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EX-10.15 - EXHIBIT 10.15 - UNIVERSAL POWER GROUP INC.ex10-15.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
þ  
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
   
For the quarterly period ended September 30, 2012
     
   
OR
     
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
   
For the transition period from ____________ to ____________              
 
Commission file number:  001-33207
 
Universal Power Group, Inc.
(Exact name of registrant as specified in its charter)
 
TEXAS
 
75-1288690
(State or other jurisdiction of incorporation or
organization)
 
(I.R.S. Employer Identification No.)
     
1720 Hayden Drive, Carrollton, Texas
 
75006
(Address of principal executive offices)
 
(Zip Code)
 
(469) 892-1122
(Registrant’s telephone number, including area code)
 
None
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ                 No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ                 No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o                                   Accelerated filer o                                   Non-accelerated filer o                                   Smaller reporting company þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o                 No þ
 
As of November 9, 2012, 5,020,000 shares of Common Stock were outstanding.
 


 
 

 

Table of Contents
 
     
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17
 
FORWARD-LOOKING STATEMENTS
 
This report includes forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995 or by the U.S. Securities and Exchange Commission (“SEC”) in its rules, regulations and releases, regarding, among other things, all statements other than statements of historical facts contained in this report, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations.  The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements.  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.  These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC (“Annual Report”) and elsewhere in this report.  In addition, our past results of operations do not necessarily indicate our future results.
 
Other sections of this report may include additional factors which could adversely affect our business and financial performance.  Moreover, the third-party logistics services business and the battery and related power accessory supply and distribution business are highly competitive and rapidly changing.  New risk factors emerge from time to time and it is not possible for us to anticipate all the relevant risks to our business, and we cannot assess the impact of all such risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements.  Those factors include, among others, those matters disclosed as Risk Factors set forth in our Annual Report.
 
Except as otherwise required by applicable laws and regulations, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in our Annual Report, whether as a result of new information, future events, changed circumstances or any other reason.  Neither the Private Securities Litigation Reform Act of 1995 nor Section 27A of the Securities Act of 1933 provides any protection to us for statements made in this report.  You should not rely upon forward-looking statements as predictions of future events or performance.  We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
 
 
(i)

 
 
 
 
UNIVERSAL POWER GROUP, INC.
 
 
ASSETS
 
(Amounts in thousands except share amounts)
 
   
September 30,
2012
   
December 31,
2011
 
   
(unaudited)
       
             
CURRENT ASSETS
           
Cash and cash equivalents
  $ 987     $ 283  
Accounts receivable:
               
Trade, net of allowance for doubtful accounts of $343 (unaudited) and $384
    10,951       12,972  
Other
    454       442  
Inventories – finished goods, net of allowance for obsolescence of $785 (unaudited) and $830
    34,161       24,174  
Current deferred tax assets
    1,174       972  
Income tax receivable
    167       721  
Prepaid expenses and other current assets
    873       1,426  
Total current assets
    48,767       40,990  
                 
PROPERTY AND EQUIPMENT
               
Logistics and distribution systems
    1,908       1,871  
Machinery and equipment
    707       1,044  
Furniture and fixtures
    519       511  
Leasehold improvements
    395       389  
Vehicles
    155       171  
Total property and equipment
    3,684       3,986  
Less accumulated depreciation and amortization
    (3,158 )     (3,128 )
Net property and equipment
    526       858  
                 
GOODWILL
    1,387       1,387  
INTANGIBLES, net
    390       527  
OTHER ASSETS
    98       100  
NON-CURRENT DEFERRED TAX ASSET
    351       213  
      2,226       2,227  
                 
TOTAL ASSETS
  $ 51,519     $ 44,075  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
1

 
 
UNIVERSAL POWER GROUP, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
(Amounts in thousands except share amounts)
 
   
September 30,
2012
   
December 31,
2011
 
   
(unaudited)
       
             
CURRENT LIABILITIES
           
Line of credit
  $ 21,346     $ 12,654  
Accounts payable
    5,583       6,845  
Accrued liabilities
    1,280       1,213  
Current portion of settlement accrual
          241  
Current portion of capital lease and note obligations
    100       119  
Current portion of deferred rent
          14  
Total current liabilities
    28,309       21,086  
                 
LONG-TERM LIABILITIES
               
Capital lease and note obligations, less current portion
    156       229  
                 
TOTAL LIABILITIES
    28,465       21,315  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
SHAREHOLDERS’ EQUITY
               
Common stock - $0.01 par value, 50,000,000 shares authorized, 5,020,000 shares issued and outstanding
    50       50  
Additional paid-in capital
    16,347       16,339  
Retained earnings
    6,657       6,419  
Accumulated other comprehensive loss
          (48 )
Total shareholders’ equity
    23,054       22,760  
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 51,519     $ 44,075  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
2

 
 
UNIVERSAL POWER GROUP, INC.
 
