SEC Form 10-Q filed by Ultralife Corporation

PART I. FINANCIAL INFORMATION

 

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

 

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands except share amounts)

(Unaudited)

 

 

 

 

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

 

 

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In Thousands except per share amounts)

(Unaudited)

 

 

 

 

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)

 

 

 

 

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)

 

 

 

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” or “Ultralife”) 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 notes 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 a 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, 2024.

 

The December 31, 2024 consolidated balance sheet information referenced herein was derived from audited 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

 

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” to expand the disclosure requirements for reportable segments. The standard expands reportable segment disclosure requirements for public business entities primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment operating profit (loss). This standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The adoption of this new accounting standard did not have an impact on the Company's results of operations, financial position or cash flows.

 

Recent Accounting Guidance Not Yet Adopted

 

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company’s annual reporting period beginning January 1, 2025, however, these disclosures are not required for interim periods. The amendments are to be applied on a prospective basis, although retrospective adoption is permitted. The Company is currently evaluating the impact that ASU 2023-09 will have on its consolidated financial statement disclosures.

 

In November 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” which requires public entities to disclose specified information about certain costs and expenses. ASU 2024-03 is effective for the Company’s annual reporting period beginning January 1, 2027 and interim reporting periods beginning January 1, 2028, with early adoption permitted. The Company is currently evaluating the impact that ASU 2024-03 will have on its consolidated financial statements.

 

2.	ACQUISITION

 

On October 31, 2024, the Company completed the acquisition of all issued and outstanding shares of Electrochem Solutions, Inc., a Massachusetts corporation (“Electrochem”), pursuant to a stock purchase agreement (the “Agreement”) with Greatbatch Ltd., a New York corporation (the “Seller”), dated September 27, 2024 (the “Acquisition”). The Agreement established a purchase price of $50,000 for the Acquisition subject to customary working capital adjustments. The Company completed the Acquisition for $48,022 in cash, inclusive of working capital adjustments of $1,978.

 

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Based in Raynham, MA and with over forty years of battery technology experience in critical applications, Electrochem designs and manufactures primary lithium metal and ultracapacitor cells and battery packs serving energy, military and various environmental, industrial and utility end markets on a global basis. Acquiring Electrochem advances our strategy of more fully realizing the operating leverage of our business model through scale and manufacturing cost efficiencies. Electrochem brings a blue-chip customer base with little or no overlap with Ultralife’s customers, long-tenured technical resources which we plan to utilize in progressing our global new product initiatives, and a complimentary portfolio of highly engineered thionyl, sulfuryl and bromine chloride cells and packs which can be commercially cost prohibitive to substitute or switch out. We view this acquisition as an avenue to create highly attractive opportunities to drive revenue growth through heightened cross-selling platforms and extend our reach into underserved adjacent markets that demand uncompromised safety, service, reliability and quality. In addition, the combination of Electrochem and Ultralife creates achievable opportunities for gross margin expansion through the realization of vertical integration, supply chain synergies and lean initiatives. With Electrochem we are increasing our value to our customers and significantly strengthening our competitive position in our end markets.

 

The Company funded the purchase price for the Acquisition through the New Credit Agreement (refer to Note 3).

 

The Acquisition was accounted for in accordance with the accounting treatment of a business combination pursuant to FASB ASC Topic 805, Business Combinations (“ASC 805”). Accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values on the acquisition date. The excess of the purchase price over the estimated fair value of the separately identifiable assets acquired and liabilities assumed was allocated to goodwill. Management is responsible for determining the acquisition date fair value of the assets acquired and liabilities assumed, which requires the use of various assumptions and judgments that are inherently subjective. The purchase price allocation presented below reflects all known information about the fair value of the assets acquired and liabilities assumed as of the acquisition date. The purchase price allocation is subject to change should additional information existing as of the acquisition date about the fair value of the assets acquired and liabilities assumed become known. The final purchase price allocation may reflect material changes in the valuation of assets acquired and liabilities assumed, including but not limited to intangible assets, fixed assets, deferred taxes, and residual goodwill.

 

Accounts receivable		$	5,270
Inventories			9,172
Prepaid expenses and other current assets			251
Property, plant and equipment			20,735
Goodwill			7,558
Other intangible assets			10,500
Other noncurrent assets			237
Accounts payable			(2,231	)
Accrued compensation and related benefits			(1,561	)
Accrued expenses and other current liabilities			(904	)
Deferred tax liability, net			(748	)
Other noncurrent liabilities			(257	)
Net assets acquired		$	48,022

 

The goodwill included in the Company’s purchase price allocation presented above represents the value of Electrochem’s assembled and trained workforce, the incremental value that Excell engineering and technology will bring to the Company and the revenue growth which is expected to occur over time which is attributable to increased market penetration from future new products and customers. The goodwill acquired in connection with the acquisition is not deductible for income tax purposes.

 

Other intangible assets were valued using the income approach which requires a forecast of all expected future cash flows and the use of certain assumptions and estimates. The following table summarizes the estimated fair value and annual amortization for each of the identifiable intangible assets acquired.

 

										Annual Amortization
		Estimated Fair Value				Amortization Period (Years)				Year 1				Year 2				Year 3				Year 4				Year 5
Trade name		$	5,300				15			$	353			$	353			$	353			$	353			$	353
Customer relationships			5,100				15				340				340				340				340				340
Patents and technology			100				5				20				20				20				20				20
Total		$	10,500							$	713			$	713			$	713			$	713			$	713

 

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We acquired right-of-use assets and assumed operating lease liabilities of $230. Right-of-use assets are classified as other noncurrent assets, and current and long-term lease liabilities are classified as accrued expenses and other current liabilities and other noncurrent liabilities, respectively, on the Company’s consolidated balance sheets.

 

The operating results and cash flows of Electrochem are reflected in the Company’s consolidated financial statements from the date of acquisition. Electrochem is included in the Battery & Energy Products segment.

 

For the three-month period ended March 31, 2025, Electrochem contributed revenue of $7,622 and net income of $743, inclusive of amortization expense of $178 on acquired identifiable intangible assets and a $60 increase in cost of products sold for the fair value step-up of acquired finished goods inventory sold during the period.

 

During the three-month period ended March 31, 2025, the Company incurred transaction costs and other non-recurring expenses of $125 directly attributable to the acquisition, including accounting and legal services. These costs are included in selling, general and administrative expense on the consolidated statement of income and comprehensive income for the three-month period ended March 31, 2025.

 

3.

