ulbi20210930

ulbi20210930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	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: 0-20852

ULTRALIFE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	16-1387013
(State or other jurisdiction of incorporation of organization)	(I.R.S. Employer Identification No.)

2000 Technology Parkway Newark, New York 14513	(315) 332-7100
(Address of principal executive offices) (Zip Code)	(Registrant's telephone number, including area code:)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.10 par value per share	ULBI	NASDAQ
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒

Non-accelerated filer ☐	Smaller reporting company ☒

	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No☒

As of October 26, 2021, the registrant had 16,080,749 shares of common stock outstanding.

ULTRALIFE CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1

	Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the Three and Nine-Month Periods Ended September 30, 2021 and September 30, 2020	2

	Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2021 and September 30, 2020	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine-Month Periods Ended September 30, 2021 and September 30, 2020	4

	Notes to Consolidated Financial Statements	5

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION

Item 6.	Exhibits	27

	Signatures	28

PART I. FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts)

(Unaudited)

	September 30,			December 31,
	2021			2020
*ASSETS*
Current assets:
Cash	$	15,853		$	10,653
Trade accounts receivable, net of allowance for doubtful accounts of $334 and $317, respectively		16,235			21,054
Inventories, net		28,179			28,193
Prepaid expenses and other current assets		4,271			4,596
Total current assets		64,538			64,496
Property, plant and equipment, net		23,035			22,850
Goodwill		26,998			27,018
Other intangible assets, net		8,725			9,209
Deferred income taxes, net		11,700			11,836
Other noncurrent assets		1,816			2,292
Total Assets	$	136,812		$	137,701

*LIABILITIES AND STOCKHOLDERS' EQUITY*
Current Liabilities:
Accounts payable	$	9,206		$	10,839
Current portion of long-term debt		253			1,361
Accrued compensation and related benefits		1,153			1,748
Accrued expenses and other current liabilities		6,076			4,758
Total current liabilities		16,688			18,706
Deferred income taxes		475			515
Other noncurrent liabilities		1,103			1,557
Total liabilities		18,266			20,778

Commitments and contingencies (Note 8)

Stockholders' equity:
Preferred stock – par value $.10 per share; authorized 1,000,000 shares; none issued		-			-
Common stock – par value $.10 per share; authorized 40,000,000 shares; issued – 20,513,344 shares at September 30, 2021 and 20,373,519 shares at December 31, 2020; outstanding – 16,080,749 shares at September 30, 2021 and 15,959,984 shares at December 31, 2020		2,051			2,037
Capital in excess of par value		186,360			185,464
Accumulated deficit		(46,701	)		(47,598	)
Accumulated other comprehensive loss		(1,819	)		(1,782	)
Treasury stock - at cost; 4,432,595 shares at September 30, 2021 and 4,413,535 shares at December 31, 2020		(21,469	)		(21,321	)
Total Ultralife Corporation equity		118,422			116,800
Non-controlling interest		124			123
Total stockholders’ equity		118,546			116,923

Total liabilities and stockholders' equity	$	136,812		$	137,701

The accompanying notes are an integral part of these consolidated financial statements.

ULTRALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(In thousands except per share amounts)
(Unaudited)

	Three-month period ended						Nine-month period ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020

Revenues	$	21,761		$	24,362		$	74,504		$	78,736
Cost of products sold		16,653			17,851			55,151			56,928
Gross profit		5,108			6,511			19,353			21,808

Operating expenses:
Research and development		1,723			1,606			5,223			4,429
Selling, general and administrative		4,164			4,198			12,866			12,893
Total operating expenses		5,887			5,804			18,089			17,322

Operating (loss) income		(779	)		707			1,264			4,486

Other (income) expense:
Interest and financing expense		53			92			164			372
Miscellaneous		(54	)		(39	)		(88	)		(110	)
Total other (income) expense		(1	)		53			76			262

(Loss) income before income tax (benefit) provision		(778	)		654			1,188			4,224
Income tax (benefit) provision		(175	)		192			290			1,010

Net (loss) income		(603	)		462			898			3,214

Net (loss) income attributable to non-controlling interest		(18	)		55			1			90

Net (loss) income attributable to Ultralife Corporation		(585	)		407			897			3,124

Other comprehensive (loss) income:
Foreign currency translation adjustments		(233	)		677			(37	)		(88	)

Comprehensive (loss) income attributable to Ultralife Corporation	$	(818	)	$	1,084		$	860		$	3,036

Net (loss) income per share attributable to Ultralife common stockholders – basic	$	(.04	)	$	.03		$	.06		$	.20

Net (loss) income per share attributable to Ultralife common stockholders – diluted	$	(.04	)	$	.03		$	.06		$	.19

Weighted average shares outstanding – basic		16,065			15,908			16,020			15,889
Potential common shares		-			181			180			214
Weighted average shares outstanding - diluted		16,065			16,089			16,200			16,103

The accompanying notes are an integral part of these consolidated financial statements.

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine-month period ended
	September 30, 2021			September 30, 2020
OPERATING ACTIVITIES:
Net income	$	898		$	3,214
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,160			1,743
Amortization of intangible assets		458			444
Amortization of financing fees		78			36
Stock-based compensation		512			756
Deferred income taxes		127			821
Changes in operating assets and liabilities:
Accounts receivable		4,814			15,094
Inventories		17			13
Prepaid expenses and other assets		775			(84	)
Accounts payable and other liabilities		(1,377	)		(546	)
Net cash provided by operating activities		8,462			21,491

INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(2,324	)		(1,902	)
Proceeds from sale of equipment		-			120
Net cash used in investing activities		(2,324	)		(1,782	)

FINANCING ACTIVITIES:
Payment of credit facilities		(1,186	)		(13,461	)
Proceeds from exercise of stock options		398			218
Tax withholdings on stock-based awards		(148	)		(15	)
Net cash used in financing activities		(936	)		(13,258	)

Effect of exchange rate changes on cash		(2	)		(79	)

INCREASE IN CASH		5,200			6,372

Cash, Beginning of period		10,653			7,405
Cash, End of period	$	15,853		$	13,777

The accompanying notes are an integral part of these consolidated financial statements.