 
(Amounts in thousands except per share data)
 
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Net sales
  $ 22,114     $ 24,676     $ 72,035     $ 67,785  
Cost of sales
    18,539       19,920       59,617       54,349  
Gross profit
    3,575       4,756       12,418       13,436  
                                 
Operating expenses
    3,312       4,241       10,883       11,524  
                                 
Operating income
    263       515       1,535       1,912  
                                 
Interest expense
    (145 )     (161 )     (441 )     (452 )
Other, net
    3             129        
Total other expense, net
    (142 )     (161 )     (312 )     (452 )
                                 
Income from continuing operations before provision for income taxes
    121       354       1,223       1,460  
Provision for income taxes
    (78 )     (197 )     (439 )     (623 )
Income from continuing operations
    43       157       784       837  
Discontinued operations:
                               
Gain (loss) from operations of discontinued Monarch Outdoor Adventures, LLC (including loss on disposal of $616 in Q2 2012)
          40       (707 )     (187 )
Provision for income taxes
          (14 )     161       61  
Gain (loss) on discontinued operations
          26       (546 )     (126 )
Net income
  $ 43     $ 183     $ 238     $ 711  
Net income (loss) per share
                               
Basic:
                               
Income from continuing operations
  $ 0.01     $ 0.03     $ 0.16     $ 0.17  
Gain (loss) on discontinued operations
  $ 0.00     $ 0.01     $ (0.11 )   $ (0.03 )
Net income
  $ 0.01     $ 0.04     $ 0.05     $ 0.14  
Diluted:
                               
Income from continuing operations
  $ 0.01     $ 0.03     $ 0.15     $ 0.17  
Gain (loss) on discontinued operations
  $ 0.00     $ 0.01     $ (0.10 )   $ (0.03 )
Net income
  $ 0.01     $ 0.04     $ 0.05     $ 0.14  
Weighted average shares outstanding
                               
Basic
    5,020       5,020       5,020       5,020  
Diluted
    5,244       5,025       5,215       5,029  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
3

 
 
UNIVERSAL POWER GROUP, INC.
 
 
(Amounts in thousands)
 
   
Three Months Ended September 30,
      Nine Months Ended September 30,  
   
2012
   
2011
   
2012
   
2011
 
Net income
  $ 43     $ 183     $ 238     $ 711  
Amortization of hedging instrument
          29       48       87  
Comprehensive income
  $ 43     $ 212     $ 286     $ 798  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
4

 
 
UNIVERSAL POWER GROUP, INC.
 
 
(Amounts in thousands)
 
    Nine Months Ended September 30,  
   
2012
   
2011
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net income
  $ 238     $ 711  
Items not requiring (providing) cash
               
Depreciation and amortization
    338       616  
Provision for bad debts
    53       139  
Provision for obsolete inventory
    500       540  
Deferred income taxes
    (340 )     (63 )
Loss on disposal of Monarch
    616        
Gain on disposal of property
          7  
Stock-based compensation
    8       22  
Changes in operating assets and liabilities, net of effect of disposition and acquisition:
               
Accounts receivable – trade
    1,961       (1,366 )
Accounts receivable – other
    68       (4 )
Inventories
    (10,652 )     12,685  
Income taxes receivable/payable
    554       (284 )
Prepaid expenses and other assets
    551       (863 )
Accounts payable
    (1,262 )     (2,479 )
Accrued liabilities
    (207 )     521  
Settlement accrual
    (241 )     (554 )
Deferred rent
    (64 )     (53 )
Net cash provided by (used in) operating activities
    (7,879 )     9,575  
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Net cash paid in ProTechnologies, Inc. Acquisition
          (2,268 )
Net cash received on Monarch Outdoor Adventures, LLC sale
    40        
Purchases of property and equipment
    (59 )     (59 )
Proceeds from sales of equipment
          2  
Net cash used in investing activities
    (19 )     (2,325 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Net activity on line of credit
    8,692       (6,586 )
Payments on capital lease and note obligations
    (90 )     (517 )
Net cash provided by (used in) financing activities
    8,602       (7,103 )
                 
NET INCREASE  IN CASH AND CASH EQUIVALENTS
    704       147  
Cash and cash equivalents at beginning of period
    283       215  
Cash and cash equivalents at end of period
  $ 987     $ 362  
                 
SUPPLEMENTAL DISCLOSURES
               
Income taxes paid
  $ 81     $ 975  
Interest paid
  $ 442     $ 454  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
5

 
 
UNIVERSAL POWER GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE A — BASIS OF PRESENTATION
 
The condensed consolidated interim unaudited financial statements of Universal Power Group, Inc. (“UPG” or the “Company”) included in this quarterly report have been prepared in accordance with generally accepted accounting principles accepted in the United States for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included for the three and nine-month periods ended September 30, 2012 and 2011.  The results for the three and nine-month periods ended September 30, 2012 are not necessarily indicative of the results that may be expected for the full year or any other interim period.  Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  The unaudited condensed consolidated financial statements included in this filing should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on April 5, 2012.  The condensed consolidated balance sheet of the Company as of December 31, 2011 has been derived from the audited consolidated balance sheet as of that date.
 
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.
 
NOTE B — ORGANIZATION
 
UPG is a distributor and supplier of batteries and related power accessories to a diverse range of industries, and a provider of third-party fulfillment and logistics services and value-added solutions.  The Company’s primary logistics center is located in Carrollton, Texas and regional logistic centers are located in Las Vegas, Nevada and Atlanta, Georgia.  The Company’s customers are primarily located in the United States.  A small portion of the Company’s sales are to customers located in the United Kingdom, Australia, Ireland, Japan, China, Canada and Latin America.
 
Until December 20, 2006, the Company was a wholly owned consolidated subsidiary of Zunicom, Inc. (“Zunicom”), a Texas corporation, whose stock is quoted on the OTC Bulletin Board under the symbol “ZNCM.OB.”  On December 20, 2006, the U.S. Securities and Exchange Commission declared effective a registration statement filed by the Company registering the sale of 3,000,000 shares of its common stock, including 1,000,000 shares owned by Zunicom (the “IPO”).  As a result of the IPO, Zunicom’s interest in the Company was reduced to 40%.  Zunicom no longer owns a controlling interest in UPG; however, as the largest shareholder, Zunicom does have significant influence over UPG.
 
