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~~June 30, ~~2021~~2022

☐	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)	16-1387013 (~~Registrant's~~I.R.S. Employer Identification No.) (315) 332-7100 (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,~~July 25, 2022, the registrant had ~~16,080,749~~16,132,868 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~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	1

	Consolidated Statements of ~~(Loss)~~ Income and Comprehensive (Loss) Income for the Three and ~~Nine-Month~~Six-Month Periods Ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020~~2021	2

	Consolidated Statements of Cash Flows for the ~~Nine-Month~~Six-Month Periods Ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020~~2021	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three and ~~Nine-Month~~Six-Month Periods Ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020~~2021	4

	Notes to Consolidated Financial Statements	5

Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	1619

Item 4.	Controls and Procedures	2628

PART II.	OTHER INFORMATION

Item 6.	Exhibits	2729

	Signatures	2830

		September 30,			December 31,
		2021			2020				June 30, 2022			December 31, 2021
*ASSETS*	*ASSETS*							ASSETS
Current assets:
Cash		$	15,853		$	10,653			$	5,114		$	8,413
Trade accounts receivable, net of allowance for doubtful accounts of $334 and $317, respectively			16,235			21,054
Trade accounts receivable, net of allowance for doubtful accounts of $316 and $346, respectively										22,349			20,232
Inventories, net			28,179			28,193				39,201			33,189
Prepaid expenses and other current assets			4,271			4,596				5,161			4,690
Total current assets			64,538			64,496				71,825			66,524
Property, plant and equipment, net			23,035			22,850				22,338			23,205
Goodwill			26,998			27,018				37,502			38,068
Other intangible assets, net			8,725			9,209				16,566			17,390
Deferred income taxes, net			11,700			11,836				11,731			11,472
Other noncurrent assets			1,816			2,292				2,261			2,879
Total Assets		$	136,812		$	137,701
Total assets									$	162,223		$	159,538

*LIABILITIES AND STOCKHOLDERS' EQUITY*
Current Liabilities:
LIABILITIES AND STOCKHOLDERS’ EQUITY								LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	9,206		$	10,839			$	13,441		$	9,823
Current portion of long-term debt			253			1,361				2,000			2,000
Accrued compensation and related benefits			1,153			1,748				1,924			1,842
Accrued expenses and other current liabilities			6,076			4,758				4,811			5,259
Total current liabilities			16,688			18,706				22,176			18,924
Long-term debt										19,566			18,857
Deferred income taxes			475			515				2,086			2,254
Other noncurrent liabilities			1,103			1,557				1,328			1,760
Total liabilities			18,266			20,778				45,156			41,795

Commitments and contingencies (Note 8)
Commitments and contingencies (Note 9)

Stockholders' equity:
Preferred stock – par value $.10 per share; authorized 1,000,000 shares; none issued			0			0
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
Stockholders’ equity:
Preferred stock – par value $.10 per share; authorized 1,000,000 shares; none issued										0			0
Common stock – par value $.10 per share; authorized 40,000,000 shares; issued – 20,567,460 shares at June 30, 2022 and 20,522,427 shares at December 31, 2021; outstanding – 16,132,868 shares at June 30, 2022 and 16,089,832 shares at December 31, 2021										2,057			2,052
Capital in excess of par value			186,360			185,464				186,999			186,518
Accumulated deficit			(46,701	)		(47,598	)			(47,488	)		(47,832	)
Accumulated other comprehensive loss			(1,819	)		(1,782	)			(3,151	)		(1,653	)
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	)
Treasury stock - at cost; 4,434,592 shares at June 30, 2022 and 4,432,595 shares at December 31, 2021										(21,480	)		(21,469	)
Total Ultralife Corporation equity			118,422			116,800				116,937			117,616
Non-controlling interest			124			123				130			127
Total stockholders’ equity			118,546			116,923				117,067			117,743

Total liabilities and stockholders' equity		$	136,812		$	137,701
Total liabilities and stockholders’ equity									$	162,223		$	159,538

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

	Three-month period ended						Nine-month period ended						Three-month period ended						Six-month period ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020			June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021

Revenues	$	21,761		$	24,362		$	74,504		$	78,736		$	32,126		$	26,770		$	62,499		$	52,743
Cost of products sold		16,653			17,851			55,151			56,928			24,480			19,503			47,895			38,498
Gross profit		5,108			6,511			19,353			21,808			7,646			7,267			14,604			14,245

Operating expenses:
Research and development		1,723			1,606			5,223			4,429			1,672			1,853			3,529			3,500
Selling, general and administrative		4,164			4,198			12,866			12,893			5,181			4,323			10,577			8,702
Total operating expenses		5,887			5,804			18,089			17,322			6,853			6,176			14,106			12,202

Operating (loss) income		(779	)		707			1,264			4,486
Operating income														793			1,091			498			2,043

Other (income) expense:
Other expense (income):
Interest and financing expense		53			92			164			372			177			55			311			111
Miscellaneous		(54	)		(39	)		(88	)		(110	)		(62	)		(34	)		(79	)		(34	)
Total other (income) expense		(1	)		53			76			262
Total other expense														115			21			232			77

(Loss) income before income tax (benefit) provision		(778	)		654			1,188			4,224
Income tax (benefit) provision		(175	)		192			290			1,010
Income before income tax provision														678			1,070			266			1,966
Income tax provision (benefit)														170			248			(81	)		465

Net (loss) income		(603	)		462			898			3,214
Net income														508			822			347			1,501

Net (loss) income attributable to non-controlling interest		(18	)		55			1			90			(4	)		11			3			19

Net (loss) income attributable to Ultralife Corporation		(585	)		407			897			3,124
Net income attributable to Ultralife Corporation														512			811			344			1,482

Other comprehensive (loss) income:
Foreign currency translation adjustments		(233	)		677			(37	)		(88	)		(1,262	)		93			(1,498	)		196

Comprehensive (loss) income attributable to Ultralife Corporation	$	(818	)	$	1,084		$	860		$	3,036		$	(750	)	$	904		$	(1,154	)	$	1,678

Net (loss) income per share attributable to Ultralife common stockholders – basic	$	(.04	)	$	.03		$	.06		$	.20
Net income per share attributable to Ultralife common stockholders – basic													$	.03		$	.05		$	. 02		$	.09

Net (loss) income per share attributable to Ultralife common stockholders – diluted	$	(.04	)	$	.03		$	.06		$	.19
Net income per share attributable to Ultralife common stockholders – diluted													$	.03		$	.05		$	. 02		$	.09

Weighted average shares outstanding – basic		16,065			15,908			16,020			15,889			16,129			16,019			16,116			15,997
Potential common shares		0			181			180			214			20			241			25			197
Weighted average shares outstanding - diluted		16,065			16,089			16,200			16,103			16,149			16,260			16,141			16,194

					Capital			Accumulated																			Capital			Accumulated
	Common Stock				in Excess			Other									Non-						Common Stock				in Excess			Other									Non-
	*Number of*				*of Par*			*Comprehensive*			*Accumulated*			*Treasury*			*Controlling*						Number of				of Par			Comprehensive			Accumulated			Treasury			Controlling
	*Shares*		*Amount*		*Value*			*Income (Loss)*			*Deficit*			*Stock*			*Interest*			*Total*			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			20,373,519	$	2,037	$	185,464		$	(1,782	)	$	(47,598	)	$	(21,321	)	$	123		$	116,923
Net income												897						1			898													1,482						19			1,501
Stock option exercises		127,324		13		385									(133	)					265			88,656		9		305									(52	)					262
Stock-based compensation – stock options						468															468							337															337
Stock-based compensation - restricted stock						44															44
Stock-based compensation – restricted stock																												33															33
Vesting of restricted stock		12,501		1		(1	)								(15	)					(15	)		12,501		1		(1	)								(15	)					(15	)
Foreign currency translation adjustments									(37	)											(37	)									196												196
Balance – September 30, 2021		20,513,344	$	2,051	$	186,360		$	(1,819	)	$	(46,701	)	$	(21,469	)	$	124		$	118,546
Balance – June 30, 2021																								20,474,676	$	2,047	$	186,138		$	(1,586	)	$	(46,116	)	$	(21,388	)	$	142		$	119,237

Balance – June 30, 2020		20,297,182	$	2,030	$	184,900		$	(3,296	)	$	(50,113	)	$	(21,246	)	$	59		$	112,334
Balance – December 31, 2021																								20,522,427	$	2,052	$	186,518		$	(1,653	)	$	(47,832	)	$	(21,469	)	$	127		$	117,743
Net income												407						55			462													344						3			347
Stock option exercises		34,166		3		139															142			38,369		4		109									(7	)					106
Stock-based compensation – stock options						204															204							362															362
Stock-based compensation - restricted stock						18															18
Stock-based compensation – restricted stock																												11															11
Vesting of restricted stock																								6,664		1		(1	)								(4	)					(4	)
Foreign currency translation adjustments									677												677										(1,498	)											(1,498	)
Balance – September 30, 2020		20,331,348	$	2,033	$	185,261		$	(2,619	)	$	(49,706	)	$	(21,246	)	$	114		$	113,837
Balance – June 30, 2022																								20,567,460	$	2,057	$	186,999		$	(3,151	)	$	(47,488	)	$	(21,480	)	$	130		$	117,067

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	)
Balance – March 31, 2021																								20,416,511	$	2,042	$	185,674		$	(1,679	)	$	(46,927	)	$	(21,380	)	$	131		$	117,861
Net income																																		811						11			822
Stock option exercises		38,668		4		80									(81	)					3			51,497		5		278															283
Stock-based compensation – stock options						131															131							174															174
Stock-based compensation - restricted stock						11															11
Stock-based compensation – restricted stock																												12															12
Vesting of restricted stock																								6,668													(8	)					(8	)
Foreign currency translation adjustments									(233	)											(233	)									93												93
Balance – September 30, 2021		20,513,344	$	2,051	$	186,360		$	(1,819	)	$	(46,701	)	$	(21,469	)	$	124		$	118,546
Balance – June 30, 2021																								20,474,676	$	2,047	$	186,138		$	(1,586	)	$	(46,116	)	$	(21,388	)	$	142		$	119,237

Balance – March 31, 2022																								20,560,796	$	2,056	$	186,816		$	(1,889	)	$	(48,000	)	$	(21,476	)	$	134		$	117,641
Net income																																		512						(4	)		508
Stock option exercises																								0		0		0									0						0
Stock-based compensation – stock options																												181															181
Stock-based compensation – restricted stock																												3															3
Vesting of restricted stock																								6,664		1		(1	)								(4	)					(4	)
Foreign currency translation adjustments																															(1,262	)											(1,262	)
Balance – June 30, 2022																								20,567,460	$	2,057	$	186,999		$	(3,151	)	$	(47,488	)	$	(21,480	)	$	130		$	117,067

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

The accompanying unaudited ~~Consolidated Financial Statements~~consolidated financial statements of Ultralife Corporation and its subsidiaries (the “Company”, or “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 8-038-03 of Regulation S-X.S-X. Accordingly, they do not include all the information and ~~footnotes~~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~~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~~a full year. Reference should be made to the ~~Consolidated Financial Statements~~consolidated financial statements and related notes thereto contained in our Form 10-K10-K for the year ended December 31, ~~2020.~~2021.