DEBT

 

On October 31, 2024, Ultralife, SWE, CLB, Excell USA, and Electrochem, as borrowers, and certain other subsidiaries of the Company, entered into a new Credit and Security Agreement with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent (the “New Credit Agreement”). The proceeds of the loans under the New Credit Agreement were used, in part, to repay outstanding indebtedness under the Company’s Amended Credit Agreement.

 

The New Credit Agreement, among other things, provides in its term loan provisions for a 5-year, $55 million senior secured term loan (the “Term Loan” or “Term Loan Facility”). The Term Loan is subject to repayment in quarterly installments commencing March 31, 2025 in amounts as set forth in the New Credit Agreement. Interest is payable on the unpaid principal outstanding under the Term Loan. All amounts of unpaid principal and accrued and unpaid interest remaining due under the Term Loan are scheduled to be paid in full October 31, 2029.

 

Upon closing of the Acquisition on October 31, 2024, the Company borrowed the full amount of the Term Loan Facility.

 

As of March 31, 2025, the Company had $54,313 outstanding principal on the Term Loan, $3,094 of which is included in current portion of long-term debt on the consolidated balance sheets, and no amounts outstanding on the Revolving Credit Facility. As of March 31, 2025, unamortized debt issuance costs associated with the Term Loan of $709 are classified on the consolidated balance sheets as a reduction of long-term debt, and unamortized debt issuance costs associated with the Revolving Credit Facility of $488 are classified on the consolidated balance sheets as other noncurrent assets. Debt issuance costs include lender fees and certain costs paid to third parties, including legal and accountant fees, and are amortized to interest expense over the term of the New Credit Agreement.

 

The New Credit Agreement also provides under its revolving credit provisions for revolving loans, letters of credit, and swing loans (“Revolving Credit Facility”). Upon the effectiveness of the New Credit Agreement, any amounts outstanding under letters of credit issued pursuant to the Amended Credit Agreement became issued under the New Credit Agreement. The availability under the Revolving Credit Facility is subject to certain borrowing base limits based on trade receivables and inventories. All unpaid principal and accrued and unpaid interest with respect to the Revolving Credit Facility is due and payable in full on October 31, 2029.

 

The Company may voluntarily prepay principal amounts outstanding under the New Credit Agreement at any time subject to certain advance notifications and other restrictions.

 

In addition to the customary affirmative and negative covenants, the Company must maintain a consolidated fixed charge coverage ratio, as defined in the New Credit Agreement, of equal to or greater than 1.15 to 1.00 for the fiscal quarter ending March 31, 2025, and for each fiscal quarter thereafter, as calculated for the four (4) consecutive fiscal quarters ending on such date, and a consolidated senior leverage ratio, as defined in the New Credit Agreement, not to exceed (i) 3.50 to 1.00 for the fiscal quarters ending March 31, 2025 through December 31, 2025, (ii) 3.25 to 1.00 for the fiscal quarters ending March 31, 2026 through December 31, 2026, (iii) 3.00 to 1.00 for the fiscal quarter ending March 31, 2027 and on the last day of each fiscal quarter thereafter, for the remaining term of the New Credit Agreement. The Company was in full compliance with its covenants under the New Credit Agreement as of March 31, 2025.

 

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Borrowings under the New Credit Agreement are secured by substantially all the assets of the Company and certain of its present and future subsidiaries who are or become parties to, or guarantors under the new Credit Agreement.

 

Interest will accrue on outstanding indebtedness under the Term Loan Facility and Revolving Credit Facilities at a variable rate of interest based on designated interest rate benchmarks plus a varying margin determined by reference to the consolidated senior leverage ratio in effect from time to time. Our borrowing rate was 6.79% as of March 31, 2025.

 

The Company must pay a fee of twenty, twenty-five or thirty basis points (depending on the consolidated senior leverage ratio in effect from time to time) based on the average daily unused availability under the Revolving Credit Facility.

 

The Company must make payments to the extent borrowings exceed the maximum amount then permitted to be borrowed and from the proceeds of certain transactions. Upon the occurrence of an event of default, the outstanding obligations may be accelerated, and the Bank will have other customary remedies including resort to the security interest the Company provided to the Bank.

 

Future minimum principal repayment obligations on our Amended Credit Facilities as of March 31, 2025 are as follows:

 

2025		$	2,063
2026			4,125
2027			5,500
2028			5,500
2029			37,125
Total		$	54,313

 

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4.	EARNINGS PER SHARE

 

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) attributable to Ultralife Corporation by the weighted average shares outstanding during the period. Diluted EPS includes the dilutive effect of securities, if any, and is calculated using the treasury stock method.

 

For the three-month period ended March 31, 2025, there were 314,704 outstanding stock options included in the calculation of diluted weighted average shares outstanding, as such securities were dilutive, resulting in 46,793 potential common shares included in the calculation of diluted EPS. There were 778,717 outstanding stock options and 35,486 unvested restricted stock awards for the three-month period ended March 31, 2025 not included in the calculation of diluted weighted average shares outstanding, as the effect would be anti-dilutive.

 

For the comparable three-month period ended March 31, 2024, there were 539,358 outstanding stock options and 5,229 unvested restricted stock awards included in the calculation of diluted weighted average shares outstanding, as such securities were dilutive, resulting in 122,515 potential common shares included in the calculation of diluted EPS. There were 524,502 outstanding stock options for the three-month period ended March 31, 2024 not included in the calculation of diluted weighted average shares outstanding, as the effect would be anti-dilutive.

 

5.	SUPPLEMENTAL BALANCE SHEET INFORMATION

 

Fair Value Measurements and Disclosures

 

The fair value of financial instruments approximated their carrying values at March 31, 2025 and December 31, 2024. The fair value of cash, accounts receivable, accounts payable, accrued liabilities, and the current portion of long-term debt approximates carrying value due to the short-term nature of these instruments.

 

Inventories, Net

 

Inventories are stated at the lower of cost or net realizable value, net of obsolescence reserves, with cost determined under the first-in, first-out (FIFO) method. The composition of inventories, net was:

 

		March 31,				December 31,
		2025				2024
Raw materials		$	34,173			$	36,035
Work in process			5,190				4,501
Finished goods			8,490				10,827
Total		$	47,853			$	51,363

 

 

Property, Plant and Equipment, Net

 

Major classes of property, plant and equipment consisted of the following:

 

		March 31,				December 31,
		2025				2024
Land		$	1,273			$	4,693
Buildings and leasehold improvements			33,534				30,109
Machinery and equipment			61,533				60,986
Furniture and fixtures			3,073				3,067
Computer hardware and software			8,052				7,990
Construction in process			2,244				2,077
			109,709				108,922
Less: Accumulated depreciation			(69,432	)			(68,437	)
Property, plant and equipment, net		$	40,277			$	40,485

 

 

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Depreciation expense for property, plant and equipment was $950 and $740 for the three-month periods ended March 31, 2025 and March 31, 2024, respectively.

