11.	Please disclose the total intrinsic value of options exercised during each period presented for the 2007 Omnibus Plan and the 2007 New Employee Plan. Refer to ASC 718-10-50¬2.d.2.

During fiscal 2009, 46,875 shares were exercised pursuant to options issued under the 2007 Omnibus Plan. The intrinsic value of such exercised options was $86,701.  Since there were no options exercised during fiscal 2009 under the 2007 New Employee Plan, disclosure of intrinsic value is not applicable. In future filings, we will disclose the intrinsic value of options exercised under each of our stock option plans for the years presented and disclose when no options are exercised under such plans for the reporting period.

12.	Please disclose the weighted average grant date fair value of warrants issued during each period presented, Refer to ASC 718-1 0-50-2.d.l.

Our future filings will reflect the grant date fair value of warrants issued for each period presented. Average grant date fair market value of outstanding warrants as of January 2, 2010 was $32,730.

13.

Where you disclose the weighted average grant date fair value of options issued during the fifty-two weeks ending January 2, 2010 on pages F-20, F-21 and F-24, please clarify whether this value represents the weighted average grant date fair value of all options issued during this period under all plans. Your current presentation implies that you are disclosing the weighted average grant date fair value of options issued under each plan, yet we note that the weighted average amount is the same in all cases. If the amount disclosed relates to all plans, please tell us why this presentation is appropriate given that the other disclosures required by ASC 718 are provided by plan.

The value of $1.18 represents the weighted average grant date fair value reported for all options issued during fiscal 2009 under all plans. The weighted average fair value of options granted during fiscal 2009 was $1.40 for the 2007 Omnibus Plan and $0.51 for the 2007 New Employee Plan.  In our future filings, we will disclose separately for each of our stock option plans the weighted average grant date fair value.

14.

Reference is made to your disclosure regarding the correction of errors in prior period financial statements related to deferred tax assets in the first quarter fiscal 2009. Based on your disclosure, we understand you concluded that the errors in prior year financial statements were not material. We also understand that you recorded the cumulative adjustment during the thirteen weeks ended April 4, 2009 based on your interpretation that: "[t]he iron curtain approach assumes that because the prior year financial statements were not materially misstated, correcting any immaterial errors that existed in those statements in the current year is the correct accounting." Please tell us why you believe this is an appropriate interpretation of the guidance in ASC 250-10-S99. If the correction of the errors is material to fiscal year 2009 after considering all relevant quantitative and qualitative factors, we believe prior year financial statements should be corrected even though the errors were previously and continue to be immaterial to the prior year financial statements. In your response please provide an assessment of materiality for the 2009 fiscal year.

Upon determining that an error occurred in a prior period, we promptly undertook a thorough analysis of the impact of the error on all interim and annual reporting purposes, including 2007, 2008, and 2009. In addition to the Company’s executive management team, general counsel, the Company’s board of directors and audit committee thoroughly reviewed the analysis and determined that the misstatement in prior periods and the impact of correcting the error in the current year was not material to the Company’s financial statements when taken as a whole. In evaluating materiality, we considered ASC 250-10-S99, including Topic 1.N, noting that “The staff does not believe the exclusive reliance on either the rollover or iron curtain approach appropriately quantifies all misstatements that could be material to users of financial statements.” Accordingly, we quantified the impact of the misstatement using both approaches. Based on these quantitative analyses, it was determined that the impact of the misstatement for 2009, 2008, or 2007 was immaterial. In addition to the quantitative analyses, qualitative factors were considered in accordance with ASC 250-10. Based on these quantitative and qualitative analyses, management concluded that these reclassifications were not material to 2009, 2008 or 2007. Accordingly, we adjusted the current year (2009) financial statements, in a manner consistent with the iron curtain approach, and elected not to adjust 2008 or 2007.

The adjustment recorded during 2009 to correct this misstatement totaled $579,000. This amounts to less than 1% of our total assets as of the end of fiscal 2009 and the end of our first quarter 2009, the quarter in which we recorded the adjustment. Similarly, the adjustment had less than 1% impact on stockholders’ equity at the end of fiscal 2009 and the end of our first quarter 2009. There was no impact on cash flows in any period. From an earnings perspective, the adjustment represents 13% of earnings before income taxes for our 2009 fiscal year. For the first quarter of 2009, the adjustment equaled 84% of earnings before income taxes. However, given that we have not demonstrated history of profits and our net income for 2009 was near break-even (less than 1% of revenues), we do not believe that these percentages are meaningful in considering the quantitative impact of the adjustment. In addition, from a qualitative perspective, we do not believe that this adjustment had a material impact on our reported earnings or trend of earnings.  Compared to fiscal 2008, the Company realized significant improvement in operating results, from a $16.9 million loss to net income of $1.3 million.  The adjustment would not change these trends.

