in excess of FDIC insurance limits and places its temporary
cash investments with high credit quality financial institutions. At December 31, 2012 and 2011, the Company had $2,724,922 and
$0 balances at financial institutions which were in excess of the FDIC insured limits. However, at December 31, 2012 the Company
held $64,497 in Japanese foreign bank accounts and $421 in European foreign bank accounts. At December 31, 2011 the Company held
$71,995 in Japanese foreign bank accounts and $62,664 in European foreign bank accounts.
Accounts Receivable and Allowance for Uncollectible Accounts
Accounts receivable consist of the receivables associated
with the revenue derived from product sales. An allowance for uncollectible accounts is recorded to allow for any amounts that
may not be recoverable, based on an analysis of prior collection experience, customer credit worthiness and current economic trends.
Based on management's review of accounts receivable, an allowance for doubtful accounts of $130,000 and $125,000 was recorded
at December 31, 2012 and 2011, respectively. The reserve in both periods takes into account aged receivables that management believes
should be specifically reserved for as well as historic experience with bad debts to determine the total reserve appropriate for
each period. Receivables are determined to be past due based on the payment terms of original invoices. The Company grants credit
to its customers, with standard terms of Net 30 days. The Company routinely assesses the financial strength of its customers and,
therefore, believes that its accounts receivable credit risk exposure is limited. Additionally, the Company maintains a foreign
credit receivables insurance policy that covers many of its receivable balances in effort to further reduce credit risk exposure.
Inventory
Inventories consist of finished and un-finished products
and are stated at the lower of cost or market; using the first-in, first-out (FIFO) method as a cost flow convention. At December
31, 2012 and 2011 inventory is valued, net of allowances, at $4,843,905 and $3,563,111, respectively. The allowances for inventory
were $250,000 and $240,000 at December 31, 2012 and 2011, respectively. At December 31, 2012, CUI had finished goods of $4,675,032,
raw materials of $365,242, and work in process of $53,631.
Furniture, Equipment and Software
Furniture, equipment and software are recorded at
cost and include major expenditures, which increase productivity or substantially increase useful lives.
Maintenance, repairs and minor replacements are charged
to expenses when incurred. When furniture and equipment is sold or otherwise disposed of, the asset and related accumulated depreciation
are removed from this account, and any gain or loss is included in the statement of operations.
The cost of furniture, equipment and software is depreciated
over the estimated useful lives of the related assets. Depreciation is computed using the straight-line method for financial reporting
purposes. The estimated useful lives and accumulated depreciation for furniture, equipment and software are as follows:
Estimated
Useful Life
Furniture and equipment
3 to 7 years
Software
3 to 5 years
Long-Lived Assets
Long-lived assets and certain identifiable assets
related to those assets are periodically reviewed for impairment whenever circumstances and situations change such that there is
an indication that the carrying amounts may not be recoverable.
In performing the review for recoverability,
the future cash flows expected to result from the use of the asset and its eventual disposition are estimated. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment
loss is recognized as the excess of the carrying amount over the fair value. Otherwise, an impairment loss is not recognized. Management
estimates the fair value and the estimated future cash flows expected. Any changes in these estimates could impact whether there
was impairment and the amount of the impairment.
There were $278,428 and $0 of impairment expenses recorded by the Company
in 2012 and 2011.
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11
Identifiable Intangible Assets
Intangible assets are stated at cost net of accumulated
amortization and impairment. The fair value for intangible assets acquired through acquisitions is measured at the time of acquisition
utilizing the following inputs, as needed:
1.
Inputs used to measure fair value are unadjusted quote prices available in active markets for the identical assets or liabilities if available.
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.
Intangible assets with a determinable finite life,
other than goodwill, including technology rights and patents are amortized over an estimated useful life of 15 years or their estimated
useful life if less than 15 years. Technology rights are amortized over a twenty year life and are reviewed for impairment annually.
Patent costs are amortized over the life of the patent. Any patents not approved will be expensed at that time. Intangible assets
are reviewed for impairment annually during the second quarter and whenever circumstances and situations change such that there
is an indication that the carrying amounts may not be recoverable.
Through this review of all known
events and circumstances, management concluded that an impairment charge of $278,428 was necessary regarding the Intangible, trademark
and trade name V-Infinity during 2012. The analysis completed in 2012 determined that there was no other impairment necessary
during 2012 to other intangible assets.
Goodwill Assets
As detailed in ASC 350 Intangibles-Goodwill and Other
subsection 20, the Company tests for goodwill impairment in the second quarter of each year and whenever events or changes in circumstances
indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.
As detailed in ASC 350-20-35-3A, in performing its
testing for goodwill impairment, management has completed a qualitative analysis to determine whether it was more likely than not
that the fair value of a reporting unit is less than its carrying amount, including goodwill. To complete this review, management
followed the steps in ASC 350-20-35-3C to evaluate the fair values of goodwill and considered all known events and circumstances
that might trigger an impairment of goodwill. The analysis completed in both 2012 and 2011, determined that there was no impairment
necessary to goodwill assets. Through the reviews completed in 2012 and 2011, management concluded that there were no events or
circumstances that triggered an impairment (and there was no expectation that a reporting unit or a significant portion of a reporting
unit would be sold or otherwise disposed of in the following year), therefore, no further analysis was necessary to prepare for
goodwill impairment beyond the steps in 350-20-35-3C in accordance with ASU 2011-08.
CUI Global has adopted ASU 2011-08, which simplifies
how an entity is required to test goodwill for impairment. The ASU allows an entity to first assess qualitative factors to determine
whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this ASU, CUI is not required to calculate
the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than
not that its fair value is less than its carrying amount. The ASU includes a number of factors to consider in conducting the qualitative
assessment. We adopted ASU 2011-08 during the year ended December 31, 2012. The adoption of ASU 2011-08 did not have an impact
on our consolidated financial statements.
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12
Investment – Equity Method
Through the acquisition of CUI, Inc. the Company obtained
352,589 common shares
(representing a 11.54% interest at December 31, 2012 and 2011, respectively)
in
Test Products International, Inc., hereafter referred to as TPI. TPI is a provider of handheld test and measurement equipment.
CUI Global enjoys a close association with this affiliate through common Board of Director membership and participation, that allows
for a significant amount of influence over affiliate business decisions. Accordingly, for financial statement purposes, the Company
accounts for its investment in this affiliated entity under the equity method. A summary of the unaudited financial statements
of the affiliate for the years ended December 31, 2012 and 2011 are as follows:
2012
2011
Current assets
$
6,509,736
$
5,532,030
Non-current assets
540,518
577,335
Total Assets
$
7,050,254
$
6,109,365
Current liabilities
$
3,272,360
$
2,696,409
Non-current liabilities
1,203,826
1,355,370
Stockholders' equity
2,574,068
2,057,586
Total Liabilities and Stockholders' Equity
$
7,050,254
$
6,109,365
Revenues
$
12,538,711
$
12,280,892
Operating income
757,484
598,691
Net profit
516,482
359,254
Company share of Net Profit at 11.54%
59,623
41,472
Equity investment in affiliate
$
258,244
$
198,621
Stock-Based Compensation
The Company accounts for stock based compensation
using FASB Accounting Standards Codification No. 718 ("FASB ASC 718"), "Compensation – Stock Compensation".
FASB Codification No. 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded
as an expense over the related vesting period. The statement also requires the recognition of compensation expense for the fair
value of any unvested stock option awards outstanding at the date of adoption. Employee stock compensation is recorded at fair
value using the Black Scholes Pricing Model. The underlying assumptions used in the Black Scholes Pricing Model by the Company
are taken from publicly available sources including, volatility is calculated using historic stock price information from online
finance websites such as Google Finance and Yahoo Finance, the stock price on the date of grant is obtained from online finance
websites such as those previously noted, appropriate discount rates are obtained from the United States Federal Reserve economic
research and data website and other inputs are determined based on previous experience and related estimates.
See Note 13 STOCK-BASED EMPLOYEE COMPENSATION for additional
disclosure and discussion of the employee stock plan and activity.
Common stock, stock options and common stock warrants
issued to other than employees or directors are recorded on the basis of their fair value, as required by FASB ASC 505, which is
measured as of the date required by FASB ASC 505, "Equity – Based Payments to Non-Employees". In accordance with
FASB ASC 505, the stock options or common stock warrants are valued using the Black-Scholes option pricing model on the basis of
the market price of the underlying common stock on the "valuation date," which for options and warrants related to
contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the
vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period
over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense
is computed under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the
end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date
is reflected in the expense recorded in the subsequent period in which that change occurs.
F-
13
Revenue Recognition
The recognition of revenues requires judgment, including
whether a sale includes multiple elements, and if so, whether vendor-specific objective evidence (VSOE) of fair value exists for
those elements. Customers receive certain elements of CUI Global products over a period of time. These elements include licensing
rights to manufacture and sell our proprietary patent protected products. The ability to identify VSOE for those elements and the
fair value of the respective elements could materially impact the amount of earned and unearned revenue. CUI Global does not have
any history as to the costs expected to be incurred in granting licensing rights relating to its products. Therefore, revenues
may be recorded that are not in proportion to the costs expected to be incurred in performing these services.
Revenues from warranty and maintenance activities
are recognized ratably over the term of the warranty and maintenance period and the unrecognized portion is recorded as deferred
revenue.
Revenues in connection with electronic devices, component,
and test and measurement equipment are recognized at the time the product is shipped to the customer, collectability is reasonably
assumed, the price is fixed and determinable and persuasive evidence of arrangement exists.
Shipping and Handling Costs
Amounts billed to customers in sales transactions
related to shipping and handling represent revenues earned for the goods provided and are included in sales, and were $53,539 and
$60,628 for the years ended December 31, 2012 and 2011, respectively. The Company expenses inbound shipping and handling costs
as cost of revenues.
Warranty Reserves
A warranty reserve liability is recorded based on
estimates of future costs on sales recognized. There was no warranty reserve recorded at December 31, 2012 or 2011.
Advertising
The costs incurred for producing and communicating
advertising are charged to operations as incurred. Advertising expense for the years ended December 31, 2012 and 2011 was $872,250
and $837,584, respectively.
Income Taxes
Income taxes are accounted for under the asset and
liability method of FASB Accounting Standards Codification No. 740 ("FASB ASC 740"), "Income Taxes". Under
FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized as income in the period that includes the enactment date.
Valuation allowances have been established against
deferred tax assets due to uncertainties in the Company's ability to generate sufficient taxable income in future periods
to make realization of such assets more likely than not. An income tax benefit has not been recognized for its operating losses
generated during 2012 and 2011 based on uncertainties concerning the ability to generate taxable income in future periods. There
was no income tax receivable at December 31, 2012 and 2011. In future periods, tax benefits and related deferred tax assets will
be recognized when management considers realization of such amounts to be more likely than not.
The Company's Federal and State tax returns
for the years 2007-2012 remain open to examination by the tax authorities.
Net Loss Per Share
In accordance with FASB Accounting Standards Codification
No. 260 ("FASB ASC 260"), "Earnings Per Share", basic net loss per share is computed by dividing the net
loss available to common stockholders for the period by the weighted average number of common shares outstanding during the period.
Diluted net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of
common and common equivalent shares outstanding during the period. Common equivalent shares outstanding as of December 31, 2012
and 2011, which consist of options, warrants, convertible notes and convertible preferred stock, have been excluded from the diluted
net loss per common share calculations because they are anti-dilutive. Accordingly, diluted net loss per share is the same as basic
net loss per share for 2012 and 2011. The following table summarizes the potential common stock shares at December 31, 2012 and
2011, which may dilute future earnings per share.
F-
14
2012
2011
Convertible preferred stock
-
9,266
Warrants and options, vested
262,952
211,861
Convertible debt
-
6,863
262,952
227,990
Foreign Currency Translation
The financial statements of the Company's foreign
offices have been translated into U.S. dollars in accordance with FASB ASC 830, "Foreign Currency Matters" (FASB ASC
830). All balance sheet accounts have been translated using the exchange rate in effect at the balance sheet date. Income statement
amounts have been translated using an appropriately weighted average exchange rate for the year. The translation gains and losses
resulting from the changes in exchange rates during 2012 and 2011 have been reported in accumulated other comprehensive income,
except for gains and losses resulting from the translation of intercompany receivables and payables, which are included in earnings
for the period.
Segment Reporting
For the year ended December 31, 2012 and 2011, the
Company operates in one operating segment based on the activities of the company in accordance with the ASC 280-10.
Operating
segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly
by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.
The Company does not disaggregate profit and loss information on a segment basis for internal management reporting purposes
to our chief operating decision maker group which consists of our Chief Executive Officer, Chief Financial Officer and Chief Operating
Officer, and therefore such information is not presented.
