UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2022~~2023

☐

☐	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

(State or other jurisdiction of incorporation of organization)

2000 Technology Parkway Newark, New York 14513

(Address of principal executive offices) (Zip Code)

16-1387013

(I.R.S. Employer Identification No.)

(315) 332-7100

(Registrant’s telephone number, including area ~~code:)~~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~~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 ~~24, 2022,~~23, 2023, the registrant had ~~16,133,618~~16,340,113 shares of common stock outstanding.

ULTRALIFE CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022	1

	Consolidated Statements of Income (Loss) ~~Income~~ and Comprehensive Income (Loss) ~~Income~~ for the Three and Nine-Month Periods Ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022	2

	Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022	3

	Consolidated Statements of Changes in ~~Stockholders’~~Shareholders’ Equity for the Three and Nine-Month Periods Ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022	4

	Notes to Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2017

Item 4.	Controls and Procedures	2926

PART II.	OTHER INFORMATION

~~Item 1A.~~	~~Risk Factors~~	30

Item 6.	Exhibits	3027

	Signatures	3128

PART I. FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands except share amounts)

(Unaudited)

	September 30, 2022			December 31, 2021			September 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash	$	5,051		$	8,413		$	9,301		$	5,713
Trade accounts receivable, net of allowance for doubtful accounts of $305 and $346, respectively		26,876			20,232
Trade accounts receivable, net of allowance for expected credit losses of $287 and $303, respectively								27,189			27,779
Inventories, net		40,769			33,189			46,634			41,192
Prepaid expenses and other current assets		6,241			4,690			6,429			4,304
Total current assets		78,937			66,524			89,553			78,988
Property, plant and equipment, net		21,898			23,205			21,166			21,716
Goodwill		37,066			38,068			37,357			37,428
Other intangible assets, net		16,095			17,390			15,270			15,921
Deferred income taxes, net		11,963			11,472			10,728			12,069
Other noncurrent assets		1,981			2,879			2,035			2,308
Total assets	$	167,940		$	159,538		$	176,109		$	168,430

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,827		$	9,823		$	13,470		$	16,074
Current portion of long-term debt		2,000			2,000			2,000			2,000
Accrued compensation and related benefits		2,000			1,842			2,467			2,890
Accrued expenses and other current liabilities		8,254			5,259			8,449			7,949
Total current liabilities		28,081			18,924			26,386			28,913
Long-term debt, net		20,874			18,857			24,108			19,310
Deferred income taxes		1,996			2,254			1,825			1,917
Other noncurrent liabilities		1,673			1,760			2,032			1,887
Total liabilities		52,624			41,795			54,351			52,027

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

Stockholders’ equity:
Shareholders’ equity:
Preferred stock – par value $.10 per share; authorized 1,000,000 shares; none issued		-			-			-			-
Common stock – par value $.10 per share; authorized 40,000,000 shares; issued – 20,568,210 shares at September 30, 2022 and 20,522,427 shares at December 31, 2021; outstanding – 16,133,618 shares at September 30, 2022 and 16,089,832 shares at December 31, 2021		2,057			2,052
Common stock – par value $.10 per share; authorized 40,000,000 shares; issued – 20,746,546 shares at September 30, 2023 and 20,570,710 shares at December 31, 2022; outstanding – 16,311,194 shares at September 30, 2023 and 16,135,358 shares at December 31, 2022								2,075			2,057
Capital in excess of par value		187,181			186,518			188,852			187,405
Accumulated deficit		(47,727	)		(47,832	)		(43,627	)		(47,951	)
Accumulated other comprehensive loss		(4,842	)		(1,653	)		(4,176	)		(3,750	)
Treasury stock - at cost; 4,434,592 shares at September 30, 2022 and 4,432,595 shares at December 31, 2021		(21,480	)		(21,469	)
Treasury stock - at cost; 4,435,352 shares at September 30, 2023 and 4,435,352 shares at December 31, 2022								(21,484	)		(21,484	)
Total Ultralife Corporation equity		115,189			117,616			121,640			116,277
Non-controlling interest		127			127			118			126
Total stockholders’ equity		115,316			117,743
Total shareholders’ equity								121,758			116,403

Total liabilities and stockholders’ equity	$	167,940		$	159,538
Total liabilities and shareholders’ equity							$	176,109		$	168,430

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

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

	Three-month period ended						Nine-month period ended						Three-month period ended						Nine-month period ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021			September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022

Revenues	$	33,234		$	21,761		$	95,733		$	74,504		$	39,488		$	33,234		$	114,096		$	95,733
Cost of products sold		26,519			16,653			74,414			55,151			29,714			26,519			86,298			74,414
Gross profit		6,715			5,108			21,319			19,353			9,774			6,715			27,798			21,319

Operating expenses:
Research and development		1,896			1,723			5,425			5,223			1,869			1,896			5,679			5,425
Selling, general and administrative		5,405			4,164			15,982			12,866			5,770			5,405			16,293			15,982
Total operating expenses		7,301			5,887			21,407			18,089			7,639			7,301			21,972			21,407

Operating (loss) income		(586	)		(779	)		(88	)		1,264
Operating income (loss)														2,135			(586	)		5,826			(88	)

Other (income) expense:
Other income (expense):
Interest and financing expense		272			53			583			164			(586	)		(272	)		(1,450	)		(583	)
Miscellaneous		(526	)		(54	)		(605	)		(88	)
Total other (income) expense		(254	)		(1	)		(22	)		76
Miscellaneous income														200			526			1,628			605
Total other (expense) income														(386	)		254			178			22

(Loss) income before income taxes		(332	)		(778	)		(66	)		1,188
Income tax (benefit) provision		(90	)		(175	)		(171	)		290
Income (loss) before income taxes														1,749			(332	)		6,004			(66	)
Income tax provision (benefit)														446			(90	)		1,688			(171	)

Net (loss) income		(242	)		(603	)		105			898
Net income (loss)														1,303			(242	)		4,316			105

Net (loss) income attributable to non-controlling interest		(3	)		(18	)		-			1
Net loss attributable to non-controlling interest														(27	)		(3	)		(8	)		-

Net (loss) income attributable to Ultralife Corporation		(239	)		(585	)		105			897
Net income (loss) attributable to Ultralife Corporation														1,330			(239	)		4,324			105

Other comprehensive loss:
Foreign currency translation adjustments		(1,691	)		(233	)		(3,189	)		(37	)		(330	)		(1,691	)		(426	)		(3,189	)

Comprehensive (loss) income attributable to Ultralife Corporation	$	(1,930	)	$	(818	)	$	(3,084	)	$	860
Comprehensive income (loss) attributable to Ultralife Corporation													$	1,000		$	(1,930	)	$	3,898		$	(3,084	)

Net (loss) income per share attributable to Ultralife common stockholders – basic	$	(.01	)	$	(.04	)	$	.01		$	.06
Net income (loss) per share attributable to Ultralife common stockholders – basic													$	.08		$	(.01	)	$	.27		$	.01

Net (loss) income per share attributable to Ultralife common stockholders – diluted	$	(.01	)	$	(.04	)	$	.01		$	.06
Net income (loss) per share attributable to Ultralife common stockholders – diluted													$	.08		$	(.01	)	$	.27		$	.01

Weighted average shares outstanding – basic		16,133			16,065			16,122			16,020			16,238			16,133			16,172			16,122
Potential common shares		-			-			22			180			65			-			2			22
Weighted average shares outstanding - diluted		16,133			16,065			16,144			16,200			16,303			16,133			16,174			16,144

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

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Nine-month period ended						Nine-month period ended
	September 30, 2022			September 30, 2021			September 30, 2023			September 30, 2022
OPERATING ACTIVITIES:
Net income	$	105		$	898		$	4,316		$	105
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		2,450			2,160			2,282			2,450
Amortization of intangible assets		969			458			663			969
Amortization of financing fees		25			78			48			25
Stock-based compensation		552			512			424			552
Deferred income taxes		(683	)		127			1,245			(683	)
Changes in operating assets and liabilities:
Accounts receivable		(7,433	)		4,814			565			(7,433	)
Inventories		(8,714	)		17			(5,626	)		(8,714	)
Prepaid expenses and other assets		(1,004	)		775			(1,972	)		(1,004	)
Accounts payable and other liabilities		9,906			(1,377	)		(2,448	)		9,906
Net cash (used in) provided by operating activities		(3,827	)		8,462
Net cash used in operating activities								(503	)		(3,827	)

INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(1,396	)		(2,324	)		(1,547	)		(1,396	)
Net cash used in investing activities		(1,396	)		(2,324	)		(1,547	)		(1,396	)

FINANCING ACTIVITIES:
Borrowings on revolving credit facility		3,350			-			6,250			3,350
Payments on term loan facility		(1,333	)		(1,186	)		(1,500	)		(1,333	)
Proceeds from exercise of stock options		116			398			1,041			116
Payment of debt issuance costs		(25	)		-			-			(25	)
Tax withholdings on stock-based awards		(11	)		(148	)		-			(11	)
Net cash provided by (used in) financing activities		2,097			(936	)
Net cash provided by financing activities								5,791			2,097

Effect of exchange rate changes on cash		(236	)		(2	)		(153	)		(236	)

(DECREASE) INCREASE IN CASH		(3,362	)		5,200
INCREASE (DECREASE) IN CASH								3,588			(3,362	)

Cash, Beginning of period		8,413			10,653			5,713			8,413
Cash, End of period	$	5,051		$	15,853		$	9,301		$	5,051

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

ULTRALIFE CORPORATION AND SUBSIDIARIES

~~ULTRALIFE CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS~~

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands except share amounts)

(Unaudited)

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

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

Balance – December 31, 2021		20,522,427	$	2,052	$	186,518		$	(1,653	)	$	(47,832	)	$	(21,469	)	$	127		$	117,743			20,522,427	$	2,052	$	186,518		$	(1,653	)	$	(47,832	)	$	(21,469	)	$	127		$	117,743
Net income												105						-			105													105						-			105
Stock option exercises		39,119		4		112									(7	)					109			39,119		4		112									(7	)					109
Stock-based compensation – stock options						538															538							538															538
Stock-based compensation -restricted stock						14															14
Stock-based compensation - restricted stock																												14															14
Vesting of restricted stock		6,664		1		(1	)								(4	)					(4	)		6,664		1		(1	)								(4	)					(4	)
Foreign currency translation adjustments									(3,189	)											(3,189	)									(3,189	)											(3,189	)
Balance – September 30, 2022		20,568,210	$	2,057	$	187,181		$	(4,842	)	$	(47,727	)	$	(21,480	)	$	127		$	115,316			20,568,210	$	2,057	$	187,181		$	(4,842	)	$	(47,727	)	$	(21,480	)	$	127		$	115,316

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 – December 31, 2022																								20,570,710	$	2,057	$	187,405		$	(3,750	)	$	(47,951	)	$	(21,484	)	$	126		$	116,403
Net income																																		4,324						(8	)		4,316
Stock option exercises		38,668		4		80									(81	)					3			175,836		18		1,023									-						1,041
Stock-based compensation – stock options						131															131							421															421
Stock-based compensation -restricted stock						11															11
Vesting of restricted stock
Stock-based compensation - restricted stock																												3															3
Foreign currency translation adjustments									(233	)											(233	)									(426	)											(426	)
Balance – September 30, 2021		20,513,344	$	2,051	$	186,360		$	(1,819	)	$	(46,701	)	$	(21,469	)	$	124		$	118,546
Balance – September 30, 2023																								20,746,546	$	2,075	$	188,852		$	(4,176	)	$	(43,627	)	$	(21,484	)	$	118		$	121,758

Balance – June 30, 2022		20,567,460	$	2,057	$	186,999		$	(3,151	)	$	(47,488	)	$	(21,480	)	$	130		$	117,067			20,567,460	$	2,057	$	186,999		$	(3,151	)	$	(47,488	)	$	(21,480	)	$	130		$	117,067
Net loss												(239	)					(3	)		(242	)												(239	)					(3	)		(242	)
Stock option exercises		750		-		3									-						3			750		-		3									-						3
Stock-based compensation – stock options						176															176							176															176
Stock-based compensation -restricted stock						3															3
Vesting of restricted stock		-		-		-									-						-
Stock-based compensation - restricted stock																												3															3
Foreign currency translation adjustments									(1,691	)											(1,691	)									(1,691	)											(1,691	)
Balance – September 30, 2022		20,568,210	$	2,057	$	187,181		$	(4,842	)	$	(47,727	)	$	(21,480	)	$	127		$	115,316			20,568,210	$	2,057	$	187,181		$	(4,842	)	$	(47,727	)	$	(21,480	)	$	127		$	115,316

Balance – June 30, 2023																								20,586,045	$	2,059	$	187,758		$	(3,846	)	$	(44,957	)	$	(21,484	)	$	145		$	119,675
Net income																																		1,330						(27	)		1,303
Stock option exercises																								160,501		16		963									-						979
Stock-based compensation – stock options																												130															130
Stock-based compensation - restricted stock																												1															1
Foreign currency translation adjustments																															(330	)											(330	)
Balance – September 30, 2023																								20,746,546	$	2,075	$	188,852		$	(4,176	)	$	(43,627	)	$	(21,484	)	$	118		$	121,758

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

ULTRALIFE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands except share and per share amounts)

(Unaudited)

1.	*BASIS OF PRESENTATION*

The accompanying unaudited consolidated financial statements of Ultralife Corporation and its subsidiaries (the “Company” or “Ultralife”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and notes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the consolidated financial statements have been included. Results for interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the consolidated financial statements and related notes thereto contained in our Form 10-K for the year ended December 31, ~~2021.~~2022.