On January 8, 2009, the Company formed a limited liability company under the name Monarch Outdoor Adventures LLC d/b/a Monarch Hunting (“Monarch”), through which it acquired all of the tangible and intangible assets of a manufacturer and retailer of high-quality hunting products including battery and solar powered deer feeders, hunting blinds, stands and accessories for approximately $892,000.  Monarch is located in Arlington, Texas and has customers throughout the United States.  Monarch’s revenue and assets are not material to the Company’s consolidated financial statements.  On May 4, 2012, the Company sold Monarch for $130,000.  See Note K.
 
On April 20, 2011, the Company completed an acquisition of substantially all of the business assets of Progressive Technologies, Inc. (“PTI”), a North Carolina company that designs and builds custom battery packs.  The acquisition consideration totaled approximately $3.3 million.  PTI’s expertise in lithium-ion battery packs, among other chemistries, further enhances the Company’s product and service offerings.  In addition, PTI’s products will strengthen the Company’s position in the medical field and other market segments.  On September 1, 2011, PTI changed its legal name to ProTechnologies, Inc.
 
NOTE C — STOCK-BASED COMPENSATION
 
At September 30, 2012, common shares reserved for future issuance include 1,980,000 shares issuable under the 2006 Stock Option Plan, as amended, as well as 20,000 shares issuable upon exercise of options not granted under the 2006 Stock Option Plan.  At September 30, 2012, there were 1,403,842 options outstanding under the 2006 Stock Option Plan, and 576,158  options are available for future grants.
 
There were no options granted during the nine months ended September 30, 2012 or 2011.
 
At September 30, 2012, the aggregate intrinsic value of options outstanding and exercisable was $302,000.
 
At September 30, 2012, all outstanding options under the 2006 Stock Option Plan were fully vested with no remaining unrecognized compensation expense.
 
On June 25, 2007, Zunicom issued restricted stock to certain employees of UPG for past and future services.  The Company amortized the fair value of 398,144 shares, which had not been forfeited, as compensation expense over the 48 month vesting period.  Compensation expense related to these shares was recorded at $0 and $19,000 during the nine-month periods ended September 30, 2012 and 2011, respectively.
 
 
6

 
 
UNIVERSAL POWER GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
On June 24, 2011, Zunicom issued an additional 99,538 restricted shares of its common stock to the same Company employees who received the grant in June 2007 and who were still employed by the Company.  As a condition to this grant, the grantees agreed to extend the restricted period on the shares issued in June 2007 for an additional three years.  As a result, all 497,682 shares will vest on June 24, 2014.  The Company is amortizing the fair value as compensation expense over the 36-month vesting period in accordance with ASC Topic 718, Compensation – Stock Compensation.  Approximately $8,500 and $2,800 compensation expense related to these shares was recorded during the nine-month periods ended September 30, 2012 and 2011, respectively.  At September 30, 2012, there is approximately $19,900 of remaining unrecognized compensation expense associated with this grant.
 
On March 21, 2007, the Company issued stock options to non-employees to purchase 20,000 shares of the Company’s common stock at an exercise price of $7.00 per share vesting over three years and expiring December 19, 2016.  These stock options remain outstanding as of September 30, 2012.
 
NOTE D — NET INCOME (LOSS) PER SHARE
 
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.
 
Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period.  The Company’s common stock equivalents include all common stock issuable upon the exercise of outstanding stock options and warrants.
 
For the three-month period ended September 30, 2012, the dilutive effect of 872,592 stock options is included in the calculation and 551,250 stock options are excluded from the calculation as they are antidilutive.  For the nine-month period ended September 30, 2012, the dilutive effect of 872,592 stock options is included in the calculation and 551,250 stock options are excluded from the calculation as they are antidilutive.
 
For the three-month period ended September 30, 2011, the dilutive effect of 20,000 stock options is included in the calculation and 1,373,842 stock options and 300,000 warrants are excluded from the calculation as they are antidilutive.  For the nine-month period ended September 30, 2011, the dilutive effect of 50,000 stock options is included in the calculation and 1,343,842 stock options and 300,000 warrants are excluded from the calculation as they are antidilutive.
 
NOTE E — LINE OF CREDIT
 
On December 16, 2009, the Company entered into a credit agreement with Wells Fargo under which the Company may borrow up to $30.0 million or up to $40.0 million if it can satisfy certain defined criteria, on a revolving basis (the “Credit Agreement”).  All borrowings under the Credit Agreement are secured by a first lien on all of the Company’s assets.  The Company’s ability to draw on the credit line is limited to an amount equal to 80% of “eligible accounts receivable” and 80% of “eligible inventory” as defined in the Credit Agreement.  In connection with each draw down, the Company has an option to choose either a “Base Rate” or “Eurodollar” loan.  Interest on Base Rate Loans is payable quarterly and interest on Eurodollar Loans is generally payable monthly or quarterly as selected by the Company.  The annual rate of interest payable on Base Rate and Eurodollar loans fluctuate depending upon a number of factors, as described in the Credit Agreement.  At September 30, 2012, all outstanding borrowings under the credit facility were accruing interest at the rate of 2.51% per annum.  The Credit Agreement matures on July 30, 2013.
 
The Credit Agreement contains customary negative covenants restricting the Company’s ability to take certain actions without Wells Fargo’s consent, including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses.  If there is an “event of default”, including failure to pay, bankruptcy, breach of covenants and breach of representations and warranties, all amounts outstanding under the Credit Agreement will become immediately due and payable.  In addition, the Company must maintain certain financial covenants on a quarterly basis.
 