The 10-K filing for the year ended 2011 presented
five operating segments based on the products offered, which included: External Power, Internal Power, Industrial Controls, Discontinued
Operations and Other. Management determined that presenting these as a consolidated segment is the best presentation as the business
activities of CUI Global are not organized on the basis of differences related to products, services or geography. The Company's
chief operating decision maker looks at the operations as a whole when making operating decisions and allocating resources.
Reclassification
Certain amounts from the prior period have been reclassified
to conform to the current period presentation.
Recent Accounting Pronouncements
In June, 2011, the FASB issued
ASU No. 2011-05, which amends ASC Topic 220, Comprehensive Income. Under the amendment, an entity has the option to present the
total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required
to present each component of net income along with total net income, each component of other comprehensive income along with a
total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the
components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU
do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must
be reclassified to net income. The amendments in this ASU have been applied retrospectively.
In December 2011, FASB issued Accounting Standards
Update 2011-11, Balance Sheet - Disclosures about Offsetting Assets and Liabilities" to enhance disclosure requirements relating
to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets
and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that
are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective
and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures,
as such, the adoption of this standard did not have a material impact on our results of operations, cash flows or financial condition.
F-
15
In July 2012, the FASB issued updated guidance on
the periodic testing of indefinite-lived intangible assets, other than goodwill, for impairment. This updated guidance will allow
companies the option to first assess qualitative factors to determine if it is more-likely-than-not that an indefinite-lived intangible
asset might be impaired and whether it is necessary to perform the quantitative impairment test required under current accounting
standards. This guidance is applicable for reporting periods beginning after September 15, 2012. This updated guidance did not
have a material impact on our results of operations, cash flows or financial condition.
3.
PROPERTY AND EQUIPMENT, NET
Property and equipment is summarized as follows at
December 31, 2012 and 2011:
2012
2011
Building
$
-
$
-
Equipment
2,577,681
2,193,817
Computers and software
883,408
778,985
3,461,089
2,972,802
Less accumulated depreciation
(2,444,870
)
(2,061,992
)
$
1,016,219
$
910,810
Depreciation expense for the years ended December
31, 2012 and 2011 was $579,861 and $520,959, respectively.
4.
GOODWILL AND OTHER INTANGIBLE ASSETS
At December 31, 2012, the gross carrying amount and
accumulated amortization of intangible assets, other than goodwill, are as follows:
Gross
Assets
Accumulated
Amortization
Net
Trademarks and tradename
$
5,988,256
$
(109,540
)
$
5,878,716
Customer lists
1,857,000
-
1,857,000
Technology rights
303,664
(77,779
)
225,885
Technology – patent pending
551,559
-
551,559
Other intangibles assets
154,470
(49,106
)
105,364
Total
$
8,854,949
(236,425
)
$
8,618,524
At December 31, 2011, the gross carrying amount and
accumulated amortization of intangible assets, other than goodwill, are as follows:
Gross
Assets
Accumulated
Amortization
Net
Trademarks and tradename
$
6,266,684
$
-
$
6,266,684
Customer lists
1,857,000
-
1,857,000
Technology rights
303,664
(51,269
)
252,395
Technology – patent pending
551,559
-
551,559
Other intangibles assets
74,127
(34,724
)
39,403
Total
$
9,053,034
$
(85,993
)
$
8,967,041
Amortization expenses from continuing operations
for the years ended December 31, 2012 and 2011 amounted to approximately $150,432 and $258,805, respectively.
As of December 31, 2012 and 2011, the carrying amount
of goodwill was $13,048,474. The estimated fair value of our goodwill could change if the Company is unable to achieve operating
results at the levels that have been forecasted, the market valuation of our business decreases based on transactions involving
similar companies, or there is a permanent, negative change in the market demand for the services offered by the Company. These
changes could result in an impairment of the existing goodwill balance that could require a material non-cash charge to our results
of operations.
F-
16
Trademarks and tradename
As of December 31, 2012, $4,892,856 of costs related
to CUI and $1,095,400 of costs related to the V-Infinity trademarks and trade names have been capitalized. The Intangible, trademark
and trade name CUI was determined to have an indefinite life and is reviewed regularly for impairment by management, which includes
an annual test for impairment. During 2012, management determined that an impairment of $278,428 related to the Intangible, trademark
and trade name V-Infinity was necessary. As a result of this evaluation and the impairment, management determined the trademark
and trade name V-Infinity no longer has an indefinite life, and will instead be amortized over the estimated remaining useful life
of 5 years.
Customer lists
As of December 31, 2012, CUI Global has $1,857,000
of capitalized costs related to Intangible, customer list. Intangible, customer list is reviewed regularly for impairment by management.
The customer lists were determined to have an indefinite life and are not amortized but tested annually for impairment. Among other
factors, this review includes consideration of the revenues and related cash flows associated with customers that existed at the
time of the acquisition of the Intangible, customer list. This review determined that the total net revenues and related cash flows
associated with customers that existed at the time of the acquisition of the intangible, customer list have increased as compared
with their pre-acquisition comparable revenues and maintains a back log of customer orders indicating that this will continue based
on historical company experience.
Technology rights
As of December 31, 2012, CUI Global has $303,664 of
capitalized costs related to technology rights. Technology rights are amortized over a twenty year life. In an effort to concentrate
our business focus on our core product development and marketing, in December 2011, 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 in 2011 of $143,636.
Technology – patents pending
As of December 31, 2012, CUI Global has $551,559 of
capitalized costs related to Intangible, patent pending technology. Intangible, patent pending technology is reviewed regularly
for impairment by management.
Debt Offering Costs
As of December 31, 2012, $220,000 of debt offering
costs related to payments issued in efforts to secure debt financing for the Company have been capitalized. The debt offering costs
are amortized over the life of the applicable loan. The net balance of debt offering costs as of December 31, 2012 is $42,778.
5.
NOTES PAYABLE
Notes payable is summarized as follows at December
31, 2012 and 2011:
December 31,
2012
2011
(a) Term Note - bank
$
-
$
4,000,000
(b) Acquisition Note Payable
7,303,683
10,303,683
(c) Convertible Note Payable - related party
-
35,000
(a)
In August 2010, the Company replaced the $4,000,000 cash loan from Commerce Bank of Oregon with a $4,000,000 term note through
the Business Credit division of Wells Fargo Capital Finance, Wells Fargo Bank, National Association, with a July 31, 2012 maturity
date, paying interest only at an interest rate equal to the daily three month LIBOR plus 4.00% and secured by personal letters
of credit from a related party.
In February 2012, the Company utilized $4,000,000 from the 2012 equity
raises to repay the principal balance in full. The balance remaining at December 31, 2012 and 2011 on the term note with Wells
Fargo was $0 and $4,000,000, respectively.
F-
17
(b)
A promissory note utilized to fund the acquisition of CUI, Inc. was a $14,000,000 promissory note
to International Electronic Devices, Inc. (formerly CUI, Inc.), 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 (May 15, 2011), with no prepayment penalty,
an annual success fee of 2.3%, and the right of first refusal to the note payee, International Electronic Devices, Inc., relating
to any private capital raising transactions of CUI Global during the term of the note. In September 2010, the Company negotiated
an amendment to this note which provided forgiveness of the principal balance of $1,588,063 and forgiveness of accrued interest
of $724,729, as well as an extension of the maturity date to May 15, 2018. The total forgiveness of debt and accrued interest of
$2,312,792 was recorded as additional paid in capital due to the related party nature. In exchange for this amendment, the Company
agreed to make principal payments totaling $1,500,000 as follows: $1,200,000 before December 31, 2010 and an additional $300,000
in January 2011. Additionally, the Company agreed to assign a note receivable owed to CUI Inc. from TPI in the amount of $192,508
to IED during the first quarter of 2011. In February 2012, the Company utilized proceeds from the sale of equity to repay $3,000,000
toward the principal balance of the IED note payable.
At December 31, 2012, the current portion of this note is $0, the
long term balance is $7,303,683.
(c)
In July 2011, a CUI Global officer provided a short term convertible loan of $35,000 to the Company
with interest at 6% per annum, and convertible at $5.10 per common share. The balance of this loan was paid in full during 2012
following the receipt of proceeds from the equity raise. The balance remaining at December 31, 2012 and 2011 was $0 and $35,000,
respectively.
The following table details the maturity of the notes
payable for CUI Global, Inc. as of December 31, 2012:
2013
2014
2015
2016
2017
Thereafter
Total
Notes Payable Maturities:
$
-
$
-
$
-
$
-
$
-
$
7,303,683
$
7,303,683
6.
LINE OF CREDIT
At December 31, 2012, CUI, Inc. had a $4,000,000 revolving
working capital line of credit with the Business Credit division of Wells Fargo Capital Finance, part of Wells Fargo Bank, National
Association (NYSE: WFC), interest payable monthly at the daily three month LIBOR plus 3.25% (3.56% at December 31, 2012). At December
31, 2012 the current borrowing capacity under the credit facility was $3,579,305 considering any current restrictions on the amount
that could be borrowed (borrowings may be limited by the amount of trade receivables, inventory and other items), but without considering
any amounts currently outstanding under the facility.
Effective April 3, 2012, the Wells Fargo Line of Credit
expiration was extended to July 31, 2015 and the interest rate reduced to the Daily Three Month LIBOR plus 3.25%. At December 31,
2012 and 2011, the balance outstanding on the line of credit was $459,448 and $1,528,900, respectively. The Line of Credit is secured
by all of the Company's accounts, documents, equipment, general intangibles, goods, instruments, inventory, investment property,
letter-of-credit rights, letters of credit and all cash and cash equivalents.
7.
COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company may be involved in certain legal actions
arising from the ordinary course of business. While it is not feasible to predict or determine the outcome of these matters, we
do not anticipate that any of these matters, or these matters in the aggregate, will have a material adverse effect on the financial
position or results of operations.
Commissions, Royalty and License Fee Agreements
Royalty and license fees are paid in accordance with
their related agreements, either on a monthly or quarterly basis. As of December 31, 2012, $32,303 was accrued for royalty and
license fees payable, and is reported as a current liability in accrued expenses.
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18
External Sales Representative Commissions
Commissions to external sales representatives are
paid in accordance with their related agreements, either on a monthly or annual basis. As of December 31, 2012, $236,366 was accrued
for commissions to external sales representatives, and is reported as a current liability in accrued expenses.
Employment Agreements
As of the year ended December 31, 2012, the following
employment agreements were in place:
Chief Executive Officer, General Counsel, Director:
This employment agreement expires August 1, 2015. The CEO is eligible for annual bonuses and stock option grants.
Said
contract provides, in relevant part, for an annual salary of $350,000 and bonus provisions for each calendar year. Bonuses are
approved quarterly based on the various factors, including a thorough evaluation of current performance. All 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
15
th
day of each month. At December 31, 2012 and 2011, there was an accrual of $53,542 and $13,542, respectively, for
compensation owed to Mr. Clough. In conjunction with Mr. Clough's contract extension, he also received a Board approved Stock
Option Plan, which entitles him to receipt of a $6.00 option to purchase 330,000 shares of the Company's common stock. Said
options vest on a monthly basis during the course of Mr. Clough's employment term. Mr. Clough's employment agreement shall
not be terminated by any change of control of CUI Global.
President, Chief Operating Officer, Director: This
employment agreement expires May 15, 2014. The President is eligible for annual bonuses and stock option grants.
Said
contract provides, in relevant part, for an annual salary of $205,000 and bonus provisions for each calendar year, beginning with
2008, in which the CUI Global yearend 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 15
th
day of each month. At December 31, 2012 and 2011 there was an accrual of $8,542 and $12,083, respectively,
for compensation owed to Mr. McKenzie. Mr. McKenzie's employment agreement shall not be terminated by any change of control of
CUI Global.
Chief Financial Officer: This employment agreement
expires May 15, 2014. The CFO is eligible for annual bonuses and stock option grants.
Mr. Ford is employed
under a three year employment contract with the company, which was recently extended to May 15, 2014 and provides, in relevant
part, for an annual salary of $195,000 and bonus provisions for each calendar year, beginning with 2010, in which the CUI Global
yearend 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 15
th
day
of each month. At December 31, 2012 and 2011 there was an accrual of $8,125 and $0, respectively, for compensation owed to Mr.
Ford. Mr. Ford's employment agreement shall not be terminated by any change of control of CUI Global.
Leases
As an integrated part of the
CUI asset acquisition, the CUI Global, Inc. corporate offices were relocated to the CUI location at 20050 SW 112th Avenue, Tualatin,
Oregon 97062. CUI and CUI Global occupy the 61,380 square feet of offices and warehouse premises under a ten year non-cancelable
lease agreement beginning September 1, 2006 with Barakel, LLC (a related party) at a base monthly rent subject to periodic base
payment increases plus real property taxes, utilities, insurance and common area maintenance charges. During the year ended December
31, 2012, the monthly base rent was $40,250 in accordance with the lease schedule.
During the period
January 1 through August 31, 2011, the monthly base rent was $40,000 and increased in accordance with the lease schedule to $40,250
for the period September 1 through December 31, 2011.