The December 31, ~~2021~~2022 consolidated balance sheet information referenced herein was derived from audited financial statements but does not include all disclosures required by GAAP.

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

Significant Accounting Policies

~~We regularly review of our accounting policies~~During the quarter ended June 30, 2023, in consultation with third party experts, the Company completed an analysis to determine and ~~make modifications as necessary to align with new accounting standards and changing business conditions. Accordingly,~~verify its eligibility for the ~~accounting policies below have been updated during the current year. Reference should be made to Note 1 to the consolidated financial statements in our 2021 Annual Report on Form 10-K for all other~~Employee Retention Credit (“ERC”), which is a refundable tax credit against certain employment taxes under Section 2301 of the ~~Company’s significant accounting policies.~~

Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) and the American Rescue Plan of 2021, and filed the necessary amended payroll tax forms with the Internal Revenue ~~Recognition:~~

~~Revenues are generated from~~Service to claim a refund for the ~~sale~~credit. The ERC refund receivable of ~~products. Performance obligations are met and revenue~~$1,544 is recognized upon transfer of control to the customer, which is generally upon shipment. When contract terms require transfer of control upon delivery at a customer’s location, revenue is recognized on the date of delivery. For products shipped under vendor managed inventory arrangements, revenue is recognized and billed when the product is consumed by the customer, at which point control has transferred and there are no further obligations by the Company. Revenue is measured as the amount of consideration we expect to receiveincluded in exchange for shipped product. Sales, value-added and other taxes billed and collected from customers are excluded from revenue. Customers, including distributors, do not have a general right of return.

Separately priced extended warranty contracts are offered on certain products. Extended warranties are treated as separate performance obligations and recognized to revenue evenly over the term of the respective contract. Revenue not yet recognized on extended warranty contracts is recorded as deferred revenue on the consolidated balance sheet.

For customer contracts with an original expected duration of less than one year, we apply 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.

~~Warranties:~~

We generally offer standard warranties against product defects. We also offer separately priced extended warranty contracts on certain products. Warranty costs expected to be incurred are estimated based on the Company’s experience and recorded as costs of products sold. Standard warranty costs are recognized upon product sale. Extended warranty costs are recognized over the term of the contract. Provision for warranty costs is recorded in accruedprepaid expenses and other current ~~liabilities and other noncurrent liabilities~~assets on our consolidated balance sheet ~~based~~as of September 30, 2023, and the benefit is recognized as other income on our consolidated statement of income for the ~~duration of the warranty.~~nine-month period ended September 30, 2023.

~~Recent~~Recently Adopted Accounting Guidance ~~Not Yet Adopted~~

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance iswas 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~~adoption of this new accounting standard ~~will~~did not have a material impact on our consolidated financial statements.

2.	*~~ACQUISITION~~*

~~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.

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

The purchase price allocation was adjusted during the nine-month period ended September 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 September 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 is expected to bring to the Company and the revenue growth expected to occur over time attributable to increased market penetration from future new products and customers. The goodwill acquired in connection with the acquisition is not deductible for income tax purposes.

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

Annual Amortization

Estimated
Fair Value

Amortization
Period (Years)

Year
1

Year
2

Year
3

Year
4

Year
5

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

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 September 30, 2022, Excell contributed revenue of $6,871 and net income of $398, inclusive of amortization expense of $181 on acquired identifiable intangible assets. For the nine months ended September 30, 2022, Excell contributed revenue of $19,898 and net income of $1,112~~, inclusive of amortization expense of $545 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.

3.	*DEBT*

On December 13, 2021, Ultralife, Southwest Electronic Energy Corporation, a Texas corporation and wholly owned subsidiary of Ultralife (“SWE”), CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), Ultralife Excell Holding Corp., a Delaware corporation and wholly owned subsidiary of Ultralife (“UEHC”), Ultralife Canada Holding Corp., a Delaware corporation and wholly owned subsidiary of UEHC ~~UCHC~~(“UCHC”), and Excell Battery Corporation USA, a Texas corporation and wholly owned subsidiary of UEHC (“Excell USA”), as borrowers, entered into the Second 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 1, 2019 (the “Credit Agreement”). On November 28, 2022, Ultralife, SWE, CLB, UEHC, UCHC, Excell USA, and Excell Battery Canada ULC, a British Columbia unlimited liability corporation and wholly owned subsidiary of UCHC (“Excell Canada”), entered into that certain Third Amendment Agreement with KeyBank, to further amend the Credit Agreement to, among other things, facilitate the joinder of Excell Canada as a guarantor under the Credit Agreement and to replace the LIBOR benchmark thereunder with SOFR (the “Third Amendment Agreement”, and together with the Second Amendment Agreement and the Credit Agreement, the “Amended Credit Agreement”).

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

As of September 30, ~~2022,~~2023, the Company had ~~$8,667~~$6,667 outstanding principal on the Term Loan Facility, $2,000 of which is included in current portion of long-term debt on the ~~consolidated~~ balance sheet, and ~~$14,330~~$19,580 outstanding on the Revolving Credit Facility. As of September 30, ~~2022,~~2023, total unamortized debt issuance costs of ~~$123,~~$139, including placement, renewal and legal fees associated with the Amended Credit Agreement, are classified as a reduction of long-term debt on the balance sheet. Debt issuance costs are amortized to interest expense over the 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 equal consecutive monthly payments commencing on 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 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 30, 2025. The Company may voluntarily prepay principal amounts outstanding at any time subject to certain restrictions.

In addition to the customary affirmative and negative covenants, the Company must maintain a ~~consolidated senior leverage ratio,~~Consolidated Senior Leverage Ratio, as defined in the Amended Credit Agreement, of equal to or less than 3.5 to 1.0 for the 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, 2023 and thereafter. The Company was in full compliance with its covenants under the Amended Credit Agreement as of September 30, 2023.

Borrowings under the Amended Credit Facilities are secured by substantially all the assets of the Company and its subsidiaries.

~~Interest will accrue~~Upon the effectiveness of the Third Amendment Agreement, interest accrues on outstanding indebtedness under the Amended Credit Facilities at the ~~Base~~Daily Simple SOFR Rate, ~~or the Overnight LIBOR Rate, as selected by the Company,~~plus an index spread adjustment of 0.10%, plus the applicable margin. The ~~Base Rate is the highest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 50 basis points, and (c) the Overnight LIBOR Rate plus one~~ ~~hundred~~ ~~basis points. The~~ applicable margin ranges ~~from~~ ~~zero~~ ~~to negative 50 basis points for the Base Rate and~~ from 185 to 215 basis points ~~for the Overnight LIBOR Rate~~ and ~~are~~is 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 fee of 0.15% to 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.

Future minimum principal repayment obligations on our Amended Credit Facilities as of September 30, 2023 are as follows:

2023	$	500
2024		2,000
2025		21,580
2026		2,000
2027		167
Thereafter		0
Total	$	26,247

4.3.

EARNINGS PER SHARE

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

For the three-month period ended September 30, 2023, there were 677,029 outstanding stock options and 2,500 unvested restricted stock awards included in the calculation of diluted weighted average shares outstanding, as such securities were dilutive, resulting in 65,275 potential common shares included in the calculation of diluted EPS. There were 411,583 outstanding stock options for the three-month period ended September 30, 2023 not included in EPS as the effect would be anti-dilutive

For the comparable three-month period ended September 30, 2022, there no were no outstanding stock awards included in the calculation of diluted weighted average shares outstanding and no potential common shares included in the calculation of diluted EPS, as no securities were dilutive. There were 1,202,076 outstanding stock options and 5,000 unvested restricted stock awards ~~not included in the calculation of diluted EPS~~ for the three-month period ended September 30, 2022 not included in EPS as the effect would be ~~antidilutive.~~

For the comparable three-month period ended September 30, 2021, there were no outstanding stock awards included in the calculation of diluted weighted average shares outstanding and no potential common shares included in the calculation of diluted EPS, as no securities were dilutive. There were 1,064,656 outstanding stock options and 14,164 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.anti-dilutive.

For the nine-month period ended September 30, ~~2022,~~2023, there were ~~128,665~~22,165 outstanding stock options and ~~5,000 outstanding~~2,500 unvested restricted stock awards included in the calculation of diluted weighted average shares outstanding, as such securities were dilutive, resulting in ~~22,203~~2,441 potential common shares included in the calculation of diluted EPS. There were 1,066,447 outstanding stock options for the nine-month periods ended September 30, 2023 not included in EPS as the effect would be anti-dilutive.

For the comparable nine-month period ended September 30, ~~2021,~~2022, there were ~~598,489~~128,665 outstanding stock options and ~~14,164 outstanding~~5,000 unvested restricted stock awards included in the calculation of diluted ~~weighted average shares outstanding, as such securities were dilutive,~~EPS, resulting in ~~179,951~~22,203 potential common shares included in the calculation of diluted EPS. There were 1,073,411 ~~and 466,167~~ outstanding stock options ~~not included in the calculation of diluted weighted average shares outstanding~~ for the nine-month ~~periods~~period ended September 30, 2022 ~~and September 30, 2021, respectively,~~not included in EPS as the effect would be ~~antidilutive.~~anti-dilutive.

5.4.

SUPPLEMENTAL BALANCE SHEET INFORMATION

Fair Value Measurements and Disclosures

The fair value of financial instruments approximated their carrying values at September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. 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.

Cash

The composition of the Company’s cash was as follows:

	September 30,		December 31,
	2022		2021		September 30, 2023		December 31, 2022
Cash	$	4,978	$	8,329	$	9,223	$	5,634
Restricted cash		73		84		78		79
Total	$	5,051	$	8,413	$	9,301	$	5,713

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, restricted cash included ~~$73and $~~84,$78 and $79, respectively, of euro-denominated deposits withheld by the Dutch tax authorities and 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 of cash flows.