We understand that quantifying the magnitude of the misstatement in percentage terms is only the beginning of an analysis of materiality and that misstatements are material if in the light of surrounding circumstances, the magnitude of the item is such that it is probable that the judgment of a reasonable person relying upon the financial statements would have been changed or influenced by the inclusion or correction of the item. As such, both “quantitative” and “qualitative” factors must be used to assess the materiality of these issues. We thus considered the applicability of the following qualitative factors in reaching our conclusion, as suggested by ASC 250-10:

·	whether the misstatement masks a change in earnings or other trends

No, as stated above, the adjustment as identified would not change this trend.

·	whether the misstatement hides a failure to meet analysts’ consensus expectations

No.  Net income is not a measurement that is utilized by analysts.  Typically, analysts covering the Company utilize “adjusted EBITDA” as their measure for evaluating the results of operations. We believe that adjusted EBITDA helps investors and analysts better understand our business and the operating trends we are realizing. We disclose adjusted EBITDA in our quarterly press releases and analysts use this measure as a base to calculate price targets and valuations.  Given that tax expense was the only P&L account impacted, the adjustment had no impact on adjusted EBITDA for any reported quarterly or annual period. While we acknowledge that adjusted EBITDA is not a U.S. GAAP measure, we nonetheless believe that it is an important and meaningful consideration from both a quantitative and qualitative perspective given that this is the primary measure utilized by third parties in their analysis of our business.

·	whether the misstatement changes a loss into income or vice versa

No, in the case of the first quarter of 2009, we realized a net loss with or without recording the adjustment. In the case of the full year 2009, we realized net income with or without recording the adjustment. Similarly, in 2007 and 2008, there would not have been any change from a loss into income or vice versa in any quarterly or annual period.

·	whether the misstatement concerns a segment or other portion of the registrant’s business that has been identified as playing a significant role in the registrant’s operations or profitability

The Company has only one reporting segment.

·	whether the misstatement affects the registrant’s compliance with loan covenants or other contractual requirements

No, the adjustment did not affect any loan covenants.

·	whether the misstatement has the effect of increasing management’s compensation

No, management compensation and bonus was not affected as it is calculated on an EBITDA basis only, not a net income basis.

·	whether the misstatement involves concealment of an unlawful transaction

No, the adjustment does not involve concealment of any unlawful transactions.  This was primarily a revision of estimates that were not properly identified in the review process of the tax provision.

Based on these considerations and analyses, we do not believe that the judgment of a reasonable person relying upon the financial statements would likely have been changed or influenced by the correction of this misstatement during fiscal 2009.

15.	Notwithstanding the preceding comment, please tell us more about the original and revised accounting for the permanent differences created by vested non-qualified stock option forfeitures. Tell us how the errors arose and the basis in GAAP for the revised accounting.

During the review of the Company’s quarterly tax provision for Q1 2009, it was determined that the Company was not properly reducing its deferred tax asset for permanent differences created by vested non-qualified stock option forfeitures that occurred during the first quarter of fiscal 2009 in accordance with ASC 718-20-55-23.  Upon further investigation, the Company determined that deferred tax assets had not been reduced for previously forfeited vested non-qualified options. The Company calculated accumulated stock compensation expense for current employees with non-qualified stock options; compared the total with the stock compensation expense supporting the deferred tax asset; and determined that it would not recognize the benefit of approximately $1.5 million of vested recognized expense for forfeitures; tax effected totaling approximately $579,000. Given that Company did not have an exercise of a non-qualified stock option, no APIC pool existed as of the first quarter of 2009 from option exercises to apply the deferred tax asset reversal from forfeitures. Therefore, the charge was recorded to income tax provision.

The overall impact of the above adjustment would be a $579,000 increase in tax expense for the quarter ended April 4, 2009.  The Company evaluated the tax effect of the actual forfeitures for each period in which the actual forfeiture occurred. The Company considered the relevant guidance of ASC 250 and determined appropriate accounting treatment as described in Item 14 above.

16.	Please explain to us why you believe your tabular presentation and disclosure of pre-tax income excluding non-recurring events and federal taxable income less the NOL carry-back are permitted by Item 10(e)(1)(ii)(C) of Regulation S-K.

The application of U.S. GAAP requires USAP to evaluate the recoverability of deferred tax assets and establish a valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be realized.  Significant judgment is required to determine whether a valuation allowance is necessary as well as the amount of the valuation, if required.  In assessing the realization of the deferred tax assets the Company considered both the positive and negative evidence.  The Company uses a 3 year rolling actual and current year anticipated results as a primary measure of cumulative losses.  Due to the cumulative loss of $27.3 million incurred in fiscal 2007, fiscal 2008 and fiscal 2009, the Company assessed that a substantial portion of the cumulative losses related to non-recurring matters such as a class-action lawsuit settlement and the write off of goodwill and other intangible assets.  We believed it was important to reflect and disclose to investors the primary support for our determination that no valuation allowance was necessary.

We believed that the tabular presentation would provide the investors with one of our considerations in determining that a valuation allowance was not necessary given the cumulative loss of $27.3 million, which resulted from the significant non-recurring items of $27.9 million. We believed a valuation allowance was not required as the Company had positive taxable income. This tabular presentation will be removed from the future filings.

17.