Barakel, LLC is controlled by James McKenzie, majority owner of CUI,
Inc. prior to acquisition and Matt McKenzie, COO.
F-
19
The Company also leased office
space in Malmo, Sweden pursuant to a renewable lease which terminated January 31, 2011. In addition to the base rent of (subject
to periodic base lease payment increases), the Company was responsible for property taxes, maintenance and related VAT taxes. During
the year ended December 31, 2012 and 2011, the monthly base rent was approximately $0 and $1,386, respectively.
Additionally, subsequent to the
acquisition of CUI Japan and Comex Electronics, the Company had leased spaces in Tokyo, Japan and owned a small manufacturing facility
on leased land in Nagano, Japan. The CUI Japan leased space in Tokyo, Japan expired January 31, 2012 and there was no rent expense
for this space in 2012. CUI Japan subleased space from Comex Electronics during 2012 on a month to month basis, with monthly base
rent of approximately $1,253.
The discontinued operations of
Comex Electronics had leased space in Tokyo, Japan with expirations between May 7, 2011 and September 9, 2011. In conjunction with
these leases, Comex Electronics also leased parking spaces which leases expired December 31, 2010 and became a month to month agreement.
Additionally, the discontinued operations of Comex Electronics had a land lease in Nagano with an expiration of August 11, 2019.
Rental expense was $552,655 and $592,573 in 2012
and 2011, respectively, and is included in selling, general and administrative on the statement of operations.
2013
2014
2015
2016
2017
Thereafter
Operating Leases:
$
484,000
$
486,000
$
487,000
$
326,000
$
-
$
-
Consulting Agreements
In January 2010, the Company entered into a consulting
agreement with Terry Williams, former GL Industrial Services Project Director, to serve as the Company's Project Director
and Lead Engineer for the GASPT2 technology. The consultant will be compensated a base monthly fee and will receive commissions
on sales of the GASPT2 products.
In September 2010, the Company entered into an agreement
for strategic investor communications services to be provided through March 2011. For these services, the consultant was paid a
fee of $25,000 in 2010.
During 2011, the agreement was extended through June
2012. During 2012 and 2011, the consultant was paid fees of $6,750 and $29,750, respectively.
In September 2010, the Company entered into an agreement
with a consulting firm to provide strategic investor marketing services for a period of one year. For these services, the consultant
is to be paid $3,000 per month as well as $84,000 in common stock compensation. $42,000 of the common stock compensation was earned
in 2010 for which the consultant received 7,000 shares of common stock at $6.00 per share. The remaining $42,000 is to be priced
at the ten day trailing average closing price at the time of the issuance when earned in 2011. The remaining $42,000 common shares
were earned March 2011, for which the consultant received 5,957 common shares at $7.05 per share.
In February 2011, the Company engaged a consultant
firm for marketing and website development services. For these services, the consultant was paid $41,925 during 2011.
In March 2011, the Company engaged a consultant firm
to provide services related to customs and duties classification for imported products. During 2011, this consultant was paid $36,588.
In April 2011, the Company engaged a consultant firm
to provided strategic investor marketing services. For these services, the consultant received $8,000 per month. For these services
which were completed in 2011, the consultant was paid $32,000.
F-
20
In June 2011, the Company engaged Merriman Capital,
Inc. to act as exclusive placement agent to CUI Global, Inc. For these services, the consultant would receive a cash financing
completion fee of 7.5% of the total amount of capital received by the Company from the sale of its securities to investors during
the agreement period. No fees were earned during 2011. Fees paid to Merriman in 2012 were recorded as reductions to additional
paid in capital associated with the equity raises.
In June 2011, the Company engaged a consultant firm
to provide website support and marketing production services. This consultant was paid $56,809 during 2011.
In December 2011, the Company issued 5,000 shares
of common stock to a former consultant in consideration for the release of a claim on intellectual property with a fair value of
$19,500 recorded.
During 2012, the Company engaged a consultant firm
to assist in the development and design of websites. For these services, the consultant firm was paid $135,008 during the year.
During 2012, the Company engaged a consultant firm
to assist in printed circuit board layout design related to new products. For these services, the consultant firm was paid $130,706
during the year.
In March 2012,
15,000
shares of common stock were issued in consideration for strategic investor marketing services rendered for the benefit of the company.
A $69,450 consulting expense was recorded in relation to this transaction based on the fair market value of the stock on the date
of grant.
On each of April 5, May 7, June 6, July 2, August
1, September 7, October 1 and November 1, 2012, the company issued 13,500 shares of common stock to a consultant in consideration
for strategic investor marketing services rendered for the benefit of the company. A $569,970 consulting expense was recorded in
relation to these issuances based on the fair market value of the stock on the dates of the grants. In addition, the consultant
was paid $110,000 for their services.
In June and October 2012, 1,000 and 2,500 shares of
common stock, respectively, were issued to a consultant in consideration for strategic investor marketing services rendered for
the benefit of the company and $19,275 of consulting expense was recorded in relation to these issuances based on the fair market
value of the stock on the dates of the grant. Additionally, the consultant was paid $11,000 for their services.
In July 2012, the Company engaged a consultant firm
to provide strategic investor marketing services. For these services the consultant was paid $65,000 during 2012.
8.
STOCKHOLDERS' EQUITY
Convertible Preferred Series A
5,000,000 shares of preferred stock were designated
as new Series A Convertible Preferred Stock ("Series A"). The Series A is convertible to common shares on a six-for-one
basis, is due dividends at $0.10 per share as authorized by the Board, has a liquidation value of $1.00 per share and has equivalent
voting rights as common shares on a share for share basis. Once the Series A shares have been issued, they cannot be reissued.
Effective September 17, 2012 the Board of Directors passed a resolution eliminating and discontinuing all Series A Convertible
Preferred Series stock and required that all preferred stock shall be returned to the Company treasury. As of December 31, 2012,
no shares of Series A Convertible Preferred Stock are issued nor outstanding.
Convertible Preferred Stock Series B
On February 3, 2004, the Board of Directors designated
30,000 shares of preferred stock as Series B Convertible Preferred Stock ("Series B"). The Series B is convertible
to common shares on a one thousand-for-one ratio, is due dividends at $1 per share payable quarterly as authorized by the Board,
and the dividends are cumulative. Series B has a liquidation value of $240 per share and has voting rights of one thousand votes
per Series B share. Once the Series B shares have been issued, they cannot be reissued. Effective September 17, 2012 the Board
of Directors passed a resolution eliminating and discontinuing all Series B Convertible Preferred Series stock and required that
all preferred stock shall be returned to the Company treasury. As of December 31, 2012 and 2011, no shares of Series B Convertible
Preferred Stock are issued nor outstanding.
F-
21
Convertible Preferred Stock Series C
The Company authorized for issuance 10,000 shares
of preferred stock, designated as Series C Preferred Stock ("Series C"), as the result of a previously negotiated investment
plan with a specific investment group. The agreement was fulfilled in 2011 and the group no longer retains rights to the convertible
preferred stock Series C. Effective September 17, 2012 the Board of Directors passed a resolution eliminating and discontinuing
all Series C Convertible Preferred Series stock and required that all preferred stock shall be returned to the Company treasury.
During 2012 and 2011, there were no shares of Series C convertible preferred stock issued and no shares were outstanding.
Common Stock Dividend Restrictions
As of December 31, 2012, there are no restrictions
on common stock dividends. As of December 31, 2011, there was a restriction on the common stock dividends as any cumulative preferred
stock dividends are required to be paid prior to any common stock dividends being paid. Also, at December 31, 2012, retained earnings
were not restricted upon involuntary liquidation, however at December 31, 2011, retained earnings would be restricted upon an involuntary
liquidation by the cumulative unpaid preferred dividends to the preferred stockholders and for the $1 per share Series A and $240
per share Series B liquidation preferences.
Common Stock Issuances
During 2011, the 1,667 issuable shares listed on the
balance sheet as of December 31, 2010 were issued.
During 2011, two former employees completed cashless
exercises of their options for which 269 shares of common stock were issued. The Company did not receive funds from these options
exercises as they were cashless.
During 2011, 5,957 shares of common stock were issued
pursuant to a consultant agreement for strategic investor marketing services. The shares were priced at $7.05 per share based on
the ten day trailing average closing price at the time of the issuance in accordance with the agreement and a $42,000 consulting
expense was recorded in relation to this transaction.
During 2011, a member of the Board of Directors exercised
23,333 warrants which he previously received in exchange for a personal guarantee of a bank note provided on behalf of the Company
in May 2008. The Company received $7,000 from the exercise of these warrants.
During 2011, a beneficial owner of more than 5% of
the outstanding common stock, exercised 10,000 warrants which he previously received in exchange for a personal guarantee of a
bank note provided on behalf of the Company in May 2008. The Company received $3,000 from the exercise of these warrants.
During 2011, a beneficial owner of more than 10% of
the outstanding common stock, exercised 133,333 warrants which he previously received in exchange for a personal guarantee of a
bank note provided on behalf of the Company in May 2008. The Company received $40,000 from the exercise of these warrants.
During 2011, 5,000 shares of common stock were issued
to a former consultant in consideration for the release of a claim on intellectual property with a fair value related expense of
$19,500 recorded.
Effective February 17, 2012, the issued and outstanding
shares of the Company's $0.001 par value common stock were reverse split at a ratio of one for thirty (1:30) as a part of
our plan to up-list our common stock on to the NASDAQ Stock Market. All fractional shares resulting from the reverse split were
rounded up to the next full numbers. As a result of the rounding up effect, 97 additional shares of common stock were issued that
are included in the S-1 registration statement. The company received no monetary consideration for these 97 shares.
During February 2012 our Form S-1 registration statement
became effective that allowed us to sell 2,222,222 shares of common stock to our underwriter. We received $8,913,302 in net proceeds
from this sale after related costs for this transaction.
F-
22
Our Form S-1 registration statement included 333,333
shares of common stock that were sold in March 2012 to our underwriter pursuant to the over-allotment provision of our underwriting
contract. We received $1,387,499 in net proceeds from this sale after related costs for this transaction.
Also in March 2012, pursuant to stock purchase agreement,
we sold to seven investors a total of 570,000 shares of common stock at $4.50 per share. We received $2,253,008 in net proceeds
from this sale after related costs for this transaction.
During March 2012, a beneficial owner
of approximately 8%, exercised 10,071 warrants he previously received in relation to a note provided to the Company which has since
been paid in full. The company received $3,021 from this transaction.
March 20, 2012,
15,000
shares of common stock were issued in consideration for strategic investor marketing services rendered for the benefit of the company.
A $69,450 consulting expense was recorded in relation to this transaction based on the fair market value of the stock on the date
of grant.
On each of April 5, May 7, June 6, July 2, August
1, September 7, October 1 and November 1, 2012, the company issued 13,500 shares of common stock to a consultant in consideration
for strategic investor marketing services rendered for the benefit of the company. A $569,970 consulting expense was recorded in
relation to these issuances based on the fair market value of the stock on the dates of the grants.
Between April 4-12, 2012, 57,000 shares of common
stock were issued in relation to common stock bonuses granted to officers and employees. 50,750 of these common shares were issued
to three officers with a fair value of $243,600 in accordance with their employment agreement bonus provisions. Two employees were
awarded a total of 6,250 common shares with a fair value total of $30,000.
On April 12, 2012, a holder of 2,500 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $250 into common shares. For these conversions, the holder received 458 common shares based
upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.
On May 4, 2012, a holder of 45,000 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $4,500 into common shares. For these conversions, the holder received 8,645 common shares
based upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.
On May 30, 2012, a holder of 3,043 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $304 into common shares. For these conversions, the holder received 558 common shares based
upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.
On June 21, 2012, 1,000 shares of common stock were
issued to a consultant in consideration for strategic investor marketing services rendered for the benefit of the company and a
$6,450 consulting expense was recorded in relation to these issuances based on the fair market value of the stock on the date of
the grant.
On June 28 and 29, July 2, 3, 16 and 27, 2012, we
sold 234,332 shares of common stock to nine investors at $4.50 per share pursuant to stock purchase agreements net proceeds of
$975,455 after related costs for this transaction.
On September 7, 2012, 1,052 shares of common stock
were issued as a royalty to James McKenzie, majority owner of CUI, Inc. prior to the May 2008 asset acquisition by CUI Global.
The shares were valued at $6,638.
On September 27, 2012, 4,596 shares of common stock
were issued to an employee as a bonus. These shares were expensed at a fair value of $25,000 as of the date of issuance.
F-
23
On October 16, 2012, 2,500 shares of common stock
were issued to a consultant in consideration for strategic investor marketing services rendered for the benefit of the company
and a $12,825 consulting expense was recorded in relation to these issuances based on the fair market value of the stock on the
date of the grant.
Non-Employee Stock Warrants
During 2012 and 2011, no warrants were issued by the
Company.