At September 30, 2012, approximately $21.3 million was outstanding under the credit facility out of a maximum availability of approximately $22.2 million based on the borrowing formula.
 
Interest Rate Swap
 
In connection with the Credit Agreement, the Company terminated an Interest Swap Agreement (“ISA”) it had with its previous lender and, consequently, discontinued hedge accounting as of December 16, 2009.  The Company incurred interest expense commensurate with its original, hedged risk.  The realized losses related to the ISA was not recognized immediately and was in accumulated other comprehensive income (loss).  These losses are reclassified into interest expense over the original contractual term of the ISA starting as of December 16, 2009 through July 5, 2012.
 
NOTE F — CONCENTRATIONS
 
At September 30, 2012 and 2011, the Company had receivables due from ADT Security Services, Inc. (“ADT”) in the amount of approximately $1.8  million and $1.7 million, respectively.  For the three months ended September 30, 2012 and 2011, there were no customers with 10% or more of net sales.  For the nine months ended September 30, 2012, there were no customers with 10% or more of net sales.  For the nine months ended September 30, 2011, ADT accounted for 12% of net sales.

 
7

 
 
UNIVERSAL POWER GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE G — LEGAL PROCEEDINGS
 
Universal Power Group, Inc.,(Plaintiff and Counter defendant) v. Randy T. Hardin, Steven W. Crow and Bright Way Group, LLC (Defendants, Counter Plaintiffs and Third-Party Plaintiffs) v. William Tan, Ian Edmonds and Mimi Tan Edmonds (Third-Party Defendants), Cause No. 11-09787-E (In the District Court of Dallas County, Texas, 101st Judicial District).
 
The Company initiated the above referenced case on August 8, 2011 by filing its Original Petition and Application for Temporary Injunction and for Permanent Injunctive Relief against Randy Hardin, a former President of the Company, Bright Way Group, Hardin’s new business venture, and Steven Crow, the Company’s former Vice President of Product Development and Retail Chain Sales.  On March 19, 2012, the parties entered into a settlement agreement whereby the defendants paid the Company a sum of money and agreed to an entry of a temporary injunction restricting them from contacting certain of the Company’s customers and suppliers until January 1, 2013.  The parties have agreed to dismiss all claims and counterclaims in the lawsuit.
 
The Company is not currently party to any legal proceedings other than those arising in the ordinary course of business, which management does not believe will have a material adverse effect on the Company’s financial position, operating results, or cash flows, regardless of the outcome.
 
NOTE H — INCOME TAXES
 
The Company files income tax returns in the U.S. federal jurisdiction and various states.  With a few exceptions, the Company is no longer subject to U.S. state and local income tax examinations by tax authorities for the years before 2008.
 
The Company recorded income tax expense of approximately $78,000 and $211,000 for the three-month periods ended September 30, 2012 and 2011, respectively.  The income tax expense for the nine-month periods ended September 30, 2012 and 2011 was $278,000 and $562,000, respectively.  The Company’s effective tax rate was 64.5% and 53.6% for the three months ended September 30, 2012 and 2011, respectively.  The Company’s effective tax rate was 53.9% and 44.1% for the nine-months ended September 30, 2012, and 2011, respectively. The taxes are different than the federal statutory rate of 34% primary due to items permanently not deductible for income tax reporting purposes and state income taxes.
 
NOTE I— GOODWILL
 
Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired business. Goodwill is tested annually for impairment and when events or circumstances change to suggest that the carrying amount may not be recoverable. For purposes of impairment testing, goodwill is allocated to reporting units, which are either at the operating segment level or one reporting level below the operating segment. Goodwill is recorded in the financial statements at cost less accumulated impairment losses.  In the second quarter of 2012, UPG performed the annual impairment tests and determined that goodwill was not impaired.
 
NOTE J — SEGMENT AND GEOGRAPHIC INFORMATION
 
The accounting standard for segment reporting requires enterprises to report financial information and descriptive information about reportable operating segments.  It also establishes standards for related disclosures about products and services, geographic areas and major customers.  The Company evaluated the accounting standard for segment reporting and determined that the Company operates in only one segment.
 
NOTE K — DISCONTINUED OPERATIONS
 
On May 4, 2012, pursuant to a Securities Purchase Agreement, dated as of May 4, 2012 (the “Agreement”), the Company sold all of the issued and outstanding membership interests of Monarch for $130,000.  Of the purchase price, $50,000 was paid in cash at closing and $80,000 was evidenced by a 6% secured promissory note maturing May 1, 2014.  The principal amount of the note and all accrued interest thereon is payable in 24 equal monthly installments of $3,692 beginning on June 1, 2012.  The note is secured by a pledge of all of the membership interests in Monarch as well as a lien on all of Monarch’s assets.  The purchasers also agreed to sublet from the Company for a minimum term of two years the premises used by Monarch at an annual rental of $42,000.  The Agreement contains representations and warranties, covenants and indemnification provisions typical of those in these types of transactions.  UPG realized a pre-tax loss of approximately $600,000 related to the sale of Monarch including lease obligations retained for the manufacturing facility.
 
NOTE L — SUBSEQUENT EVENT
 
On October 31, 2012, the Company entered into a 10-year lease for approximately 208,800 square feet in Coppell, TX for its corporate headquarters and warehouse.  The lease term starts on March 1, 2013 with base payments totaling approximately $3,852,000 over the 10-year lease term.

 
8

 
 
Item 2.             Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this report.
 