 

Goodwill

 

The following table summarizes the goodwill activity by segment for the three-month period ended March 31, 2025.

 

		Battery & Energy				Communications
		Products				Systems				Total
Balance – December 31, 2024		$	33,513			$	11,493			$	45,006
Effect of foreign currency translation			135				-				135
Balance – March 31, 2025		$	33,648			$	11,493			$	45,141

 

 

Other Intangible Assets, Net

 

The composition of other intangible assets was:

 

		at March 31, 2025
						Accumulated
		Cost				Amortization				Net
Customer relationships		$	18,231			$	7,580			$	10,651
Trade names			9,954				940				9,014
Patents and technology			5,722				5,491				231
Trademarks			3,399				-				3,399
Other			1,500				610				890
Total other intangible assets		$	38,806			$	14,621			$	24,185

 

 

		at December 31, 2024
						Accumulated
		Cost				Amortization				Net
Customer relationships		$	18,154			$	7,296			$	10,858
Trade names			9,942				813				9,129
Patents and technology			5,690				5,428				262
Trademarks			3,399				-				3,399
Other			1,500				591				909
Total other intangible assets		$	38,685			$	14,128			$	24,557

 

 

The change in the cost of total intangible assets from December 31, 2024 to March 31, 2025 is the effect of foreign currency translations.

 

Amortization of other intangible assets was included in the following financial statement captions:

 

		Three-month period ended
		March 31, 2025				March 31, 2024
Selling, general and administrative expense		$	376			$	203
Research and development expense			29				25
Total		$	405			$	228

 

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6.	STOCK-BASED COMPENSATION

 

We recorded non-cash stock compensation expense in each period as follows:

 

		Three-month period ended
		March 31,				March 31,
		2025				2024
Stock options		$	188			$	156
Restricted stock grants			39				5
Total		$	227			$	161

 

We have stock options outstanding from various stock-based employee compensation plans for which we record compensation cost relating to share-based payment transactions in our financial statements. As of March 31, 2025, there was $921 of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of 1.4 years.

 

The following table summarizes stock option activity for the three-month period ended March 31, 2025:

 

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (years)				Aggregate Intrinsic Value
Outstanding at January 1, 2025			1,106,436			$	7.15
Granted			-				-
Exercised			-				-
Forfeited or expired			(13,015	)		$	7.11
Outstanding at March 31, 2025			1,093,421			$	7.15				4.26			$	25
Vested and expected to vest at March 31, 2025			994,263			$	7.17				4.09			$	23
Exercisable at March 31, 2025			628,327			$	7.16				2.93			$	16

 

Cash received from stock option exercises under our stock-based compensation plans for the three-month periods ended March 31, 2025 and March 31, 2024 was $0 and $685, respectively.

 

Restricted stock awards vest in equal annual installments over three (3) years. Unrecognized compensation cost related to unvested restricted stock awards at March 31, 2025 and March 31, 2024, respectively, was $216 and $31.

 

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7.	INCOME TAXES

 

Our effective tax rate for the three-month periods ended March 31, 2025 and March 31, 2024 was 23.2% and 19.5%, respectively. The period-over-period change was primarily attributable to the geographic mix of our operating results.

 

As of December 31, 2024, we have domestic net operating loss (“NOL”) carryforwards of $15,000, which expire 2031 through 2035, and domestic tax credits of $3,200, which expire 2028 through 2044, available to reduce future taxable income. As of March 31, 2025, management has concluded it is more likely than not that these domestic NOL and credit carryforwards will be fully utilized.

 

As of March 31, 2025, for certain past operations in the U.K., we continue to report a valuation allowance for NOL carryforwards of approximately $9,600, nearly all of which can be carried forward indefinitely. Utilization of the net operating losses may be limited due to the change in the past U.K. operation and cannot currently be used to reduce taxable income at our other U.K. subsidiary, Accutronics Ltd. There are no other deferred tax assets related to the past U.K. operations.

 

As of March 31, 2025, we have not recognized a valuation allowance against our other foreign deferred tax assets, as realization is considered to be more likely than not.

 

As of March 31, 2025, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations, other than earnings generated in the U.K.

 

There were no unrecognized tax benefits related to uncertain tax positions at March 31, 2025 and December 31, 2024.

 

As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. Our U.S. tax matters for 2021 thru 2023 remain subject to IRS examination. Our U.S. tax matters for 2001-2002, 2005-2007, 2009, and 2011-2015 also remain subject to IRS examination due to the remaining availability of net operating loss carryforwards generated in those years. Our U.S. tax matters for 2014 thru 2023 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years 2014 thru 2023 remain subject to examination by the respective foreign tax jurisdiction authorities.

 

8.	OPERATING LEASES

 

The Company has operating leases predominantly for operating facilities. As of March 31, 2025, the remaining lease terms on our operating leases range from approximately one (1) year to seven (7) years. Lease terms include renewal options reasonably certain of exercise. There is no transfer of title or option to purchase the leased assets upon expiration. There are no residual value guarantees or material restrictive covenants.

 

The components of lease expense for the current and prior-year comparative periods were as follows:

 

		Three-month period ended March 31,
		2025				2024
Operating lease cost		$	296			$	262
Variable lease cost			24				28
Total lease cost		$	320			$	290

 

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Supplemental cash flow information related to leases was as follows:

 

		Three-month period ended March 31,
		2025				2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	314			$	265
Right-of-use assets obtained in exchange for lease liabilities:		$	-			$	-

 

Supplemental consolidated balance sheet information related to leases was as follows:

 

	Balance sheet classification		March 31, 2025				December 31, 2024
Assets:
Operating lease right-of-use asset	Other noncurrent assets		$	3,905			$	4,153
Liabilities:
Current operating lease liability	Accrued expenses and other current liabilities		$	1,125			$	1,138
Operating lease liability, net of current portion	Other noncurrent liabilities			2,782				2,998
Total operating lease liability			$	3,907			$	4,136
Weighted-average remaining lease term (years)				4.3				4.5
Weighted-average discount rate				6.7	%			6.7	%

 

Future minimum lease payments as of March 31, 2025 are as follows:

 

Maturity of operating lease liabilities
2025		$	873
2026			1,038
2027			984
2028			968
2029			508
Thereafter			107
Total lease payments			4,478
Less: Imputed interest			(571	)
Present value of remaining lease payments		$	3,907

 

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9.	COMMITMENTS AND CONTINGENCIES

 

Purchase Commitments

 

As of March 31, 2025, we have made commitments to purchase approximately $828 of production machinery and equipment.