Inventories, Net

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

	September 30,		December 31,
	2022		2021		September 30, 2023		December 31, 2022
Raw materials	$	28,485	$	21,660	$	31,516	$	29,200
Work in process		3,215		4,227		4,342		2,757
Finished goods		9,069		7,302		10,776		9,235
Total	$	40,769	$	33,189	$	46,634	$	41,192

Property, Plant and Equipment, Net

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

	September 30,			December 31,
	2022			2021			September 30, 2023			December 31, 2022
Land	$	1,273		$	1,273		$	1,273		$	1,273
Buildings and leasehold improvements		15,483			15,442			15,934			15,572
Machinery and equipment		63,724			63,780			57,164			63,981
Furniture and fixtures		2,787			2,588			2,822			2,845
Computer hardware and software		7,589			7,579			7,807			7,744
Construction in process		1,041			761			1,709			1,245
		91,897			91,423			86,709			92,660
Less: Accumulated depreciation		(69,999	)		(68,218	)		(65,543	)		(70,944	)
Property, plant and equipment, net	$	21,898		$	23,205		$	21,166		$	21,716

Depreciation expense for property, plant and equipment was as follows:

Three-month period ended

Nine-month period ended

September 30,

September 30,

September 30,

September 30,

2022

2021

2022

2021

Depreciation expense
$ 815 $ 700 $ 2,450 $ 2,160

Three-month period ended

Nine-month period ended

September 30,
2023

September 30,
2022

September 30,
2023

September 30,
2022

Depreciation expense
$ 760 $ 815 $ 2,282 $ 2,450

Goodwill

The following table summarizes the goodwill activity by segment for the nine-month period ended September 30, ~~2022.~~2023.

Battery &
Energy

Communications

Products

Systems

Total

Balance – December 31, 2021
$ 26,575 $ 11,493 $ 38,068
Measurement period adjustment (1)
(30 ) - (30 )
Effect of foreign currency translation
(972 ) - (972 )
Balance – September 30, 2022
$ 25,573 $ 11,493 $ 37,066
Battery &
Energy
Products

Communications
Systems

Total

Balance – December 31, 2022
$ 25,935 $ 11,493 $ 37,428
Effect of foreign currency translation
(71 ) - (71 )
Balance – September 30, 2023
$ 25,864 $ 11,493 $ 37,357

~~(1)~~
~~Change for measurement period adjustment related to Excell Acquisition (Note 2).~~

Other Intangible Assets, Net

The composition of other intangible assets was:

at September 30, 2022

Accumulated

at September 30, 2023

Cost

Amortization

Net

Cost

Accumulated
Amortization

Net

Customer relationships
$ 12,781 $ 5,757 $ 7,024 $ 12,989 $ 6,451 $ 6,538
Patents and technology
5,481 5,092 389 5,564 5,260 304
Trade names
4,601 475 4,126 4,632 607 4,025
Trademarks
3,401 - 3,401 3,399 - 3,399
Other
1,500 345 1,155 1,500 496 1,004
Total other intangible assets
$ 27,764 $ 11,669 $ 16,095 $ 28,084 $ 12,814 $ 15,270

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 - 3,413
Other
1,490 18 1,472
Total other intangible assets
$ 28,454 $ 11,064 $ 17,390

at December 31, 2022

Cost

Accumulated
Amortization

Net

Customer relationships
$ 12,970 $ 5,992 $ 6,978
Patents and technology
5,557 5,171 386
Trade names
4,629 522 4,107
Trademarks
3,404 - 3,404
Other
1,500 454 1,046
Total other intangible assets
$ 28,060 $ 12,139 $ 15,921

The change in the cost of total intangible assets from December 31, ~~2021~~2022 to September 30, ~~2022~~2023 is ~~a result of measurement period adjustments for the Excell Acquisition (Note 2) and~~ the effect of foreign currency translations.

Amortization expense for other intangible assets was as follows:

Three-month period ended

Nine-month period ended

September 30,

September 30,

September 30,

September 30,

Three-month period ended

Nine-month period ended

2022

2021

2022

2021

September 30,
2023

September 30,
2022

September 30,
2023

September 30,
2022

Amortization included in:
Selling, general and administrative
$ 203 $ 295 $ 591 $ 895
Research and development
$ 23 $ 27 $ 74 $ 93 24 23 72 74
Selling, general and administrative
295 121 895 365
Total amortization expense
$ 318 $ 148 $ 969 $ 458 $ 227 $ 318 $ 663 $ 969

6.5.
STOCK-BASED COMPENSATION

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

Three-month period ended

Nine-month period ended

September 30,

September 30,

September 30,

September 30,

Three-month period ended

Nine-month period ended

2022

2021

2022

2021

September 30,
2023

September 30,
2022

September 30,
2023

September 30,
2022

Stock options
$ 176 $ 131 $ 538 $ 468 $ 130 $ 176 $ 421 $ 538
Restricted stock grants
3 11 14 44
Restricted stock
1 3 3 14
Total
$ 179 $ 142 $ 552 $ 512 $ 131 $ 179 $ 424 $ 552

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 30, ~~2022,~~2023, there was ~~$393~~$314 of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of ~~1.0~~0.9 years.

The following table summarizes stock option activity for the nine-month period ended September 30, ~~2022:~~2023:

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
11,500 4.49
Exercised
(59,500 ) 3.82
Forfeited or expired
(56,748 ) 6.63
Outstanding at September 30, 2022
1,202,076 $ 7.01 3.81 $ 70
Vested and expected to vest at September 30, 2022
1,119,892 $ 7.04 3.67 $ 70
Exercisable at September 30, 2022
803,774 $ 7.22 2.82 $ 67

Number of Shares

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (years)

Aggregate Intrinsic Value

Outstanding at January 1, 2023
1,425,693 $ 6.72
Granted
12,500 $ 4.07
Exercised
(204,891 ) $ 5.71
Forfeited or expired
(144,690 ) $ 5.01
Outstanding at September 30, 2023
1,088,612 $ 7.11 3.54 $ 2,898
Vested and expected to vest at September 30, 2023
1,009,489 $ 7.20 3.37 $ 2,598
Exercisable at September 30, 2023
703,529 $ 7.79 2.36 $ 1,402

Cash received from stock option exercises under our stock-based compensation plans for the three-month periods ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022 was $3$979 and ~~$84,~~$3, respectively. Cash received from stock option exercises under our stock-based compensation plans for the nine-month periods ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022 was ~~$116~~$1,041 and ~~$398,~~$116, respectively.

Outstanding restricted shares vest in equal annual installments over three~~(3)~~ (3) years. ~~There were 5,000 unvested restricted shares outstanding as of September 30, 2022.~~ Unrecognized compensation cost related to ~~these~~outstanding restricted shares ~~was $4~~ at September 30, ~~2022, which is expected to be recognized over a weighted average period of 1.1 years.~~2023 was $0.

7.6.
INCOME TAXES

Our effective tax rate for the nine-month periods ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022 was ~~259.1%~~28.1% and ~~24.4%~~259.1%, respectively. The period-over-period change was primarily attributable to the geographic mix of our operating results and the larger ~~effect~~impact of ~~permanent and~~ discrete adjustments in the ~~current~~prior year.

As of December 31, ~~2021,~~2022, we have domestic net operating loss (“NOL”) carryforwards of ~~$44,716,~~$40,952, which expire ~~2022 thru 2037,~~2025 through 2035, and domestic tax credits of ~~$2,239,~~$2,600, which expire 2028 ~~thru 2039,~~through 2042, available to reduce future taxable income. As of September 30, ~~2022,~~2023, management has concluded it is more likely than not that these domestic NOL and credit carryforwards will be fully utilized.

As of September 30, ~~2022,~~2023, for certain past operations in the U.K., we continue to report a valuation allowance for NOL carryforwards of approximately $10,000, nearly all of which can be carried forward indefinitely. Utilization of the net operating losses may be limited due to the change in the past U.K. operation and cannot currently be used to reduce taxable income at our other U.K. subsidiary, Accutronics Ltd. There are no other deferred tax assets related to the past U.K. operations.

As of September 30, ~~2022,~~2023, 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 30, ~~2022,~~2023, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations, other than earnings generated in the U.K.

There were no unrecognized tax benefits related to uncertain tax positions at September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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 with no material adjustments identified.~~ Our U.S. tax matters for ~~2019-2021~~2019-2022 remain subject to IRS examination. Our U.S. tax matters for ~~2002~~2005~~, 2005-2007~~-2007 and 2011-2015 also remain subject to IRS examination due to the remaining availability of ~~NOL~~net operating loss carryforwards generated in those years. Our U.S. tax matters for ~~2002~~2005~~, 2005-2007~~-2007 and ~~2011-2021~~2011-2022 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years ~~2011~~2013 through ~~2021~~2022 remain subject to examination by the respective foreign tax jurisdiction authorities.

10

8.7.
OPERATING LEASES

The Company has operating leases predominantly for operating facilities. As of September 30, ~~2022,~~2023, the remaining lease terms on our operating leases range from approximately one (1) year to ~~ten~~ ~~(10)~~eight (8) years. Lease terms include renewal options reasonably certain of exercise. There is no transfer of title or option to purchase the leased assets upon expiration. There are no residual value guarantees or material restrictive covenants.

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

Three months ended

Nine months ended

September
30, 2022

September
30, 2021

September
30, 2022

September
30, 2021

Operating lease cost
$ 216 $ 188 $ 674 $ 564
Variable lease cost
22 25 69 57
Total lease cost
$ 238 $ 213 $ 743 $ 621

Three months ended

Nine months ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Operating lease cost
$ 252 $ 216 $ 732 $ 674
Variable lease cost
28 22 85 69
Total lease cost
$ 280 238 $ 817 $ 743

Supplemental cash flow information related to leases was as follows:

Nine-month period ended

Nine-month period ended September 30,

September
30, 2022

September
30, 2021

2023

2022

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases
$ 676 $ 550 $ 762 $ 676
Right-of-use assets obtained in exchange for lease liabilities:
$ 310 $ -

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

Balance sheet classification

September
30, 2022

December
31, 2021

Balance sheet classification

September 30, 2023

December 31, 2022

Assets:

Operating lease right-of-use asset
Other noncurrent assets
$ 1,861 $ 2,581
Other noncurrent assets
$ 1,914 $ 2,187

Liabilities:

Current operating lease liability
Accrued expenses and other current liabilities
$ 824 $ 867
Accrued expenses and other current liabilities
$ 793 $ 895
Operating lease liability, net of current portion
Other noncurrent liabilities
1,064 1,743
Other noncurrent liabilities
1,087 1,307
Total operating lease liability
Total operating lease liability
$ 1,888 $ 2,610
Total operating lease liability
$ 1,880 $ 2,202

Weighted-average remaining lease term (years)
Weighted-average remaining lease term (years)
4.2 4.5
Weighted-average remaining lease term (years)
4.5 4.7

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

Future minimum lease payments as of September 30, ~~2022~~2023 are as follows:

Maturity of operating lease liabilities

2022
$ 212
2023
840 $ 258
2024
430 642
2025
128 306
2026 129 241
2027 129 217
Thereafter 264 426
Total lease payments
2,132 2,090
Less: Imputed interest
(244 ) (210 )
Present value of remaining lease payments
$ 1,888 $ 1,880

9.8.
COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of September 30, ~~2022,~~2023, we have made commitments to purchase approximately ~~$624~~$925 of production machinery and equipment.

Product Warranties

We ~~generally offer standard warranties against product defects. We also offer separately priced extended~~estimate future warranty ~~contracts on certain products. Warranty~~ costs ~~expected~~ to be incurred for product failure rates, material usage and service costs in the development of our warranty obligations. Estimated future costs are ~~estimated~~ based on ~~the Company’s~~actual past experience and ~~recorded~~are generally estimated as ~~costs~~a percentage of ~~products sold. Standard warranty costs are recognized upon product sale. Extended warranty costs are recognized~~sales over the ~~term~~warranty period. Changes in our product warranty liability during the first nine months of ~~the contract.~~ 2023 and 2022 were as follows:

Nine-month period ended September 30,

Nine-month period ended September 30,

2022

2021

2023

2022

Accrued warranty obligations – beginning
$ 133 $ 149 $ 323 $ 133
Accruals for warranties issued
247 123
260
247
Settlements made
(94 ) (143 ) (98 ) (94 )
Accrued warranty obligations – ending
$ 286 $ 129 $
485
$ 286

Contingencies and Legal Matters

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

~~10.~~9.
REVENUE RECOGNITION

Revenues are generated from the sale of products. Performance obligations are met and revenue is recognized upon transfer of control to the customer, which is generally upon shipment. When contract terms require transfer of control upon delivery at a customer’s location, revenue is recognized on the date of delivery. For products shipped under ~~vendor managed~~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.