A summary of the warrants issued to non-employees
for services as of December 31, 2012 and 2011 and changes during the years is presented below:
2012
2011
Number of
Warrants
Weighted
Average
Exercise
Price
Number of
Warrants
Weighted
Average
Exercise
Price
Balance at beginning of period
10,071
$
0.30
416,634
$
3.58
Granted
-
$
-
-
$
-
Exercised
(10,071
)
$
0.30
(166,667
)
$
0.30
Forfeited (expired)
-
$
-
(239,896
)
$
6.00
Balance at end of period
-
$
-
10,071
$
0.30
Warrants exercisable at end of period
-
$
-
10,071
$
0.30
Weighted average fair value of warrants granted during the period
$
-
$
-
During 2011, warrants to purchase 239,896 shares of
common stock expired during the year and are recorded as forfeited in the table above.
The following table summarizes information about non-employee
stock warrants outstanding and exercisable that were issued for services at December 31, 2012 and 2011:
Warrants Outstanding
Warrants Exercisable
Range of
Exercise Price
Number
Outstanding at
December 31,
2012
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Number
Exercisable at
December 31,
2012
Weighted
Average
Exercise Price
$
-
-
0.00 Years
$
-
-
$
-
-
0.00 Years
$
-
-
$
-
Warrants Outstanding
Warrants Exercisable
Range of
Exercise Price
Number
Outstanding at
December 31,
2011
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Number
Exercisable at
December 31,
2011
Weighted
Average
Exercise Price
$
0.30
10,071
0.62 Years
$
0.30
10,071
$
0.30
10,071
0.62 Years
$
0.30
10,071
$
0.30
Employee Stock Options and Warrants
All options and warrants issued are presented at post
reverse quantities.
On May 16, 2008 the Company's Board of Directors
adopted the Waytronx, Inc. 2008 Equity Incentive Plan (the "Equity Incentive Plan") and authorized 1,500,000 shares
of Common Stock to fund the Plan. At the 2008 Annual Meeting of Shareholders held on September 15, 2008, the Equity Incentive Plan
was approved by the Company shareholders. At the 2009 Annual Meeting of Shareholders held on September 29, 2009, the shareholders
approved an amendment to the 2008 Equity Incentive Plan to increase the number of common shares issuable under the plan from 1,500,000
to 3,000,000. All of these shares have been registered under Form S-8.
F-
24
The 2008 Equity Incentive Plans is intended to: (a)
provide incentive to employees of the Company and its affiliates to stimulate their efforts toward the continued success of the
Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the
Company; (b) encourage stock ownership by employees, directors and independent contractors by providing them with a means to acquire
a proprietary interest in the Company by acquiring shares of Stock or to receive compensation which is based upon appreciation
in the value of Stock; and (c) provide a means of obtaining and rewarding employees, directors, independent contractors and advisors.
The 2008 Equity Incentive Plans provide for the issuance of incentive stock options (ISOs) and Non Statutory Options (NSOs) to
employees, directors and independent contractors of the Company. The Board shall determine the exercise price per share in the
case of an ISO at the time an option is granted and such price shall be not less than the fair market value or 110% of fair market
value in the case of a ten percent or greater stockholder. In the case of an NSO, the exercise price shall not be less than the
fair market value of one share of stock on the date the option is granted. Unless otherwise determined by the Board, ISOs and
NSOs granted under the both plans have a maximum duration of 10 years.
On January 5, 2009 the
Company Board of Directors received and approved a written report and recommendations of the Compensation Committee which included
a
detailed executive equity compensation report and market analysis
and the recommendations of
Compensia, Inc., a management consulting firm that provides executive compensation advisory services to compensation committees
and senior management of knowledge-based companies. The Compensation Committee used the report and analysis as a basis for its
formal written recommendation to the board. Pursuant to a January 8, 2009 board resolution the 2009
Equity
Incentive Plan (Executive), a Non-Qualified Stock Option Plan, was created and funded with 4,200,000 shares of $0.001 par value
common stock. The Compensation Committee was appointed as the Plan Administrator to manage the plan. On October 11, 2010, CUI Global
authorized an additional 3,060,382 options under the 2009 Equity Incentive Plan (Executive). On September 21, 2012, CUI Global
authorized an additional 330,000 options under the 2009 Equity Incentive Plan (Executive).
The 2009 Equity Incentive Plan (Executive) provides
for the issuance of Incentive Non Statutory Options to attract, retain and motivate executive and management employees and directors
and to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management
employees and directors based upon the value of the Company's stock and to provide these individuals with an incentive to
maximize the success of the Company and further the interest of the shareholders. The Administrator of the plan is authorized to
determine the exercise price per share at the time the option is granted, but the exercise price shall not be less than the fair
market value on the date the option is granted. Stock options granted under the 2009 Plan have a maximum duration of 10 years.
At December 31, 2012, there are 1,328,833 shares of
common stock available under the 2008 Equity Incentive Stock Plan and 378,151 available under the 2009 Equity Incentive Plan (Executive).
During the years ended 2012 and 2011, the Company
recorded compensation expense of $232,785 and $166,367, respectively, for stock options that the requisite service was performed
during the year. The compensation expense is recorded over the vesting period based upon fair market value of the options using
the Black Scholes option model in accordance with FASB ASC 718 as discussed in section Employee Stock Options and Warrants.
A summary of the warrants and options issued to employees
and directors as of December 31, 2012 and 2011 and changes during the year are presented below:
2012
2011
Number of
Warrants
and
Options
Weighted
Average
Exercise
Price
Number of
Warrants
and
Options
Weighted
Average
Exercise
Price
Balance at beginning of period
259,299
$
7.75
293,372
$
7.45
Exercised
-
$
-
(1,000
)
$
5.70
Expired
(3,000
)
$
5.33
(33,073
)
$
2.81
Forfeited
-
$
-
-
$
-
Granted
425,842
$
5.68
-
$
-
Balance at end of period
682,141
$
6.47
259,299
$
7.75
Exercisable
262,952
$
7.31
201,790
$
7.44
F-
25
As of December 31, 2012 and 2011, there were 419,189
and 57,509, respectively, non-vested warrants and options issued to employees and directors.
The weighted average fair value of warrants and options
granted during the periods are as follows:
2012
2011
Exercise price lower than the market price
$
-
$
-
Exercise price equaled the market price
$
4.56 - $4.58
$
-
Exercise price exceeded the market price
$
6.00
$
-
The fair value of warrants and options granted during
2012 was estimated on the dates of the grants using the following assumptions: dividend yield of 0%, expected volatilities of 84%
- 91%, risk-free interest rates of 0.27%, and expected lives of 2 years. There were no warrants and options granted during 2011.
The following tables summarize information about employee
stock warrants and options outstanding at December 31, 2012 and 2011:
Warrants and Options Outstanding December 31, 2012
Warrants and Options
Exercisable December 31, 2012
Range of
Exercise Price
Number
Outstanding at
December 31,
2012
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Number
Exercisable at
December 31,
2012
Weighted
Average
Exercise Price
$
4.56
84,675
1.15 Years
$
4.56
-
$
4.56
$
4.58
10,167
0.14 Years
$
4.58
10,167
$
4.58
$
5.70
39,750
0.37 Years
$
5.70
39,750
$
5.70
$
6.00
330,000
4.70 Years
$
6.00
27,500
$
6.00
$
7.50
124,573
1.10 Years
$
7.50
124,573
$
7.50
$
9.00
92,976
1.06 Years
$
9.00
60,962
$
9.00
682,141
8.52 Years
$
6.47
262,952
$
7.31
Warrants and Options Outstanding December 31, 2011
Warrants and Options
Exercisable December 31, 2011
Range of
Exercise Price
Number
Outstanding at
December 31,
2011
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Number
Exercisable at
December 31,
2011
Weighted
Average
Exercise Price
$
5.70
41,750
1.17 Years
$
5.70
41,750
$
5.70
$
7.50
124,573
3.37 Years
$
7.50
117,372
$
7.50
$
9.00
92,976
3.15 Years
$
9.00
42,668
$
9.00
259,299
7.69 Years
$
7.75
201,790
$
7.44
9.
RELATED PARTY TRANSACTIONS
As an integrated part of the CUI asset acquisition,
the CUI Global, Inc. corporate offices were relocated to the CUI location at 20050 SW 112th Avenue, Tualatin, Oregon 97062. CUI
and CUI Global occupy the 61,380 square feet of offices and warehouse premises under a ten year non-cancelable lease agreement
beginning September 1, 2006 with Barakel, LLC (a related party) at a base monthly rent subject to periodic base payment increases
plus real property taxes, utilities, insurance and common area maintenance charges. During the year ended December 31, 2012, the
monthly base rent was $40,250 in accordance with the lease schedule.
During the period January 1 through
August 31, 2011, the monthly base rent was $40,000 and increased in accordance with the lease schedule to $40,250 for the period
September 1 through December 31, 2011.
Barakel, LLC is controlled by James McKenzie, who was a majority owner of CUI, Inc.
prior to acquisition and Matt McKenzie, COO.
F-
26
The Company recorded investment income of $59,623
and $41,472 during 2012 and 2011, respectively, related to its interest in Test Products International ("TPI"). During
2011, the Company assigned a note receivable from TPI with a balance of $192,508 to IED, Inc. toward the principal owed on notes
payable. For further details regarding TPI, please see Note 2 discussion Investment – Equity Method.
In September 2010, the Company negotiated an amendment
to the $14,000,000 seller's promissory note to International Electronic Devices, Inc., of which a related party and two corporate
officers, one of whom is also a director, are principals in the corporate note holder. This amendment provided forgiveness of the
principal balance of $1,588,063 and forgiveness of accrued interest of $724,729, as well as an extension of the maturity date to
May 15, 2018. The total forgiveness of debt and accrued interest of $2,312,792 was recorded as additional paid in capital in 2010.
In exchange for this amendment, the Company agreed to make principal payments totaling $1,500,000 as follows: $1,200,000 before
December 31, 2010 and an additional $300,000 in January 2011. Additionally, the Company agreed to assign a note receivable owed
to CUI Inc. from TPI in the amount of $187,208 to IED during the first quarter of 2011. During 2010, $200,000 of the $1,200,000
in principal that was due before December 31, 2010 was settled for 33,333 shares of common stock at a conversion price of $6.00
per share.
A related party and two corporate officers, one of whom is also a director are principals
in the corporate note holder and each received shares from this transaction. During 2012 and 2011, the Company made regular interest
payments on this seller's promissory note in accordance with the terms of the note. Additionally, during 2012, the Company
repaid $3,000,000 of the principal balance from proceeds received through the equity issuances.
At December 31, 2012, the
balance of this note is $7,303,683 and is held in long term notes payable, related party.
In April 2011, a member of the Board of Directors
exercised 23,333 warrants at $0.30 per share which he previously received in exchange for a personal guarantee of a bank note provide
don behalf of the Company in May 2008. The Company received $7,000 of proceeds from this warrant exercise.
In May 2011, a beneficial owner of more than 5% of
the outstanding common stock, exercised 10,000 warrants at $0.30 per share which he previously received in exchange for a personal
guarantee of a bank note provided on behalf of the Company in May 2008. The Company received $3,000 from this warrant exercise.
Also in May 2011, a beneficial owner of approximately
8% of the outstanding common stock, exercised 133,333 warrants at $0.30 per share which he previously received in exchange for
a personal guarantee of a bank note provided on behalf of the Company in May 2008. The Company received $40,000 from this warrant
exercise.
In July 2011, a CUI Global officer provided a short
term convertible loan of $35,000 to the Company which accrues interest at 6% per annum, convertible at $0.17 per common share.
The balance of this loan was repaid in full during 2012. At December 31, 2012 and 2011, the balance of this loan was $0 and $35,000,
respectively, and is included in Convertible notes payable, related party, current portion due. There was no beneficial conversion
on the convertible note as the conversion price was equal to the fair value on the date of grant.
In March 2012, a beneficial owner of approximately
8% of the outstanding common stock exercised 10, 071 warrants at $0.30 per share which he previously received in relation to a
note provided to the Company which has since been paid in full. The Company received $3,021 from this warrant exercise.
10.
DISCONTINUED OPERATIONS
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. The Company's continuing operations focus on the development, manufacturing and sale of electrical components.
There were no discontinued operations in 2012. Revenue and expenses allocated to discontinued operations for the year ended December
31, 2011 were limited to revenue and expenses that were directly related to the operations of Comex Electronics, or that were eliminated
as a result of the sale of the subsidiary. As a result, certain continuing indirect costs that were previously allocated to Comex
were not allocated to discontinued operations. It is expected that the Company and Comex Electronics will continue a business relationship.
Comex Electronics is a customer of CUI Global and also a vendor to CUI Global that provides manufacturing and other services.