The December 31, ~~2020~~ 2021 consolidated balance sheet information referenced herein was derived from audited ~~Consolidated Financial Statements~~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.

~~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.~~

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU ~~2016~~-~~13,~~2016-13, “Financial Instruments – Credit Losses (Topic ~~326~~)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.~~

On December 13, 2021, the Company acquired all the outstanding shares of Excell (as defined below) for an aggregate net purchase price of $23,519 in cash.

On December 13, 2021, 1336889 B.C. Unlimited Liability Company, a British Columbia unlimited liability company and wholly-owned subsidiary of Ultralife Canada Holding Corp., a Delaware corporation (“UCHC”) and wholly-owned subsidiary of Ultralife Excell Holding Corp., a Delaware corporation (“UEHC”) and wholly-owned subsidiary of Ultralife Corporation, completed the acquisition of all issued and outstanding shares of Excell Battery Canada Inc., a British Columbia corporation (“Excell Canada”) (the “Excell Canada Acquisition”), and, concurrently, 1336902 B.C. Unlimited Liability Company, a British Columbia unlimited liability company and wholly-owned subsidiary of UCHC, completed the acquisition of all issued and outstanding shares of 656700 B.C. LTD, a British Columbia corporation and sole owner of all issued and outstanding shares of Excell Battery Corporation USA, a Texas corporation (“Excell USA”, and together with Excell Canada, “Excell Battery Group” or “Excell”) (the “Excell USA Acquisition”, and together with the Excell Canada Acquisition, the “Excell Acquisition”).

Based in Canada with U.S. operations, Excell is a leading independent designer and manufacturer of high-performance smart battery systems, battery packs and monitoring systems to customer specifications. Excell serves a variety of industrial markets including downhole drilling, OEM industrial and medical devices, automated meter reading, ruggedized computers, and mining, marine and other mission critical applications which demand uncompromised safety, service, reliability and quality.

The Excell Canada Acquisition was completed pursuant to a Share Purchase Agreement dated December 13, 2021 (the “Excell Canada Acquisition Agreement”) by and among 1336889 B.C. Unlimited Liability Company, Mark Kroeker, Randolph Peters, Brian Larsen, M. & W. Holdings Ltd., Karen Kroeker, Heather Peterson, Michael Kroeker, Nicholas Kroeker, Brentley Peters, Craig Peters, Kurtis Peters, Heather Larsen, Ian Kane, Carol Peters, and 0835205 B.C. LTD (the “Excell Canada Sellers”), Mark Kroeker in his capacity as the Excell Canada Sellers’ Representative, and Excell Canada. The Excell USA Acquisition was completed pursuant to a Share Purchase Agreement dated December 13, 2021 (the “Excell USA Acquisition Agreement”, and together with the Excell Canada Acquisition Agreement, the “Excell Acquisition Agreements”) by and among 1336902 B.C. Unlimited Liability Company, M. & W. Holdings Ltd., Ian Kane, Sanford Capital Ltd., Arcee Enterprises Inc., and 0835205 B.C. Ltd. (the “Excell USA Sellers”, and together with the Excell Canada Sellers, the “Sellers”), Mark Kroeker in his capacity as the Excell USA Sellers’ Representative, and 656700 B.C. LTD. The Excell Acquisition Agreements contain customary terms and conditions including representations, warranties and indemnification provisions. A portion of the consideration paid to the Sellers is being held in escrow for indemnification purposes for a period of twelve months from the closing date.

The Excell Acquisition was funded by the Company through a combination of cash on hand and borrowings under the Amended Credit Facilities (Note 3).

The Excell 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 becomes 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.

The purchase price allocation was adjusted during the six-month period ended June 30, 2022 to reflect a change in the estimated fair value of certain other intangible assets acquired. The measurement period adjustment resulted in a $40 increase in other intangible assets acquired, a $10 increase in deferred tax liabilities and a $30 decrease to goodwill. The adjusted purchase price allocation is reflected in the consolidated balance sheet as of June 30, 2022.

The goodwill included in the Company’s purchase price allocation presented above represents the value of Excell’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.

We acquired right-of-use assets and assumed lease liabilities of $960 for Excell’s operating facilities. 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 sheet.

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

For the three months ended June 30, 2022, Excell contributed revenue of $6,591 and net income of $320, inclusive of amortization expense of $182 on acquired identifiable intangible assets. For the six months ended June 30, 2022, Excell contributed revenue of $13,027 and net income of $714, inclusive of amortization expense of $364 on acquired identifiable intangible assets and $55 in cost of products sold attributable to the fair market value step-up of acquired inventory sold during the period.

On ~~May 1, 2019,~~ December 13, 2021, Ultralife, Southwest Electronic Energy Corporation, a Texas corporation (“SWE”), ~~and~~ CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), UEHC, UCHC and Excell USA, as borrowers, entered into the ~~First~~Second 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 dated May 31, 2017 as amended by the First Amendment Agreement by and among Ultralife, SWE, CLB and KeyBank dated May ~~31, 2017 (~~~~the~~1, 2019 (the “Credit Agreement”, and together with the ~~First~~Second Amendment Agreement, the “Amended Credit Agreement”).

The Amended Credit Agreement, among other things, provides for a ~~five-year, $8,000~~5-year, $10,000 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~~“Amended Credit Facilities”) through May ~~31, 2022.~~ 30, 2025. Up to six months prior to May ~~31, 2022,~~ 30, 2025, the Revolving Credit Facility may be increased to $50,000 with the Bank’s concurrence.

As of ~~September~~June 30, ~~2021,~~ 2022, the Company had ~~$288~~$9,167 outstanding principal on the Term Loan Facility, ~~all~~$2,000 of which is included in current portion of long-term debt on the ~~Consolidated Balance Sheet,~~consolidated balance sheet, and no ~~amounts~~$12,530 outstanding on the Revolving Credit Facility. As of ~~September~~June 30, ~~2021,~~ 2022, total unamortized debt issuance costs of ~~$35~~$131, including placement, renewal and legal fees associated with the Amended Credit Agreement, ~~including placement, renewal and legal fees,~~ are classified as a reduction of ~~the current portion of~~ long-term debt on the ~~Consolidated Balance Sheet.~~balance sheet. Debt issuance costs are amortized to interest expense over the ~~remaining~~ term of the Amended Credit Facilities.

The remaining availability under the Revolving Credit Facility is subject to certain borrowing base limits based on trade receivables and inventories.

The Company is required to repay the borrowings under the Term Loan Facility in ~~sixty~~ (60) equal consecutive monthly payments ~~which commenced~~commencing on ~~May 31, 2019,~~ February 1, 2022, in arrears, together with applicable interest. All unpaid principal and accrued and unpaid interest with respect to the Term Loan Facility is due and payable in full on ~~April 30, 2024.~~ January 1, 2027. All unpaid principal and accrued and unpaid interest with respect to the Revolving Credit Facility is due and payable in full on May ~~31, 2022.~~ 30, 2025. The Company may voluntarily prepay principal amounts outstanding at any time subject to certain restrictions. ~~The Company made voluntary prepayments of $4,200 during the year ended~~ ~~December 31, 2020.~~ ~~NaN voluntary prepayments were made during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021.~~

In addition to the customary affirmative and negative covenants, the Company must maintain a consolidated ~~fixed charge coverage ratio equal to or greater than 1.15 to~~ ~~1.0,~~ ~~and a consolidated~~ senior leverage ratio, ~~equal to or less than 2.5 to~~ ~~1.0,~~ ~~each~~ as defined in the Amended Credit ~~Agreement. The Company was in full compliance with its covenants under~~Agreement, of equal to or less than 3.5 to 1.0 for the ~~Amended Credit Agreement as of~~ ~~September~~fiscal quarters ending December 31, 2022 and March 31, 2023, and equal to or less than 3.0 to 1.0 for the fiscal quarters ending June 30, ~~2021.~~2023 and thereafter.

Borrowings under the Amended Credit Facilities are secured by substantially all the assets of the ~~Company. Availability under the Revolving Credit Facility is subject to certain borrowing base limits based on receivables~~Company and ~~inventories.~~its subsidiaries.

Interest will accrue on outstanding indebtedness under the Amended Credit Facilities at the Base Rate or the Overnight LIBOR Rate, as selected by the Company, plus the applicable margin. The Base Rate is the higher of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 50 basis points, and (c) the Overnight LIBOR Rate plus one ~~100~~hundred basis points. The applicable margin ranges from zero (0) to negative 50 basis points for the Base Rate and from 185 to 215 basis points for the Overnight LIBOR Rate and are determined based on the Company’s senior leverage ratio. The Second Amendment Agreement includes standard market provisions permitting the Bank to transition from LIBOR to a SOFR based rate, in its discretion

The Company must pay a ~~quarterly~~ fee of ~~0.1%~~0.15% to ~~0.2%~~0.25% based on the average daily unused availability under the Revolving Credit Facility.

Payments must be made by the Company to the extent borrowings exceed the maximum amount then permitted to be drawn on the Amended Credit Facilities 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.