 

Product Warranties

 

We estimate future warranty costs to be incurred for product failure rates, material usage and service costs in the development of our warranty obligations. Estimated future costs are based on actual past experience and are generally estimated as a percentage of sales over the warranty period. Changes in our product warranty liability during the first three months of 2025 and 2024 were as follows:

 

		Three-month period ended March 31,
		2025				2024
Accrued warranty obligations – beginning		$	887			$	547
Accruals for warranties issued			93				141
Settlements made			(6	)			(49	)
Accrued warranty obligations – ending		$	974			$	639

 

 

Contingencies and Legal Matters

 

We are subject to legal proceedings and claims that arise from time to time in the normal course of business. We believe that the final disposition of any such matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, recognizing that legal matters are subject to inherent uncertainties, there exists the possibility that ultimate resolution of these matters could have a material adverse impact on the Company’s financial position, results of operations or cash flows. We are not aware of any such situations at this time.

  

10.	REVENUE RECOGNITION

 

Revenues are generated from the sale of products. Performance obligations are met and revenue is recognized upon transfer of control to the customer, which is generally upon shipment. When contract terms require transfer of control upon delivery at a customer’s location, revenue is recognized on the date of delivery. For products shipped under vendor-managed inventory arrangements, revenue is recognized and billed when the product is consumed by the customer, at which point control has transferred and there are no further obligations by the Company. Revenue is measured as the amount of consideration we expect to receive in exchange for shipped product. Sales, value-added and other taxes billed and collected from customers are excluded from revenue. Customers, including distributors, do not have a general right of return.

 

Separately priced extended warranty contracts are offered on certain Communications Systems products for a duration of up to eight (8) years. Extended warranties are treated as separate performance obligations and recognized to revenue evenly over the term of the respective contract. Revenue not yet recognized on extended warranty contracts is recorded as deferred revenue on the consolidated balance sheet. For the three-month periods ended March 31, 2025 and March 31, 2024, revenue recognized on extended warranties was $74 and $72, respectively.

 

As of March 31, 2025, there was deferred revenue on extended warranty contracts of $1,078, comprised of $298 expected to be recognized as revenue within one (1) year and classified as accrued expenses and other current liabilities on our consolidated balance sheet, and $780 expected to be recognized as revenue over the remaining duration of the respective contracts and classified as other noncurrent liabilities on our consolidated balance sheet.

 

As of December 31, 2024, there was deferred revenue on extended warranty contracts of $1,153, comprised of $298 expected to be recognized as revenue within one (1) year and classified as accrued expenses and other current liabilities on our consolidated balance sheets, and $855 expected to be recognized as revenue over the remaining duration of the respective contracts and classified as other noncurrent liabilities on our consolidated balance sheet.

 

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As of March 31, 2025 and December 31, 2024, the Company had no other unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, we have applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations.

 

11.	BUSINESS SEGMENT INFORMATION

 

Operating segments represent a component of the Company that engages in business activities from which it may recognize revenues and incur expenses whose operating results are regularly reviewed by the public entity’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.  Once operating segments are identified, the Company determined which of those operating segments are required to be presented as reportable segments based on the quantitative thresholds.

 

We structure our operations primarily around the products we sell and report our financial results in the following two reportable segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes Lithium 9-volt, cylindrical and various other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design.

 

Our CODM is Mike Manna, President & Chief Executive Officer.  Both of our operating segments are regularly reviewed by the CODM through weekly revenue, gross margin and consolidated financial forecast updates, bi-weekly business and financial reviews to assess business performance, top priorities, utilization of resources and to regularly communicate with segment management, who are part of the CODM’s executive leadership team, and monthly meetings with the executive leadership team.  In his role as CODM, Mr. Manna is deeply involved in business operations through daily updates by the segment management and ongoing financial, revenue and operations discussions.

 

The primary financial measures used by the CODM to monitor and evaluate the performance of the operating segments is segment contribution, as defined by gross profit less direct selling, general and administrative (“SG&A”) and research and development expenses. This metric is used as a consistent benchmark for comparison across reporting periods.

 

Corporate general and administrative (“G&A”) expenses, including costs associated with our acquisitions, include corporate functions including board of directors, executive officers, accounting & finance, human resources, legal, information technology and their related functional expenses. These costs are not directly allocable to the operating segments.

 

Three-month period ended March 31, 2025:

 

		Battery & Energy Products				Communications Systems				Corporate				Total
Revenues		$	46,321			$	4,425			$	-			$	50,746
Cost of products sold			(34,881	)			(3,120	)			-				(38,001	)
Gross profit			11,440				1,305				-				12,745
Direct SG&A expenses			(3,865	)			(366	)			-				(4,231	)
Research and development			(1,591	)			(813	)			-				(2,404	)
Segment contribution			5,984				126				-				6,110
Corporate G&A expenses											(2,711	)			(2,711	)
Operating income															3,399
Other expenses, net											(953	)			(953	)
Income tax provision											(567	)			(567	)
Non-controlling interest											(14	)			(14	)
Net income attributable to Ultralife														$	1,865

 

15

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Three-month period ended March 31, 2024:

 

		Battery & Energy Products				Communications Systems				Corporate				Total
Revenues		$	34,989			$	6,938			$	-			$	41,927
Cost of products sold			(26,003	)			(4,454	)			-				(30,457	)
Gross profit			8,986				2,484				-				11,470
Direct SG&A expenses			(2,907	)			(394	)							(3,301	)
Research and development			(1,001	)			(755	)							(1,756	)
Segment contribution			5,078				1,335				-				6,413
Corporate G&A expenses											(2,350	)			(2,350	)
Operating income															4,063
Other expenses, net											(456	)			(456	)
Income tax provision											(703	)			(703	)
Non-controlling interest											(13	)			(13	)
Net income attributable to Ultralife														$	2,891

 

The following tables disaggregate our business segment revenues by major source and geography.