F-
27
The results of operations from discontinued operations
are set forth below:
For the year ended
December 31,
2012
2011
Total revenues
$
-
$
1,280,485
Cost of revenues
-
1,146,443
Gross profit
-
134,042
Selling, general, administrative and other
-
294,195
(Loss) from discontinued operations
-
(160,153
)
Gain on sale of Comex Electronics
-
603,034
Net profit (loss) from discontinued operations
-
442,881
Less net profit (loss) from discontinued operations - noncontrolling interest
-
67,872
Net profit (loss) from discontinued operations allocable to common stocholders
$
-
$
375,009
11.
INCOME TAXES
The Company recognized losses for both financial and
tax reporting purposes during each of the periods in the accompanying consolidated statements of operations. Accordingly, no provision
for income taxes and/or deferred income taxes payable has been provided for in the accompanying consolidated financial statements.
An income tax benefit has not been recognized for
operating losses generated in prior periods based on uncertainties concerning the ability to generate taxable income in future
periods. At December 31, 2012, the Company had available net operating loss carry-forwards which expire in various years through
the year ending December 31, 2032; however, because the Company has incurred significant operating losses, utilization of the tax
loss carry-forwards are not assured. The increase in the valuation allowance for the year ended December 31, 2012 was approximately
$481,000. As a result, the non-current deferred income tax asset arising from these net operating loss carry-forwards and from
other temporary differences are not recorded in the accompanying balance sheets because a valuation allowance was established to
fully reserve such assets due to the uncertainty of the Company's realization of this benefit.
After consideration of all the evidence management
has determined that a full valuation allowance is necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized.
In future periods, tax benefits and related deferred
tax assets will be recognized when management considers realization of such amounts to be more likely than not.
The Company's tax expense differs from the "expected"
tax expense for the periods ended December 31, 2012 and 2011, computed by applying the Federal Corporate tax rate of 34% to loss
before taxes, as follows:
2012
2011
Computed "expected" tax benefit
$
(800,084
)
$
(16,579
)
State tax benefit, net of federal effect
(166,285
)
(2,124
)
Change in valuation allowance
480,742
(98,800
)
Non-deductible expenses
(435,030
)
147,313
$
(920,657
)
$
29,810
For the periods ended December 31, 2012 and 2011,
the tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities were as
follows:
F-
28
2012
2011
Deferred tax assets (liabilities)
Intangible assets
$
(8,046,564
)
$
(8,153,358
)
Property and equipment
634,354
634,354
Net operating loss carryforwards
20,699,678
20,376,785
Contribution and other carryforwards
292,692
241,637
Inventory and accounts receivable reserves
139,999
139,999
Valuation allowance
(13,720,159
)
(13,239,417
)
Net deferred tax assets
$
-
$
-
12.
CONCENTRATIONS
During 2012, 59% of revenues were
derived from five customers at 47%, 4%, 3%, 3%, and 2%. During 2011, 55% of revenues were derived from six customers at 41%, 4%,
3%, 3%, 2% and 2%.
The Company's major product lines in 2012 and
2011 were external power, internal power and industrial controls.
At December 31, 2012, of the gross trade accounts
receivable from continuing operations totaling $5,095,926, 57% was due from six customers: 37%, 8%, 3%, 3%, 3% and 3%. At December
31, 2011, of the gross trade accounts receivable from continuing operations totaling $3,819,641, 53% was due from eight customers:
21%, 9%, 7%, 5%, 4%, 3%, 2% and 2%.
13.
STOCK-BASED EMPLOYEE COMPENSATION
Stock options granted are presented post reverse split
using the 30 to 1 reverse split ratio.
On May 16, 2008, the Board of Directors approved the
CUI Global, Inc. 2008 Equity Incentive Plan ("2008 Plan") and authorized 1,500,000 shares of the Company's common
stock to fund the Plan. At the 2008 Annual Meeting of Shareholders the Equity Incentive Plan was approved by the Company shareholders.
The 2008 Plan provides for the issuance of stock options to attract, retain and motivate employees, to encourage employees, directors
and independent contractors to acquire an equity interest in the Company, to make monetary payments to certain employees based
upon the value of the Company's stock, and provide employees, directors and independent contractors with an incentive to
maximize the success of the Company and further the interest of the shareholders. The 2008 Plan provides for the issuance of Incentive
Stock Options and Non Statutory Options. The Administrator of the plan shall determine the exercise price per share at the time
the option is granted, but the exercise price shall not be less than the fair market value on the date the option is granted. Stock
options granted under the 2008 Plan have a maximum duration of 10 years.
At the 2009 Annual Meeting of Shareholders held on
September 29, 2009, the shareholders approved an amendment to the 2008 Equity Incentive Plan to increase the number of common shares
issuable under the plan from 1,500,000 to 3,000,000. All of these shares have been registered under Form S-8.
On January 5, 2009 the
Company Board of Directors received and approved a written report and recommendations of the Compensation Committee which included
a
detailed executive equity compensation report and market analysis
and the recommendations of
Compensia, Inc., a management consulting firm that provides executive compensation advisory services to compensation committees
and senior management of knowledge-based companies. The Compensation Committee used the report and analysis as a basis for its
formal written recommendation to the board. Pursuant to a January 8, 2009 board resolution the
2009
Equity Incentive Plan (Executive), a Non-Qualified Stock Option Plan, was created and funded with 4,200,000 shares of $0.001 par
value common stock. The Compensation Committee was appointed as the Plan Administrator to manage the plan. October 11, 2010, CUI
Global authorized an additional 3,060,382 options under the 2009 Equity Incentive Plan (Executive).
The 2009 Equity Incentive Plan (Executive) provides
for the issuance of Incentive Non Statutory Options to attract, retain and motivate executive and management employees and directors
and to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management
employees and directors based upon the value of the Company's stock and to provide these individuals with an incentive to
maximize the success of the Company and further the interest of the shareholders. The Administrator of the plan is authorized to
determine the exercise price per share at the time the option is granted, but the exercise price shall not be less than the fair
market value on the date the option is granted. Stock options granted under the 2009 Plan have a maximum duration of 10 years.
F-
29
The fair value of each stock option is estimated on
the date of grant using a Black Scholes Pricing Model. The fair value of warrants and options granted during 2012 was estimated
on the dates of the grants using the following assumptions: dividend yield of 0%, expected volatilities of 84% - 91%, risk-free
interest rates of 0.27%, and expected lives of 2 years. During the year ended December 31, 2011, the Company did not grant any
stock options.
The following information is presented post reverse
split for the stock option activity for the year ended December 31, 2012:
Number of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contract
Life
Aggregate
Intrinsic
Value
Outstanding at December 31, 2010
293,372
$
7.45
8.37 Years
$
66,544
Exercised
(1,000
)
$
5.70
Expired
(33,073
)
$
2.81
Forfeited
-
$
-
Granted
-
$
-
Outstanding at December 31, 2011
259,299
$
7.75
7.69 Years
$
-
Exercised
-
$
-
Expired
(3,000
)
$
5.33
Forfeited
-
$
-
Granted
425,842
$
5.68
6.00 Years
Outstanding at December 31, 2012
682,141
$
6.47
8.52 Years
$
88,000
Outstanding exercisable at December 31, 2012
262,952
$
7.31
6.98 Years
$
9,252
The weighted average fair value of warrants and options
granted during the periods are as follows:
2012
2011
Exercise price lower than the market price
$
-
$
-
Exercise price equaled the market price
$ 4.56 - $4.58
$
-
Exercise price exceeded the market price
$
6.00
$
-
F-
30
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
Orbital Gas Systems Limited
We have audited the accompanying balance
sheets of Orbital Gas Systems Limited as of June 30, 2012 and 2011, and the related profit and loss accounts, statements of total
recognized gains and losses, note of historical cost profits and losses, reconciliation of net cash flow to movement in net funds,
reconciliation of movements in shareholders' funds, and statements of cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audits in accordance with
auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Orbital Gas Systems Limited as of June 30,
2012 and 2011, and the results of its operations and cash flows for the years then ended in conformity with accounting principles
generally accepted in the United Kingdom.
Generally accepted accounting principles
in the United Kingdom vary in certain significant respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United States of America ("U.S. GAAP") would
have affected the results of operations of the company for the years ended June 30, 2012 and 2011 to the extent summarized in Note
22 to the financial statements.
/s/ BAKER TILLY VIRCHOW KRAUSE, LLP
Minneapolis, Minnesota
March 2, 2013
F-
31
Orbital Gas Systems Limited
Profit and Loss Account
for the years ended 30 June 2012 and 2011
Note
2012
2011
£
£
TURNOVER – CONTINUING OPERATIONS
1
13,997,850
13,751,265
Cost of sales
(7,808,629
)
(8,844,758
)
GROSS PROFIT
6,189,221
4,906,507
Distribution costs
(282,498
)
(239,807
)
Administrative expenses
(3,640,460
)
(3,687,610
)
OPERATING PROFIT – CONTINUING OPERATIONS
2,266,263
979,090
Interest receivable and similar income
2
21,697
14,184
Interest payable and similar charges
3
(4,822
)
(836
)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
4-5
2,283,138
992,438
Taxation
6
(493,617
)
(206,224
)
PROFIT FOR THE FINANCIAL YEAR
15
1,789,521
786,214
F-
32
Orbital Gas Systems Limited
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the years ended 30 June 2012 and 2011
2012
£
2011
£
Profit for the financial year
1,789,521
786,214
Unrealised deficit on revaluation of properties
-
(42,547
)
TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE FINANCIAL YEAR
1,789,521
743,667
NOTE OF HISTORICAL COST PROFITS AND LOSSES
for the years ended 30 June
2012 and 2011
2012
£
2011
£
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
2,283,138
992,438
Difference between a historical cost depreciation charge and the actual depreciation charge calculated on the revalued amount
2,768
(878
)
HISTORICAL COST PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
2,285,906
991,560
HISTORICAL COST PROFIT FOR THE YEAR RETAINED AFTER TAXATION
1,792,289
785,336
F-
33
Orbital Gas Systems Limited
BALANCE SHEET
for the years ended 30 June 2012 and 2011
Note
2012
2011
£
£
£
£
£
FIXED ASSETS
Tangible assets
7
865,834
735,819
CURRENT ASSETS
Stocks
9
386,937
683,034
Debtors
10
3,927,279
2,899,231
Cash at bank and in hand
3,883,485
4,393,293
8,197,701
7,975,558
CREDITORS: Amounts falling due within one year
11
(6,294,482
)
(7,813,000
)
NET CURRENT ASSETS
1,903,219
162,558
TOTAL ASSETS LESS CURRENT LIABILITIES
2,769,053
898,377
CREDITORS: Amounts falling due after more than one year
12
(70,080
)
-
PROVISION FOR LIABILITIES
13
(28,268
)
(17,193
)
NET ASSETS
2,670,705
881,184
CAPITAL AND RESERVES
Called up share capital
14
3,817
3,817
Revaluation reserve
15
87,940
85,172
Capital redemption reserve
15
1,183
1,183
Profit and loss account
15
2,577,765
791,012
SHAREHOLDERS' FUNDS
2,670,705
881,184
F-
34
Orbital Gas Systems Limited
CASH FLOW STATEMENT
for the years ended 30 June 2012 and 2011
Note
2012
2011
£
£
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
16
(228,288
)
2,430,757
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
17
a
16,875
13,348
TAXATION
(190,344
)
(133,287
)
CAPITAL EXPENDITURE
17
b
(39,482
)
(96,118
)
(441,239
)
2,214,700
FINANCING
17
c
(68,569
)
(35,781
)
(DECREASE)/INCREASE IN CASH IN THE YEAR
(509,808
)
2,178,919
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
for the years ended 30 June 2012 and 2011
Note
2012
2011
£
£
(DECREASE)/INCREASE IN CASH IN THE YEAR
(509,808
)
2,178,919
New finance leases
(181,576
)
-
Change in net debt resulting from cash flows
68,569
35,781
MOVEMENT IN NET DEBT
(622,815
)
2,214,700
NET FUNDS AT START OF YEAR
4,388,852
2,174,152
NET FUNDS AT END OF YEAR
18
3,766,037
4,388,852
F-
35
Orbital Gas Systems Limited
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the years ended 30 June 2012 and 2011
2012
£
2011
£
PROFIT FOR THE FINANCIAL YEAR
1,789,521
786,214
Other recognised gains and losses relating to the year
-
(42,547
)
NET ADDITION TO SHAREHOLDERS' FUNDS
1,789,521
743,667
Opening shareholders' funds
881,184
137,517
CLOSING SHAREHOLDERS' FUNDS
2,670,705
881,184
F-
36
Orbital Gas Systems Limited
ACCOUNTING POLICIES
AUTHORIZATION OF NON-STATUTORY FINANCIAL
STATEMENTS
The financial statements of Orbital Gas
Systems Limited ("Orbital" or "the company") were authorised for issue by the Board of Directors and the
balance sheet was signed on the board's behalf by a director. Orbital is a private limited company incorporated and domiciled
in England and Wales.