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) attributable to Ultralife by the ~~weighted-average~~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~~three-month period ended ~~September~~June 30, ~~2021,~~ ~~there were~~ no ~~outstanding stock awards included in the calculation of diluted weighted average shares outstanding and 0 potential common shares included in the calculation of diluted EPS, as~~ no ~~securities were dilutive. There were 1,064,656 outstanding~~2022, 135,163 stock options and ~~14,164 unvested restricted stock awards~~ ~~not~~ ~~included in the calculation of diluted EPS for the~~ ~~three~~~~-month period ended~~ ~~September 30, 2021,~~ ~~as the effect would be antidilutive. For the comparable~~ ~~three~~~~-month period ended~~ ~~September 30, 2020,~~ ~~831,244 outstanding stock options and 19,165 outstanding~~5,000 restricted stock awards were included in the calculation of diluted ~~weighted average~~EPS as such securities are dilutive. Inclusion of these securities resulted in 20,352 additional shares ~~outstanding, resulting in 181,270 potential common shares included~~ in the calculation of fully diluted ~~EPS. There were 898,167 outstanding~~earnings per share. For the comparable three-month period ended June 30, 2021, 906,404 stock options ~~not~~and 14,164 restricted stock awards were included in the calculation of diluted EPS ~~for the~~ ~~three~~~~-month period ended~~ ~~September 30, 2020,~~ ~~as the effect would be antidilutive.~~

~~For the~~ ~~nine~~~~-month period ended~~ ~~September 30, 2021,~~ ~~there were 598,489 outstanding stock options and 14,164 outstanding restricted stock awards included~~resulting in 240,259 additional shares in the calculation of fully diluted ~~weighted average shares outstanding, resulting in 179,951 potential common shares included in the calculation of diluted EPS.~~earnings per share. For the ~~nine~~~~-month period~~six-month periods ended ~~September~~June 30, ~~2020,~~ ~~there were 831,244 outstanding~~2022 and June 30, 2021, 135,163 and 659,488 stock options and ~~19,165 outstanding~~5,000 and 14,164 restricted stock awards, ~~included in the calculation of diluted weighted average shares outstanding, resulting in 213,574 potential common shares included in the calculation of diluted EPS. There~~respectively, were ~~466,167 and 898,167 outstanding stock options~~ ~~not~~ included in the calculation of diluted EPS as such securities are dilutive. Inclusion of these securities resulted in 24,751 and 197,848 additional shares, respectively, in the calculation of fully diluted EPS. There were 1,073,077 and 414,916 outstanding stock options for the ~~nine~~~~-month~~three and six-month periods ended ~~September~~June 30, 2022 and June 30, 2021, ~~and~~ ~~September 30, 2020,~~ respectively, which were not included in EPS as the effect would be ~~antidilutive.~~anti-dilutive.

The fair value of financial instruments approximated their carrying values at ~~September~~June 30, ~~2021~~ 2022 and December 31, ~~2020.~~ 2021. 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.

As of ~~September~~June 30, ~~2021~~ 2022 and December 31, ~~2020,~~ 2021, restricted cash included ~~$87~~$77 and ~~$91,~~$84, respectively, of euro-denominated deposits withheld by the Dutch tax authorities and ~~third~~~~-party value-added tax (VAT)~~third-party VAT representatives in connection with a previously utilized logistics arrangement in the Netherlands. Restricted cash is included as a component of the cash balance for purposes of the ~~Consolidated Statements~~consolidated statements of ~~Cash Flows.~~cash flows.

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~~first-in, first-out (FIFO) method. The composition of inventories, net was:

The following table summarizes the goodwill activity by segment for the ~~nine~~~~-month~~six-month period ended ~~September~~June 30, ~~2021.~~2022.

The change in the cost of total intangible assets from December 31, ~~2020~~ 2021 to ~~September~~June 30, ~~2021~~ 2022 is a result of measurement period adjustments for the Excell Acquisition (Note 2) and the effect of foreign currency translations.

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 ~~September~~June 30, ~~2021,~~ 2022, there was ~~$367~~$516 of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of ~~1.1~~1.0 years.

The following table summarizes stock option activity for the ~~nine~~~~-month~~six-month period ended ~~September~~June 30, ~~2021:~~2022:

Cash received from stock option exercises under our stock-based compensation plans for the ~~three~~~~-month~~three-month periods ended ~~September~~June 30, 2022 and June 30, 2021 was $0 and ~~September 30, 2020~~ ~~was $84 and $142, respectively. Cash received from stock option exercises under our stock-based compensation plans for the~~ ~~nine~~~~-month periods ended~~ ~~September 30, 2021~~ ~~and~~ ~~September 30, 2020~~ ~~was $398 and $218,~~$283, respectively.

In ~~October 2020,~~ ~~5,000 shares of restricted stock were awarded to an employee at a weighted-average grant date fair value of $6.08 per share. In~~ ~~April 2019,~~ ~~20,000 shares of restricted stock were awarded to certain of our employees at a weighted-average grant date fair value of $11.12 per share. In~~ ~~January 2018,~~ ~~17,500 shares of restricted stock were awarded to certain of our employees at a weighted-average grant date fair value of $7.16 per share. All outstanding~~Outstanding restricted shares vest in equal annual installments over three ~~three~~(3) (3) years. There were 5,000 unvested restricted shares outstanding as of June 30, 2022. Unrecognized compensation cost related to these restricted shares was ~~$26~~$6 at ~~September~~June 30, ~~2021,~~ 2022, which is expected to be recognized over a weighted average period of 1.3 years.

Our effective ~~income~~ tax rate for the ~~nine~~~~-month~~six-month periods ended ~~September~~June 30, 2022 and June 30, 2021 was (30.5%)and ~~September 30, 2020~~ ~~was 24.4% and 23.9%~~23.7%, respectively. The period-over-period change was primarily attributable to the geographic mix of ~~earnings~~our operating results and ~~incentive stock options.~~the larger impact of permanent and discrete adjustments on a smaller amount of pretax income.

As of December 31, ~~2020,~~ 2021, we have domestic net operating loss (“NOL”) carryforwards of ~~$47,755,~~$44,716, which expire ~~2021~~ ~~through~~ ~~2035,~~2022 thru 2037, and domestic tax credits of ~~$2,070,~~$2,239, which expire 2028 ~~through~~ thru 2039, available to reduce future taxable income. As of ~~September~~June 30, ~~2021,~~ 2022, management has concluded it is more likely than not that these domestic NOL and credit carryforwards will be fully utilized.

As of ~~September~~June 30, ~~2021,~~ 2022, for certain past operations in the U.K., we continue to report a valuation allowance for NOL carryforwards of approximately $11,000, nearly all of which can be carried forward indefinitely. Utilization of the ~~NOLs~~ 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 ~~September~~June 30, ~~2021,~~ 2022, 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 ~~September~~June 30, ~~2021,~~ 2022, 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 0no unrecognized tax benefits related to uncertain tax positions at ~~September~~June 30, ~~2021~~ 2022 and December 31, ~~2020.~~2021.

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. In August 2020, the Internal Revenue Service (“IRS”) completed its examination of the Company’s federal tax returns for ~~2016~~-~~2018~~2016-2018 with no material adjustments identified. Our U.S. tax matters for ~~2019~~ ~~and~~ ~~2020~~2019-2021 remain subject to IRS examination. Our U.S. tax matters for ~~2001,~~2002, ~~2002,~~~~2005~~-~~2007~~2005-2007 and ~~2011~~-~~2015~~2011-2015 also remain subject to IRS examination due to the remaining availability of NOL carryforwards generated in those years. Our U.S. tax matters for ~~2001,~~2002, ~~2002,~~~~2005~~-~~2007~~2005-2007 and ~~2011~~-~~2020~~2011-2021 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years ~~2010~~2011 through ~~2020~~2021 remain subject to examination by the respective foreign tax jurisdiction authorities.

The Company has operating leases predominantly for operating facilities. As of ~~September~~June 30, ~~2021,~~ 2022, the remaining lease terms on our operating leases range from ~~less than~~ approximately one(1) year to ~~three~~ ~~(3)~~ten (10) years. ~~Renewal~~Lease terms include renewal options~~not~~ ~~yet exercised and termination options are~~ ~~not~~ reasonably certain of ~~exercise by the Company.~~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:

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

Future minimum lease payments as of ~~September~~June 30, ~~2021~~ 2022 are as follows:

As of ~~September~~June 30, ~~2021,~~ 2022, we have made commitments to purchase approximately ~~$1,100~~$697 of production machinery and equipment.

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 ~~warranty~~ 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~~nine~~ six months of ~~2021~~2022 and ~~2020~~2021 were as follows:

We are subject to legal proceedings and claims that arise from time to time in the ~~ordinary~~normal course of business. We believe that the final disposition of any such matters ~~of which we are currently aware~~ 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 ~~current or future legal~~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.

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~~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.

Revenues recognized from prior period performance obligations for the ~~nine~~~~-month~~six-month periods ended ~~September~~June 30, 2022 and 2021 ~~and~~ ~~2020~~were not material.

Deferred revenue, unbilled revenue and deferred contract costs recorded on our ~~Consolidated Balance Sheets~~consolidated balance sheets as of ~~September~~June 30, ~~2021~~ 2022 and December 31, ~~2020~~ 2021 were not material. As of ~~September~~June 30, ~~2021~~ 2022 and December 31, ~~2020,~~ 2021, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one (1) 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.

We report our results in 2two (2) operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes: Lithium 9~~-volt,~~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. We believe that reporting performance at the gross profit level is the best indicator of segment performance.

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

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

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

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 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, the ~~effects~~continued impact of COVID-19 and the ~~novel coronavirus disease of 2019 (“COVID-19”);~~related supply chain disruptions on our business, operating results and financial condition; our reliance on certain key customers; reduced U.S. and foreign military spending including the uncertainty associated with government budget approvals; our efforts to develop new commercial applications for our products; fluctuations in the price of oil and the resulting impact on the demand for downhole drilling; the unique risks associated with our China operations; potential disruptions in our supply of raw materials and components; our ability to retain top management and key personnel; possible breaches in information systems security and other disruptions in our information technology systems; our resources being overwhelmed by our growth; possible future declines in demand for the products that use our batteries or communications systems; ~~the unique risks associated with our China operations;~~ potential costs ~~because of~~attributable to the warranties we supply with our products and services; ~~potential disruptions in our supply of raw materials and components; our efforts to develop new commercial applications for our products; reduced U.S. and foreign military spending~~safety risks, including the ~~uncertainty associated with government budget approvals; possible breaches in security and other disruptions;~~risk of fire; variability in our quarterly and annual results and the price of our common stock; ~~safety risks, including the risk of fire;~~ our entrance into new end-markets which could lead to additional financial exposure; fluctuations in the price of oil and the resulting impact on the level of downhole drilling; our ability to retain top management and key personnel; our resources being overwhelmed by our growth prospects; our inability to comply with changes to the regulations for the shipment of our products; our customers’ demand falling short of volume expectations in our supply agreements; our exposure to foreign currency fluctuations; negative publicity concerning Lithium-ion batteries; possible impairments of our goodwill and other intangible assets; ~~negative publicity concerning Lithium-ion batteries;~~ our ~~exposure~~ability to ~~foreign currency fluctuations;~~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; ~~our ability to utilize our net operating loss carryforwards;~~ exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; ~~our ability to comply with government regulations regarding the use of “conflict minerals”;~~known and unknown environmental matters; possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; ~~known and unknown environmental matters;~~our ability to comply with government regulations regarding the use of “conflict minerals”; technological innovations in the non-rechargeable and rechargeable battery industries; 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,~~“plan,” “may,” “will,” “should,” or words of similar import ~~and in each case, their negatives,~~ 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, ~~2020.~~2021.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of 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 quarterly report, 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. 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 contained in this Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 to reflect new information or risks, future events or other developments.