 

Commercial and Government/Defense Revenue Information:

 

Three-month period ended March 31, 2025:

		Total Revenue				Commercial				Government/ Defense
Battery & Energy Products		$	46,321			$	29,659			$	16,662
Communications Systems			4,425				-				4,425
Total		$	50,746			$	29,659			$	21,087
							58	%			42	%

 

Three-month period ended March 31, 2024:

		Total Revenue				Commercial				Government/ Defense
Battery & Energy Products		$	34,989			$	24,140			$	10,849
Communications Systems			6,938				-				6,938
Total		$	41,927			$	24,140			$	17,787
							58	%			42	%

 

U.S. and Non-U.S. Revenue Information¹:

 

Three-month period ended March 31, 2025:

		Total Revenue				United States				Non-United States
Battery & Energy Products		$	46,321			$	35,182			$	11,139
Communications Systems			4,425				4,287				138
Total		$	50,746			$	39,469			$	11,277
							78	%			22	%

 

Three-month period ended March 31, 2024:

		Total Revenue				United States				Non-United States
Battery & Energy Products		$	34,989			$	19,603			$	15,386
Communications Systems			6,938				4,858				2,080
Total		$	41,927			$	24,461			$	17,466
							58	%			42	%

 

¹ Sales classified to U.S. include shipments to U.S.-based prime contractors which in some cases may serve non-U.S. projects.

 

16

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report contains certain forward-looking statements and information that are based on the beliefs of management as well as assumptions made by management and information currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, changes in economic conditions including inflation, tariffs, interest rates and supply chain disruptions affecting our business, revenues and earnings adversely; our reliance on certain key customers for a significant portion of our revenues; reductions or delays in U.S. and foreign military spending; our efforts to develop new products or new commercial applications for our products; potential disruptions in our supply of raw materials and components or material increases in their costs due to business conditions, new or additional tariffs, global conflicts or other factors not under our control; our resources being overwhelmed by our growth; breaches in information systems security and other disruptions in our information technology systems; our ability to recruit and retain top management and key personnel; the unique risks associated with our China operations; fluctuations in the price of oil and the resulting impact on the demand for downhole drilling; possible future declines in demand for the products that use our batteries or communications systems; safety risks, including the risk of fire inherent in the manufacture, use and transportation of Lithium batteries; variability in our quarterly and annual results and the price of our common stock; rising interest rates increasing the cost of our variable borrowings; purchases by our customers of product quantities not meeting the volume expectations in our supply agreements;  the continued impact of COVID-19, or other pandemics that may arise, causing delays in the manufacture and delivery of our mission critical products to end customers;  potential costs attributable to the warranties we supply with our products and services; our inability to comply with changes to the regulations for the shipment of our products; our entrance into new end-markets which could lead to additional financial exposure; negative publicity concerning Lithium-ion batteries; our exposure to foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; the risk that we are unable to protect our proprietary and intellectual property; rules and procedures regarding contracting with the U.S. and foreign governments; possible impairments of our goodwill and other intangible assets; our ability to comply with government regulations including the use of “conflict minerals”; exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; known and unknown environmental matters;  possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; and other risks and uncertainties, certain of which are beyond our control.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those forward-looking statements described herein. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “seek,” “project,” “intend,” “plan,” “may,” “will,” “should,” “foresee,” “could,” “likely,” or words of similar import are intended to identify forward-looking statements. For further discussion of certain of the matters described above and other risks and uncertainties, see Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.

 

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements do not guarantee future performance and that our actual results of operations, financial condition and liquidity and developments in the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

 

Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim any obligation to update any risk factors or to publicly announce the results of any revisions to any of the forward-looking statements to reflect new information or risks, future events or other developments.

 

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the consolidated financial statements and notes thereto in Part I, Item 1 of this Form 10-Q, and the consolidated financial statements and notes thereto and risk factors in our Annual Report on Form 10-K for the year ended December 31, 2024.

 

The financial information in this MD&A is presented in thousands of dollars, except for share and per share amounts, unless otherwise specified.

 

 

General

 

We offer products and services ranging from power solutions to communications and electronics systems to customers across the globe in the government, defense and commercial sectors. With an emphasis on strong engineering and a collaborative approach to problem solving, we design and manufacture power and communications systems including rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems and accessories, and custom engineered systems related to those product lines. We continually evaluate ways to grow, including the design, development and sale of new products, expansion of our sales force to penetrate new markets and territories, as well as seeking opportunities to expand through acquisitions.

 

We sell our products worldwide through a variety of trade channels, including original equipment manufacturers (“OEMs”), industrial and defense supply distributors, and directly to U.S. and foreign defense departments. We enjoy strong name recognition in our markets under our Ultralife®, Ultralife HiRate®, Ultralife Thin Cell®, Ultralife Batteries Inc.®, Lithium Power®, McDowell Research®, AMTI^TM, ABLE^TM, ACCUTRONICS™, ACCUPRO™, ENTELLION™, SWE Southwest Electronic Energy Group™, SWE SEASAFE™, Excell Battery Group™ and Criterion Gauge™ brands, among others. We have sales, operations and product development facilities in North America, Europe and Asia.

 

We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes Lithium 9-volt, cylindrical, thin cell and other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design. We believe that segment contribution, as defined by gross profit less direct selling, general and administrative (“SG&A”) and research and development expenses, is the best indicator of segment performance. As such, we report segment results at the segment contribution level. Refer to Note 10 in the notes to Consolidated Financial Statements in Item 1 of Part 1 of this Form 10-Q.

 

Our website address is www.ultralifecorporation.com. We make available free of charge via a hyperlink on our website (see Investor Relations link on the website) our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports and statements as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). We will provide copies of these reports upon written request to the attention of Philip A. Fain, CFO, Treasurer and Secretary, Ultralife Corporation, 2000 Technology Parkway, Newark, New York, 14513. Our filings with the SEC are also available through the SEC website at www.sec.gov or at the SEC Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by calling 1-800-SEC-0330.

 

 

Overview

 

Consolidated revenues of $50,746 for the three-month period ended March 31, 2025, increased by $8,819 or 21.0%, over $41,927 for the three-month period ended March 31, 2024, reflecting the inclusion of Electrochem and an increase in government/defense sales of 18.6% partially offset by a 12.3% decrease in medical sales.

 

Gross profit was $12,745, or 25.1% of revenue, for the three-month period ended March 31, 2025, compared to $11,470, or 27.4% of revenue, for the same quarter a year ago. The 230-basis point decline primarily resulted from sales product mix.