PRINCIPAL ACTIVITIES
The principal activity of the company during
the year was that of the supply and installation of gas control systems.
BASIS OF ACCOUNTING
The financial statements have been prepared
under the historical cost convention, modified to include the revaluation of freehold properties, and in accordance with applicable
United Kingdom accounting standards.
The financial statements present information
about the company as an individual undertaking and not about its group, as the company has taken advantage of the exemption provided
by section 402 of the Companies Act 2006 not to prepare consolidated financial statements as the directors consider that the company's
subsidiary be excluded from consolidation on the grounds of it being immaterial for purpose of true and fair view. The subsidiary
company is a dormant company.
The financial statements are presented
in Sterling.
BASIS OF PREPARATION
The directors are constantly reviewing
resource competence and availability and believe that the company has adequate current resources to continue in operational existence
for at least the next twelve months. Thus they continue to adopt the going concern basis of accounting in preparing the annual
financial statements.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at cost
or valuation net of depreciation and any provision for impairment.
Depreciation is provided on all tangible
fixed assets except for freehold land at rates calculated to write each asset down to its estimated residual value over its expected
useful life, as follows:-
Freehold property
- 2% on cost
Improvements to freehold property
- 10% on cost
Plant and machinery
- 20% on cost
Fixtures and fittings
- 10%-33% on cost
Computer equipment
- 33% on cost
Motor vehicles
- 25% on cost
Freehold properties are revalued in accordance
with FRS 15 with a full valuation carried by professionally qualified Chartered Surveyors on an existing use open market value
basis, in accordance with the Statement of Assets Valuation Practice No. 4 and the Guidance Notes of the Royal Institution of Chartered
Surveyors every five years and an interim valuation is carried out in year three.
IMPAIRMENTS
Fixed assets are reviewed for impairment
if events or changes in circumstances indicate that the carrying amount may not be recoverable or as otherwise required by relevant
accounting standards.
Shortfalls between the carrying value of
fixed assets and their recoverable amounts, being the higher of net realisable value and value-in-use, are recognised as impairments.
Impairments of revalued assets, except those caused by a clear consumption of economic benefit, are recognised in the statement
of total recognised gains and losses until the carrying amount reaches depreciated historic cost. All other impairment losses are
recognised in the profit and loss account.
F-
37
Orbital Gas Systems Limited
ACCOUNTING POLICIES
STOCKS AND WORK IN PROGRESS
Stocks are stated at the lower of cost
and net realisable value. In determining the cost of raw materials, consumables and goods purchased for resale, the weighted average
purchase price is used.
For work in progress and finished goods,
cost is taken as production cost, which includes an appropriate proportion of attributable overheads.
LONG TERM CONTRACTS
Long term contracts are assessed on a contract
by contract basis and reflected in the profit and loss account by recording turnover and related costs as contract activity progresses.
Turnover is ascertained in a manner appropriate to the stage of completion of the contract, and credit taken for profit earned
to date when the outcome of the contract can be assessed with reasonable certainty. In respect of contracts where the degree of
work completed is certified by either a third party or the customer then turnover is recognised based on these work certificates.
In respect of contracts where work certificates are not obtained then turnover is recognised based on a percentage of completion
against the contract value. Percentage completion is measured on the basis of costs incurred to the year end against the estimated
total costs of the contract. The amount by which turnover exceeds payments on account is classified as "amounts recoverable
on contracts" and included in debtors; to the extent that payments on account exceed relevant turnover and long term contract
balances, the excess is included as a creditor. The amount of long term contracts, at cost net of amounts transferred to cost of
sales, less provision for foreseeable losses and payments on account not matched with turnover, is included within stocks.
DEFERRED TAXATION
Deferred tax is recognised in respect of
all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result
in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.
Timing differences are differences between the company's taxable profits and its results as stated in the financial statements
that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised
in the financial statements.
Deferred tax is measured at the average
tax rates that are expected to apply in the years in which timing differences are expected to reverse, based on tax rates and laws
that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.
FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated
into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into
sterling at the rate of exchange ruling at the date of transaction. All differences are taken to the profit and loss account.
LEASED ASSETS AND OBLIGATIONS
Where assets are financed by leasing agreements
that give rights approximating to ownership ("finance leases"), the assets are treated as if they had been purchased
outright. The amount capitalised is the present value of the minimum lease payments payable during the lease term. The corresponding
leasing commitments are shown as obligations to the lessor.
Lease payments are treated as consisting
of capital and interest elements, and the interest is charged to the profit and loss account in proportion to the remaining balance
outstanding.
All other leases are "operating leases"
and the annual rentals are charged to profit and loss on a straight line basis over the lease term.
RETIREMENT BENEFITS
The company operates a defined contribution
scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The amount
charged to the profit and loss account in respect of pension costs is the contributions payable in the year. Differences between
contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.
F-
38
Orbital Gas Systems Limited
ACCOUNTING POLICIES
RESEARCH AND DEVELOPMENT
Research and development is written off
to the profit and loss account as it is incurred.
INVESTMENTS
Fixed asset investments are stated at cost.
Provision is made for any impairment in the value of fixed asset investments.
TURNOVER
Turnover is recognised at the fair value
of the consideration received or receivable for sale of goods and/or services in the ordinary nature of the business.  Turnover
is shown net of Value Added Tax, of goods sold and services provided to external customers and, in the case of long term contracts,
credit is taken appropriate to the stage of completion when the outcome of the contract can be assessed with reasonable certainty.
In respect of contracts where the degree of work completed is certified by either a third party or the customer then turnover is
recognised based on these work certificates. In respect of contracts where work certificates are not obtained then turnover is
recognised based on a percentage of completion against the contract value. Percentage completion is measured on the basis of costs
incurred to the year end against the estimated total costs of the contract.
CASH AND CASH EQUIVALENTS
Cash for the purpose of the cash flow statement
comprises cash in hand and deposits repayable on demand less overdrafts repayable on demand.
F-
39
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
1
TURNOVER
The company's turnover and profit before taxation were all derived from its principal activity.
In the year to 30 June 2012, 2% of the company's turnover was derived from markets outside the United Kingdom (2011:
3%).
2
INTEREST RECEIVABLE AND SIMILAR INCOME
2012
£
2011
£
Bank interest
21,697
14,184
3
INTEREST PAYABLE AND SIMILAR CHARGES
2012
£
2011
£
Finance leases
4,822
836
4
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
2012
£
2011
£
Profit on ordinary activities before taxation is stated after charging/(crediting):
Depreciation and amounts written off tangible fixed assets:
Charge for the year:
Owned assets
53,124
33,089
Leased assets
54,465
38,551
Profit on disposal of tangible fixed assets
(16,546
)
(2,350
)
(Profit)/loss on foreign exchange
(235
)
4,625
Operating lease rentals:
Land and buildings
8,974
-
Plant and machinery
117,947
82,649
F-
40
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
5
EMPLOYEES
2012
Number
2011
Number
The average monthly number of persons (including directors) employed by the company during the year was:
Management
10
9
Service
27
21
Administration
39
33
76
63
Staff costs for the above persons:
2012
£
2011
£
Wages and salaries
4,241,649
4,097,003
Social security costs
498,777
442,366
Other pension costs
81,688
72,074
4,822,114
4,611443
DIRECTORS' REMUNERATION
2012
£
2011
£
Emoluments
1,981,379
2,199,427
Money purchase pension contributions
17,500
16,558
1,998,879
2,215,985
The number of directors to whom retirement benefits were accruing was as follows:
2012
Number
2011
Number
Money purchase schemes
2
2
Highest paid director
2012
£
2011
£
Emoluments
1,576,474
1,803,269
Money purchase pension contributions
10,000
9,475
1,586,474
1,812,744
F-
41
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
6
TAXATION
2012
2011
£
£
£
£
Current tax:
UK corporation tax on profits of the year
482,542
190,354
Adjustments in respect of previous years
-
(3
)
Total current tax
482,542
190,351
Deferred tax:
Origination and reversal of timing differences
12,398
15,966
Adjustment in respect of prior years
(1,323
)
(93
)
Total deferred tax
11,075
15,873
Tax on profit on ordinary activities
493,617
206,224
Factors affecting tax charge for year:
2012
£
2011
£
The tax assessed for the year is lower (2011: lower) than the standard rate of corporation tax in the UK 25.5% (2011: 27.5%). The differences are explained below:
Profit on ordinary activities before tax
2,283,138
992,438
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK 25.5% (2011: 27.5%)
582,262
272,934
Effects of:
Expenses not deductible for tax purposes
10,826
3,619
Fixed asset timing differences
(13,174
)
(16,888
)
Research and development tax credits
(97,372
)
(56,466
)
Marginal relief
-
(12,845
)
Adjustment in respect of previous year
-
(3
)
Current tax charge for the year
482,542
190,351
F-
42
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
7
TANGIBLE FIXED ASSETS
Freehold
property
£
Plant
and
machinery
£
Fixtures
and
fittings
£
Computer
equipment
£
Motor
vehicles
£
Total
£
Cost or valuation
At beginning of year
550,000
200,774
245,317
111,145
227,887
1,335,123
Additions
9,080
23,834
1,602
11,833
194,867
241,216
Disposals
-
(6,250
)
-
-
(112,114
)
(118,364
)
Reclassification
-
-
(9,847
)
9,847
-
-
At end of year
559,080
218,358
237,072
132,825
310,640
1,457,975
Depreciation
At beginning of year
-
172,060
140,994
91,039
195,211
599,304
Charged in the year
6,826
12,106
20,274
12,917
55,466
107,589
Disposals
-
(6,250
)
-
-
(108,502
)
(114,752
)
Reclassification
-
-
(5,960
)
5,960
-
-
At end of year
6,826
177,916
155,308
109,916
142,175
592,141
Net book value
At 30 June 2012
552,254
40,442
81,764
22,909
168,465
865,834
At 30 June 2011
550,000
28,714
104,323
20,106
32,676
735,819
Cost or valuation at 30 June 2012
Cost
9,080
218,358
237,072
132,825
310,640
907,975
Valuation
550,000
-
-
-
-
550,000
559,080
218,358
237,072
132,825
310,640
1,457,975
Included in the cost or valuation of freehold property is freehold land of £275,000 (2011:
£275,000) which is not depreciated. If the freehold property had not been revalued, they would have been included at the
following historical cost:
2012
2011
£
£
Cost
609,992
600,913
Aggregate depreciation
175,497
165,903
Value of land in freehold property
200,000
200,000
On 23 May 2011 the freehold land and buildings were revalued by Butters John Bee, Chartered Surveyors.
The open market value of the freehold interest in the property free from encumbrance, with the benefit of full possession is £550,000.
The valuation has been carried out with the guidance notes issued by The Royal Institute of Chartered Surveyors for Asset Valuations.
The net book value of motor vehicles held under hire purchase contracts is £146,913 (2011:
£31,245) and the depreciation charged on these assets was £54,465 (2011: £38,551).
F-
43
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
8
FIXED ASSET INVESTMENTS
The company's investments
at the balance sheet date in share capital of companies include the following:
Class and %
Name of company
of shares held
Activity
Orbital Gas (Process and Instrumentation) Limited
100% Ordinary
Dormant
The subsidiary company is registered
in England and Wales.
The carrying value of these investments
is £nil (2011: £nil).
9
STOCKS
2012
£
2011
£
Raw materials and consumables
154,975
193,389
Work in progress
231,962
489,645
386,937
683,034
10
DEBTORS
2012
£
2011
£
Due within one year:
Trade debtors
3,015,418
1,736,961
Amounts recoverable on contracts
872,654
1,122,377
Prepayments
39,207
39,893
3,927,279
2,899,231
11
CREDITORS: Amounts falling due within one year
2012
£
2011
£
Obligations under finance leases and hire purchase contracts
47,368
4,441
Payments received on account
302,352
425,832
Trade creditors
1,557,231
1,705,085
Amounts owed to group undertakings
134,030
134,030
Corporation tax
482,552
190,354
Other taxation and social security
650,747
902,329
Accruals
3,120,202
4,450,929
6,294,482
7,813,000
F-
44
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
11
CREDITORS: Amounts falling due within one year (continued)
The bank facility is secured
by a fixed and floating charge on all assets of the company.
The company also has guarantees
and bonds to third parties in place issued by the National Westminster Bank Plc of £420,353 at 30 June 2012 (2011: £156,983).