12
Separately priced extended warranty contracts are offered on certain Communications Systems products for a duration of up to eight (8) years. Extended warranties are treated as separate performance obligations and recognized to revenue evenly over the term of the respective contract. Revenue not yet recognized on extended warranty contracts is recorded as deferred revenue on the consolidated balance sheet.

As of September 30, 2023, there was deferred revenue on extended warranty contracts of $1,121, comprised of $193 expected to be recognized as revenue within one (1) year and classified as accrued expenses and other current liabilities on our consolidated balance sheet, and $928 expected to be recognized as revenue over the remaining duration of the respective contracts and classified as other noncurrent liabilities on our consolidated balance sheet.
As of December 31, 2022, there was deferred revenue on extended warranty contracts of ~~$592 in other noncurrent liabilities~~$682, comprised of $119 expected to be recognized as revenue within one (1) year and ~~$119 in~~classified as accrued expenses and other current liabilities on our consolidated balance sheet, and $563 expected to be recognized as revenue over the remaining duration of the respective contracts and classified as other noncurrent liabilities on our consolidated balance sheet.
As of September 30, 2023 and December 31, ~~2021,~~2022, the Company had no ~~extended warranty~~ other unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, we have applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations.

~~11.~~10.
BUSINESS SEGMENT INFORMATION

We report our results in two ~~(2)~~ operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment ~~includes:~~includes Lithium 9-volt, cylindrical and various other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment ~~includes:~~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. ~~We report operating expenses as Corporate charges.~~

Three-month period ended September 30, ~~2022:~~2023:

Battery &
Energy
Products

Communications
Systems

Corporate

Total

Battery &
Energy Products

Communications
Systems

Corporate

Total

Revenues
$ 28,583 $ 4,651 $ - $ 33,234 $ 31,919 $ 7,569 $ - $ 39,488
Segment contribution
5,345 1,370 (7,301 ) (586 ) 7,728 2,046 (7,639 ) 2,135
Other income
254 254
Income tax benefit
90 90
Other expense
(386 ) (386 )
Income tax provision
(446 ) (446 )
Non-controlling interest
3 3 27 27
Net loss attributable to Ultralife
$ (239 )
Net income attributable to Ultralife
$ 1,330
Three-month period ended September 30, 2022:

Battery &
Energy Products

Communications
Systems

Corporate

Total

Revenues
$ 28,583 $ 4,651 $ - $ 33,234
Segment contribution
5,345 1,370 (7,301 ) (586 )
Other income
254 254
Income tax benefit
90 90
Non-controlling interest
3 3
Net loss attributable to Ultralife
$ (239 )

~~Three-month~~Nine-month period ended September 30, ~~2021:~~2023:

Battery &
Energy
Products

Communications
Systems

Corporate

Total

Battery &
Energy Products

Communications
Systems

Corporate

Total

Revenues
$ 20,008 $ 1,753 $ - $ 21,761 $ 94,250 $ 19,846 $ - $ 114,096
Segment contribution
4,792 316 (5,887 ) (779 ) 21,783 6,015 (21,972 ) 5,826
Other income
1 1 178 178
Income tax benefit
175 175
Income tax provision
(1,688 ) (1,688 )
Non-controlling interest
18 18 8 8
Net loss attributable to Ultralife
$ (585 )
Net income attributable to Ultralife
$ 4,324

Nine-month period ended September 30, 2022:

Battery &
Energy
Products

Communications
Systems

Corporate

Total

Revenues
$ 87,873 $ 7,860 $ - $ 95,733
Segment contribution
19,217 2,102 (21,407 ) (88 )
Other income
22 22
Income tax benefit
171 171
Non-controlling interest
- -
Net income attributable to Ultralife
$ 105
~~Nine-month period ended September 30, 2021:~~

Battery &
Energy
Products

Communications Systems

Corporate

Total

Battery &
Energy Products

Communications
Systems

Corporate

Total

Revenues
$ 64,994 $ 9,510 $ - $ 74,504 $ 87,873 $ 7,860 $ - $ 95,733
Segment contribution
16,244 3,109 (18,089 ) 1,264 19,217 2,102 (21,407 ) (88 )
Other expense
(76 ) (76 )
Income tax provision
(290 ) (290 )
Other income
22 22
Income tax benefit
171 171
Non-controlling interest
(1 ) (1 ) - -
Net income attributable to Ultralife
$ 897 $ 105

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

Commercial and Government/Defense Revenue Information:

Three-month period ended September 30, ~~2022:~~2023:

Total
Revenue

Commercial

Government/
Defense

Total
Revenue

Commercial

Government/
Defense

Battery & Energy Products
$ 28,583 $ 22,878 $ 5,705 $ 31,919 $ 24,150 $ 7,769
Communications Systems
4,651 - 4,651 7,569 - 7,569
Total
$ 33,234 $ 22,878 $ 10,356 $ 39,488 $ 24,150 $ 15,338
69 % 31 % 61 % 39 %

Three-month period ended September 30, ~~2021:~~2022:

Total
Revenue

Commercial

Government/
Defense

Total
Revenue

Commercial

Government/
Defense

Battery & Energy Products
$ 20,008 $ 16,579 $ 3,429 $ 28,583 $ 22,878 $ 5,705
Communications Systems
1,753 - 1,753 4,651 - 4,651
Total
$ 21,761 $ 16,579 $ 5,182 $ 33,234 $ 22,878 $ 10,356
76 % 24 % 69 % 31 %
Nine-month period ended September 30, 2023:

Total
Revenue

Commercial

Government/
Defense

Battery & Energy Products
$ 94,250 $ 73,319 $ 20,931
Communications Systems
19,846 - 19,846
Total
$ 114,096 $ 73,319 $ 40,777
64 % 36 %

Nine-month period ended September 30, 2022:

Total
Revenue

Commercial

Government/
Defense

Battery & Energy Products
$ 87,873 $ 70,154 $ 17,719
Communications Systems
7,860 - 7,860
Total
$ 95,733 $ 70,154 $ 25,579
73 % 27 %
~~Nine-month period ended September 30, 2021:~~

Total
Revenue

Commercial

Government/
Defense

Battery & Energy Products
$ 64,994 $ 46,935 $ 18,059
Communications Systems
9,510 - 9,510
Total
$ 74,504 $ 46,935 $ 27,569
63 % 37 %

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

Three-month period ended September 30, ~~2022:~~2023:

Total
Revenue

United
States

Non-United
States

Total
Revenue

United States

Non-United States

Battery & Energy Products
$ 28,583 $ 13,433 $ 15,150 $ 31,919 $ 15,926 $ 15,993
Communications Systems
4,651 3,547 1,104 7,569 4,348 3,221
Total
$ 33,234 $ 16,980 $ 16,254 $ 39,488 $ 20,274 $ 19,214
51 % 49 % 51 % 49 %

Three-month period ended September 30, ~~2021:~~2022:

Total
Revenue

United
States

Non-United
States

Total
Revenue

United States

Non-United States

Battery & Energy Products
$ 20,008 $ 7,941 $ 12,067 $ 28,583 $ 13,433 $ 15,150
Communications Systems
1,753 1,249 504 4,651 3,547 1,104
Total
$ 21,761 $ 9,190 $ 12,571 $ 33,234 $ 16,980 $ 16,254
42 % 58 % 51 % 49 %
Nine-month period ended September 30, 2023:

Total
Revenue

United States

Non-United States

Battery & Energy Products
$ 94,250 $ 47,088 $ 47,162
Communications Systems
19,846 11,170 8,676
Total
$ 114,096 $ 58,258 $ 55,838
51 % 49 %

Nine-month period ended September 30, 2022:

Total
Revenue

United
States

Non-United
States

Battery & Energy Products
$ 87,873 $ 41,303 $ 46,570
Communications Systems
7,860 6,609 1,251
Total
$ 95,733 $ 47,912 $ 47,821
50 % 50 %
~~Nine-month period ended September 30, 2021:~~

Total
Revenue

United
States

Non-United
States

Total
Revenue

United States

Non-United States

Battery & Energy Products
$ 64,994 $ 32,344 $ 32,650 $ 87,873 $ 41,303 $ 46,570
Communications Systems
9,510 4,670 4,840 7,860 6,609 1,251
Total
$ 74,504 $ 37,014 $ 37,490 $ 95,733 $ 47,912 $ 47,821
50 % 50 % 50 % 50 %

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

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report contains certain forward-looking statements and information that are based on the beliefs of management as well as assumptions made by and information currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, changes in economic conditions including inflation and supply chain disruptions affecting our business, revenues and earnings adversely; the continued impact of COVID-19 causing delays in the manufacture and ~~the related supply chain disruptions on~~delivery of our ~~business, operating results and financial condition;~~mission critical products to end customers; our reliance on certain key customers; our efforts to develop new commercial applications for our products; reduced U.S. and foreign military spending including the uncertainty associated with government budget approvals; the unique risks associated with our ~~efforts to develop new commercial applications for~~China operations; breaches in information systems security and other disruptions in our ~~products;~~information technology systems; potential disruptions in our supply of raw materials and components; 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; ~~potential costs attributable to the warranties we supply with our products and services;~~ safety risks, ~~related to the nature of our products,~~ including the risk of fire; variability in our quarterly and annual results and the price of our common stock; rising interest rates increasing the cost of our ~~entrance into new end-markets which could lead~~variable borrowings; purchases by our customers of product quantities not meeting the volume expectations in our supply agreements; potential costs attributable to ~~additional financial exposure;~~the warranties we supply with our products and services; our inability to comply with changes to the regulations for the shipment of our products; our ~~customers’ demand falling short of volume expectations in~~ability to utilize our ~~supply agreements;~~net operating loss carryforwards; our ~~exposure~~entrance into new end-markets which could lead to ~~foreign currency fluctuations;~~additional financial exposure; negative publicity concerning Lithium-ion batteries; possible impairments of our goodwill and other intangible assets; our ~~ability~~exposure to ~~utilize our net operating loss carryforwards;~~foreign currency fluctuations; 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; exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; known and unknown environmental matters; possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; our ability to comply with government regulations regarding the use of “conflict minerals”; technological innovations ~~by our competitors~~ 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,” “may,” “will,” “should,” “would,” “could,” or words of similar import are intended to identify forward-looking statements. For further discussion of certain of the matters described above and other risks and uncertainties, see Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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~~forward looking statements ~~contained~~ in this ~~Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, 2021~~report to reflect new information or risks, future events or other developments.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the consolidated financial statements and notes thereto in Part I, Item 1 of this Form 10-Q, and the consolidated financial statements and notes thereto and risk factors in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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

2017

General

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

We sell our products worldwide through a variety of trade channels, including original equipment manufacturers (“OEMs”), industrial and defense supply distributors, and directly to U.S. and foreign defense departments. We enjoy strong name recognition in our markets under our Ultralife® Batteries, Lithium Power®, McDowell Research®, AMTI^TM, ABLE^TM, ACCUTRONICS™, ACCUPRO™, ENTELLION™, SWE Southwest Electronic Energy Group™, SWE DRILL-DATA™, SWE SEASAFE™, Excell Battery ~~Group~~Group™ and Criterion ~~Gauge~~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:~~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:~~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~~charges (See Note 1110 in the notes to ~~the~~ consolidated financial ~~statements of this Form 10-Q for further information.~~statements.)

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.