 

Operating expenses were $9,346 for the three-month period ending March 31, 2025, compared to $7,407 for the three-month period ended March 31, 2024, reflecting the inclusion of Electrochem, a 24.0% increase in new product development costs related to continued investment in our product offering, the strengthening of our sales and marketing leadership team to expedite organic growth and further leverage our global brand and resources, and certain one-time, non-recurring costs.  Operating expenses for the 2025 period were 18.4% of revenue compared to 17.7% of revenue for the year-earlier period.

 

 

Operating income for the three-month period ended March 31, 2025 was $3,399, or 6.7% of revenues, compared to $4,063, or 9.7% of revenues, for the year-earlier period. The decrease in operating income primarily resulted from the decline in gross margin resulting from sales product mix and the increase in operating expenses, including $402 in one-time, non-recurring costs and purchase accounting adjustments.

 

Net income attributable to Ultralife Corporation was $1,865, or $0.11 per share – basic and diluted, for the three-month period ended March 31, 2025, compared to $2,891, or $0.18 per share – basic and diluted, for the three-month period ended March 31, 2024.

 

Adjusted EBITDA, defined as net income attributable to Ultralife Corporation before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expenses/income that we do not consider reflective of our ongoing operations, amounted to $5,448, or 10.7% of revenues, for the first quarter of 2025, compared to $5,243, or 12.5% of revenues, for the first quarter of 2024. See the section “Adjusted EBITDA” on page 21 for a reconciliation of adjusted EBITDA to net income attributable to Ultralife Corporation.

 

We are confident in our ability to deliver and sustain profitable growth, generating incremental cash flow to reduce acquisition-related debt, and continuing to invest in strategic product development. Our strong backlog replenishment this quarter, combined with a growing pipeline of innovative products targeting high-growth markets, positions us to scale efficiently and capitalize on market demand. With enhanced sales and marketing leadership in place, we’re accelerating organic growth and maximizing the value of our global brand and resources.

 

 

Results of Operations

 

Three-Month Periods Ended March 31, 2025 and March 31, 2024

 

Revenues. Consolidated revenues for the three-month period ending March 31, 2025 were $50,746, an increase of $8,819, or 21.0%, over $41,927 for the three-month period ended March 31, 2024. Overall, government/defense sales increased 18.6% and commercial sales decreased 8.7%, when excluding the 2025 sales of Electrochem.

 

Battery & Energy Products revenues increased $11,332, or 32.4%, from $34,989 for the three-month period ended March 31, 2024 to $46,321 for the three-month period ended March 31, 2025. The revenue growth was primarily attributable to the inclusion of Electrochem and organic growth of 10.6% driven by a 53.6% increase in government/defense sales reflecting strong demand from our U.S.-based global prime, partially offset by a 12.3% decrease in medical battery sales.

 

Communications Systems sales decreased $2,513, or 36.2%, from $6,938 for the three-month period ended March 31, 2024 to $4,425 for the three-month period ended March 31, 2025. The decrease was primarily attributable to shipments in the prior year of integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor.

 

Cost of Products Sold / Gross Profit. Cost of products sold totaled $38,001 for the quarter ended March 31, 2025, an increase of $7,544, or 24.8%, from the $30,457 reported for the same three-month period a year ago. Consolidated cost of products sold as a percentage of total revenue increased from 72.6% for the three-month period ended March 31, 2024 to 74.9% for the three-month period ended March 31, 2025. Correspondingly, consolidated gross margin decreased from 27.4% for the three-month period ended March 31, 2024, to 25.1% for the three-month period ended March 31, 2025, primarily reflecting unfavorable sales mix for both segments.

 

For our Battery & Energy Products segment, gross profit for the first quarter of 2025 was $11,440, an increase of $2,454 or 27.3% from gross profit of $8,986 for the first quarter of 2024. Battery & Energy Products’ gross margin of 24.7% decreased by 100-basis points from the 25.7% gross margin for the year-earlier period, primarily due to sales mix reflecting the 12.3% decline in medical battery sales.

 

For our Communications Systems segment, gross profit for the first quarter of 2025 was $1,305 or 29.5% of revenues, compared to gross profit of $2,484 or 35.8% of revenues for the first quarter of 2024. The 630-basis point decrease in gross margin was primarily due to unfavorable sales mix and the 36.2% revenue decline reducing factory volume.

 

 

Operating Expenses. Operating expenses for the three-month period ended March 31, 2025 were $9,346, an increase of $1,939 or 26.2% from the $7,407 for the three-month period ended March 31, 2024. The increase is primarily attributable to the inclusion of $1,060 for Electrochem, a 24.0% increase in new product development costs related to continued investment in our product offering, the strengthening of our sales and marketing leadership team to expedite organic growth and further leverage our global brand and resources, and certain one-time, non-recurring expenses which include costs related to our acquisition of Electrochem. Both periods reflected continued tight control over discretionary spending.

 

Overall, operating expenses were 18.4% of revenue for the quarter ending March 31, 2025 compared to 17.7% of revenue for the quarter ended March 31, 2024.  Amortization expense associated with intangible assets related to our acquisitions was $405 for the first quarter of 2025 ($376 in selling, general and administrative expenses and $29 in research and development costs), compared with $228 for the first quarter of 2024 ($203 in selling, general, and administrative expenses and $25 in research and development costs). Research and development costs were $2,403 for the three-month period ended March 31, 2025, an increase of $647 or 36.8%, from $1,756 for the three-month period ended March 31, 2024. The increase is attributable to the inclusion of Electrochem and a 24.0% increase in new product development costs related to continued investment in our product offering as we aggressively pursue both government/defense and commercial opportunities. Selling, general, and administrative expenses were $6,943 for the three-month period ended March 31, 2025, an increase of $1,292 or 22.9% from $5,651 for the first quarter of 2024. The period-over-period increase was primarily attributable to the inclusion of Electrochem, the strengthening of our sales and marketing leadership team to expedite organic growth and further leverage our global brand and resources, and certain one-time, non-recurring expenses which include costs related to our acquisition of Electrochem.

 

Other Expense. Other expense totaled $953 for the three-month period ended March 31, 2025 compared to $456 for the three-month period ended March 31, 2024. Interest and financing expense increased $512, or 98.5%, from $520 for the first quarter of 2024 to $1,032 for the comparable period in 2025 resulting from the financing of the Electrochem acquisition on October 31, 2024. Miscellaneous income amounted to $79 for the first quarter of 2025 compared to $64 for the first quarter of 2024, primarily attributable to interest income recognized in the 2025 period on the Employee Retention Credit under the Coronavirus Aid, Relief and Economic Security Act filed on June 22^nd 2023 and approved for payment by the Internal Revenue Service on March 31, 2025 and foreign exchange gains and losses due to fluctuations in foreign currency exchange rates.