Please explain in greater detail how you calculated the annual incentive bonus for each executive officer. For example, disclose the target and actual revenue and Adjusted EBITDA amounts and explain how the committee analyzed those measures to calculate the $317,000 in cash and 212,642 shares award for your chief executive officer.  Note that under Item 402(b)(1)(v) of Regulation S-K, a filer must disclose how it determined the amount and formula for each element of compensation.

Each executive officer is eligible for annual incentive bonuses as established by the Compensation Committee.  For fiscal 2009, the Chief Executive Officer was eligible for a target bonus up to 80% of his base compensation, the Chief Information Officer was eligible for a target bonus up to 50% of his base compensation, the Senior Vice President Global Sourcing and Procurement was eligible for a target bonus up to 40% of his base compensation and the Vice President Marketing was eligible for a target bonus of 36.4% of his base compensation.  The bonus percentage of up to 50% of annual salary for the Chief Financial Officer was initially established in his employment agreement dated February 16, 2009.  The Chief Executive Officer elected to receive 50% of his bonus in shares of stock, with the target number of shares calculated based on the closing share price on the date the target was established by the Compensation Committee.  The target dollar and share amounts were disclosed in a Form 8-K filed with the Commission on January 9, 2009.

Although the target bonus percentages differed for each executive, the adjusted EBITDA and Revenue targets were the same for all, with a linear progression based on Revenue band increases of $5 million and adjusted EBITDA band increases of $1 million.  There was no cap on the potential payout.  The total bonus percentage was established at the intersection of revenue and an adjusted EBITDA target.  For instance, if Revenue was $135 million and adjusted EBITDA was $5 million, no bonus would be paid to any executive.  If Revenue was $175 million and adjusted EBITDA was $11 million, the bonus payout would be at 190% of target.  Additionally, no bonus would be paid if the sum of cash plus the auction rate securities held by the Company did not exceed $34 million.

The actual financial results for fiscal 2009 were Revenue at $176.3 million and EBITDA of $13.1 million.  Based on these results, the bonus payout percentage was 230% of the target.  The Chief Executive Officer target bonus was $147,000 in cash and 92,452 shares of stock. Based on a 230% payout level achieved, the cash bonus payment for fiscal 2009 was $317,000 in cash (235% of $147,000), and 212,642 shares of stock (230% of the 92,452 shares).

18.	We note your disclosure concerning the performance based options granted to your Chief Executive Officer and Chief Financial Officer. Please describe these grants in greater detail, including a discussion of the performance thresholds.

The performance based option grant was made to our Chief Executive Officer on May 15, 2008, as more fully described in a Form 8-K filed with the Commission on May 15, 2008, which filing included the stock option agreement as an exhibit.  The Company granted to Shane Evangelist, the Company’s Chief Executive Officer, a stock option (the “Option”) under the Company’s 2007 Omnibus Incentive Plan (the “Plan”) to purchase up to an aggregate of 250,000 shares of the Company’s common stock.  The Option has an exercise price of $3.72 per share, which was equal to the closing sales price of the Company’s common stock as reported by the NASDAQ Global Market (“NASDAQ”) on the date of grant, and terminates on May 14, 2018, unless earlier terminated in accordance with the Plan and the related stock option agreement.  Fifty percent (50%) of the shares underlying the Option will vest and become exercisable if the monthly average closing sales price of the Company’s common stock as reported by NASDAQ (the “Average Closing Price”) equals or exceeds $6.00 per share in any consecutive three month period prior to October 15, 2012.  The remaining 50% of the shares underlying the Option will vest and become exercisable if the Average Closing Price equals or exceeds $8.00 per share in any consecutive three-month period prior to October 15, 2012.    The $6.00 threshold was met in March, 2009 and 50% of the shares vested at that time.

The performance based option grant was made to our Chief Financial Officer on February 16, 2009 as part of his new hire package, and described in a Form 8-K filed with the Commission on February 17, 2009, which included the stock option agreement as an exhibit.  The grant was for 100,000 shares of USAP stock, with an exercise price of $1.15 per share, which was equal to the closing sales price of the Company’s common stock as reported by the NASDAQ on the date of grant, and such option terminates on February 15, 2019, unless earlier terminated in accordance with the Plan and the related stock option agreement. The shares underlying the Option “shall become vested Shares on the last day of any consecutive three calendar months when and if the average of the Monthly Average Prices (as defined below) of the Common Stock during such three month period reaches or exceeds $5.00 (as adjusted for any stock dividends, splits, combinations or similar events with respect to the Common Stock after the date of this Agreement); provided that, in such case, Optionee shall have continuously provided Service from the date of this Agreement through the date of such vesting.”  The options vested in October 2009.

Please do not hesitate to contact the undersigned if you require any further information regarding the foregoing clarifications. The Company believes that the foregoing clarifications can be provided in prospective filings, and would hope that you agree, as the date for filing the Second Quarter Form 10-Q is rapidly approaching.

In addition, we acknowledge that:

·	We are responsible for the adequacy and accuracy of the disclosure in the filing;

·	Staff comments or changes to the disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·	We may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Thank you again for the opportunity to respond to your comments and questions, and we will look forward to speaking with you soon.