~~COVID-19~~
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 following the protocols established by public health officials and on meeting the demand of our customers. We have maintained normal business operations at all our facilities with the exception of the well-publicized shutdowns in China which impacted our Shenzhen facility in the first quarter of 2022. The COVID-19 related supply chain disruptions including increased lead times on key components 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, severity 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 ramifications from 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 pandemic may cause. Consequently, there may be adverse effects 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 business.

Overview

Consolidated revenues of $39,488 for the three-month period ended September 30, 2023, increased by $6,254 or 18.8%, over $33,234 for the three-month period ended September 30, 2022, reflecting increases in government/defense sales of 48.1% and commercial sales of 5.6%. Sales for our Battery & Energy Products segment increased ~~by $11,473 or 52.7%, over $21,761~~11.7% from $28,583 for the ~~three-month period ended September 30, 2021, reflecting the revenues~~third quarter of Excell Battery Group (“Excell”) acquired on December 13, 2021, and increased sales in our government/defense, oil & gas and industrial battery markets, partially offset by lower revenues for medical which was due2022 to ~~delayed sales caused by component shortages. Government/defense revenues of $10,356 increased $5,174 or 99.8% over the 2021 period, and excluding Excell, commercial revenues of $16,007~~$31,919 for the third quarter ~~ended September 30, 2022 decreased $572 or 3.5%~~of 2023, and sales for our Communications Systems segment increased 62.7% from ~~the year-earlier period. Including the operations of Excell, commercial revenues were $22,878.~~$4,651 to $7,569.

Gross profit was ~~$6,715,~~$9,774, or ~~20.2%~~24.8% of revenue, for the three-month period ended September 30, ~~2022,~~2023, compared to ~~$5,108,~~$6,715, or ~~23.5%~~20.2% of revenue, for the same quarter a year ago. The ~~330-basis~~460-basis point ~~decline~~improvement primarily ~~reflects incremental costs in 2022~~resulted from higher factory volume leading to greater cost absorption, efficiencies associated with ~~supply chain disruptions including component cost inflation, manufacturing inefficiencies resulting from prolonged lead times~~improved level-loading of production and ~~logistics delays, and the transitioning of new products to high volume production.~~price realization.

Operating expenses increased to $7,639 for the three-month period ended September 30, 2023, compared to $7,301 for the three-month period ended September 30, ~~2022,~~2022. The increase of $338 or 4.6% was primarily attributable to higher variable compensation, including Officer and Executive Team bonuses and salesforce commissions, and insurance costs in the 2023 period. Operating expenses represented 19.3% of revenues compared to ~~$5,887~~22.0% of revenues for the year-earlier period.
Operating income for the three-month period ended September 30, ~~2021. The increase~~2023 was $2,135, or 5.4% of $1,414 or 24.0% was primarily attributable to our acquisition of Excell which contributed operating expenses of $1,115. Excluding Excell, operating expenses increased by $299 or 5.1% reflecting increased new product development costs, travel expenses and sales commissions, as well as inflationary cost increases. Operating expenses as a percentage of sales decreased 500 basis points from 27.0% for the third quarter of 2021 to 22.0% for the current quarter highlighting our continued control over discretionary spending and positive sales leverage.
~~Operating loss for the three-month period ended September 30, 2022 was $586,~~revenues, compared to a loss of ~~$779,~~$586 for the year-earlier period. The ~~decrease~~increase in ~~the~~ operating ~~loss~~income resulted from ~~higher sales from both of our business segments, offset~~the 18.8% increase in ~~large part~~revenues leveraged by ~~a reduction~~the 460-basis point improvement in gross margin ~~due~~and the 270-basis point improvement in operating expenses to ~~increased costs resulting from supply chain disruptions, including inflationary cost pressures and prolonged component lead times and logistical delays causing manufacturing inefficiencies.~~revenues ratio.
18

Net ~~loss~~income attributable to Ultralife Corporation was $1,330 or $0.08 per share – basic and diluted on a GAAP basis, compared to a net loss of $239 or ~~($0.01)~~$0.01 per share – basic and diluted for the ~~three-month period ended September 30, 2022, compared to net loss attributable to Ultralife~~third quarter of ~~$585, or ($0.04) per share –~~2022. Adjusted EPS was $0.10 - basic and diluted for the ~~three-month period ended September 30, 2021. The reduction~~third quarter of ~~net~~2023, compared to a loss ~~resulted from higher revenues in~~$0.03 - basic and diluted for the 2022 ~~quarter.~~period. Adjusted EPS excludes the provision for deferred taxes of $357 which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. See the section “Adjusted EPS” on Page 24 for a reconciliation of adjusted EPS to EPS.

Adjusted EBITDA, defined as net income (loss) attributable to Ultralife Corporation before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expenses/income that we do not consider reflective of our ongoing operations, amounted to $3,480, or 8.8% of revenues, for the third quarter of 2023, compared to $1,255 or 3.8% of revenues, for the third quarter of ~~2022, compared to $283, or 1.3% of revenues, for the third quarter of 2021.~~2022. See the section “Adjusted EBITDA” ~~beginning~~ on Page 2623 for a reconciliation of adjusted EBITDA to net income attributable to ~~Ultralife.~~Ultralife Corporation.

~~With~~As we close out 2023 with a strong backlog, ~~now over $100,000,~~ we are well positioned ~~well for near-term revenue increases~~to continue profitable growth and ~~remain committed~~ to ~~advancing several transformational projects~~generate incremental cashflow to reduce our acquisition debt and further invest in our businesses, including new product ~~opportunities to drive long-term revenue growth.~~development, strategic capital expenditures and accretive acquisitions.

Results of Operations

Three-Month Periods Ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022

Revenues. Consolidated revenues for the three-month period ended September 30, ~~2022~~2023 were ~~$33,234,~~$39,488, an increase of ~~$11,473,~~$6,254, or ~~52.7%~~18.8%, over ~~$21,761~~$33,234 for the three-month period ended September 30, ~~2021.~~2022. Overall, government/defense sales increased ~~99.8%, or $5,174,~~48.1% and commercial sales increased 38.0%, or $6,299, from the 2021 period. Revenues for the 2022 period include the results of Excell which was acquired by the Company on December 13, 2021. Our revenue backlog, consisting of committed firm orders, was $106,200 at September 30, 2022, an increase of 34.1% over the backlog at June 30, 2022 and 154% over the backlog at September 30, 2021.5.6%.

Battery & Energy Products revenues increased ~~$8,575,~~$3,336, or ~~42.9%~~11.7%, from ~~$20,008 for the three-month period ended September 30, 2021 to~~ $28,583 for the three-month period ended September 30, ~~2022. The increase was attributable~~2022 to the $6,870 revenue contribution from the acquisition of Excell, coupled with a 66.4%, or $2,276, increase in government/defense sales, a 7.4%, or $318, increase in oil & gas market sales and a 2.4%, or $116, increase in industrial market sales, partially offset by a 12.1%, or $904, decrease in medical sales. Net sales for this segment, excluding the results of Excell, increased 8.5%, or $1,706. The increase in government/defense sales primarily resulted from strong order flow from a large global defense prime contractor. The increase in oil & gas market sales was driven by higher demand for our battery packs for downhole drilling in both U.S. and international markets. The decline in medical sales resulted from component shortages in the current quarter to fulfill the increased demand for our products. The revenue backlog for this segment is now at its highest level in our Company’s history.
22

~~Communications Systems revenues increased $2,898, or 165.3%, from $1,753~~$31,919 for the three-month period ended September 30, ~~2021~~2023, reflecting increases of $1,272 or 5.6% in commercial sales and $2,064 or 36.2% in government/defense sales. The increase in commercial sales was driven by a $2,488 or 37.9% increase in medical sales reflecting an increased demand for our batteries used in ventilators, respirators, infusion pumps and other medical devices, partially offset by a $1,216 or 7.5% decrease in industrial and other commercial sales primarily attributable to 9-Volt and our new Thionyl Chloride and thin cell battery cells for which sales are expected to rebound in future periods based on the timing of purchase orders placed by our customers.
Communications Systems sales increased $2,918, or 62.7%, from $4,651 for the three-month period ended September 30, ~~2022. This~~2022 to $7,569 for the three-month period ended September 30, 2023. The increase iswas primarily attributable to ~~our receipt~~shipments of ~~components~~vehicle-amplifier adaptor orders to ~~commence~~a global defense contractor for the ~~fulfillment~~U.S. Army and of ~~modest shipments under various large program awards.~~integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor for an ongoing allied country government/defense modernization program.
Our total backlog at September 30, 2023 was $101,087 with approximately $35,100 due to ship over the remaining three months of 2023. Total backlog decreased $5,066 or 4.8% compared to the backlog of $106,153 for the same period in 2022 primarily due to the timing of certain expected orders.

Cost of Products Sold / Gross Profit. ~~Consolidated cost~~Cost of products sold totaled ~~$26,519~~$29,714 for the quarter ended September 30, ~~2022,~~2023, an increase of ~~$9,866,~~$3,195, or ~~59.2%~~12.0%, from the ~~$16,653~~$26,519 reported for the same three-month period a year ago. Consolidated cost of products sold as a percentage of total revenue ~~increased~~decreased from ~~76.5% for the three-month period ended September 30, 2021 to~~ 79.8% for the three-month period ended September 30, ~~2022. Correspondingly, consolidated gross margin decreased from 23.5%~~2022 to 75.2% for the three-month period ended September 30, ~~2021, to~~2023. Correspondingly, consolidated gross margin increased from 20.2% for the three-month period ended September 30, 2022, to 24.8% for the three-month period ended September 30, 2023, primarily reflecting ~~increased costs attributable~~higher factory volume leading to ~~ongoing component~~greater cost ~~inflation, manufacturing inefficiencies related to prolonged lead times~~absorption, efficiencies associated with improved level-loading of production and ~~logistics delays, and the incremental costs of transitioning new products to higher volume production.~~price realization.

For our Battery & Energy Products segment, gross profit for the third quarter of ~~2022~~2023 was ~~$5,345,~~$7,728, an increase of ~~$553~~$2,383 or ~~11.5% over~~44.6% from gross profit of ~~$4,792~~$5,345 for the third quarter of ~~2021.~~2022. Battery & Energy Products’ gross margin of ~~18.7% decreased~~24.2% increased by ~~530 basis~~550-basis points from the ~~24.0%~~18.7% gross margin for the year-earlier period, primarily reflecting ~~rapid cost inflation on components not fully aligned with customer~~higher factory volume, efficiencies resulting from improved level-lading of production across the quarter and improved price increases, manufacturing inefficiencies associated with component availability, prolonged lead times and related logistics delays impacting timely deliveries, and incremental costs associated with the transition of new products to higher volume production.realization.