 

Income Taxes. For the three-month period ended March 31, 2025, Ultralife recognized an income tax provision of $567, comprised of a current provision of $223 expected to be paid on income primarily in foreign jurisdictions and a deferred tax provision of $344 which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. This compares to a provision of $703 comprised of a current provision of $53 and a deferred tax provision of $650 for the three-month period ended March 31, 2024. Our effective tax rate was 23.2% for the first quarter of 2025 as compared to 19.5% for the first quarter of 2024, primarily attributable to the geographic mix of our operating results. See Note 7 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q for additional information regarding our income taxes.

 

Net Income Attributable to Ultralife Corporation. Net income attributable to Ultralife Corporation was $1,865, or $0.11 per share – basic and diluted, for the three-month period ended March 31, 2025, compared to $2,891, or $0.18 per share – basic and diluted, for the three-month period ended March 31, 2024.  Adjusted EPS was $0.13 per share on a diluted basis for the first quarter of 2025, compared to an adjusted $0.21 per share for the 2024 period.  Adjusted EPS for 2025 excludes the provision for deferred income taxes of $344 which represents non-cash charges primarily for U.S. income taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. Adjusted EPS for 2024 excludes the deferred income taxes of $650 which represents non-cash charges primarily for U.S. net operating losses and temporary tax differences which are expected to offset future U.S. taxable income. See section “Adjusted Earnings Per Share” on page 22 for a reconciliation of adjusted EPS to EPS.  Weighted average shares outstanding used to compute diluted earnings per share increased from 16,518,389 for the first quarter of 2024 to 16,679,758 for the first quarter of 2025.  The increase is attributable to the exercise of stock options and the vesting of restricted stock since the first quarter of 2024.

 

 

Adjusted EBITDA

 

In evaluating our business, we consider and use adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure of our operating performance. We define adjusted EBITDA as net income attributable to Ultralife Corporation before interest expense, provision for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expense/income that we do not consider reflective of our ongoing continuing operations. We also use adjusted EBITDA as a supplemental measure to review and assess our operating performance and to enhance comparability between periods. We believe the use of adjusted EBITDA facilitates investors’ understanding of operating performance from period to period by backing out potential differences caused by variations in such items as capital structures (affecting relative interest expense and stock-based compensation expense), the amortization of intangible assets acquired through our business acquisitions (affecting relative amortization expense and provision (benefit) for income taxes), the age and book value of facilities and equipment (affecting relative depreciation expense) and one-time charges/benefits relating to income taxes. We also present adjusted EBITDA from operations because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. We reconcile adjusted EBITDA to net income attributable to Ultralife Corporation, the most comparable financial measure under GAAP.

 

We use adjusted EBITDA in our decision-making processes relating to the operation of our business together with GAAP financial measures such as operating income (loss). We believe that adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while eliminating the effects of depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance, and of stock-based compensation, which is a non-cash expense that varies widely among companies. We believe that by presenting adjusted EBITDA, we assist investors in gaining a better understanding of our business on a going forward basis. We provide information relating to our adjusted EBITDA so that securities analysts, investors and other interested parties have the same data that we employ in assessing our overall operations. We believe that trends in our adjusted EBITDA are a valuable indicator of our operating performance on a consolidated basis and of our ability to produce operating cash flows to fund working capital needs, to service debt obligations and to fund capital expenditures.

 

The term adjusted EBITDA is not defined under GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. Our adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, adjusted EBITDA should not be considered in isolation or as a substitute for net income attributable to Ultralife Corporation or other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include, but are not limited to, the following:

 

	●	Adjusted EBITDA does not reflect (1) our cash expenditures or future requirements for capital expenditures or contractual commitments; (2) changes in, or cash requirements for, our working capital needs; (3) the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; (4) income taxes or the cash requirements for any tax payments; and (5) all of the costs associated with operating our business;
	●	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and adjusted EBITDA from continuing operations does not reflect any cash requirements for such replacements;
	●	While stock-based compensation is a component of cost of products sold and operating expenses, the impact on our consolidated financial statements compared to other companies can vary significantly due to such factors as assumed life of the stock-based awards and assumed volatility of our common stock; and
	●	Other companies may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

 

We compensate for these limitations by relying primarily on our GAAP results and using adjusted EBITDA only on a supplemental basis. Neither current nor potential investors in our securities should rely on adjusted EBITDA as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of adjusted EBITDA to net loss attributable to Ultralife Corporation.

 

Adjusted EBITDA is calculated as follows for the periods presented:

 

		Three-month period ended
		March 31,				March 31,
		2025				2024
Net income attributable to Ultralife Corporation		$	1,865			$	2,891
Adjustments:
Interest expense			1,032				520
Income tax provision			567				703
Depreciation expense			950				740
Amortization of intangible assets			405				228
Stock-based compensation expense			227				161
Severance costs for plant closure			150				-
Acquisition and other non-recurring costs			192				-
Non-cash purchase accounting adjustments			60				-
Adjusted EBITDA		$	5,448			$	5,243

 

 

Adjusted Earnings Per Share

 

In evaluating our business, we consider and use adjusted earnings per share (“EPS”), a non-GAAP financial measure, as a supplemental measure of our business performance. We define adjusted EPS as net income (loss) attributable to Ultralife Corporation excluding the provision (benefit) for deferred income taxes divided by our weighted average shares outstanding on both a basic and diluted basis. We believe that this information is useful in providing period-to-period comparisons of our results by reflecting the portion of our tax provision that will be predominantly offset by our U.S. net operating loss carryforwards and other tax credits for the foreseeable future. We reconcile adjusted EPS to EPS, the most comparable financial measure under GAAP. Neither current nor potential investors in our securities should rely on adjusted EPS as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of adjusted EPS to EPS and net income (loss) attributable to Ultralife Corporation.

 

Adjusted EPS is calculated as follows for the periods presented:

 

 

		Three-month period ended
		March 31, 2025												March 31, 2024
		Amount				Per basic share				Per diluted share				Amount				Per basic share				Per diluted share
Net income attributable to Ultralife Corporation		$	1,865			$	.11			$	.11			$	2,891			$	.18			$	.18
Deferred tax provision			344				.02				.02				650				.04				.04
Adjusted net income		$	2,209			$	.13			$	.13			$	3,541			$	.22			$	.22
Weighted average shares outstanding							16,633				16,680								16,396				16,518

 

 

Liquidity and Capital Resources

 

As of March 31, 2025, cash totaled $8,719, an increase of $1,865 as compared to $6,854 of cash held at December 31, 2024.