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands except share amounts)

(Unaudited)

					Capital			Accumulated
	Common Stock				in Excess			Other									Non-
	*Number of*				*of Par*			*Comprehensive*			*Accumulated*			*Treasury*			*Controlling*
	*Shares*		*Amount*		*Value*			*Income (Loss)*			*Deficit*			*Stock*			*Interest*			*Total*

Balance – December 31, 2019		20,268,050	$	2,026	$	184,292		$	(2,531	)	$	(52,830	)	$	(21,231	)	$	24		$	109,750
Net income												3,124						90			3,214
Stock option exercises		50,797		5		213															218
Stock-based compensation – stock options						674															674
Stock-based compensation - restricted stock						82															82
Vesting of restricted stock		12,501		2											(15	)					(13	)
Foreign currency translation adjustments									(88	)											(88	)
Balance – September 30, 2020		20,331,348	$	2,033	$	185,261		$	(2,619	)	$	(49,706	)	$	(21,246	)	$	114		$	113,837

Balance – December 31, 2020		20,373,519	$	2,037	$	185,464		$	(1,782	)	$	(47,598	)	$	(21,321	)	$	123		$	116,923
Net income												897						1			898
Stock option exercises		127,324		13		385									(133	)					265
Stock-based compensation – stock options						468															468
Stock-based compensation - restricted stock						44															44
Vesting of restricted stock		12,501		1		(1	)								(15	)					(15	)
Foreign currency translation adjustments									(37	)											(37	)
Balance – September 30, 2021		20,513,344	$	2,051	$	186,360		$	(1,819	)	$	(46,701	)	$	(21,469	)	$	124		$	118,546

Balance – June 30, 2020		20,297,182	$	2,030	$	184,900		$	(3,296	)	$	(50,113	)	$	(21,246	)	$	59		$	112,334
Net income												407						55			462
Stock option exercises		34,166		3		139															142
Stock-based compensation – stock options						204															204
Stock-based compensation - restricted stock						18															18
Vesting of restricted stock
Foreign currency translation adjustments									677												677
Balance – September 30, 2020		20,331,348	$	2,033	$	185,261		$	(2,619	)	$	(49,706	)	$	(21,246	)	$	114		$	113,837

Balance – June 30, 2021		20,474,676	$	2,047	$	186,138		$	(1,586	)	$	(46,116	)	$	(21,388	)	$	142		$	119,237
Net loss												(585	)					(18	)		(603	)
Stock option exercises		38,668		4		80									(81	)					3
Stock-based compensation – stock options						131															131
Stock-based compensation - restricted stock						11															11
Vesting of restricted stock
Foreign currency translation adjustments									(233	)											(233	)
Balance – September 30, 2021		20,513,344	$	2,051	$	186,360		$	(1,819	)	$	(46,701	)	$	(21,469	)	$	124		$	118,546

The accompanying notes are an integral part of these consolidated financial statements.

ULTRALIFE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands except share and per share amounts)

(Unaudited)

1.	*BASIS OF PRESENTATION*

The accompanying unaudited Consolidated Financial Statements of Ultralife Corporation and its subsidiaries (the “Company”, “Ultralife”, “we” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the Consolidated Financial Statements have been included. Results for interim periods should not be considered indicative of results to be expected for any subsequent interim period or the full year. Reference should be made to the Consolidated Financial Statements and related notes thereto contained in our Form 10-K for the year ended December 31, 2020.

The December 31, 2020 consolidated balance sheet information referenced herein was derived from audited Consolidated Financial Statements but does not include all disclosures required by GAAP.

Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.

Recently Adopted Accounting Guidance

Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. Adoption of the new standard did not materially impact the Company’s Consolidated Financial Statements.

Recent Accounting Guidance Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently assessing the impact that adopting this new accounting standard will have on our Consolidated Financial Statements.

2.	*DEBT*

On May 1, 2019, Ultralife, Southwest Electronic Energy Corporation, a Texas corporation (“SWE”), and CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), as borrowers, entered into the First Amendment Agreement (the “First Amendment Agreement”) with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent, to amend the Credit and Security Agreement by and among Ultralife and KeyBank dated May 31, 2017 (the “Credit Agreement”, and together with the First Amendment Agreement, the “Amended Credit Agreement”).

The Amended Credit Agreement, among other things, provides for a five-year, $8,000 senior secured term loan (the “Term Loan Facility”) and extends the term of the $30,000 senior secured revolving credit facility (the “Revolving Credit Facility”, and together with the Term Loan Facility, the “Credit Facilities”) through May 31, 2022. Up to six months prior to May 31, 2022, the Revolving Credit Facility may be increased to $50,000 with the Bank’s concurrence.

As of September 30, 2021, the Company had $288 outstanding principal on the Term Loan Facility, all of which is included in current portion of long-term debt on the Consolidated Balance Sheet, and no amounts outstanding on the Revolving Credit Facility. As of September 30, 2021, total unamortized debt issuance costs of $35 associated with the Amended Credit Agreement, including placement, renewal and legal fees, are

SEC Form 10-Q filed by Ultralife Corporation