The following ~~discussion~~Management’s Discussion and ~~analysis~~Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the ~~Consolidated Financial Statements~~consolidated financial statements and ~~Notes~~notes thereto in Part I, Item 1 of this Form 10-Q, and the ~~Consolidated Financial Statements~~consolidated financial statements and ~~Notes~~notes thereto and ~~Risk Factors~~risk factors in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

The financial information in this ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~MD&A is presented in thousands of dollars, except for share and per share amounts, unless otherwise specified.

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.~~systems related to those product lines. We continually evaluate ~~and implement growth opportunities,~~ways to grow, including the design, development and sale of new products, expansion of our sales force to penetrate new markets and ~~geographies,~~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 ~~international~~foreign defense departments. We enjoy strong name recognition in our markets under our Ultralife® Batteries, Lithium Power®, McDowell Research®, ~~AMTI™~~AMTI^TM, ~~ABLE™~~ABLE^TM, ACCUTRONICS™, ACCUPRO™, ENTELLION™, SWE Southwest Electronic Energy Group™, SWE DRILL-DATA™, ~~and~~ SWE SEASAFE™, Excell Battery Group and Criterion Gauge brands. 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 reporting performance at the gross profit level is the best indicator of segment performance. As such, we report segment performance at the gross profit level and operating expenses as Corporate charges. See Note ~~10 in~~11 to the ~~Notes to Consolidated Financial Statements~~consolidated financial statements of this Form ~~10-Q.~~10-Q for further information.

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.

The COVID-19 pandemic has created significant economic disruption and uncertainty around the world. The Company continues to closely monitor the developments surrounding COVID-19 and take actions to mitigate the business risks involved. During this challenging time, we remain focused on ensuring the health and safety of our employees by implementing the protocols established by public health officials and on meeting the demand of our customers. ~~As an essential supplier currently exempt from government-mandated shutdown directives,~~While we ~~are striving to ensure an uninterrupted flow of our mission critical products serving medical device, first responder, public safety, energy, and national security customers. We~~ have maintained normal business operations at all our facilities with the exception of ~~an approximately one-month closure~~the well-publicized shutdowns in China which impacted our Shenzhen facility in the first quarter of ~~our China facility as was mandated by~~2022, the ~~Chinese government through early March 2020.~~

~~For the quarter ended September 30, 2021,~~COVID-19 related supply chain disruptions including increased lead times on key components ~~from suppliers~~experienced within our business and by our customers, impacted our work schedules and timing of shipments. The continuing impact of these conditions on our business is uncertain and will depend on many evolving factors which we continue to monitor but cannot predict, including the duration and scope of the pandemic and its variants, the resulting actions taken by governments, businesses and individuals, and the flow-through impact on operations and supply chains. Potential effects of COVID-19 that may continue to adversely impact our future business include limited availability and/or increased cost of raw materials and components used in our products, reduced demand and/or pricing for our products, inability of our customers to pay for our products or remain solvent, and reduced availability of our workforce. Prolonged adverse effects of COVID-19 on our business could result in the impairment of long-lived assets including goodwill and other intangible assets. Further, we cannot predict all possible adverse effects the COVID-19 ~~related logistics matters resulted~~pandemic may cause. Consequently, there may be adverse effects in ~~delays in~~addition to those described above. We will continue to closely monitor the developments surrounding COVID-19 and take actions when possible to mitigate the business risks involved and the potential effects of COVID-19 on our shipments to future periods. For the quarter ended September 30, 2021, we estimate that such delayed shipments adversely impacted revenues by approximately $4,100, operating income by approximately $1,300 and adjusted EPS by approximately $0.08.business.

Consolidated revenues of ~~$21,761~~$32,126 for the three-month period ended ~~September~~June 30, ~~2021, decreased~~2022, increased by ~~$2,601~~$5,356 or ~~10.7%~~20.0%, ~~from $24,362~~over $26,770 for the three-month period ended ~~September~~June 30, ~~2020, as a 5.1% increase~~2021, reflecting the revenues of Excell Battery Group (“Excell”) acquired on December 13, 2021, and increased sales in ~~commercial sales was offset by 39.7% decline in government/defense sales. The increase in commercial sales primarily resulted from an 89.5% increase in~~our medical, industrial, and oil & gas battery ~~sales and a 115.8% increase in our new ER and thin cell battery sales,~~markets, partially offset by ~~a 28.3% decrease in medical battery sales. The decrease in~~lower revenues for government/defense ~~sales primarily resulted from the completion~~which continued to be impacted by supply chain challenges. Excluding Excell, commercial revenues of an order for BA-5390 batteries to the U.S. Department of Defense in the third quarter of 2020 under a spot purchase announced in December 2019, and lower shipments for our Communications Systems business segment. During the third quarter of 2021, increased lead times on components from suppliers and other COVID-19 related logistics matters resulted in delays in our shipments to future periods. We estimate that the delayed shipments adversely impacted revenue$18,090 for the ~~2021 third quarter by $4,100, with $1,700 and $2,400 impacting our commercial~~quarter-ended June 30, 2022 increased $2,079 or 13.0% over the year-earlier period, and government/defense ~~businesses, respectively.~~revenues of $7,444 decreased $3,315 or 30.8% from the 2021 period.

Gross profit was ~~$5,108,~~$7,646, or ~~23.5%~~23.8% of revenue, for the three-month period ended June 30, 2022, compared to ~~$6,511,~~$7,267, or ~~26.7%~~27.1% of revenue, for the same quarter a year ago. The ~~320-basis~~330-basis point ~~decrease~~decline primarily ~~resulted from unfavorable~~reflects the lower sales ~~product mix and~~volume for Communications Systems resulting in lower factory ~~volumes resulting~~throughput and incremental costs in 2022 associated with supply chain disruptions, including rapid increases in the cost of some key components in advance of price realization from customers, and the ~~revenue decline.~~transition of new products to higher volume production.

Operating expenses ~~slightly~~ increased to ~~$5,887 during~~$6,853 for the three-month period ended ~~September~~June 30, ~~2021, from $5,804 during~~2022, compared to $6,176 for the three-month period ended ~~September~~June 30, ~~2020.~~2021. The increase of ~~$83~~$677 or ~~1.4%~~11.0% was primarily attributable to our ~~continued investment in engineering resources for~~acquisition of Excell which contributed operating expenses of $1,086. Excluding Excell, operating expenses decreased by $409 or 6.6% reflecting the timing of new product development spending, including ~~resources~~those costs associated with test materials dedicated to ~~our~~the May 2021 indefinite-delivery/indefinite-quantity contract from the U.S. Army for purchases of Conformal Wear ~~Battery IDIQ contract announced on May 17, 2021.~~Batteries not to exceed $168,000 during the three-year base award period with the potential for up to an additional $350,000 should the six one-year options be exercised, and strict control over all discretionary spending. Operating expenses as a percentage of sales ~~increased 330~~decreased 180 basis points from ~~23.8%~~23.1% for the ~~third~~second quarter of ~~2020~~2021 to ~~27.1%~~21.3% for the current quarter.

Operating ~~loss~~income for the three-month period ended ~~September~~June 30, ~~2021~~2022 was ~~($779)~~$793, or ~~(3.6%)~~2.5% of revenues, compared to ~~operating income of $707~~$1,091, or ~~2.9%~~4.1% of revenues, for the year-earlier period. The decrease in operating income primarily resulted from lower sales for our Communications Systems segment and a reduction in gross margin due to supply chain disruptions, including rapid increases in the cost of some key components in advance of price realization from customers, partially offset by the operating income generated by Excell and ~~higher new product development costs to support~~lower operating expenses across our ~~organic growth initiatives.~~businesses excluding Excell.

Net ~~loss~~income attributable to Ultralife was ~~($585), or ($0.04) per share – basic and diluted, for the three-month period ended September 30, 2021, compared to net income of $407,~~$512, or $0.03 per share – basic and diluted, for the three-month period ended ~~September~~June 30, ~~2020. Adjusted EPS was ($0.05) on a~~2022, compared to net income attributable to Ultralife of $811, or $0.05 per share – basic and diluted, ~~basis~~ for the third quarter of 2021, compared to $0.04 for the 2020 period. Adjusted EPS excludes the (benefit) provision for deferred income taxes of ($218) and $188 for the 2021 and 2020 periods, respectively, which primarily represents non-cash (benefits) charges for U.S. income taxes which we expect will be fully offset by NOL carryforwards and other tax credits for the foreseeable future. See the section “Adjusted EPS” beginning on Page 23 for a reconciliation of Adjusted EPS to EPS.three-month period ended June 30, 2021.

Adjusted EBITDA, defined as net income ~~(loss)~~ attributable to Ultralife 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 ~~$283 or 1.3% of revenues in the third quarter of 2021, compared to $1,656~~$2,185, or 6.8% of revenues, for the ~~third~~second quarter of ~~2020.~~2022, compared to $2,186, or 8.2% of revenues, for the second quarter of 2021. See the section “Adjusted EBITDA” beginning on Page 2225 for a reconciliation of Adjusted EBITDA to net income attributable to Ultralife.

AsWhile we ~~look ahead,~~anticipate continuing to contend with inflationary cost pressures and manufacturing inefficiencies associated with supply chain disruptions in the second half of the year, we remain steadfast in our ~~strong balance sheet and liquidity position,~~commitment to advancing our new product development initiatives, transitioning new products to production, and ~~durable customer relationships anchor our view that our long-term~~generating profitable growth ~~drivers and strategy are sound and achievable.~~for the year.