 

For the three-month period ended March 31, 2025, cash generated from operations was $3,368, as compared to $81 cash used for the three-month period ended March 31, 2024. For the 2025 period, cash generated from operations was comprised of net income of $1,879, plus non-cash items totaling $1,991 for depreciation, amortization, stock-based compensation, and deferred taxes, less $502 attributable to changes in working capital.

 

Cash used in investing activities for the three months ended March 31, 2025 was $895 for capital expenditures, primarily reflecting investments in equipment for new products transitioning to high-volume manufacturing.

 

Cash used in financing activities for the three months ended March 31, 2025 was $687, representing principle payments due on our term loan.

 

We continue to have significant U.S. net operating loss carryforwards available to utilize as an offset to future taxable income. See Note 7 to the consolidated financial statements in Item 1 of Part 1 of this Form 10-Q for additional information.

 

Going forward, we expect positive operating cash flow and the availability of borrowings under our Revolving Credit Facility will be sufficient to meet our general funding requirements for the foreseeable future.

 

To provide flexibility in accessing the capital markets, on March 30, 2021, the Company filed a shelf registration statement on Form S-3 (File No. 333-254846) (the “Prior Registration Statement”) registering securities in an aggregate amount of $100,000,000. None of the $100,000,000 of registered securities were sold under the Prior Registration Statement (the “Unsold Securities”). Under the rules of the Securities and Exchange Commission (the “SEC”) the Prior Registration Statement was set to expire on April 2, 2024. Therefore, on March 29, 2024, the Company filed a new shelf registration statement on Form S-3 (File No. 333-278360) (the “New Registration Statement”) to replace the Prior Registration Statement. The New Registration Statement includes all $100,000,000 of the Unsold Securities registered on the Prior Registration Statement. The SEC declared the New Registration Statement effective May 7, 2024. Pursuant to Rule 415(a)(6) under Securities Act of 1933, as amended (the “Securities Act”), the offering of the Unsold Securities under the Prior Registration Statement was deemed terminated as of the date of effectiveness of the New Registration Statement. Upon the filing of an appropriate prospectus supplement or supplements under the New Registration Statement, we may offer and sell our securities from time to time in one or more offerings, at our discretion. We intend to use the net proceeds resulting from any sales of these securities for general corporate purposes which may include, but are not limited to, potential acquisitions of complementary businesses or technologies, strategic capital expenditures to expand and protect our competitive position, and investments in the development of transformational, competitively differentiated products for attractive growth markets.

 

 

Commitments

 

As of March 31, 2025, the Company had $54,313 outstanding on the Term Loan and no amounts outstanding on the Revolving Credit Facility. The Company is in full compliance with its debt covenants under the Credit Facilities.

 

As of March 31, 2025, we have made commitments to purchase approximately $828 of production machinery and equipment.

 

 

Critical Accounting Policies

 

Management exercises judgment in making important decisions pertaining to choosing and applying accounting policies and methodologies in many areas. Not only are these decisions necessary to comply with GAAP, but they also reflect management’s view of the most appropriate manner in which to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 to the consolidated financial statements in our 2024 Annual Report on Form 10-K should be reviewed for a greater understanding of how our financial performance is recorded and reported.

 

During the first three months of 2025, there were no significant changes in the manner in which our significant accounting policies were applied or in which related assumptions and estimates were developed.

 

 

Item 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Management, under the supervision and with the participation of our President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer and Treasurer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this quarterly report. Management has concluded that our disclosure control and procedures were not effective as of March 31, 2025 because of the existing material weakness in our internal control over financial reporting as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2024.

 

Notwithstanding the material weakness identified, management believes that the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with U.S. generally accepted accounting principles for each of the periods presented.

 

Remediation Efforts to Address Material Weaknesses

 

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on our evaluation, management concluded that there is a material weakness in our internal control over financial reporting attributable to our need for additional accounting personnel to provide a full complement of accounting and reporting expertise commensurate with the growth of the Company both organic and through acquisitions.  As a result of the material weakness identified, management concluded that our internal control over financial reporting was not effective as of December 31, 2024. The material weakness was not yet fully remediated as of March 31, 2025.

 

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

 

Management has already taken steps to remediate our identified material weakness and will continue to take further steps until the remediation is complete. The Company is currently seeking to hire additional personnel including certified public accountants to augment the experience and expertise of our accounting team and provide for a full complement of resources commensurate with the Company’s continued growth. During the fourth quarter of 2024, we hired a highly experienced individual as VP of Financial Growth, Transition & Efficiency and in the first quarter of 2025 we hired a Controller for Electrochem. Until all of the necessary resources are in place, expected to occur in 2025, the current members of our accounting team will continue their best efforts to provide additional oversight. We believe that with this interim additional oversight, coupled with the additional personnel we are in the process of recruiting and hiring, will allow us to execute business process controls more quickly and ensure a greater level of monitoring whether controls are present and functioning.

 

Remediation will be deemed complete once our corrective actions are fully implemented and further evaluation is performed, including testing, to conclude that our internal control over financial reporting is effective.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)) that occurred during the fiscal quarter covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II.         OTHER INFORMATION

 

Item 6.

Exhibits

 

Exhibit Index		Exhibit Description		Incorporated by Reference from
31.1		Rule 13a-14(a) / 15d-14(a) CEO Certifications		Filed herewith
31.2		Rule 13a-14(a) / 15d-14(a) CFO Certifications		Filed herewith
32		Section 1350 Certifications		Furnished herewith
101.INS		Inline XBRL Instance Document		Filed herewith
101.SCH		Inline XBRL Taxonomy Extension Schema Document		Filed herewith
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document		Filed herewith
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document		Filed herewith
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document		Filed herewith
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document		Filed herewith
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)		Filed herewith

 

Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024, (ii) Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2025 and 2024, (iii) Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024, (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024, and (v) Notes to Consolidated Financial Statements.

 

 

SIGNATURES

 

 

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.

 

			ULTRALIFE CORPORATION
			(Registrant)
	Date: May 12, 2025	By:	/s/ Michael E. Manna
			Michael E. Manna
			President and Chief Executive Officer
			(Principal Executive Officer)
	Date: May 12, 2025	By:	/s/ Philip A. Fain
			Philip A. Fain
			Chief Financial Officer and Treasurer
			(Principal Financial Officer and
			Principal Accounting Officer)