1372000--3/29/2007--UNIVERSAL_POWER_GROUP

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{customer, product, revenue}

{stock, price, share}

{acquisition, growth, future}

{operation, international, foreign}

{property, intellectual, protect}

{stock, price, operating}

{provision, law, control}

{control, financial, internal}

{product, liability, claim}

{interest, director, officer}

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{competitive, industry, competition}

{product, market, service}

{personnel, key, retain}

{financial, litigation, operation}

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Risks Relating to Our Business A significant portion of our annual revenue is derived from a single customer. If this customer were to terminate its relationship with us or even reduce its level of business with us our operating results would suffer. Our revolving credit agreement with Compass Bank contains restrictive covenants that could impede our growth and our ability to compete. We depend on a limited number of suppliers and do not have written agreements with any of them. Any disruption in our ability to purchase products from them or any drastic changes in the prices we pay for our products could adversely affect our gross margins and profitability, which could have an adverse impact on our operating results. Any disruption in our ability to move our goods from the manufacturers to our logistics centers or from our logistics centers to our customers could result in lost business. We depend on foreign manufacturers, which exposes us to various financial, political and economic risks. Currency fluctuations could have a negative impact on financial performance, which may result in the loss of all or a portion of your investment in us. Our industry is cyclical, which causes our operating results to fluctuate significantly. Our industry is susceptible to supply shortages and price volatility. Any delay or inability to obtain components or a significant increase in the price of components may have an adverse effect on our operating results. Our business model assumes that distributors will continue to play a significant role in the electronics industry, as a traditional distributor, as a logistics provider or as both. A reversal of the trend for distributors to play an increasing role in the electronic components industry could adversely affect our business. Competition in our industry is intense, which creates significant pricing pressures on our products and services. If we cannot compete effectively, our gross margins and profitability would be adversely impacted, which could have an adverse impact on the market price of our stock. Disruption in our logistics centers may prevent us from meeting customer demand and our sales and profitability may suffer as a result. As part of our long-term growth strategy, we may undertake strategic acquisitions. If we are unable to address the risks associated with these acquisitions our business operations may be disrupted and our financial performance may be impaired. Rapid growth in our business could strain our managerial, operational, financial, accounting and information systems, customer service staff and office resources. If we fail to manage our growth effectively, our business may be negatively impacted. Our success to date and our future success depend on our senior executives and other key personnel. If we lose the services of any of these individuals, our business will suffer. If we become subject to product returns or product liability claims resulting from defects in our products, we may face an increase in our costs, a loss of customers, damage to our reputation, or a delay in the market acceptance of our products. If we are unable to protect our intellectual property, our ability to compete effectively in our markets could be harmed. We may be required to incur substantial expenses and divert management attention and resources in defending intellectual property litigation against us or prosecuting others for their unauthorized use of our intellectual property. We owe a significant amount of money to Zunicom, our former corporate parent and largest shareholder. Our obligation to repay indebtedness could strain our financial resources. We will incur increased costs as a result of being a public company, which may divert management attention from our business and impair our financial results. Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our ability to produce accurate financial statements and on our stock price. We are subject to various governmental regulations that could adversely affect our business. Risks Related to Our Stock Currently our common stock is thinly traded . If an active market does not develop for our securities, you may not be able to sell our common stock when you want. We may not be able to maintain our listing on the American Stock Exchange, which may adversely affect the ability of purchasers to resell their common stock in the secondary market. After our IPO, Zunicom is our largest shareholder and will have significant influence over us, which may result in conflicts of interest, or the appearance of such conflicts, and may adversely impact our value and the liquidity of our stock. Future sales or the potential for sale of a substantial number of shares of our common stock could cause the trading price of our common stock to decline and could impair our ability to raise capital through subsequent equity offerings. Management has broad discretion over the use of proceeds from our IPO and may not apply them effectively or in the manner currently contemplated. We may issue shares of preferred stock in the future, which could depress the price of our stock. Texas law and provisions of our amended and restated articles of incorporation and bylaws could deter or prevent takeover attempts by a potential purchaser of our common stock that would be willing to pay you a premium for your shares of our common stock. We do not anticipate paying dividends in the foreseeable future. This could make our stock less attractive to potential investors.

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1372000--3/29/2007--UNIVERSAL_POWER_GROUP_INC.