Three-Month Periods Ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020~~2021

Revenues. Consolidated revenues for the three-month period ended ~~September~~June 30, ~~2021 amounted to $21,761, a decrease~~2022 were $32,126, an increase of ~~$2,601~~$5,356, or ~~10.7%~~20.0%, ~~from $24,362~~over $26,770 for the three-month period ended ~~September~~June 30, ~~2020.~~2021. Overall, commercial sales increased ~~$807 or 5.1%~~54.2% while government/defense sales decreased ~~$3,408 or 39.7%~~30.8% from the ~~2020~~2021 period. Revenues for the 2022 period include Excell which was acquired by the Company on December 13, 2021.

Battery & Energy Products revenues ~~decreased $1,811,~~increased $7,265, or ~~8.3%~~31.8%, from ~~$21,819~~$22,875 for the three-month period ended ~~September~~June 30, ~~2020~~2021 to ~~$20,008~~$30,140 for the three-month period ended ~~September~~June 30, 2022. The increase was attributable to the $6,592 revenue contribution from the acquisition of Excell, and a 13.0% increase in commercial sales excluding Excell, partially offset by a 20.5% reduction in government/defense sales. Net organic sales for this segment increased 3.0%. The increase in commercial sales, excluding Excell, was driven by a 16.3% increase in medical battery sales due to the high demand for our batteries used in ventilators, respirators, infusion pumps and other medical devices, a 14.6% increase in industrial market sales including our new Thionyl Chloride and thin cell battery cells, and a 6.9% increase in oil & gas market sales reflecting the recent rebound in the energy sector. The decline in government/defense sales was primarily due to supply chain disruptions experienced by us and our customers which pushed out sales to future periods.

Communications Systems revenues decreased $1,909, or 49.0%, from $3,895 for the three-month period ended June 30, 2021 to $1,986 for the three-month period ended June 30, 2022. This decrease is primarily attributable to supply chain disruptions including extended lead times for components and the push out of certain orders by our customers which delayed approximately $4,100 of sales to future periods and the placement and fulfillment of an order from an international defense contractor in the first quarter of 2021 which is not expected to reoccur until the second half of 2022.

Cost of Products Sold / Gross Profit. Cost of products sold totaled $24,480 for the quarter ended June 30, 2022, an increase of $4,977, or 25.5%, from the $19,503 reported for the same three-month period a year ago. Consolidated cost of products sold as a percentage of total revenue increased from 72.9% for the three-month period ended June 30, 2021 to 76.2% for the three-month period ended June 30, 2022. Correspondingly, consolidated gross margin decreased from 27.1% for the three-month period ended June 30, 2021, to 23.8% for the three-month period ended June 30, 2022, primarily reflecting lower factory volume for our Communications Systems segment, incremental costs in 2022 associated with supply chain disruptions, including rapid increases in the cost of some key components in advance of price realization from customers, and the transition of new products to higher volume production.

For our Battery & Energy Products segment, gross profit for the second quarter of 2022 was $7,151, an increase of $1,135 or 18.9% over gross profit of $6,016 for the second quarter of 2021. Battery & Energy Products’ gross margin of 23.7% decreased by 260 basis points from the 26.3% gross margin for the year-earlier period, reflecting sales mix, higher materials and logistics costs on incoming materials in advance of price realization from customers, and incremental costs associated with the transition of new products to higher volume production.

For our Communications Systems segment, gross profit for the second quarter of 2022 was $495 or 24.9% of revenues, compared to gross profit of $1,251 or 32.1% of revenues, for the second quarter of 2021. The decline was primarily due to lower factory volume resulting in the under-absorption of factory costs and unfavorable sales mix.

Operating Expenses. Operating expenses for the three-month period ended June 30, 2022 were $6,853, an increase of $677 or 11.0% from the $6,176 for the three-month period ended June 30, 2021. The increase is primarily attributable to the acquisition of Excell, which contributed operating expenses of $1,086 in the second quarter, including $182 of intangible asset amortization. Excluding Excell, operating expenses decreased $409 or 6.6% due to the timing of new product development spending, including those costs associated with test materials dedicated to the May 2021 indefinite-delivery/indefinite-quantity contract from the U.S. Army for purchases of Conformal Wear Batteries not to exceed $168,000 during the three-year base award period with the potential for up to an additional $350,000 should the six one-year options be exercised. Both periods reflected continued tight control over discretionary spending.

Overall, operating expenses as a percentage of revenues were 21.3% for the quarter ended June 30, 2022 compared to 23.1% for the quarter ended June 30, 2021. Amortization expense associated with intangible assets related to our acquisitions was $323 for the second quarter of 2022 ($298 in selling, general and administrative expenses and $25 in research and development costs), compared with $156 for the second quarter of 2021 ($123 in selling, general, and administrative expenses and $33 in research and development costs). Research and development costs were $1,672 for the three-month period ended June 30, 2022, a decrease of $181 or 9.7%, from $1,853 for the three-months ended June 30, 2021. The decrease ~~primarily resulted~~is largely attributable to the timing of the purchase of test materials to support new product development in our Battery & Energy Products business, including those resources and materials dedicated to our Conformal Wearable Battery contract. Selling, general, and administrative expenses increased $858 or 19.8%, to $5,181 for the second quarter of 2022 from ~~a $2,950~~$4,323 for the second quarter of 2021. The increase is attributable to the December 2021 acquisition of Excell which contributed $1,000 of selling, general and administrative expenses, including intangible asset amortization of $182, for the second quarter of 2022.

Other Expense. Other expense totaled $115 for the three-month period ended June 30, 2022 compared to $21 for the three-month period ended June 30, 2021. Interest and financing expense increased $122, or ~~28.3% decrease in medical battery sales primarily~~221.8%, from $55 for the second quarter of 2021 to $177 for the second quarter of 2022. The increase is due to the ~~high volume~~financing of ~~orders in 2020~~the Excell Acquisition. Miscellaneous income amounted to $62 for ~~respirators, ventilators~~the second quarter of 2022 compared with $34 for the second quarter of 2021, primarily representing foreign currency exchange gains and ~~infusion pumps~~losses on U.S.-denominated transactions and balances of our non-U.S. businesses.

Income Taxes. For the three-month period ended June 30, 2022, Ultralife recognized an income tax provision of $170, comprised of a $143 current provision for taxes expected to ~~meet the sector’s initial response to COVID-19,~~be paid on income primarily from our non-U.S. operations, and a ~~$2,618~~$27 deferred provision, compared to a tax provision of $248 for the three-month period ended June 30, 2021, comprised of a current provision of $71 and a deferred provision of $177. Our effective tax rate was 25.1% for the second quarter of 2022 as compared to 23.2% for the second quarter of 2021, primarily attributable to the geographic mix of our operating results, including income generated in Canada by Excell for the current year. See Note 7 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q for further information.

Net Income Attributable to Ultralife. Net income attributable to Ultralife was $512, or ~~43.3%~~$0.03 per share – basic and diluted, for the three-month period ended June 30, 2022, compared to net income of $811, or $0.05 per share – basic and diluted, for the three-month period ended June 30, 2021. Weighted average shares outstanding used to compute diluted earnings per share decreased from 16,259,584 for the second quarter of 2021 to 16,149,278 for the second quarter of 2022. The decrease is attributable to stock option exercises since the second quarter of 2021 offset by a decrease in the average stock price used to compute diluted shares from $8.66 for the second quarter of 2021 to $4.93 for the second quarter of 2022. Accordingly diluted shares of 240,259 were added to basic weighted average shares in 2021 compared to 20,352 in 2022.

Revenues. Consolidated revenues for the six-month period ended June 30, 2022 were $62,499, an increase of $9,756, or 18.5%, over $52,743 for the six-month period ended June 30, 2021. Overall, commercial sales increased 55.7% while government/defense sales ~~primarily due~~decreased 32.0% from the 2021 period. Revenues for the 2022 period include Excell which was acquired by the Company on December 13, 2021.

Battery & Energy Products revenues increased $14,304, or 31.8%, from $44,986 for the six-month period ended June 30, 2021 to $59,290 for the six-month period ended June 30, 2022. The increase was attributable to the ~~shipment~~$13,028 revenue contribution from the acquisition of ~~BA-5390 batteries to the U.S. Department of Defense under~~Excell, and a ~~spot purchase announced~~12.8% increase in ~~December 2019 and completed in 2020,~~commercial sales excluding Excell, partially offset by a ~~$2,031 or 89.5%~~17.9% reduction in government/defense sales. The increase in commercial sales, excluding Excell, was driven by a 13.8% increase in industrial market sales including our new Thionyl Chloride and thin cell battery cells, a 12.8% increase in oil & gas market sales reflecting the recent rebound in the energy sector, and a ~~$1,135 or 115.8%~~12.7% increase in medical battery sales due to the high demand for our ~~new ER~~batteries used in ventilators, respirators, infusion pumps and ~~thin cell battery cells. For the third quarter of 2021, we estimate that shipments delayed~~other medical devices. The decline in government/defense sales was primarily due to supply chain disruptions experienced internally and by our customers which pushed out sales to future ~~periods due to increased lead times on components from suppliers and other COVID-19 related logistics matters adversely impacted Battery & Energy Products revenue by $2,500.~~periods.

Communications Systems revenues decreased ~~$790,~~$4,548, or ~~30.9%~~58.6%, from ~~$2,543 during~~$7,757 for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2020~~2021 to ~~$1,753~~$3,209 for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2021. For~~2022. This decrease is primarily attributable to supply chain disruptions including extended lead times for components and the ~~third~~push out of certain orders by our customers to future periods and the placement and fulfillment of an order from an international defense contractor in the first quarter of 2021 ~~we estimate that shipments delayed~~which is not expected to ~~future periods due to increased lead times on components from suppliers and other COVID-19 related logistics matters adversely impacted Communications Systems revenue by $1,600.~~reoccur until the second half of 2022.

Cost of Products Sold / Gross Profit. Cost of products sold totaled ~~$16,653~~$47,895 for the ~~quarter~~six-month period ended ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$1,198,~~$9,397, or ~~6.7%~~24.4%, from the ~~$17,851~~$38,498 reported for the same ~~quarter~~six-month period a year ago. Consolidated cost of products sold as a percentage of total revenue increased from ~~73.3%~~73.0% for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2020~~2021 to ~~76.5%~~76.6% for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2021.~~2022. Correspondingly, consolidated gross margin decreased from ~~26.7%~~27.0% for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2020,~~2021, to ~~23.5%~~23.4% for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2021,~~2022, primarily reflecting ~~unfavorable sales product mix and~~ lower factory volume for ~~both business segments.~~our Communications Systems segment, incremental costs in 2022 associated with supply chain disruptions, including rapid increases in the cost of some key components in advance of price realization from customers, and the transition of new products to higher volume production.