For our Communications Systems segment, gross profit for the third quarter of ~~2022~~2023 was ~~$1,370~~$2,046 or ~~29.5%~~27.0% of revenues, compared to gross profit of ~~$316~~$1,370 or ~~18.0%~~29.5% of revenues for the third quarter of ~~2021.~~2022. The ~~increase~~250-basis point decrease in gross margin was primarily due to inefficiencies caused by component delivery delays from certain vendors and sales product mix, partially offset by the higher factory ~~volume and favorable sales mix.~~volume.
19

Operating ~~Expenses.~~Expense. Consolidated operating expenses for the three-month period ended September 30, 2022 were $7,301, an increase of $1,414 or 24.0% from the $5,887 for the three-month period ended September 30, 2021. The increase is primarily attributable to the acquisition of Excell, which contributed operating expenses of $1,115 in the third quarter, including $181 of intangible asset amortization. Excluding Excell, operating expenses increased $299 or 5.1% due to increased new product development, travel, and sales commissions, as well as inflationary cost increases. Both periods reflected continued tight control over discretionary spending.
Overall, operating expenses ~~as a percentage~~were 19.3% of ~~revenues were 22.0%~~revenue for the quarter ended September 30, ~~2022~~2023, compared to ~~27.1%~~22.0% of revenue for the quarter ended September 30, ~~2021 resulting from sales leverage and control over discretionary spending.~~2022. Amortization expense associated with intangible assets related to our acquisitions was $227 for the third quarter of 2023 ($203 in selling, general and administrative expenses and $24 in research and development costs), compared with $318 for the third quarter of 2022 ($295 in selling, general, and administrative expenses and $23 in research and development costs)~~, compared with $148 for the third quarter of 2021 ($121 in selling, general, and administrative expenses and $27 in research and development costs)~~. Research and development costs were $1,869 for the three-month period ended September 30, 2023, a decrease of $27 or 1.4%, from $1,896 for the three-months ended September 30, 2022. Selling, general, and administrative expenses were $5,770 for the three-month period ended September 30, 2023, an increase of $365 or 6.8% over the $5,405 for the three-month period ended September 30, 2022, ~~an increase of $173 or 10.0%, from $1,723~~primarily reflecting higher variable compensation, including Officer and Executive Team bonuses and salesforce commissions, and insurance costs.
Other (Expense) Income. Other expense totaled $386 for the ~~three-months~~three-month period ended September 30, ~~2021. The increase is largely attributable~~2023, compared to income totaling $254 for the ~~operations of Excell, acquired in December 2021,~~three-month period ended September 30, 2022. Interest and financing expense increased ~~investments in our Communications Systems business to develop new products expanding the business into select commercial markets. Selling, general, and administrative expenses increased $1,241~~$314, or ~~29.8%~~115.4%, ~~to $5,405~~from $272 for the third quarter of 2022 to $586 for the comparable period in 2023. The increase is primarily due to the financing of our acquisition of Excell in December 2021, working capital funding resulting from ~~$4,164~~the January 2023 cyberattack and rising interest rates. Miscellaneous income amounted to $200 for the third quarter of ~~2021. The increase is mostly attributable~~2023 compared to ~~the operations of Excell which contributed $1,026 of selling, general and administrative expenses, including intangible asset amortization of $181,~~$526 for the third quarter of 2022, ~~with the remainder reflecting inflationary cost increases.~~ primarily attributable to foreign exchange gains due to fluctuations in foreign currency exchange rates.
23

Income Taxes. ~~For~~The income tax provision for the ~~three-month period ended September 30, 2022, Ultralife recognized~~2023 third quarter was $446, compared to an income tax benefit of $90 for the third quarter of 2022. Our effective tax rate decreased to 25.5% for the third quarter of 2023 as compared to 27.1% for the third quarter of 2022, primarily attributable to the geographic mix of our operating results. The income tax provision for the third quarter of 2023 is comprised of ~~a $218~~an $89 current provision for taxes expected to be paid on income primarily ~~from our non-U.S. operations,~~in foreign jurisdictions, representing a cash-based effective tax rate of 5.1%, and a $357 deferred tax provision which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. For the comparable 2022 period, the income tax benefit was comprised of a $218 current tax provision and a $308 deferred ~~benefit, compared to an income~~ tax ~~benefit of $175 for~~benefit. The period over period change in the ~~three-month period ended September 30, 2021, comprised of a $43~~cash-based current ~~provision and a $218 deferred benefit. Our effective~~ tax ~~rate was 27.1% for the third quarter of 2022 as compared to 22.5% for the third quarter of 2021,~~provisions is primarily attributable to the geographic mix of our operating ~~results, including income generated in Canada by Excell for the current year.~~results. See Note 76 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q for ~~further information.~~additional information regarding our income taxes.

Net ~~Loss~~Income (Loss) Attributable to Ultralife. Net ~~loss~~income attributable to Ultralife was $1,330, or $0.08 per share – basic and diluted on a GAAP basis for the three-month period ended September 30, 2023, compared to a net loss of $239, or ~~($0.01)~~$0.01 per share – basic and diluted, for the three-month period ended September 30, ~~2022,~~2022. Adjusted EPS was $0.10 on a diluted basis for the third quarter of 2023, compared to ~~net loss attributable to Ultralife of $585, or~~ ($~~0.04) per share – basic and diluted,~~0.03) for the ~~three-month period ended September 30, 2021. The reduction in net loss is primarily attributable to higher sales~~third quarter of 2022. Adjusted EPS excludes the provision (benefit) for deferred taxes of $357 and ($308) for the 2023 and 2022 ~~quarter.~~ periods, respectively, which primarily represent non-cash charges (benefits) for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. See the section “Adjusted EPS” on Page 24 for a reconciliation of adjusted EPS to EPS.
Weighted average shares outstanding used to compute diluted earnings per share increased from ~~16,065,412 for the third quarter of 2021 to~~ 16,133,069 for the third quarter of 2022 ~~as a result~~to 16,303,139 for the third quarter of 2023. The increase is attributable to stock option exercises since the third quarter of ~~2021.~~2022 and a greater average stock price in the current quarter. Accordingly, dilutive shares of 65,275 were added to basic weighted average shares for the 2023 period compared to none for the 2022 period due to the net loss for that period.

Nine-Month Periods Ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022

Revenues. Consolidated revenues for the nine-month period ended September 30, ~~2022~~2023 were ~~$95,733,~~$114,096, an increase of ~~$21,229,~~$18,363, or ~~28.5%~~19.2%, over ~~$74,504~~$95,733 for the nine-month period ended September 30, ~~2021.~~2022. Overall, government/defense sales increased $15,198 or 59.4% and commercial sales increased ~~49.5% while government/defense sales decreased 7.2% from the 2021 period. Revenues for the 2022 period include the operations of Excell which was acquired by~~$3,165 or 4.5%. On January 25, 2023, the Company experienced a ransomware cyberattack which impacted our ability to process orders, ship products, provide services to our customers and effectively manage our sales and operating planning process over a several week period for our Newark, NY location and an even longer period for our Virginia Beach, VA location. A large portion of our time during the quarter was devoted to data restoration, systems security augmentation, and regulatory reporting of the cyberattack, all of which were successfully accomplished with no ransom paid. Management continues to work on ~~December 13, 2021.~~its cybersecurity insurance claim covering the cost of engaging external cybersecurity experts and the business interruption impact.
20

Battery & Energy Products revenues increased ~~$22,879,~~$6,377, or ~~35.2%~~7.3%, from ~~$64,994 for the nine-month period ended September 30, 2021 to~~ $87,873 for the nine-month period ended September 30, ~~2022.~~2022 to $94,250 for the nine-month period ended September 30, 2023. The increase was attributable to ~~the $19,898 revenue contribution from the operations of Excell, and~~ a ~~7.1%~~$3,165 or 4.5% increase in commercial sales ~~excluding Excell, partially offset by~~and a ~~1.9% reduction~~$3,212 or 18.1% increase in government/defense sales. The increase in commercial sales ~~excluding Excell,~~ was driven by a ~~11.0%~~$3,428 or 12.4% increase in oil & gas ~~market~~ sales reflecting the rebound in the energy sector ~~a 9.6% increase in industrial market sales including our new Thionyl Chloride and thin cell battery cells,~~ and a ~~3.9%~~$3,085 or 14.2% increase in medical battery sales due to the high demand for our batteries used in ventilators, respirators, infusion pumps and other medical devices. ~~The decline~~These increases in ~~government/defense~~commercial sales ~~was~~were partially offset by a $3,348 or 16.2% decrease in industrial and other commercial market sales primarily due to ~~supply chain disruptions experienced internally~~timing of demand for 9-Volt and by our ~~customers~~new Thionyl Chloride and thin cell battery cells which ~~pushed out sales~~are expected to rebound in future periods.

Communications Systems revenues ~~decreased $1,650,~~increased $11,986, or ~~17.4%~~152.5%, from ~~$9,510 for the nine-month period ended September 30, 2021 to~~ $7,860 for the nine-month period ended September 30, ~~2022.~~2022 to $19,846 for the nine-month period ended September 30, 2023. This ~~decrease is~~increase was primarily attributable to ~~supply chain disruptions including extended lead times~~shipments of vehicle-amplifier adaptor orders to a global defense contractor for ~~components causing delays in our shipments~~the U.S. Army and of integrated systems of amplifiers and radio vehicle mounts to ~~customers, and the push out of certain orders by our customers to future periods.~~ a major international defense contractor for an ongoing allied country government/defense modernization program.

Cost of Products Sold / Gross Profit. ~~Consolidated cost~~Cost of products sold totaled ~~$74,414~~$86,298 for the nine-month period ended September 30, ~~2022,~~2023, an increase of ~~$19,263,~~$11,884, or ~~34.9%~~16.0%, from the ~~$55,151~~$74,414 reported for the same nine-month period a year ago. Consolidated cost of products sold as a percentage of total revenue ~~increased~~decreased from ~~74.0% for the nine-month period ended September 30, 2021 to~~ 77.7% for the nine-month period ended September 30, ~~2022. Correspondingly, consolidated gross margin decreased from 26.0%~~2022 to 75.6% for the nine-month period ended September 30, ~~2021, to~~2023. Correspondingly, consolidated gross margin increased from 22.3% for the nine-month period ended September 30, 2022, to 24.4% for the nine-month period ended September 30, 2023, primarily reflecting ~~lower~~higher factory volume and favorable product mix for our Communications Systems segment, ~~incremental costs in 2022 associated with supply chain disruptions, including rapid~~tempered by the inefficiencies experienced at our Newark, NY and ~~continuous increases in~~Virginia Beach, VA facilities resulting from the cost of some key components, manufacturing inefficiencies caused by component availability, extended lead times and logistical delays impacting timely deliveries, and the transition of new products to higher volume production. January 2023 cyberattack.

For our Battery & Energy Products segment, gross profit for the first nine months of ~~2022~~2023 was ~~$19,217,~~$21,783 an increase of ~~$2,973~~$2,566 or ~~18.3%~~13.4% over gross profit of ~~$16,244~~$19,217 for the comparable ~~2021~~2022 period. Battery & Energy Products’ gross margin of ~~21.9% decreased~~23.1% increased by ~~310~~120 basis points from the ~~25.0%~~21.9% gross margin for the year-earlier period, primarily reflecting ~~rapid cost inflation on components not fully aligned with customer~~higher factory volume, more level-loaded production driving utilization and price ~~increases, manufacturing~~realization, partially offset by lingering supply chain disruptions, inefficiencies ~~associated with component availability, lead times~~resulting from the January 2023 cyberattack, disposition of certain non-conforming materials and ~~related logistics impacting timely deliveries, and incremental costs associated with~~continued investments in the transition of new products to ~~higher~~high volume production.

For our Communications Systems segment, gross profit for the first nine months of ~~2022~~2023 was ~~$2,102~~$6,015 or ~~26.7%~~30.3% of revenues, compared to gross profit of ~~$3,109~~$2,102 or ~~32.7%~~26.7% of revenues, for the comparable ~~2021~~2022 period. The ~~decline~~increase was primarily due to ~~lower~~higher factory volume ~~resulting in the under-absorption of factory costs~~ and ~~unfavorable sales~~favorable product mix ~~experienced during the first nine months of 2022.~~compared to last year’s nine-month period.
24

Operating Expenses. ~~Consolidated operating~~Operating expenses for the nine-month period ended September 30, ~~2022~~2023 were ~~$21,407,~~$21,972, an increase of ~~$3,318~~$565 or ~~18.3%~~2.6% from the ~~$18,089~~$21,407 for the nine-month period ended September 30, ~~2021.~~2022. The increase is primarily attributable to increased new product development investments, the ~~acquisition~~recording of ~~Excell, which contributed operating~~the $100 deductible on our cybersecurity insurance policy for expenses ~~of $3,258 for~~incurred associated with the ~~first nine months of 2022,~~January 2023 cyberattack and higher variable compensation, including ~~$545 of intangible asset amortization~~Officer and ~~one-time acquisition costs of $70. Excluding Excell, operating expenses increased $60 or 0.3%.~~Executive Team bonuses and salesforce commissions, and insurance costs. Both periods reflected continued tight control over discretionary spending.