Business Overview
 
We are (i) a leading supplier and distributor of batteries, related power accessories,  low voltage wire and cable products and security accessories and (ii) a third-party logistics services provider, specializing in supply chain management and value-added services.
 
Distribution Business
 
We sell, distribute and market batteries, related power accessories, low voltage wire and cable products and security accessories under various manufacturer brands, private labels and our own proprietary brands.  We are one of the leading domestic distributors of sealed, or “maintenance-free,” lead-acid batteries (“SLA batteries”).  We also assemble lithium-ion and other custom battery packs.  Our principal product lines include:
 
batteries and custom battery packs of a wide variety of chemistries, battery chargers and related accessories;
 
portable battery-powered products, such as jump starters and 12-volt DC power accessories;
 
low voltage wire and cable products;
 
security system components, such as alarm panels, perimeter access controls, horns, sirens, speakers, transformers, cable and wire; and
 
renewable power products such as solar power generators and solar products.
 
Our customers include original equipment manufacturers (OEMs), distributors and both online and traditional retailers.  Our products represent basic power solutions to a wide variety of existing applications in a broad market spectrum.  They are used in a diverse and growing range of markets and applications including automotive, medical mobility, consumer goods, electronics, marine, hunting, powersports, solar, portable power, security and surveillance, fire, energy management, electrical and telecommunications.
 
The demand for our products is impacted by consumer and market preferences, technological developments, fuel costs, which impact manufacturing and shipping, the cost of lead and copper, the two principal raw materials used to manufacture batteries and wire and cable products, and general economic conditions.  We believe that technological change drives growth as new product introductions accelerate sales and provide us with new opportunities.  At the same time, product needs are also evolving due to changes in consumer demands and preferences that are driven, in part, by environmental and safety concerns and the need for greater density power and longer life.  Therefore, we continue to stay current regarding advances and changes in our products.
 
Third-Party Logistics
 
We are also a third-party logistics services provider specializing in supply chain management and value-added services, designed to help customers optimize performance by allowing them to outsource supply chain management functions.  Our supply chain management services include inventory sourcing, procurement, warehousing and fulfillment.  Our value-added services include custom kitting, private labeling, product development and engineering, graphic design and sales and marketing.
 
We believe that the demand for third-party logistics and supply chain management solutions is growing, particularly with globalization.  To be successful, businesses have not only to excel in their core competencies, but they must also execute their supply chain processes quickly and accurately.  To remain competitive, businesses strive to identify ways to more efficiently manage their supply chain and streamline their logistics processes by minimizing inventory levels, reducing order and cash-to-cash cycle lengths and outsourcing manufacturing and assembly operations to low-cost locations.  An efficient supply chain has become a critical element to improving financial performance.  As a result, businesses are increasingly turning to organizations that provide a broad array of logistics and supply chain solutions.  These trends have been further facilitated by the rapid growth of technology enabling seamless electronic interfaces between systems of service providers and their customers.
 
 
9
 
 
 
Operations Overview  
 
We continue to focus on executing upon our long-term strategic plan to penetrate new markets, developing new higher-margin products and diversifying product mix to minimize our exposure to the broader economy.
 
The acquisition of ProTechnologies, Inc. (“PTI”) is indicative of this strategy. PTI is a lithium-ion battery pack assembler and distributer; and holds several ISO certifications required by medical and other specialized purchasers of battery packs.  As a result, the acquisition of PTI expands our product and service offerings, adds to our technical capabilities and enables us to penetrate new markets such as medical, military, metering, mining, hobby, handheld communications and OEM applications.
 
In May 2011, the government of the People’s Republic of China implemented a broad based inspection program for manufacturing facilities dealing with hazardous materials including lead.  These efforts came in response to a number of incidents involving the release of hazardous materials into the environment, resulting in contamination of water supplies and harm to the local population.  Chinese government authorities have been particularly focused on lead acid battery manufacturers given the potential for lead poisoning resulting from the methods used by manufacturing and recycling plants to treat waste product, including its potential release into the environment.  The Ministry of Environmental Protection in China has been inspecting these manufacturing plants and has closed a significant number of facilities due to their production practices and poor technical standards as well as their proximity to large population centers.  These recent closures have impacted production of lead acid batteries in China and have caused delays and disruptions in the supply of batteries to the United States and other global markets.  In the first nine months of 2012 we experienced delays in product shipments from a number of China-based factories.
 
On May 4, 2012, pursuant to a Securities Purchase Agreement, dated as of May 4, 2012 (“Agreement”), we sold all of the issued and outstanding membership interests of Monarch for $130,000.  Of the purchase price, $50,000 was paid in cash at closing and $80,000 was evidenced by a 6% secured promissory note due May 1, 2014.  We realized a pre-tax loss of approximately $600,000 related to the sale of Monarch in our second-quarter financial results.  When we first purchased Monarch in January 2009, we believed that it held promise in terms of the variety of Monarch’s battery-powered products that might be enhanced by UPG’s supply chain infrastructure.  Unfortunately, over the past three years we determined there was not enough overlap and opportunity for growth in Monarch to justify continued investment in the business.  During that time, Monarch generated operating losses, and we were unable to generate profit or positive cash flow from its operations, however as a result of the sale, we expect improved cash flows for our overall business because the ongoing investment demands from Monarch will no longer be required.
 