For our Battery & Energy Products segment, gross profit for the ~~third quarter~~first six months of ~~2021~~2022 was ~~$4,792, a decrease~~$13,872, an increase of ~~$885~~$2,420 or ~~15.6% from~~21.1% over gross profit of ~~$5,677~~$11,452 for the ~~third quarter of 2020.~~comparable 2021 period. Battery & Energy Products’ gross margin of ~~24.0%~~23.4% decreased by ~~200~~210 basis points from the ~~26.0%~~25.5% gross margin for the year-earlier period, ~~primarily~~ reflecting ~~unfavorable~~ sales ~~product~~ mix, higher materials and ~~lower factory volume.~~logistics costs on incoming materials in advance of price realization from customers, and incremental costs associated with the transition of new products to higher volume production.

For our Communications Systems segment, gross profit for the ~~third quarter~~first six months of ~~2021~~2022 was ~~$316~~$732 or ~~18.0%~~22.8% of revenues, ~~a decrease of $518 or 62.1%, from~~compared to gross profit of ~~$834,~~$2,793 or ~~32.8%~~36.0% of revenues, for the ~~third quarter of 2020.~~comparable 2021 period. The ~~decrease~~decline was primarily ~~reflects~~due to lower factory volume resulting in the ~~2021 third quarter.~~under-absorption of factory costs and unfavorable sales mix.

Operating Expenses. Operating expenses for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2021~~2022 were ~~$5,887,~~$14,106, an increase of ~~$83~~$1,904 or ~~1.4%~~15.6% from the ~~$5,804~~$12,202 for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2020.~~2021. The increase inis primarily attributable to the acquisition of Excell, which contributed operating expenses ~~reflects our continued investment in engineering resources~~of $2,143 for the first six months of 2022, including $364 of intangible asset amortization and one-time acquisition costs of $70. Excluding Excell, operating expenses decreased $239 or 2.0% due to the timing of new product development spending, including ~~resources~~those costs associated with test materials dedicated to the May 2021 indefinite-delivery/indefinite-quantity contract from the U.S. Army for purchases of Conformal Wear ~~Battery IDIQ contract announced on May 17, 2021.~~Batteries not to exceed $168,000 during the three-year base award period with the potential for up to an additional $350,000 should the six one-year options be exercised. Both periods reflected ~~our~~ continued tight control over discretionary spending.

Overall, operating expenses as a percentage of revenues were ~~27.1%~~22.6% for the ~~quarter~~six-month period ended ~~September~~June 30, ~~2021 and 23.8%~~2022 compared to 23.1% for the ~~quarter~~six-month period ended ~~September~~June 30, ~~2020.~~2021. Amortization expense associated with intangible assets related to our acquisitions was ~~$148~~$651 for the ~~third quarter~~first six months of ~~2021~~2022 ($~~121~~600 in selling, general and administrative expenses and ~~$27~~$51 in research and development costs), compared with ~~$149~~$310 for the ~~third quarter~~first six months of ~~2020~~2021 ($~~118~~244 in selling, general, and administrative expenses and ~~$31~~$66 in research and development costs). Research and development costs were ~~$1,723~~$3,529 for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$117~~$29 or ~~7.3%~~0.8%, from ~~$1,606~~$3,500 for the ~~three-months~~six-months ended ~~September~~June 30, ~~2020.~~2021. The increase is largely attributable to our acquisition of Excell and the ~~hiring~~timing of ~~engineering resources~~the purchase of test materials to support new product development in our Battery & Energy Products business, ~~segment.~~including those resources and materials dedicated to our Conformal Wearable Battery contract. Selling, general, and administrative expenses ~~decreased $34~~increased $1,875 or ~~0.8%~~21.5%, to ~~$4,164~~$10,577 for the ~~third quarter~~first six months of ~~2021~~2022 from ~~$4,198~~$8,702 for the ~~third quarter~~comparable 2021 period. The increase is attributable to the December 2021 acquisition of ~~2020. The slight decrease resulted from our continued tight control over all discretionary spending.~~Excell which contributed $1,985 of selling, general and administrative expenses, including intangible asset amortization of $363, for the 2022 period.

Other ~~(Income)~~ Expense. Other ~~income~~expense totaled ~~($1)~~$232 for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2021~~2022 compared to ~~other expense of $53~~$77 for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2020.~~2021. Interest and financing expense ~~net of interest income, decreased $39,~~increased $200, or ~~42.3%~~180.2%, from ~~$92~~$111 for the ~~third quarter~~first six months of ~~2020~~2021 to ~~$53~~$311 for the ~~comparable period in 2021.~~first six months of 2022. The ~~decrease~~increase is ~~primarily~~ due to ~~the continued reduction of debt incurred in connection with~~ the financing of the ~~SWE acquisition.~~Excell Acquisition. Miscellaneous income ~~of $54~~amounted to $79 for the ~~third quarter~~first six months of ~~2021~~2022 compared ~~to miscellaneous income of $39~~with $34 for the ~~third quarter of 2020 represents~~2021 period, primarily representing foreign currency exchange gains and losses ~~particularly for certain~~on U.S.-denominated transactions and balances of Accutronics (U.K.) denominated in U.S. dollars. The U.S. dollar strengthened against the Pound Sterling by approximately 3% during the third quarter of 2021 and the U.S. dollar weakened against the Pound Sterling by approximately 4% during the third quarter of 2020.our non-U.S. businesses.

Income Taxes. ~~The~~For the six-month period ended June 30, 2022, Ultralife recognized an income tax benefit ~~for the 2021 third quarter was ($175) compared to a provision~~ of $192 for the third quarter of 2020. Our effective income tax rate was (22.4%) for the third quarter of 2021 as compared to 29.4% for the third quarter of 2020, primarily due to the geographic mix of earnings. The income tax benefit for the third quarter of 2021 is$81, comprised of a ~~$43~~$294 current provision for taxes expected to be paid on income primarily from our ~~foreign~~non-U.S. operations, ~~representing a cash-based effective income tax rate of (5.5%),~~ and a ~~($218)~~$375 deferred ~~income tax benefit. For the 2020 period, the income~~benefit, compared to a tax provision ~~was~~of $465 for the prior year same period, comprised of a $4 current ~~tax~~ provision ~~representing~~of $120 and a ~~cash-based~~deferred provision of $345. Our effective tax rate was (30.5%) for the first half of ~~0.6%, and a $188 deferred~~2022 as compared to 23.7% for the first half of 2021, primarily attributable to the geographic mix of our operating results, including income ~~tax provision.~~generated in Canada by Excell for the current year. See Note ~~6 in~~7 to the ~~Notes to Consolidated Financial Statements~~consolidated financial statements in Item 1 of Part I of this Form 10-Q for ~~additional information regarding our income taxes.~~further information.

Net ~~(Loss)~~ Income Attributable to Ultralife. Net ~~(loss)~~income attributable to Ultralife was ~~($585),~~$344, or ~~($0.04)~~$0.02 per share – basic and diluted, for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2021,~~2022, compared to ~~net income of $407,~~$1,482, or ~~$0.03~~$0.09 per share – basic and diluted, for the ~~three-month~~six-month period ended ~~September~~June 30, 2020. Adjusted EPS was ($0.05) on a diluted basis for the third quarter of 2021, compared to $0.04 on a diluted basis for the third quarter of 2020. Adjusted EPS excludes the (benefit) provision for deferred income taxes of ($218) and $188 for the 2021 and 2020 periods, respectively, which primarily represents non-cash (benefits) charges for U.S. income taxes. See the section “Adjusted EPS” beginning on Page 23 for a reconciliation of Adjusted EPS to EPS.2021. Weighted average ~~common~~ shares outstanding used to compute diluted earnings per share decreased from 16,089,170 for the third quarter of 2020 to 16,065,412 for the third quarter of 2021. The period over period decrease is attributable to the antidilutive effect of all outstanding stock awards for the current period partially offset by stock option exercises and vesting of restricted stock awards since the third quarter of 2020.

~~Revenues.~~ Consolidated revenues for the nine-month period ended September 30, 2021 amounted to $74,504, a decrease of $4,232 or 5.4%, from the $78,736 reported for the nine-month period ended September 30, 2020. Overall, commercial sales increased $189 or 0.4% and government/defense sales decreased $4,421 or 13.8% from the nine-month 2020 period.

Battery & Energy Products revenues decreased $1,622, or 2.4%, from $66,616 for the nine-month period ended September 30, 2020 to $64,994 for the nine-month period ended September 30, 2021. The decline was attributable to a $1,811 or 9.1% decrease in government/defense sales partially offset by a $189 or 0.4% increase in commercial sales. The decrease in government/defense sales primarily reflects $2,800 of shipments of 5390 batteries to the U.S. Department of Defense under a spot purchase announced in December 2019 and completed in 2020. The increase in commercial sales primarily resulted from a $1,933 or 17.8% increase in oil & gas market sales and a $1,932 or 74.2% increase in our new ER and thin cell battery sales, partially offset primarily by a $3,898 or 15.7% decrease in medical sales. During the first nine months of 2021, we estimate that the negative net impact caused by supply chain disruptions and other COVID-19 related logistics matters on Battery & Energy Products revenues was $4,600.

Communications Systems revenues decreased $2,610, or 21.5%, from $12,120 during the nine-month period ended September 30, 2020 to $9,510 for the nine-month period ended September 30, 2021. This decrease is attributable to 2020 shipments of vehicle amplifier-adaptor systems in the amount of $5,680 to support the U.S. Army’s Network Modernization initiatives completing the delivery orders announced in October 2018. During the first nine months of 2021, we estimate that the negative net impact from supply chain disruptions and other COVID-19 related logistics matters on Communications Systems revenues was $3,000.

~~Cost of Products Sold / Gross Profit.~~ Cost of products sold totaled $55,151 for the nine-month period ended September 30, 2021, a decrease of $1,777 or 3.1%, from the $56,928 reported for the same nine-month period a year ago. Consolidated cost of products sold as a percentage of total revenue increased from 72.3% for the nine-month period ended September 30, 2020 to 74.0% for the nine-month period ended September 30, 2021. Correspondingly, consolidated gross margin was 26.0% for the nine-month period ended September 30, 2021, compared with 27.7% for the nine-month period ended September 30, 2020, due primarily to unfavorable sales product mix and lower factory volume.