Overall, operating expenses as a percentage of revenues were 19.3% for the nine-month period ended September 30, 2023, compared to 22.4% for the nine-month period ended September 30, ~~2022 compared to 24.3% for the nine-month period ended September 30, 2021.~~2022. Amortization expense associated with intangible assets related to our acquisitions was $663 for the first nine months of 2023 ($591 in selling, general and administrative expenses and $72 in research and development costs), compared with $969 for the first nine months of 2022 ($895 in selling, general, and administrative expenses and $74 in research and development costs)~~, compared with $458 for the first nine months of 2021 ($365 in selling, general, and administrative expenses and $93 in research and development costs)~~. Research and development costs were ~~$5,425~~$5,679 for the nine-month period ended September 30, ~~2022,~~2023, an increase of ~~$202~~$254 or ~~3.9%~~4.7%, from ~~$5,223~~$5,425 for the nine-months ended September 30, ~~2021.~~2022. The increase is largely attributable to an increase in new product development in our ~~acquisition of Excell.~~Communications Systems business to pursue both government/defense major programs and commercial opportunities. Selling, general, and administrative expenses ~~increased $3,116~~were $16,293 for the 2023 nine-month period, an increase of $311 or ~~24.2%, to~~1.9% over the $15,982 for the ~~first nine months of 2022 from $12,866 for the comparable 2021 period. The increase is attributable to the December 2021 acquisition of Excell which contributed $3,011 of selling, general~~year-earlier period, primarily reflecting higher variable compensation, including Officer and ~~administrative expenses, including intangible asset amortization of $545, for the 2022 period.~~ Executive Team bonuses and salesforce commissions, and insurance costs.
21

Other ~~(Income) Expense.~~Income (Expense). Other income totaled $178 for the nine-month period ended September 30, 2023, compared to other income of $22 for the nine-month period ended September 30, ~~2022 compared to other expense of $76~~2022. Other income for the ~~nine-month~~2023 period ~~ended September 30, 2021.~~includes an Employee Retention Credit for $1,544 under Section 2301 of the Coronavirus Aid, Relief and Economic Security Act which was filed with the Internal Revenue Service during the second quarter of 2023. Interest and financing expense increased ~~$419,~~$867, or ~~255.5%~~148.7%, from ~~$164 for the first nine months of 2021 to~~ $583 for the first nine months of ~~2022.~~2022 to $1,450 for the comparable period in 2023. The increase is primarily due to the financing of our acquisition of Excell in December 2021, working capital funding resulting from our January 2023 cyberattack and rising interest rates. Excluding the ~~Excell Acquisition. Miscellaneous~~ERC gain in the 2023 period, miscellaneous income amounted to $84 for the 2023 period compared to $605 for the 2022 period, primarily attributable to foreign exchange gains and loss due to fluctuations in foreign currency exchange rates.
Income Taxes. The income tax provision for the 2023 nine-month period was $1,688, compared to an income tax benefit of $171 for the 2022 nine-month period. Our effective tax rate decreased to 28.1% for the 2023 period as compared to 259.1% for the 2022 period, primarily attributable to the magnitude of our income reported in the first nine-months of 2023, including the Employee Retention Credit, and the geographic mix of our operating results. The income tax provision for the first nine months of ~~2022 compared with $88 for the 2021 period, primarily representing foreign currency exchange gains on U.S.-denominated transactions and balances of our non-U.S. businesses.~~
~~Income Taxes.~~ ~~For the nine-month period ended September 30, 2022, Ultralife recognized an income tax benefit of $171,~~2023 is comprised of a ~~$512~~$443 current provision for ~~income~~ taxes expected to be paid on income primarily ~~from our non-U.S. operations,~~in foreign jurisdictions, representing a cash-based effective tax rate of 7.4%, and an $1,245 deferred tax provision which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. For the comparable 2022 period, the income tax benefit was comprised of a $512 current tax provision and a $683 deferred ~~benefit, compared to an income~~ tax ~~provision of $290 for~~benefit. The period over period change in the prior year same period, comprised of a $163 current provision and a $127 deferred provision. Our effective tax rate was 259.1% for the first nine months of 2022 as compared to 24.4% for the first nine months of 2021cash-based taxes is primarily attributable to the geographic mix of our operating ~~results, including income generated in Canada by Excell and the larger effect of permanent and discrete adjustments for the current year.~~results. See Note 76 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q for ~~further information.~~additional information regarding our income taxes.

Net Income Attributable to Ultralife. Net income attributable to Ultralife was $4,324, or $0.27 per share – basic and diluted on a GAAP basis for the nine-month period ended September 30, 2023, compared to $105, or $0.01 per share – basic and diluted, for the nine-month period ended September 30, ~~2022,~~2022. Adjusted EPS was $0.34 on a diluted basis for the 2023 period, compared to ~~$897, or $0.06 per share – basic and diluted,~~($0.04) for the ~~nine-month period ended September 30, 2021.~~ 2022 period. Adjusted EPS excludes the provision (benefit) for deferred taxes of $1,245 and ($683) for the 2023 and 2022 periods, respectively, which primarily represents non-cash charges (benefits) for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. See the section “Adjusted EPS” on Page 24 for a reconciliation of adjusted EPS to EPS.
Weighted average shares outstanding used to compute diluted earnings per share decreased from ~~16,199,693 for the 2021 period to~~ 16,144,165 for the first nine-months of 2022 ~~period.~~to 16,174,341 for the first nine-months of 2023. The ~~decrease~~increase is attributable to stock option exercises since the third quarter of ~~2021 offset by the anti-dilutive effect of the decrease in the average stock price used to compute~~2022. Accordingly diluted shares ~~from $7.94 for the first nine months~~ of ~~2021~~2,441 were added to ~~$5.00 for the first nine months of 2022. Accordingly, potential common~~basic weighted average shares ~~used to compute diluted earnings per share decreased from 179,951 for the 2021 period~~in 2023 compared to 22,203 for the 2022 period.

Adjusted EBITDA

In evaluating our business, we consider and use ~~Adjusted~~adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure of our operating performance. We define ~~Adjusted~~adjusted EBITDA as net income (loss) attributable to Ultralife Corporation before interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expense/income that we do not consider reflective of our ongoing continuing operations. We also use ~~Adjusted~~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~~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~~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~~adjusted EBITDA to net income (loss) attributable to Ultralife Corporation, the most comparable financial measure under GAAP.

We use ~~Adjusted~~adjusted EBITDA in our decision-making processes relating to the operation of our business together with GAAP financial measures such as operating income (loss). We believe that ~~Adjusted~~adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while ~~isolating~~eliminating the effects of depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance, and of stock-based compensation, which is a non-cash expense that varies widely among companies. We believe that by presenting ~~Adjusted~~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~~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~~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~~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~~adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, ~~Adjusted~~adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss) attributable to Ultralife Corporation or other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include, but are not limited to, the following:

●
Adjusted EBITDA does not reflect (1) our cash expenditures or future requirements for capital expenditures or contractual commitments; (2) changes in, or cash requirements for, our working capital needs; (3) the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; (4) income taxes or the cash requirements for any tax payments; and (5) all of the costs associated with operating our business;

●
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and ~~Adjusted~~adjusted EBITDA from continuing operations does not reflect any cash requirements for such replacements;

●
While stock-based compensation is a component of cost of products sold and operating expenses, the impact on our consolidated financial statements compared to other companies can vary significantly due to such factors as assumed life of the stock-based awards and assumed volatility of our common stock; and

●
Other companies may calculate ~~Adjusted~~adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

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

Adjusted EBITDA is calculated as follows for the periods presented:

Three-Month Period Ended

Nine-Month Period Ended

Three-Month Period Ended

Nine-Month Period Ended

September 30,

September 30,

September 30,

September 30,

September 30,
2023

September 30,
2022

September 30,
2023

September 30,
2022

2022

2021

2022

2021

Net (loss) income attributable to Ultralife Corporation
$ (239 ) $ (585 ) $ 105 $ 897
Add:

Interest and financing expense
272 53 583 164
Income tax (benefit) provision
(90 ) (175 ) (171 ) 290
Net income (loss) attributable to Ultralife Corporation
$ 1,330 $ (239 ) $ 4,324 $ 105
Adjustments:

Interest expense
586 272 1,450 583
Income tax provision (benefit)
446 (90 ) 1,688 (171 )
Depreciation expense
815 700 2,450 2,160 760 815 2,282 2,450
Amortization expense
318 148 969 458 227 318 663 969
Stock-based compensation expense
179 142 552 512 131 179 424 552
Cybersecurity insurance policy deductible
- - 100 -
Non-cash purchase accounting adjustments
- - 55 - - - - 55
Adjusted EBITDA
$ 1,255 $ 283 $ 4,543 $ 4,481 $ 3,480 $ 1,255 $ 10,931 $ 4,543
23
Adjusted Earnings Per Share
In evaluating our business, we consider and use adjusted EPS, a non-GAAP financial measure, as a supplemental measure of our business performance. We define adjusted EPS as net income (loss) attributable to Ultralife Corporation excluding the provision (benefit) for deferred income taxes divided by our weighted average shares outstanding on both a basic and diluted basis. We believe that this information is useful in providing period-to-period comparisons of our results by reflecting the portion of our tax provision that will be predominantly offset by our U.S. net operating loss carryforwards and other tax credits for the foreseeable future. We reconcile adjusted EPS to EPS, the most comparable financial measure under GAAP. Neither current nor potential investors in our securities should rely on adjusted EPS as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of adjusted EPS to EPS and net income attributable to Ultralife Corporation.
Adjusted EPS is calculated as follows for the periods presented:

Three-Month Period Ended

September 30, 2023

September 30, 2022

Amount

Per Basic Share

Per Diluted Share

Amount

Per Basic Share

Per Diluted Share

Net income (loss) attributable to Ultralife Corporation
$ 1,330 $ .08 $ .08 $ (239 ) $ (.01 ) $ (.01 )
Deferred tax provision
357 .02 .02 (308 ) (.02 ) (.02 )
Adjusted net income (loss)
$ 1,687 $ .10 $ .10 $ (547 ) $ (.03 ) $ (.03 )

Weighted average shares outstanding
16,238 16,303 16,133 16,133

Nine-Month Period Ended

September 30, 2023

September 30, 2022

Amount

Per Basic Share

Per Diluted Share

Amount

Per Basic Share

Per Diluted Share

Net income attributable to Ultralife Corporation
$ 4,324 $ .27 $ .27 $ 105 $ .01 $ .01
Deferred tax provision (benefit)
1,245 .07 .07 (683 ) (.05 ) (.05 )
Adjusted net income (loss)
$ 5,569 $ .34 $ .34 $ (578 ) $ (.04 ) $ (.04 )

Weighted average shares outstanding
16,172 16,174 16,122 16,144

Liquidity and Capital Resources

As of September 30, ~~2022,~~2023, cash ~~on hand~~ totaled ~~$5,051~~$9,301 (including restricted cash of ~~$73)~~$78), ~~a decrease~~an increase of ~~$3,362~~$3,588 as compared to ~~$8,413 as~~$5,713 of cash held at December 31, ~~2021,~~2022, primarily attributable to draws on our credit facility and net income generated during the ~~procurement of inventory to enhance our ability to service orders requested by customers to ship in 2022 amidst challenging supply chain conditions.~~period.

During the nine-month period ended September 30, ~~2022,~~2023, cash used in our operations was ~~$3,827,~~$503, as compared to ~~$8,462 generated from~~$3,827 used in operations for the nine-month period ended September 30, ~~2021.~~2022. For the ~~2022~~2023 period, ~~we used~~ cash provided by our operations was comprised of ~~$8,714 to procure~~net income of $4,316 plus non-cash items totaling $4,662 for depreciation, amortization, stock-based compensation, and deferred taxes, largely offset by a $9,481 increase in net working capital. The increase in working capital was driven by the procurement of 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~~orders, as well as the ~~timing~~effects of sales, collections and disbursements resulted in net cash of $7,245 used for working capital, which was partially offset by net income of $105 and non-cash net expenses totaling $3,313 for depreciation, amortization, stock-based compensation, and deferred taxes.the January 2023 cyberattack.