12
CREDITORS: Amounts falling due after more than one year
2012
£
2011
£
Obligations under finance leases and hire purchase contracts
70,080
-
The maturity of obligations under
finance leases and hire purchase contracts is as follows:
2012
£
2011
£
Within one year
47,368
4,441
Between one and two years
50,088
-
In more than two but no more than five years
19,992
-
117,448
4,441
13
PROVISIONS FOR LIABILITIES
Deferred
taxation
£
At beginning of year
17,193
Charge during the year
11,075
At end of year
28,268
2012
2011
Provided
Unprovided
Provided
Unprovided
£
£
£
£
Provision for deferred tax has been made as follows:
Excess of tax allowances over depreciation
28,268
-
17,193
-
F-
45
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
14
SHARE CAPITAL
2012
£
2011
£
Allotted, called up and fully paid:
3,817 ordinary shares of £1 each
3,817
3,817
15
RESERVES
Profit and
loss account
£
Revaluation
reserve
£
Capital
redemption
reserve
£
Total
£
At 1 July 2011
791,012
85,172
1,183
877,367
Profit for the year
1,789,521
-
-
1,789,521
Revaluation reserve transfer
(2,768
)
2,768
-
-
At 30 June 2012
2,577,765
87,940
1,183
2,666,888
16
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
2012
£
2011
£
Operating profit
2,266,263
979,090
Depreciation charges
107,589
71,640
Profit on disposal of fixed assets
(16,546
)
(2,350
)
Decrease/(increase) in stocks
296,097
(276,039
)
(Increase)/decrease in debtors
(1,028,048
)
403,668
(Decrease)/increase in creditors
(1,853,643
)
1,254,748
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
(228,288
)
2,430,757
F-
46
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
17
ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
2012
£
2011
£
a
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received
21,697
14,184
Interest element of hire purchase payments
(4,822
)
(836
)
NET CASH INFLOW FOR RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
16,875
13,348
b
CAPITAL EXPENDITURE
Purchase of tangible fixed assets
(59,640
)
(98,468
)
Sale of tangible fixed assets
20,158
2,350
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE
(39,482
)
(96,118
)
c
FINANCING
Capital element of finance lease repayments
(68,569
)
(35,781
)
NET CASH OUTFLOW FROM FINANCING
(68,569
)
(35,781
)
18
ANALYSIS OF CHANGES IN NET FUNDS
At 1 July
2011
New finance
leases
Cash flow
At 30 June
2012
£
£
£
£
Net cash:
Cash at bank and in hand
4,393,293
-
(509,808
)
3,883,485
Debt:
Finance leases
(4,441
)
(181,576
)
68,569
(117,448
)
Total
4,388,852
(181,576
)
(441,239
)
3,766,037
F-
47
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
19
OPERATING LEASE COMMITMENTS
At 30 June the company had annual commitments under non-cancellable leases as follows:
2012
2011
Land and
buildings
Plant and
machinery
Total
Land and
buildings
Plant and
machinery
Total
£
£
£
£
£
£
Other operating leases expiring within 1 year
9,081
30,336
39,417
-
-
-
Other operating leases expiring between 2 and 5 years
-
11,559
11,559
10,896
34,545
45,441
9,081
41,895
50,976
10,896
34,545
45,441
20
CAPITAL COMMITMENTS
There were no capital commitments (2011: £nil) at the end of the financial year.
21
PENSION COMMITMENTS
The company operates a defined contribution pension scheme.
The pension cost charge represents contributions payable by the company and amounted to £81,688
(2011: £72,074). There were no outstanding or prepaid contributions at either the beginning or end of the financial year.
F-
48
Orbital Gas Systems Limited
NOTES TO THE FINANCIAL STATEMENTS
for the years ended 30 June 2012 and 2011
22
U.S. GAAP RECONCILIATION
Management performed an analysis
of the differences between U.K. GAAP and U.S. GAAP. Based upon this review, the following is the U.S. GAAP reconciliation of the
Orbital financial statements prepared under U.K. GAAP:
For the Year Ended June 30,
2012
2011
Profit and
Loss
Shareholders
Funds
Profit and
Loss
Shareholders
Funds
RESULTS UNDER U.K. GAAP
Profit for the financial year
£
1,789,521
£
786,214
Surplus on Shareholders Funds
£
2,670,705
£
881,184
U.S. GAAP REPORTING ADJUSTMENTS
Reversal of revaluation reserve
-
(87,940
)
-
(85,172
)
Accrual for paid time off
(54,000
)
(54,000
)
(46,000
)
(46,000
)
RESULTS UNDER U.S. GAAP
£
1,735,521
£
2,528,765
£
740,214
£
750,012
U.K. GAAP allows for the revaluation of fixed assets. The Company has over time recorded a surplus balance
in the revaluation reserve account. U.S. GAAP does not allow for the revaluation of fixed assets and therefore this balance has
been reversed.
U.K. GAAP does not contain provisions for the accrual
for vacation or paid time off. U.S. GAAP requires that an employer accrue for employees compensation of future absences that have
been earned and are payable.
F-
49
7,000,000 Shares of Common Stock
Prospectus
, 2013
Craig-Hallum Capital Group
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all costs and expenses, other
than the underwriting discounts and commissions payable by us, in connection with the offer and sale of the common stock being
registered.
All amounts shown are estimates except for the SEC registration fee and the FINRA filing
fee.
SEC registration fee
$
5,984
FINRA filing fee
$
7,081
Printing and engraving expenses
*
Legal fees and expenses
*
Accounting fees and expenses
*
Transfer agent fees and expenses
*
Miscellaneous
*
Total
*
*
To be provided by amendment.
Item 14. Indemnification of Directors and Officers.
The Colorado General Corporation Act, as revised, provides that
if so provided in the articles of incorporation, the corporation shall eliminate or limit the personal liability of a director
to the corporation or to its shareholders for monetary damages for breach of fiduciary duty as a director; except that any such
provision shall not eliminate or limit the liability of a director to the corporation or to its shareholders for monetary damages
for any breach of the director's duty of loyalty to the corporation or to its shareholders, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, unlawful distributions, or any transaction from which the
director directly or indirectly derived an improper personal benefit.
Our Articles of Incorporation and Bylaws provide that a person
who is performing his or her duties shall not have any liability by reason of being or having been a director of the corporation
and that the Company shall indemnify and advance expenses to a director or officer in connection with a proceeding to the fullest
extent permitted or required by and in accordance with the indemnification sections of Colorado statutes.
The above discussion of our Articles of Incorporation and the
General Corporation Law of Colorado is only a summary and is qualified in its entirety by the full text of each of the foregoing.
Item 15. Recent Sales of Unregistered Securities.
Following is a list of all securities we sold within the past
three years which were not registered under the Securities Act. The Company relied on Section 4(2) of the Securities Act of 1933
as the basis for an exemption from registration for the following issuances. Unless noted otherwise, the proceeds were used for
working capital and general corporate purposes.
97
2010 Sales of Unregistered Securities
Common Stock Issued During 2010
471,136 shares of common stock were issued to two investors
who converted their promissory notes totaling $1,250,000 and related accrued interest of $242,560 to common equity at $3.168 per
share.
33,333 shares of common stock were issued as part of
the settlement of the $4,900,000 convertible promissory note and $850,500 in accrued interest on this note related to the acquisition
of CUI, Inc. The shares were valued at $70,000 in accordance with the convertible promissory note stated conversion rate of $2.10
per share. Two corporate officers, one of whom is also a director are principals in the corporate note holder and each received
shares from this transaction.
631,314 shares of common stock were issued to four
standby letter of credit guarantors who converted $2,000,000 of their letters of credit to common equity at $3.168 per share. Two
directors, one former corporate officer and a shareholder with more than 5% beneficial ownership in the Company participated in
this transaction.
33,333 shares of common stock were issued to three
investors who exercised warrants at $0.30 per share. The Company received proceeds of $10,000. One director, one former director
and one former corporate officer participated in this transaction. These warrants were granted to the Standby Letter of Credit
guarantors as a bonus inducement to participate in the Letter of Credit guarantee that was used to secure the term loan necessary
for the acquisition of CUI, Inc.
1,786 shares of common stock were issued to an investor
in consideration for a warrant exercise at $6.00 per share. The Company received proceeds of $10,718.
22,222 shares of common stock were issued to a limited
liability company investor that converted $100,000 of its promissory note to common equity at $4.50 per share in accordance with
the convertible note terms. A former officer of CUI Global is a principal in the limited liability company.
7,000 shares of common stock were issued for services
performed by a consultant. $42,000 of consulting expense was recorded in relation to this transaction based on the fair market
value of the stock on the date of grant.
1,810 shares of common stock were issued in relation
to the exercise of 2008 Equity Incentive Plan options at $5.70 per share with proceeds of $9,500. The Company received no cash
payment for 144 of these shares because the options were exercised through a cashless exercise election.
3,333 shares of common stock were issued to an employee
as a bonus. These shares were valued at $28,000 as of the date of issuance.
236,667 shares of common stock were sold at $6.00 per
share pursuant to stock purchase agreements with proceeds of $1,420,000. 1,667 of these shares were issuable at December 31, 2010;
the 1,667 issuable shares were issued in 2011. One director and a former corporate officer participated in this transaction.
33,333 shares of common stock were issued as settlement
of $200,000 of principal on a promissory note related to the acquisition of CUI, Inc. The conversion rate was $6.00 per share.
Two corporate officers, one of whom is also a director are principals in the corporate note holder and each received shares from
this transaction.
98
Warrants and Options Issued During 2010
Fully vested options for the purchase of 9,167 shares
of its 2008 Equity Incentive Plan common stock at $5.70 per share to nine employees with an expiration of June 15, 2020. If all
options are exercised the Company could receive $52,250.
Under the 2009 Equity Incentive Plan (Executive) 19,800
options that vest October 11, 2011 were issued to directors to purchase restricted common stock at $9.00 per share and 82,213 options
were issued to officers and employees that vest over four years, 25% at year one and thereafter in equal monthly installments.
The employees include two directors who are also employees and officers and one officer. The options expire October 11, 2020.
Series A and Series B Convertible Preferred Stock Issued
During 2010
There were no shares of Series A or Series B Convertible
Preferred Stock issued during 2010.
Series C Preferred Stock Issued During 2010
There were no shares of Series C Convertible Preferred
Stock issued during 2010.
2011 Sales of Unregistered Securities
Common Stock Issued During 2011
On January 6, 2011, the 1,667 issuable shares listed
on the balance sheet as of December 31, 2010 were issued.
On February 7 and 10, 2011, two former employees
completed cashless exercises of their options for which 269 shares of common stock were issued. The Company did not receive funds
from these options exercises as they were cashless.
On March 11, 2011, 5,957 shares of common stock were
issued pursuant to a consultant agreement for strategic investor marketing services. The shares were priced at $7.05 per share
based on the ten day trailing average closing price at the time of the issuance in accordance with the agreement and a $42,000
consulting expense was recorded in relation to this transaction.
On April 19, 2011, a member of the Board of Directors
exercised 23,333 warrants which he previously received in exchange for a personal guarantee of a bank note provided on behalf of
the Company in May 2008. The Company received $7,000 from the exercise of these warrants.
On May 4, 2011, a beneficial owner of more than 5%
of the outstanding common stock, exercised 10,000 warrants which he previously received in exchange for a personal guarantee of
a bank note provided on behalf of the Company in May 2008. The Company received $3,000 from the exercise of these warrants.
On May 15, 2011, a beneficial owner of more than
10% of the outstanding common stock exercised 133,333 warrants which he previously received in exchange for a personal guarantee
of a bank note provided on behalf of the Company in May 2008. The Company received $40,000 from the exercise of these warrants.
99
On December 27, 2011, 5,000 shares of common stock
were issued to a former consultant in consideration for the release of a claim on intellectual property with a related expense
of $19,500 recorded.
Warrants and Options Issued During 2011
There were no warrants or options issued
during 2011.
Series A and Series B Convertible Preferred Stock Issued
During 2011
There were no shares of Series A or Series B Convertible
Preferred Stock issued during 2011.
Series C Preferred Stock Issued During 2011
There were no shares of Series C Convertible Preferred
Stock issued during 2011.
2012 Sales of Unregistered Securities
Common Stock Issued During 2012
Effective February 17, 2012, the issued and outstanding
shares of the Company's $0.001 par value common stock were reverse split at a ratio of one for thirty (1:30). All fractional
shares resulting from the reverse split were rounded up to the next full numbers. As a result of the rounding up effect, 97 additional
shares of common stock were issued that are included in the S-1 registration statement. The Company received no monetary consideration
for these 97 shares.
March 16, 2012, 10,071 shares of
common stock were issued in relation to a warrant exercise. The Company received $3,021 from this transaction.
March 20, 2012,
15,000
shares of common stock were issued in consideration for strategic marketing services rendered for the benefit of the Company. A
$69,450 consulting expense was recorded in relation to this transaction based on the fair market value of the stock on the date
of grant.
Between April 4-12, 2012, 57,000 shares of common
stock were issued in relation to common stock bonuses granted to officers and employees. 50,750 of these common shares were issued
to three officers with a fair value of $243,600 in accordance with their employment agreement bonus provisions. Two employees were
awarded a total of 6,250 common shares with a fair value total of $30,000.
On April 12, 2012, a holder of 2,500 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $250 into common shares. For these conversions, the holder received 458 common shares based
upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.