For our Battery & Energy Products segment, the cost of products sold decreased $847 or 1.7%, from $49,597 during the nine-month period ended September 30, 2020 to $48,750 during the nine-month period ended September 30, 2021. Battery & Energy Products’ gross profit for the 2021 nine-month period was $16,244 or 25.0% of revenues, a decrease of $775 or 4.6% from gross profit of $17,019, or 25.5% of revenues, for the 2020 nine-month period. Battery & Energy Products’ gross margin decreased for the nine-month period ended September 30, 2021 by 50 basis points, primarily due to unfavorable sales product mix and lower factory volume.

For our Communications Systems segment, the cost of products sold decreased by $930 or 12.7% from $7,331 during the nine-month period ended September 30, 2020 to $6,401 during the nine-month period ended September 30, 2021. Communications Systems’ gross profit for the first nine months of 2021 was $3,109 or 32.7% of revenues, a decrease of $1,680 or 35.1% from gross profit of $4,789 or 39.5% of revenues, for the nine-month period ended September 30, 2020. The decrease in gross margin primarily reflects the favorable sales mix in 2020 of the vehicle amplifier-adaptor systems for the U.S. Army and lower factory volume in 2021.

~~Operating Expenses.~~ Total operating expenses for the nine-month period ended September 30, 2021 totaled $18,089, an increase of $767 or 4.4% from the $17,322 for the nine-month period ended September 30, 2020. The increase in operating expenses reflects our continued investment in engineering resources for new product development, including resources dedicated to the Conformal Wear Battery IDIQ contract announced on May 17, 2021. Both periods reflected our continued tight control over discretionary spending.

Overall, operating expenses as a percentage of revenues were 24.3% for the nine-month period ended September 30, 2021 compared to 22.0% for the comparable 2020 period. Amortization expense associated with intangible assets related to our acquisitions was $458 for the first nine months of 2021 ($365 in selling, general and administrative expenses and $93 in research and development costs), compared with $444 for the first nine months of 2020 ($352 in selling, general and administrative expenses and $92 in research and development costs). Research and development costs were $5,223 for the nine-month period ended September 30, 2021 an increase of $794 or 17.9% over $4,429 for the nine months ended September 30, 2020. The increase is largely attributable to the hiring of engineering resources to support new product development in our Battery & Energy Products business segment. Selling, general and administrative expenses decreased $27 or 0.2% from $12,893 during the first nine months of 2020 to $12,866 during the first nine months of 2021, primarily reflecting a 3.6% increase in selling expenses for sales resources to support our new product market launches virtually, offset by a 1.5% decrease in general and administrative expenses.

~~Other (Income) Expense.~~ Other expense totaled $76 for the nine-month period ended September 30, 2021 compared to $262 for the nine-month period ended September 30, 2020. Interest and financing expense, net of interest income, decreased $208, or 55.9%, to $16416,194,377 for the 2021 period ~~from $372~~to 16,141,083 for the comparable period in 2020, as a result of the continued reduction of debt incurred with the financing for the SWE acquisition. Miscellaneous income amounted to ($88) for the first nine months of 2021 compared with miscellaneous income of ($110) for the first nine months of 2020, primarily due to fluctuations in the U.S. dollar relative to the Pound Sterling.

~~Income Taxes.~~ We recognized an income tax provision of $290 for the first three quarters of 2021 compared with an income tax provision of $1,010 for the first three quarters of 2020. Our effective income tax rate increased to 24.4% for the first nine months of 2021 as compared to 23.9% for the first nine months of 2020, primarily due to the geographic mix of earnings.2022. The ~~income tax provision for the 2021 period~~decrease is comprised of a $163 current provision for taxes expected to be paid on income from our foreign operations, representing a cash-based effective income tax rate of 13.7%, and a $127 deferred income tax provision which primarily represents non-cash charges for U.S. income taxes which we expect will be fully offset by NOL carryforwards and other tax credits for the foreseeable future. For the 2020 period, the income tax provision was comprised of a $189 current income tax provision, representing a cash-based effective income tax rate of 4.5%, and a non-cash $821 deferred provision for income taxes. See Note 6 in the Notes to Consolidated Financial Statements of this Form 10-Q for additional information regarding our income taxes.

~~Net Income Attributable to Ultralife.~~ Net income attributable to Ultralife and net income attributable to Ultralife common stockholders per diluted share was $897 and $‐‐‐0.06, respectively, for the nine months ended September 30, 2021, compared to $3,124 and $0.19 for the nine months ended September 30, 2020. Weighted average common shares outstanding used to compute diluted earnings per share increased from 16,102,879 for the 2020 period to 16,199,693 for the 2021 period, primarily attributable to stock option exercises since the ~~third~~second quarter of ~~2020 and an increase~~2021 offset by a decrease in the average stock price used to compute diluted shares from ~~$6.89~~$7.89 for the first ~~nine~~six months of ~~2020~~2021 to ~~$7.94~~$5.11 for the first ~~nine~~six months of ~~2021.~~2022. Accordingly diluted shares of 197,848 were added to basic weighted average shares in 2021 compared to 24,751 in 2022.

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 (loss) attributable to Ultralife before interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus ~~expenses/~~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 (loss) attributable to Ultralife, 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.~~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 isolating 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 (loss), 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 (loss) attributable to Ultralife or other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include, but are not limited to, the following:

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 income (loss) attributable to Ultralife.

In evaluating our business, we consider and use Adjusted EPS, a non-GAAP financial measure, as a supplemental measure of our business performance in addition to GAAP financial measures. 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 income tax provision (benefit) that we expect will be offset by our U.S. NOL 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.

As of ~~September~~June 30, ~~2021,~~2022, cash on hand totaled ~~$15,853~~$5,114 (including restricted cash of ~~$87)~~$77), ~~an increase~~a decrease of ~~$5,200~~$3,299 as compared to ~~$10,653~~$8,413 as of ~~cash held at~~ December 31, ~~2020. The increase was~~2021, primarily attributable to ~~cash generated from operations, partially offset~~the procurement of inventory to enhance our ability to service orders requested by ~~cash used~~customers to ship in ~~investing and financing activities.~~2022 amidst challenging supply chain conditions.

During the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2021, operating activities provided~~2022, cash used in operations was $3,400, as compared to $6,955 generated from operations for the six-month period ended June 30, 2021. For the 2022 period, we used cash of ~~$8,462, consisting~~$6,606 to procure inventory to proactively manage our supply chain, reduce lead times and the impact of potential cost increases on components and raw materials, and enhance our position to service customer orders. The increase in inventory and the timing of sales, collections and disbursements resulted in net cash of $6,048 used for working capital, which was partially offset by net income of ~~$898, deferred income taxes of $127,~~$347 and non-cash expenses oftotaling $2,301 for depreciation, amortization, ~~and~~ stock-based compensation, ~~totaling $3,208,~~ and ~~a $4,229 reduction in net working capital primarily attributable to a decrease in accounts receivable.~~deferred taxes.

Cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$2,324, primarily attributable~~$585 for capital expenditures, reflecting investments in equipment for new products transitioning to ~~strategic capital investments for our Battery & Energy Products business segment.~~high-volume manufacturing.

~~Net cash used in~~Cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$936,~~$794, consisting of ~~$1,186~~draws from our credit facility for the purchase of ~~principal payments against our remaining term loan balance and $148 of tax withholdings for stock~~certain critical raw materials requiring cash-in-advance payment terms by the vendors, plus $102 in net proceeds on stock-based awards, partially offset by ~~stock option exercise proceeds~~$833 of ~~$398.~~principle payments on our term loan.

We continue to have significant U.S. ~~NOL~~net operating loss carryforwards available to utilize as an offset to future taxable income. See Note 67 to the ~~Consolidated Financial Statements~~consolidated financial statements of this Form 10-Q for additional information.

Going forward, we expect ~~that~~ positive operating cash flow and the availability under our Revolving Credit Facility will be sufficient to meet our general funding requirements for the foreseeable future. Over the long-term, we expect that some of our future investments, including strategic business opportunities such as acquisitions, may be made through a number of sources, including internally available cash, availability of borrowing under our Credit Facilities, new debt financing, the issuance of equity securities or any combination of these sources.

To provide flexibility in accessing the capital market, the Company filed a shelf registration statement on Form S-3 on March 30, 2021, which was declared effective by the SEC on April 2, 2021. Under this registration statement, upon the filing of an appropriate supplemental prospectus, we may offer and sell certain of our securities from time to time in one (1) or more offerings, at our discretion, of up to an aggregate offering price of $100 million. We intend to use the net proceeds resulting from any sales of our 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.

As of ~~September~~June 30, ~~2021,~~2022, the Company had ~~$288~~$12,530 outstanding ~~principal~~borrowings on the Revolving Credit Facility and $9,167 on the Term Loan Facility, all of which is included in current portion of long-term debt on the Consolidated Balance Sheet, net of $35 unamortized debt issuance costs, and no amounts outstanding on the Revolving Credit Facility. The Company was in full compliance with all covenants under the Credit Facilities as of ~~September~~June 30, ~~2021.~~2022.

As of ~~September~~June 30, ~~2021,~~2022, we had made commitments to purchase approximately ~~$1,100~~$697 of production machinery and equipment.

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 (“Summary of Operations and Significant Accounting Policies”) to ~~our Consolidated Financial Statements~~the consolidated financial statements in our ~~2020~~2021 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 ~~nine~~six months of ~~2021,~~2022, 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.

Our President and Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer and Treasurer (Principal Financial Officer) have evaluated our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e)) as of the end of the period covered by this quarterly report. Based on this evaluation, our President and Chief Executive Officer and Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures were effective as of such date.

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.

Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, (ii) Consolidated Statements of Income and Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, (iii) Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, and (v) Notes to Consolidated Financial ~~Statements~~Statements.