Cash used in investing activities for the nine months ended September 30, ~~2022~~2023 was ~~$1,396~~$1,547 for capital expenditures, primarily reflecting investments in equipment for new products transitioning to high-volume manufacturing.

Cash provided by financing activities for the nine months ended September 30, ~~2022~~2023 was ~~$2,097, primarily consisting of~~$5,791, largely attributable to draws ~~from~~on our credit facility ~~for the purchase~~primarily attributable to advance purchases of certain critical raw materials, ~~requiring cash-in-advance payment terms by the vendors, plus $105 in net proceeds on stock-based awards,~~ partially offset by ~~$1,333 of~~ principle payments on our term ~~loan.~~loan during the period, plus cash proceeds of $1,041 on stock option exercises under our stock-based compensation plans.

We continue to have significant U.S. net operating loss carryforwards available to utilize as an offset to future taxable income. See Note 76 to the consolidated financial statements of this Form 10-Q for additional information.

Going forward, we expect 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.

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.

Commitments

As of September 30, ~~2022,~~2023, the Company had ~~$14,330~~$19,580 outstanding borrowings on the Revolving Credit Facility and ~~$8,667~~$6,667 on the Term Loan Facility. The Company was in full compliance with all covenants under the Credit Facilities as of September 30, ~~2022.~~2023.

As of September 30, ~~2022,~~2023, we had made commitments to purchase approximately ~~$624~~$925 of production machinery and equipment.

Critical Accounting Policies

Management exercises judgment in making important decisions pertaining to choosing and applying accounting policies and methodologies in many areas. Not only are these decisions necessary to comply with GAAP, but they also reflect management’s view of the most appropriate manner in which to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 to the consolidated financial statements in our ~~2021~~2022 Annual Report on Form 10-K and ~~Note 1 to the consolidated financial statements in Part I of this~~subsequent Quarterly Reports on Form 10-Q should be reviewed for a greater understanding of how our financial performance is recorded and reported.

During the first nine months of ~~2022,~~2023, 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.~~developed, other than as described in Note 1 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q.

25

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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.

Changes in Internal Control Over Financial Reporting

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

PART II. OTHER INFORMATION
~~Item 1A.~~~~Risk Factors~~
~~As a smaller reporting company, we are not required to provide the information required by this Item.~~
In addition to the Risk Factors set forth in Item 1A of our Form 10-K for the year ended December 31, 2021, as filed on March 8, 2022, you should carefully consider the following Risk Factors that we believe are material to our business:
●
Changes in economic conditions, including inflation, rising interest rates, volatile equity capital markets and ongoing supply chain disruptions, have affected and may continue to affect our business, revenues and earnings adversely.
●
Inflation rates have increased and may continue to rise. Our suppliers have raised their prices and may continue to raise prices that we may not be able to pass on to our customers on a timely manner consistent with the price increases. This affected and may continue to affect our business and profit margins adversely.
●
~~Rising interest rates will increase the cost of our variable borrowing rates, may affect our earnings adversely.~~

Item 6. Exhibits

Exhibit
Index

Exhibit Description

Incorporated by Reference from
31.1

Rule 13a-14(a) / 15d-14(a) CEO Certifications

Filed herewith
31.2

Rule 13a-14(a) / 15d-14(a) CFO Certifications

Filed herewith
32

Section 1350 Certifications

Furnished herewith
101.INS

Inline XBRL Instance Document

Filed herewith
101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed herewith
101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith
101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith
101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith
101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith
104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith

Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, (ii) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, (iv) Consolidated Statements of Changes in ~~Stockholders’~~Shareholders’ Equity for the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, and (v) Notes to Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ULTRALIFE CORPORATION
(Registrant)
~~(Registrant)~~
~~Date:~~ ~~October 27, 2022~~
~~By:~~
~~/s/~~ ~~Michael D. Popielec~~
~~Michael D. Popielec~~
~~President and Chief Executive Officer~~
~~(Principal Executive Officer)~~

Date: October 26, 2023
By:
/s/ Michael E. Manna

~~Date:~~ ~~October 27, 2022~~ ~~By:~~ ~~/s/ Philip A. Fain~~
Michael E. Manna

~~Philip A. Fain~~
President and Chief Executive Officer

~~Chief Financial Officer and Treasurer~~
(Principal Executive Officer)

~~(Principal Financial Officer and~~
Date: October 26, 2023
By:
/s/ Philip A. Fain

Philip A. Fain
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)

3128

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

	Battery & Energy			Communications
	Products			Systems		Total
Balance – December 31, 2021	$	26,575		$	11,493	$	38,068
Measurement period adjustment (1)		(30	)		-		(30	)
Effect of foreign currency translation		(972	)		-		(972	)
Balance – September 30, 2022	$	25,573		$	11,493	$	37,066

	Battery & Energy Products			Communications Systems		Total
Balance – December 31, 2022	$	25,935		$	11,493	$	37,428
Effect of foreign currency translation		(71	)		-		(71	)
Balance – September 30, 2023	$	25,864		$	11,493	$	37,357

	at September 30, 2022
			Accumulated				at September 30, 2023
	Cost		Amortization		Net		Cost		Accumulated Amortization		Net
Customer relationships	$	12,781	$	5,757	$	7,024	$	12,989	$	6,451	$	6,538
Patents and technology		5,481		5,092		389		5,564		5,260		304
Trade names		4,601		475		4,126		4,632		607		4,025
Trademarks		3,401		-		3,401		3,399		-		3,399
Other		1,500		345		1,155		1,500		496		1,004
Total other intangible assets	$	27,764	$	11,669	$	16,095	$	28,084	$	12,814	$	15,270

	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		-		3,413
Other		1,490		18		1,472
Total other intangible assets	$	28,454	$	11,064	$	17,390

	at December 31, 2022
	Cost		Accumulated Amortization		Net
Customer relationships	$	12,970	$	5,992	$	6,978
Patents and technology		5,557		5,171		386
Trade names		4,629		522		4,107
Trademarks		3,404		-		3,404
Other		1,500		454		1,046
Total other intangible assets	$	28,060	$	12,139	$	15,921

	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		11,500			4.49
Exercised		(59,500	)		3.82
Forfeited or expired		(56,748	)		6.63
Outstanding at September 30, 2022		1,202,076		$	7.01		3.81	$	70
Vested and expected to vest at September 30, 2022		1,119,892		$	7.04		3.67	$	70
Exercisable at September 30, 2022		803,774		$	7.22		2.82	$	67

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2023		1,425,693		$	6.72
Granted		12,500		$	4.07
Exercised		(204,891	)	$	5.71
Forfeited or expired		(144,690	)	$	5.01
Outstanding at September 30, 2023		1,088,612		$	7.11		3.54	$	2,898
Vested and expected to vest at September 30, 2023		1,009,489		$	7.20		3.37	$	2,598
Exercisable at September 30, 2023		703,529		$	7.79		2.36	$	1,402

	Three months ended				Nine months ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Operating lease cost	$	216	$	188	$	674	$	564
Variable lease cost		22		25		69		57
Total lease cost	$	238	$	213	$	743	$	621

	Three months ended				Nine months ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Operating lease cost	$	252	$	216	$	732	$	674
Variable lease cost		28		22		85		69
Total lease cost	$	280		238	$	817	$	743

	Nine-month period ended				Nine-month period ended September 30,
	September 30, 2022		September 30, 2021		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	676	$	550	$	762	$	676
Right-of-use assets obtained in exchange for lease liabilities:					$	310	$	-

	Balance sheet classification	September 30, 2022			December 31, 2021			Balance sheet classification	September 30, 2023			December 31, 2022
Assets:
Operating lease right-of-use asset	Other noncurrent assets	$	1,861		$	2,581		Other noncurrent assets	$	1,914		$	2,187

Liabilities:
Current operating lease liability	Accrued expenses and other current liabilities	$	824		$	867		Accrued expenses and other current liabilities	$	793		$	895
Operating lease liability, net of current portion	Other noncurrent liabilities		1,064			1,743		Other noncurrent liabilities		1,087			1,307
Total operating lease liability	Total operating lease liability	$	1,888		$	2,610		Total operating lease liability	$	1,880		$	2,202

Weighted-average remaining lease term (years)	Weighted-average remaining lease term (years)		4.2			4.5		Weighted-average remaining lease term (years)		4.5			4.7

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

Maturity of operating lease liabilities
2022	$	212
2023		840		$	258
2024		430			642
2025		128			306
2026		129			241
2027		129			217
Thereafter		264			426
Total lease payments		2,132			2,090
Less: Imputed interest		(244	)		(210	)
Present value of remaining lease payments	$	1,888		$	1,880

	Battery & Energy Products		Communications Systems		Corporate			Total			Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	28,583	$	4,651	$	-		$	33,234		$	31,919	$	7,569	$	-		$	39,488
Segment contribution		5,345		1,370		(7,301	)		(586	)		7,728		2,046		(7,639	)		2,135
Other income						254			254
Income tax benefit						90			90
Other expense																(386	)		(386	)
Income tax provision																(446	)		(446	)
Non-controlling interest						3			3							27			27
Net loss attributable to Ultralife								$	(239	)
Net income attributable to Ultralife																		$	1,330

	Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	87,873	$	7,860	$	-		$	95,733
Segment contribution		19,217		2,102		(21,407	)		(88	)
Other income						22			22
Income tax benefit						171			171
Non-controlling interest						-			-
Net income attributable to Ultralife								$	105

	Battery & Energy Products		Communications Systems		Corporate			Total			Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	64,994	$	9,510	$	-		$	74,504		$	87,873	$	7,860	$	-		$	95,733
Segment contribution		16,244		3,109		(18,089	)		1,264			19,217		2,102		(21,407	)		(88	)
Other expense						(76	)		(76	)
Income tax provision						(290	)		(290	)
Other income																22			22
Income tax benefit																171			171
Non-controlling interest						(1	)		(1	)						-			-
Net income attributable to Ultralife								$	897									$	105

	Total Revenue		Commercial			Government/ Defense			Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	28,583	$	22,878		$	5,705		$	31,919	$	24,150		$	7,769
Communications Systems		4,651		-			4,651			7,569		-			7,569
Total	$	33,234	$	22,878		$	10,356		$	39,488	$	24,150		$	15,338
				69	%		31	%				61	%		39	%

	Total Revenue		United States			Non-United States			Total Revenue		United States			Non-United States
Battery & Energy Products	$	28,583	$	13,433		$	15,150		$	31,919	$	15,926		$	15,993
Communications Systems		4,651		3,547			1,104			7,569		4,348			3,221
Total	$	33,234	$	16,980		$	16,254		$	39,488	$	20,274		$	19,214
				51	%		49	%				51	%		49	%

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)
	~~(Registrant)~~

~~Date:~~ ~~October 27, 2022~~	~~By:~~	~~/s/~~ ~~Michael D. Popielec~~
		~~Michael D. Popielec~~
		~~President and Chief Executive Officer~~
		~~(Principal Executive Officer)~~
	Date: October 26, 2023	By:	/s/ Michael E. Manna

~~Date:~~ ~~October 27, 2022~~	~~By:~~	~~/s/ Philip A. Fain~~ Michael E. Manna
		~~Philip A. Fain~~	President and Chief Executive Officer
		~~Chief Financial Officer and Treasurer~~	(Principal Executive Officer)
		~~(Principal Financial Officer and~~
	Date: October 26, 2023	By:	/s/ Philip A. Fain
			Philip A. Fain
			Chief Financial Officer and Treasurer
			(Principal Financial Officer and
			Principal Accounting Officer)