Results of Operations
 
The following table compares our statement of operations data for the three and nine months ended September 30, 2012 and 2011.  The trends suggested by this table may not be indicative of future operating results, which will depend on various factors including the nature of revenues (sales of batteries, power accessories, wire and cable products, security products versus logistics or value added services) and the relative mix of products sold (batteries versus security products, wire and cable products and power accessories), which can vary from quarter to quarter, as well as the state of the general economy.  In addition, our operating results in future periods may also be affected by acquisitions.
                                                                 
   
Three months ended September 30,
   
Nine months ended September 30,
 
      2012       2011       2012       2011  
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
    Percent  
     
(dollars in thousands)
 
Net sales
  $ 22,114       100.0 %   $ 24,676       100.0 %   $ 72,035       100.0 %   $ 67,785       100.0 %
Cost of sales
    18,539       83.8 %     19,920       80.7 %     59,617       82.8 %     54,349       80.2 %
Gross profit
    3,575       16.2 %     4,756       19.3 %     12,418       17.2 %     13,436       19.8 %
Operating expenses
    3,312       15.0 %     4,241       17.2 %     10,883       15.1 %     11,524       17.0 %
Operating income
    263       1.2 %     515       2.1 %     1,535       2.1 %     1,912       2.8 %
Interest expense
    (145 )     (0.7 %)     (161 )     (0.7 %)     (441 )     (0.6 %)     (452 )     (0.7 %)
Other, net
    3       0.1 %                 129       0.2 %            
Income from continuing operations before provision for income taxes
    121       0.6 %     354       1.4 %     1,223       1.7 %     1,460       2.1 %
Provision for income taxes
    (78 )     (0.4 %)     (197 )     (0.8 %)     (439 )     (0.6 %)     (623 )     (0.9 %)
Income from continuing operations
    43       0.2 %     157       0.6 %     784       1.1 %     837       1.2 %
Gain (loss) on discontinued operations
          0.0 %     40       0.1 %     (707 )     (1.0 %)     (187 )     (0.3 %)
Provision for income taxes
          0.0 %     (14 )     (0.0 %)     161       0.2 %     61       0.1 %
Gain (loss) on discontinued operations
          0.0 %     26       0.0 %     (546 )     (0.8 %)     (126 )     (0.2 %)
Net income
  $ 43       0.2 %   $ 183       0.7 %   $ 238       0.3 %   $ 711       1.0 %
 
 
10
 
 
 
Comparison of the three months ended September 30, 2012 and 2011
 
Net sales
 
Consolidated net sales for the three-month period ended September 30, 2012 was $22.1 million compared to $24.7 million for same period in 2011, a decrease of $2.6 million or 10.4%.  This decrease was attributable to the decrease in sales to retail customers and ADT and its authorized dealers which was offset by an increase of PTI sales.
 
Cost of sales
 
Cost of sales is comprised of the base product cost, freight, duty and servicing fees where applicable.  Cost of sales totaled $18.5 million for the three-month period ended September 30, 2012 compared to $19.9 million in the comparable 2011 period, a decrease of $1.4 million, or 6.9%.  Cost of sales as a percentage of sales increased to 83.8% in the 2012 three-month period from 80.7% in 2011.  This increase was driven by the closure of a significant number of factories as a result of the China Ministry of Environmental Protection’s investigative efforts on production practices, which in turn resulted in disruptions and shortages in the supply of batteries to the United States and other global markets.  This increase in cost of sales was attributable in part to increased costs as a result of the shortage in supply of sealed lead acid batteries due to factory closures and manufacturing disruptions from Chinese suppliers.  We have also seen higher product costs overall as material and labor costs have risen in China.  These cost increases combined with the need to honor our pricing commitments to our customers placed downward pressure on gross margins.
 
Operating expenses
 
Operating expenses for the three-month period ended September 30, 2012 decreased by approximately $929,000 or 21.9%, compared to the same period in 2011.  For the 2012 period, the decrease in operating expenses is attributable to decreases of (i) $271,000 in personnel and travel cost; (ii) $259,000 in legal and professional fees; (iii) $142,000 depreciation and amortization and (iv) $234,000 in facilities costs, marketing expenses, bad debts expenses and insurance.
 
Operating income
 
For the three-month period ended September 30, 2012, our operating income decreased by approximately $252,000, or 48.9%, compared to the same period in 2011.
 
Interest expense
 
Interest expense totaled approximately $145,000 and $161,000  for the three-month period ended September 30, 2012 and 2011, respectively.  The average outstanding loan balance on the line of credit for the 2012 and 2011 periods was $21.4 million and $13.0 million, respectively, with a weighted average interest rate of 2.5% and 2.48% on all 2012 and 2011 borrowings, respectively.  The 2011 period included $43,000 of interest expense related to the interest rate swap which was fully expensed in June 2012.
 
 
11
 
 
 
Discontinued operations
 
For the three-month period ended September 30, 2012 we did not have any gain or loss from discontinued operations compared to a gain of $40,000 in the same period in 2011.  We sold Monarch for $130,000 of which approximately $40,000 was net cash and $80,000 was in a two-year secured promissory note.  This was offset by $100,000 in inventory, $200,000 in property and equipment and $400,000 in rent.  The total remaining contractual estimated lease obligation amounted to $700,000 accrued in connection with the sale, including future estimated property taxes, until the expiration of the Monarch lease on August 31, 2018 offset by sublease income and estimated fair rental value for the remainder of the Monarch lease term of $300,000.
 
Income taxes
 
We recorded an income tax expense on continuing operations of approximately $78,000 and $197,000 for each of the three-month periods ended September 30, 2012 and 2011, respectively.  Our effective tax rate was 64.5% and 55.6% for the three-month periods ended September 30, 2012 and 2011, respectively.  The taxes reflect federal as well as state taxes.  The high effective tax rates are driven by an increase in state income taxes and permanent differences.
 