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

	Nine-month period ended						Six-month period ended
	September 30, 2021			September 30, 2020			June 30, 2022			June 30, 2021
OPERATING ACTIVITIES:
Net income	$	898		$	3,214		$	347		$	1,501
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		2,160			1,743			1,635			1,460
Amortization of intangible assets		458			444			651			310
Amortization of financing fees		78			36			17			52
Stock-based compensation		512			756			373			370
Deferred income taxes		127			821			(375	)		345
Changes in operating assets and liabilities:
Accounts receivable		4,814			15,094			(2,385	)		2,390
Inventories		17			13			(6,606	)		864
Prepaid expenses and other assets		775			(84	)		104			2,536
Accounts payable and other liabilities		(1,377	)		(546	)		2,839			(2,873	)
Net cash provided by operating activities		8,462			21,491
Net cash (used in) provided by operating activities								(3,400	)		6,955

INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(2,324	)		(1,902	)		(585	)		(1,225	)
Proceeds from sale of equipment		-			120
Net cash used in investing activities		(2,324	)		(1,782	)		(585	)		(1,225	)

FINANCING ACTIVITIES:
Payment of credit facilities		(1,186	)		(13,461	)
Borrowings on revolving credit facility								1,550			0
Payments on term loan facility								(833	)		(789	)
Proceeds from exercise of stock options		398			218			113			314
Payment of debt issuance costs								(25	)		-
Tax withholdings on stock-based awards		(148	)		(15	)		(11	)		(67	)
Net cash used in financing activities		(936	)		(13,258	)
Net cash provided by (used in) financing activities								794			(542	)

Effect of exchange rate changes on cash		(2	)		(79	)		(108	)		(13	)

INCREASE IN CASH		5,200			6,372
(DECREASE) INCREASE IN CASH								(3,299	)		5,175

Cash, Beginning of period		10,653			7,405			8,413			10,653
Cash, End of period	$	15,853		$	13,777		$	5,114		$	15,828

Cash	$	736
Accounts receivable		3,570
Inventories		3,622
Prepaid expenses and other current assets		785
Property, plant and equipment		429
Goodwill		10,989
Other intangible assets		8,870
Other noncurrent assets		991
Accounts payable		(1,450	)
Accrued compensation and related benefits		(540	)
Accrued expenses and other current liabilities		(720	)
Deferred tax liability, net		(2,223	)
Other noncurrent liabilities		(803	)
Net assets acquired	$	24,256

					Annual Amortization
	Estimated Fair Value		Amortization Period (Years)		Year 1		Year 2		Year 3		Year 4		Year 5
Customer relationships	$	4,100		15	$	273	$	273	$	273	$	273	$	273
Trade name		3,150	Indefinite			-		-		-		-		-
Customer contracts		1,140		15		76		76		76		76		76
Backlog		360		1		360		-		-		-		-
Technology		120		7		17		17		17		17		17
Total	$	8,870			$	726	$	366	$	366	$	366	$	366

	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Raw materials	$	16,955	$	17,277	$	26,209	$	21,660	��
Work in process		3,485		3,411		3,526		4,227
Finished goods		7,739		7,505		9,466		7,302
Total	$	28,179	$	28,193	$	39,201	$	33,189

	Three-month period ended				Nine-month period ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Depreciation expense	$	700	$	582	$	2,160	$	1,743

	Battery & Energy			Communications
	Products			Systems		Total
Balance – December 31, 2020	$	15,525		$	11,493	$	27,018
Effect of foreign currency translation		(20	)		0		(20	)
Balance – September 30, 2021	$	15,505		$	11,493	$	26,998

	September 30, 2021						at June 30, 2022
			Accumulated						Accumulated
	Cost		Amortization		Net		Cost		Amortization		Net
Trademarks	$	3,412	$	0	$	3,412
Customer relationships		9,133		5,377		3,756	$	12,978	$	5,689	$	7,289
Patents and technology		5,542		5,097		445		5,560		5,117		443
Distributor relationships		377		377		0
Trade name		1,519		407		1,112
Total	$	19,983	$	11,258	$	8,725
Trade names								4,631		468		4,163
Trademarks								3,407		0		3,407
Other								1,500		236		1,264
Total other intangible assets							$	28,076	$	11,510	$	16,566

	December 31, 2020
			Accumulated
	Cost		Amortization		Net
Trademarks	$	3,410	$	0	$	3,410
Customer relationships		9,171		5,115		4,056
Patents and technology		5,557		5,014		543
Distributor relationships		377		377		0
Trade name		1,524		324		1,200
Total	$	20,039	$	10,830	$	9,209

	at December 31, 2021
			Accumulated
	Cost		Amortization		Net
Customer relationships	$	13,214	$	5,484	$	7,730
Patents and technology		5,667		5,126		541
Trade names		4,670		436		4,234
Trademarks		3,413		0		3,413
Other		1,490		18		1,472
Total other intangible assets	$	28,454	$	11,064	$	17,390

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2021		1,217,163		$	6.50
Granted		56,500			8.50
Exercised		(184,429	)		4.46
Forfeited or expired		(24,578	)		7.35
Outstanding at September 30, 2021		1,064,656		$	6.94		3.83	$	978
Vested and expected to vest at September 30, 2021		995,875		$	6.91		3.71	$	958
Exercisable at September 30, 2021		769,123		$	6.77		3.14	$	889

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2022		1,306,824		$	6.87
Granted		5,000			4.68
Exercised		(58,750	)		3.81
Forfeited or expired		(44,834	)		6.76
Outstanding at June 30, 2022		1,208,240		$	7.01		4.07	$	33
Vested and expected to vest at June 30, 2022		1,103,948		$	7.01		3.93	$	33
Exercisable at June 30, 2022		717,956		$	7.06		2.93	$	33

	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Operating lease cost	$	188	$	172	$	564	$	508	$	226	$	189	$	458	$	376
Variable lease cost		25		18		57		54		23		13		47		32
Total lease cost	$	213	$	190	$	621	$	562	$	249	$	202	$	505	$	408

	Nine months ended				Six-month period ended June 30,
	September 30, 2021		September 30, 2020		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	550	$	506	$	449	$	365
Right-of-use assets obtained in exchange for lease liabilities:	$	0	$	875

	Balance Sheet Classification	September 30, 2021			December 31, 2020			Balance sheet classification	June 30, 2022			December 31, 2021
Assets:
Operating lease right-of-use asset	Other noncurrent assets	$	1,711		$	2,189		Other noncurrent assets	$	2,131		$	2,581

Liabilities:
Current operating lease liability	Accrued expenses and other current liabilities	$	657		$	680		Accrued expenses and other current liabilities	$	859		$	867
Operating lease liability, net of current portion	Other noncurrent liabilities		1,086			1,524		Other noncurrent liabilities		1,312			1,743
Total operating lease liability	Total operating lease liability	$	1,743		$	2,204		Total operating lease liability	$	2,171		$	2,610

Weighted-average remaining lease term (years)	Weighted-average remaining lease term (years)		2.6			3.3		Weighted-average remaining lease term (years)		4.3			4.5

Weighted-average discount rate	Weighted-average discount rate		4.5	%		4.5	%	Weighted-average discount rate		4.5	%		4.5	%

	September 30,			December 31,
	2021			2020
Land	$	1,273		$	1,273
Buildings and leasehold improvements		15,425			15,393
Machinery and equipment		62,449			61,048
Furniture and fixtures		2,503			2,235
Computer hardware and software		7,316			6,894
Construction in process		1,456			1,227
		90,422			88,070
Less: Accumulated depreciation		(67,387	)		(65,220	)
Property, plant and equipment, net	$	23,035		$	22,850

	June 30,			December 31,
	2022			2021
Land	$	1,273		$	1,273
Buildings and leasehold improvements		15,522			15,442
Machinery and equipment		63,930			63,780
Furniture and fixtures		2,756			2,588
Computer hardware and software		7,583			7,579
Construction in process		824			761
		91,888			91,423
Less: Accumulated depreciation		(69,550	)		(68,218	)
Property, plant and equipment, net	$	22,338		$	23,205

Maturity of Operating Lease Liabilities
2021		179
Maturity of operating lease liabilities
2022		700		$	440
2023		720			871
2024		279			449
2025					136
2026					137
2027					137
Thereafter					281
Total lease payments		1,878			2,451
Less: Imputed interest		(135	)		(280	)
Present value of remaining lease payments	$	1,743		$	2,171

	Nine-month period ended September 30,						Six-month period ended June 30,
	2021			2020			2022			2021
Accrued warranty obligations – beginning	$	149		$	195		$	133		$	149
Accruals for warranties issued		123			75			25			121
Settlements made		(143	)		(103	)		(26	)		(108	)
Accrued warranty obligations – ending	$	129		$	167		$	132		$	162

	Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	30,140	$	1,986	$	0		$	32,126
Segment contribution		7,151		495		(6,853	)		793
Other expense						(115	)		(115	)
Income tax provision						(170	)		(170	)
Non-controlling interest						4			4
Net income attributable to Ultralife								$	512

	Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	66,616	$	12,120	$	0		$	78,736
Segment contribution		17,019		4,789		(17,322	)		4,486
Other expense						(262	)		(262	)
Tax provision						(1,010	)		(1,010	)
Non-controlling interest						(90	)		(90	)
Net income attributable to Ultralife								$	3,124

	Total Revenue		Commercial			Government/ Defense			Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	20,008	$	16,579		$	3,429		$	30,140	$	24,682		$	5,458
Communications Systems		1,753		0			1,753			1,986		0			1,986
Total	$	21,761	$	16,579		$	5,182		$	32,126	$	24,682		$	7,444
				76	%		24	%				77	%		23	%

	Total Revenue		United States			Non-United States			Total Revenue		United States			Non-United States
Battery & Energy Products	$	20,008	$	7,941		$	12,067		$	30,140	$	13,330		$	16,810
Communications Systems		1,753		1,249			504			1,986		1,910			76
Total	$	21,761	$	9,190		$	12,571		$	32,126	$	15,240		$	16,886
				42	%		58	%				47	%		53	%

	Three-Month Period Ended
	September 30, 2021									September 30, 2020
	Amount			Per Basic Share			Per Diluted Share			Amount		Per Basic Share		Per Diluted Share
Net (loss) income attributable to Ultralife Corporation	$	(585	)	$	(.04	)	$	(.04	)	$	407	$	.03	$	.03
Deferred income tax (benefit) provision		(218	)		(.01	)		(.01	)		188		.01		.01
Adjusted net (loss) income attributable to Ultralife Corporation	$	(803	)	$	(.05	)	$	(.05	)	$	595	$	.04	$	.04
Weighted average shares outstanding					16,065			16,065					15,908		16,089

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

	ULTRALIFE CORPORATION
	(Registrant)

Date: ~~October~~July 28, ~~2021~~2022	By:	/s/ Michael D. Popielec
	Michael D. Popielec
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: ~~October~~July 28, ~~2021~~2022	By:	/s/ Philip A. Fain
	Philip A. Fain
	Chief Financial Officer and Treasurer
	(Principal Financial Officer and
	Principal Accounting Officer)