On May 4, 2012, a holder of 45,000 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $4,500 into common shares. For these conversions, the holder received 8,645 common shares
based upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.
100
On May 30, 2012, a holder of 3,043 shares of convertible
Series A preferred stock completed the conversion of those shares into common shares. At the same time, the holder also converted
an accrued preferred stock dividend of $304 into common shares. For these conversions, the holder received 558 common shares based
upon the conversion features of the convertible Series A preferred stock and accrued preferred stock dividends.
On June 21, 2012, 1,000 shares of common stock were
issued to a consultant in consideration for strategic investor marketing services rendered for the benefit of the Company and a
$6,450 consulting expense was recorded in relation to these issuances based on the fair market value of the stock on the date of
the grant.
On June 28 and 29, July 2, 3, 16 and 27, 2012, 234,332
shares of common stock were sold to investors at $4.50 per share pursuant to stock purchase agreements with proceeds of $1,054,500
before related costs from this transaction of $79,045 which were recorded as reductions of additional paid in capital.
On September 7, 2012, 1,052 shares of common stock
were issued as a royalty to James McKenzie, majority owner of CUI, Inc. prior to the May 2008 asset acquisition by CUI Global.
The shares were valued at $6,638.
On September 27, 2012, 4,596 shares of common stock
were issued to an employee as a bonus. These shares were expensed at a fair value of $25,000 as of the date of issuance.
On each of April 5, May 7, June 6, July 2, August
1, September 7, October 1 and November 1, 2012, the Company issued 13,500 shares of common stock to a consultant in consideration
for strategic investor marketing services rendered for the benefit of the Company. A $569,970 consulting expense was recorded in
relation to these issuances based on the fair market value of the stock on the dates of the grants.
On October 16, 2012, 2,500 shares of common stock
were issued to a consultant in consideration for strategic investor marketing services rendered for the benefit of the Company
and a $12,825 consulting expense was recorded in relation to these issuances based on the fair market value of the stock on the
date of the grant.
Warrants and Options Issued During 2012
During April 2012, 84,675 options to purchase restricted
common stock were issued to officers and directors under the 2009 Equity Incentive Plan (Executive) with the following assumptions:
exercise price of $4.56 per share, volatility of 90%, risk free interest rate of 0.27% and a term of 2 years. The 19,800 director
related options vest one year from the date of grant while the 64,875 officer options have a four year vesting period with 25%
vesting one year from date of grant and monthly thereafter.
During May 2012, 11,167 fully vested options were
granted to employees under the 2008 Equity Incentive Plan to purchase common stock with the following assumptions: exercise price
of $4.58 per share, volatility of 91%, risk-free interest rate of 0.27% and a term of 2 years.
During September 2012, 330,000 options to purchase
common stock were issued to an officer under the 2009 Equity Incentive Plan (Executive) with the following assumptions: exercise
price of $6.00 per share, volatility of 84%, risk-free interest rate of 0.27% and a term of 2 years. The 330,000 options vest in
equal monthly installments over the course of forty-eight consecutive months beginning September 2012.
101
Series A and Series B Convertible Preferred Stock Issued
During 2012
There were no shares of Series A or Series B Convertible Preferred
Stock issued during 2012.
Series C Preferred Stock Issued During 2012
There were no shares of Series C Convertible Preferred
Stock issued during 2012.
Note:
Effective September 17, 2012, the Board of Directors
passed a resolution eliminating and discontinuing all Series A and B Convertible Preferred and Series C Preferred stock. As of
December 31, 2012, no shares of Series B and Series C Convertible Preferred Stock are issued or outstanding.
Shares Eligible for Future Sale
As of December 31, 2012, we had outstanding 10,883,280 shares
of common stock. Of these shares, 8,636,820 shares are freely tradable without restriction or limitation under the Securities Act.
The 2,246,460 shares of common stock held by existing shareholders
as of December 31, 2012 that are "restricted" within the meaning of Rule 144 adopted under the Securities Act (the "Restricted
Shares"), may not be sold unless they are registered under the Securities Act or sold pursuant to an exemption from registration,
such as the exemption provided by Rule 144 promulgated under the Securities Act. The Restricted Shares were issued and sold by
us in private transactions in reliance upon exemptions from registration under the Securities Act.
Effective September 17, 2012, the Board of Directors passed
a resolution eliminating and discontinuing all Series A and B Convertible Preferred and Series C Preferred stock and requiring
that all preferred stock shall be returned to the Company treasury. As of December 31, 2012, no shares of Series B and Series C
Convertible Preferred Stock are issued or outstanding.
Item 16. Exhibits and Financial Statement Schedules.
See the Exhibit Index following the signature page.
Item 17. Undertakings.
The undersigned registrant hereby undertakes
that
:
i.
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
ii.
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
102
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act of 1933, as amended and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of
1933, as amended and will be governed by the final adjudication of such issue.
103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S-1
and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Tualatin, State of Oregon on March 6, 2013.
CUI Global, Inc.
By:
/s/ William J. Clough, Esq.
/s/ Daniel N. Ford
William J. Clough, Esq.,
Daniel N. Ford,
Chief Executive Officer/President
Chief Financial Officer and
Principal Financial and Accounting
Officer
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Name
Title
Date
*
Director
March 6, 2013
Colton R. Melby
*
Chief Executive Officer,
William J. Clough
President, and Director
March 6, 2013
*
Director
March 6, 2013
Thomas A. Price
*
Director
March 6, 2013
Sean P. Rooney
*
Director
March 6, 2013
Corey Lambrecht
*
Director
March 6, 2013
Matthew M McKenzie
BY:
/s/ William J. Clough, Esq.
William J. Clough
Attorney-in-Fact
*
Signed on individual's behalf by attorney-in-fact
104
Exhibit
Index
The following exhibits are included as part of this Form S-1.
Exhibit No.
Description
1.1
*
Form of Underwriting Agreement
2.1
7
Orbital Gas Systems Limited Share Purchase Agreement dated March
    3, 2013.
3.1
8
Composite Articles of Incorporation of the Company, as currently in effect.
3.2
1
Bylaws of the Company.
4.1
2
Form of Warrant to Purchase Restricted Common Stock.
5.1
*
Opinion regarding legality.
10.32
4
Amendment to $14,000,000 Promissory Note between IED, Inc. and the Company, dated September 1, 2010.
10.33
4
Agreement for Accord and Satisfaction of an Undisputed Debt between IED, Inc. and the Company, dated April 1, 2010.
10.34
8
Agreement for the sale of certain intellectual property rights, dated September 2, 2011.
10.35
5
Amendment to Divestment Agreement Regarding Stock Sale and Purchase Agreement between CUI Global, Inc. (formerly Waytronx, Inc.), Kunio Yamagih and Others on July 1, 2009, dated April 13, 2012.
10.37
5
Memorandum of Understanding with Ericsson Inc., dated July 7, 2011.
10.38
5
BPS-5 License Agreement by and between California Power Research, Inc. and the Company, dated March 5, 2010. 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).
10.39
5
Patent License Agreement by and between Power-One, Inc. and CUI, Inc., dated September 18, 2009. 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).
10.40
5
Licensing Agreement between AnderMotion Technologies LLC and the Company, dated April 20, 2009.
10.41
5
Gas Quality Inferential Measurement Device (GasPT) License Agreement between GL Industrial Services UK Ltd and the Company, dated December 1, 2009. 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).
10.42
5
Distributor Agreement by and between Orbital Gas Systems Ltd and the Company, dated October 21, 2011. 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).
10.43
5
Distributor Agreement by and between Socrate s.p.a. and the Company, dated January 16, 2012. 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).
10.44
5
Manufacturing Agreement by and between Agilent Technologies Singapore International and CUI Inc., dated November 1, 2011. 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).
10.45
5
Exclusive Distributor Agreement by and between Digi-Key Corporation and CUI Inc., dated April 1, 2009.
105
10.46
5
Contract Manufacturing Agreement
between
Ingenion Design Ltd.
and the Company, dated March 18, 2011.
10.47
5
Amended and Restated Letter
Agreement
between The
Belleau Wood Group
and the Company, dated
    June 5, 2012.
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).
10.48
5
Lease Agreement
between
Barakel
LLC and CUI Inc., dated September 1, 2006.
10.49
5
Credit and Security Agreement
between
    Wells Fargo Bank, National Association, and CUI, Inc., dated July 26, 2010.
10.50
5
Revolving Note for $4,000,000 between Wells
    Fargo Bank, National Association, and CUI, Inc., dated July 26, 2010.
10.51
5
Security Agreement between Wells Fargo Bank,
    National Association, and the Company, dated July 26, 2010.
10.52
5
Subordination Agreement between Wells Fargo
    Bank, National Association, and International Electronic Devices, Inc., dated May 27, 2010.
10.53
5
Term Note for $4,000,000 between Wells Fargo
    Bank, National Association, and CUI Inc., dated August 23, 2010.
10.54
5
Patent and Trademark Security Agreement
.
    between Wells Fargo Bank, National Association, and the Company, dated July 28, 2010.
10.55
6
First Amendment to Credit and Security Agreement
.
    by and between Wells Fargo Bank, National Association, and CUI, Inc., dated January 25, 2011.
10.56
5
Second Amendment to Credit and Security Agreement
by and between Wells Fargo Bank, National Association, and CUI, Inc., dated April 12, 2011.
10.57
5
Third Amended
to Credit and Security
    Agreement
by and between Wells Fargo Bank, National Association, and CUI, Inc., dated May
    24, 2011.
10.58
5
Fourth Amendment to Credit and Security Agreement
.
    by and between Wells Fargo Bank, National Association, and CUI, Inc., dated November 29, 2011.
10.59
5
Fifth Amendment to Credit and Security Agreement
.
    by and between Wells Fargo Bank, National Association, and CUI, Inc., dated December 21, 2011.
10.60
5
Employment Agreement
, dated May
    15, 2008, and Addendum A, dated July 1, 2010, by and between
Daniel N. Ford and
the
    Company.
10.61
5
Employment Agreement, dated May 15, 2008, and
Addendum A
",
dated July 1,
2010, by and
    between
Matthew M. McKenzie and
the Company.
10.62
5
Employment Agreement, dated October 2005, Addendum
    A, dated June 1, 2007, Addendum B, dated May 15, 2008, Addendum C, dated July 1, 2010, and Addendum D, dated August 1, 2012,
    by and between
William J. Clough
and the Company
.
10.63
5
Amendment to
$14,000,000 Promissory
    Note between
IED, Inc.
and the Company, dated
September 1, 2010.
10.64
5
Amendment to
$14,000,000 Promissory
    Note between
IED, Inc.
, and the Company, dated
December 1, 2010.
10.65
5
Amendment to
Secured Promissory
    Notes between OnScreen Technologies, Inc. and
Central Finance LLC, dated September 30, 2010.
10.66
5
General Release between CUI, Inc. and the Company,
dated December 15, 2011.
10.67
5
Promissory
Note (Unsecured) by
    the Company for the benefit of
Daniel N. Ford,
dated July 28, 2011.
10.68
5
Purchase
/
Sales Agreement
between
Tensility International Corporation
and the
    Company, dated November 3, 2010.
10.69
5
"Finders
Fee
"
Agreement
between
Test Products International, Inc.
,
James McKenzie
and the Company, dated October 28, 2011.
10.70
6
Sixth Amendment to Credit and Security Agreement
.
    by and between Wells Fargo, National Association, and CUI, Inc., dated April 3, 2012.
106
10.71
6
Seventh Amendment to Credit and Security Agreement
.
by and between Wells Fargo, National Association,
    and CUI, Inc., dated December 7, 2012.
21.1
3
Subsidiaries of the Company.
23.1
8
Consent of Liggett, Vogt & Webb, P. A., Independent Registered
    Public Accounting Firm
23.2
8
Consent of Baker Tilly Virchow Krause, LLP,
    Independent Auditors.
23.3
*
Consent of
Counsel
included
    with Exhibit 5.1 above.
24.1
8
Powers of Attorney
101
*
XBRL related documents.
Footnotes to Exhibit Index:
1.
Incorporated by reference to our Registration Statement
                                                                       on Form SB-2/A filed with the Commission on October 26,
                                                                       2001.
2.
Incorporated
                                                                                                              by reference to
the
                                                                                                              Post-Effective Amendment
                                                                                                              No. 1 to
Form
S
-
3
filed with
                                                                                                              the Commission on
August
                                                                                                              17, 2009.
3.
Incorporated by reference to our Report on Form 10-K
                                                                       filed with the Commission on April 1, 2010.
4.
Incorporated by reference to our Report on Form 10-K
                                                                       filed with the Commission on March 31, 2011.
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
15,
                                                                                                              2013.
7.
Incorporated by reference to our Report on Form 8-K filed
with the Commission on March 6,
2013.
8.
Filed herewith.
*
To be filed by amendment.
107