For the nine months ended September 30, 2012 and 2011
 
Net sales
 
For the nine-month period ended September 30, 2012, we had net sales of $72.0 million compared to $67.8 million for the same period in 2011, an increase of $4.2 million, or 6.3%.  This increase was attributable to an increase in sales to new and existing customers and sales by PTI which was off-set by a decrease in sales to retail customers for the 2012 period compared to the 2011 period.
 
Cost of sales
 
Cost of sales totaled $59.6 million for the nine-month period ended September 30, 2012 compared to $54.3 million in the comparable 2011 period, an increase of $5.3 million, or 9.7%.  Cost of sales as a percentage of sales increased to 82.8% in 2012 compared to 80.2% in 2011.  This increase was driven by the closure of a significant number of factories as a result of the China Ministry of Environmental Protection’s investigative efforts on production practices, which in turn resulted in disruption and shortages in the supply of batteries to the United States and other global markets.  This shortage in supply of sealed lead acid batteries due to factory closures and manufacturing disruptions from Chinese contributed to increased cost of sales during the first nine months of 2012.  We have also seen higher product costs overall as material and labor costs have risen in China.  These cost increases combined with the need to honor our pricing commitments to our customers placed downward pressure on gross margins.  Our overall gross margin for the nine-month period ended September 30, 2012, was approximately 17.2% compared to a gross margin of 19.8% for the comparable period in 2011.
 
Operating expenses
 
Operating expenses for the nine-month period ended September 30, 2012 decreased by approximately $641,000, or 5.6%, to $10.9 million compared to $11.5 million in the same period in 2011.  For the 2012 period, the decrease in operating expenses is attributable to decreases of (i) $258,000 in depreciation and amortization; (ii) $110,000 in legal and professional fees; (iii) $93,000 in personnel and travel cost and (iv) $177,000 in facilities costs, marketing expenses, bad debts expenses, public company costs and insurance.
 
Operating income
 
For the nine-month period ended September 30, 2012, our operating income decreased to approximately $1.5 million compared to $1.9 million for the same period in 2011.

 
12

 
 
Interest expense
 
Interest expense totaled approximately $441,000 and $452,000 for the nine-month periods ended September 30, 2012 and 2011, respectively. The average outstanding loan balance on the line of credit for the 2012 and 2011 periods was $17.6 million and $13.5 million, respectively, with a weighted average interest rate of 2.51% and 2.48% on all 2012 and 2011 borrowings, respectively.  Interest expense related to the interest rate swap which was fully expensed in June 2012, totaled approximately $78,000 and $131,000 for the 2012 and 2011 periods, respectively.
 
Discontinued operations
 
For the nine-month periods ended September 30, 2012 and 2011 we had losses from discontinued operations of $707,000 and $187,000, respectively. The disposition of Monarch in the second quarter of 2012 resulted in a loss on disposal of approximately $600,000 for the nine-month period ended September 30, 2012.  We sold Monarch for $130,000 of which approximately $40,000 was net cash and $80,000 was in a two-year secured promissory note.  This was offset by $100,000 in inventory, $200,000 in properaty and equipment and $400,000 in rent.  The total remaining contractual estimated lease obligation amounted to $700,000 accrued in connection with the sale, including future estimate property taxes, until the expiration of the Monarch lease on August 31, 2018 offset by sublease income and estimated fair rental value for the remainder of the Monarch lease term of $300,000.  
 
Income taxes
 
We recorded income tax expense on continuing operations of approximately $439,000 and $623,000 for the nine-month periods ended September 30, 2012 and 2011, respectively.  Our effective tax rate was 35.9% and 42.7% for the nine-month periods ended September 30, 2012 and 2011, respectively.  The rates reflect federal as well as state taxes, and are also impacted by expenses not deductible for income tax reporting purposes. 
 
Liquidity and capital resources
 
We had cash and cash equivalents of approximately $987,000 and $283,000, at September 30, 2012 and December 31, 2011, respectively.
 
For the nine-month period ended September 30, 2012, net cash used in operating activities was approximately $7.9 million compared to $9.6 million provided by operating activities for the same period in 2011.  The net cash used in operating activities for 2012 reflects non-cash charges of $600,000 resulting from loss on disposal of Monarch, increase in deferred income taxes of $340,000, an increase in inventory of $9.9 million, a decrease in accounts payable and accrued expenses of $1.4 million which were an offset by decrease in trade accounts receivable of $1.9 million, a decrease in prepaid expenses of $550,000 and decrease of $550,000 in income tax receivable.  This change in cash used in operating activities was primarily attributable to the increase in inventory purchases in 2012 to rebuild our inventory levels.  Our inventory levels were affected by the production issues of battery manufacturers in China, as significant shipping delays resulted in the depletion of our inventory during 2011, resulting in exceptionally low inventory levels at December 31, 2011.  As manufacturing and delivery lead times improved during 2012, we were able to increase inventories to more historical levels.  In addition, we elected to add additional inventory to provide an extra layer of safety given the continued uncertainties in the market.
 
Net cash used in investing activities for the nine-month period ended September 30, 2012 was $19,000 compared to $2.3 million used in investing activities for the same period in 2011. The decrease in cash used in 2012 was primarily attributable to our investment of approximately $2.3 million to acquire substantially all of the business assets of PTI in the same prior year period.
 
