4. ACQUISITION

CUI-Canada, Inc.

On March 5, 2015, we closed on an Asset Purchase Agreement to acquire certain assets and assumed certain liabilities of Tectrol, Inc., a Toronto, Canada corporation. The acquisition was effective March 1, 2015. As a part of this acquisition strategy, CUI Global, Inc. formed a wholly owned Canadian corporate subsidiary, CUI-Canada, Inc., to receive these acquired assets and liabilities. That entity entered into a five-year lease of the Toronto facility where Tectrol, Inc. was operating its business. CUI-Canada, Inc. operations include the design, manufacture assembly and sales of electronic power conversion devices such as AC/DC power supplies, DC/DC power supplies, linear power supplies and uninterruptable power supplies.

The purchase price for the acquisition of the assets was five million two hundred thousand dollars ($5,200,000), subject to good faith adjustments by the Parties according to the final value of the non-obsolete inventory conveyed and other closing adjustments. In addition, the agreement calls for an earn-out/royalty payment of two percent (2%) of the gross sales (for specific, identified customers) over a period of three (3) years from the closing date, up to a maximum of $300,000, that may or may not be paid to the Seller within 90 days of each calendar year end, depending on performance by the identified customer(s). The final adjusted purchase price for the acquisition of Tectrol was $4,500,945, which includes the present value of $300,000 of royalties to be paid on future sales, which has been recorded as $215,500 of contingent consideration. The full purchase price less the royalties was paid in cash. Amounts paid in excess of the purchase price, which were due to the adjustments, is held in escrow at March 31, 2015 and will be refunded to the Company. The amount is $900,957 and is included in other current assets in the consolidated balance sheet. We funded the consideration paid to the shareholder of Tectrol with existing cash and cash equivalents and funds from short term investments that had matured.

The acquisition was accounted for using the acquisition method of accounting and the purchase price was allocated to the assets acquired and liability assumed based upon their estimated fair values at the date of acquisition.

The allocation of the purchase price is as follows:

Purchase price	$	4,500,945
Inventory		2,301,624
Property & equipment		831,298
Software		73,484
Intangible, customer lists		270,000
Intangible, trade mark and tradename		130,000
Intangible, technology-based asset		1,000,000
Goodwill		63,578
Liabilities assumed		(169,039)
	$	4,500,945

CUI Global recognized revenues of $651 thousand and net loss of $300 thousand related to the operations of CUI Canada since acquisition on March 1, 2015.

The table below summarizes the unaudited condensed pro forma information of the results of operations of CUI Global, Inc. for the three months ended March 31, 2015 and 2014 as though the acquisition had been completed as of January 1, 2014 and January 1, 2015:

For the three months ended March 31, 2015

	CUI Global		Tectrol, Inc.		Adjustment		Pro Forma
Gross revenue	$	16,853,120	$	4,837,085	$	-	$	21,690,205
Total expenses		20,929,276		5,212,203		37,460		26,178,939
Net profit (loss)	$	(4,076,156)	$	(375,118)			$	(4,488,734)
Basic and diluted loss per share							$	(0.22)

For the three months ended March 31, 2014

	CUI Global		Tectrol, Inc.		Adjustment		Pro Forma
Gross revenue	$	16,899,909	$	5,419,651	$	-	$	22,319,560
Total expenses		17,387,827		5,535,659		56,190		22,979,676
Net profit (loss)	$	(487,918)	$	(116,008)			$	(660,116)
Basic and diluted loss per share							$	(0.03)

(1)

Adjustment to recognize the amortization expense of $37,460 and $56,190 of acquisition related intangible assets as though the acquisition had occurred at the beginning January 1, 2015 and 2014, respectively. The pro forma condensed consolidated statements of operations reflect only pro forma adjustments expected to have a continuing effect on the consolidated results beyond 12 months from the consummation of the acquisition.

The above unaudited condensed pro forma information does not purport to represent what the Companies’ combined results of operations would have been if such transactions had occurred at the beginning of the period presented, and are not indicative of future results.