For the nine-month period ended September 30, 2012, net cash provided by financing activities was approximately $8.6 million compared to $7.1 million used in financing activities for the corresponding period in 2011.  The increase in cash provided by financing activities was primarily due to draw down on our line of credit  in the first nine months of 2012, while the cash used in financing activities in the prior year period primarily reflects repayments on the line of credit.
 
 
13
 
 
 
We have a revolving credit agreement with Wells Fargo that matures on July 30, 2013.  The Credit Agreement provides that we may borrow up to $30.0 million, with the possibility that we can increase the line to $40.0 million if we can satisfy certain defined criteria.  All of our assets secure our obligations under the Credit Agreement.  Our borrowing availability is limited to 80% of “eligible accounts receivable” and 80% of “eligible inventory,” as those terms are defined in the Credit Agreement.  For each borrowing, we have the option to choose a “Base Rate,” or “Eurodollar,” loan.  Interest on Base Rate loans is payable quarterly and interest on Eurodollar loans is generally payable monthly or quarterly at our option.  The annual rate of interest payable on Base Rate and Eurodollar loans fluctuate depending upon a number of factors, all as described in the Credit Agreement. At September 30, 2012, the interest rate was 2.50%.  The Credit Agreement contains negative covenants restricting our ability to take certain actions without Wells Fargo’s consent, including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses.  If there is an “event of default”, including failure to pay, bankruptcy, breach of covenants and breach of representations and warranties, all amounts outstanding under the credit facility will become immediately due and payable.  In addition, we must maintain certain financial covenants on a quarterly basis.
 
At September 30, 2012, approximately $21.3 million was outstanding under the credit facility out of a maximum availability of approximately $22.2 million based on the borrowing formula.
 
We believe that our cash and cash equivalents, cash provided by operations and cash available under our line of credit will be sufficient to meet our operational needs over the next 12 months.

 
14

 
 
Capital Resources
 
At December 31, 2011, we did not have any material commitments for capital expenditures.  Other than the lease agreement signed in October 2012, we may enter into various commitments during the fourth quarter of 2012 if expansion opportunities arise.  We will disclose material items in press releases and other appropriate filings as they develop.  We have no off balance sheet financing arrangements.
 
Item 3.             Quantitative and Qualitative Disclosures About Market Risk
 
As a smaller reporting company, we are not required to provide the information required by this item.
 
Item 4.             Controls and Procedures
 
Management, with the participation of our chief executive officer/interim chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.  Based on that evaluation, our chief executive officer/interim chief financial officer has concluded that, as of the end of such period, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to management, including our chief executive/interim chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2012, covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
15

 
 
 
Item 1.             Legal Proceedings
 
The Company is not currently party to any legal proceedings other than those arising in the ordinary course of business, which management does not believe will have a material adverse effect on the Company’s financial position, operating results, or cash flows.
 
Item 6.             Exhibits
 
The following exhibits are furnished as part of this report or incorporated herein as indicated
 
Exhibit No.
 
Description
     
3(i)
 
Amended and Restated Certificate of Formation (including Amended and Restated Articles of Incorporation) (1)
3(ii)
 
Amended and Restated Bylaws (1)
4.1
 
Specimen stock certificate (1)
4.2
 
Form of representatives’ warrant (1)
10.1(a)**
 
Form of 2006 Stock Option Plan (1)
10.1(b)
 
Form of Stock Option Agreement (1)
10.1(c)**
 
Amendment to the 2006 Stock Option Plan (5)
10.2
 
Separation Agreement between UPG and Randy Hardin (2)
10.3**
 
Form of Ian Edmonds Employment Agreement (6)
10.7
 
Real Property Lease for 1720 Hayden Drive, Carrollton, Texas (1)
10.9
 
Real Property Lease for Las Vegas, Nevada (1)
10.10
 
Real Property Lease for Atlanta, GA (8)
10.11
 
Termination Agreement with Stan Battat d/b/a Import Consultants (3)
10.12
 
Third-Party Logistics & Purchase Agreement, dated as of November 3, 2008, with Brinks Home Security, Inc., (currently ADT Security Services (formerly Broadview Security), Inc.) (4)
10.13
 
Credit Agreement with Wells Fargo Bank, National Association (7)
10.14
 
Security Agreement with Wells Fargo Bank, National Association (7)
10.15
 
Real Property Lease for 488 S. Royal Lane, Coppell, Texas *
31.1
 
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
 
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1
 
Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS***
 
XBRL Instance Document
101.SCH***
 
XBRL Taxonomy Extension Schema Document
101.CAL***
 
XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB***
 
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE***
 
XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF***
 
XBRL Taxonomy Extension Definition Linkbase Document.

 
*
Filed herewith.
**
Management Contract, compensatory plan or arrangement.
***
Furnished with this report. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
(1)
Incorporated by reference to the Exhibit with the same number to our Registration Statement on Form S-1 (SEC File No. 333-137265) effective as of December 20, 2006.
(2)
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 23, 2009.
(3)
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 17, 2009.
(4)
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 7, 2008.
(5)
Incorporated by reference to Exhibit 10.1(c) to our Annual Report on Form 10-K for the year ended December 31, 2008.
(6)
Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the period ended September 30, 2009.
(7)
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on December 23, 2009.
(8)
Incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K for the year ended December 31, 2010.
 
 
16

 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  Universal Power Group, Inc.  
     
     
     
Date:  November 9, 2012 /s/Ian Edmonds  
 
Ian Edmonds
President and Chief Executive Officer
(Principal Executive Officer)
 
 
  /s/Ian Edmonds  
 
Ian Edmonds
Interim Chief Financial Officer
(Principal Financial and Accounting Officer)
 
 
17