Ultralife (ULBI) 8-K/A Financial Statements and Exhibits

Exhibit 99.2

ULTRALIFE BATTERIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     The following unaudited pro forma financial statements combine the historical consolidated balance sheets and statements of operations of Ultralife Batteries, Inc. (“Ultralife”), Stationary Power Services, Inc. (“SPS”) and Reserve Power Systems, Inc. (“RPS”), giving effect to the acquisition of all of the issued and outstanding shares of common stock of SPS and RPS (collectively “SPS/RPS”) by Ultralife on November 16, 2007 using the purchase method of accounting.

     The unaudited pro forma condensed combined statements of operations for the nine months ended September 29, 2007 and for the year ended December 31, 2006 are presented to give effect to the acquisition of all of the issued and outstanding shares of common stock of SPS/RPS as if it had occurred on January 1, 2006, and all transactions contemplated by that acquisition. The unaudited pro forma condensed combined balance sheets as of September 29, 2007 are presented to give effect to the acquisition of all of the issued and outstanding shares of common stock of SPS/RPS on September 29, 2007, and all transactions contemplated by that acquisition.

     The unaudited pro forma financial statements are presented for illustrative purposes only and are not intended to represent or be indicative of the consolidated results of operations or the consolidated financial position of Ultralife that would have been reported had the acquisition been consummated as of the dates presented, and should not be viewed to be representative of future operating results or the financial position of Ultralife. The unaudited pro forma financial statements do not reflect any adjustments to conform accounting policies, other than those mentioned in the notes thereto, or to reflect any cost synergies anticipated as a result of the acquisition, or any future acquisition related expenses.

     Certain adjustments made to the unaudited pro forma financial statements have been prepared based on preliminary estimates of the fair values of the net assets from SPS/RPS. The impact of ongoing integration activities and adjustments to the fair value of acquired net tangible and intangible assets of SPS/RPS could cause material differences in the information presented.

     The unaudited pro forma financial statements should be read in conjunction with the historical consolidated financial statements of SPS/RPS included in this Current Report on Form 8-K/A and the consolidated financial statements of Ultralife included in its Quarterly Report on Form 10-Q for the period ended September 29, 2007 and its Annual Report on Form 10-K for the year ended December 31, 2006.

ULTRALIFE BATTERIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 29, 2007
(Amounts In Thousands, Except Per Share Amounts)

	Historical			Offering						Historical			Pro Forma			Pro Forma
	Ultralife			Proceeds			Sub-Total			SPS/RPS			Adjustments			Combined
Revenues	$	100,807		$	—		$	100,807		$	6,197		$	(244)	(C)	$	106,760
Cost of products sold		77,767			—			77,767			4,209			(244)	(C)
														88	(D)		81,820
Gross margin		23,040			—			23,040			1,988			(88	)		24,940
Operating expenses:
Research and development		4,849			—			4,849			—			—			4,849
Selling, general, and administrative		15,685			—			15,685			1,402			—			17,087
Total operating expenses		20,534			—			20,534			1,402			—			21,936
Operating income (loss)		2,506			—			2,506			586			(88	)		3,004
Other income (expense):
Interest income		44			—			44			1			—			45
Interest expense		(1,770	)		—			(1,770	)		(106	)		(150)	(A)
														37	(B)		(1,989	)
Miscellaneous		354			—			354			(14	)		—			340
Income (loss) before income taxes		1,134			—			1,134			467			(201	)		1,400
Income tax provision — current		—			—			—			—			—			—
Income tax provision — deferred		—			—			—			—			—			—
Total income taxes		—			—			—			—			—			—
Net Income (Loss)	$	1,134		$	—		$	1,134		$	467		$	(201	)	$	1,400
Earnings (Loss) per share — basic	$	0.08					$	0.07								$	0.09
Earnings (Loss) per share — diluted	$	0.07					$	0.07								$	0.09
Weighted average shares outstanding — basic		15,120			473	(E)		15,593						100	(F)		15,693
Weighted average shares outstanding — diluted		15,346			473	(E)		15,819						100	(F)		15,919

See accompanying notes to unaudited pro forma condensed combined financial statements.

ULTRALIFE BATTERIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2006
(Amounts In Thousands, Except Per Share Amounts)

	Historical			Offering						Historical			Pro Forma			Pro Forma
	Ultralife			Proceeds			Sub-Total			SPS/RPS			Adjustments			Combined
Revenues	$	93,546		$	—		$	93,546		$	8,938		$	—		$	102,484
Cost of products sold		76,103			—			76,103			6,206			117	(D)		82,426
Gross margin		17,443			—			17,443			2,732			(117	)		20,058
Operating expenses:
Research and development		5,097			—			5,097			—			—			5,097
Selling, general, and administrative		15,303			—			15,303			1,664			—			16,967
Total operating expenses		20,400			—			20,400			1,664			—			22,064
Operating income (loss)		(2,957	)		—			(2,957	)		1,068			(117	)		(2,006	)
Other income (expense):
Interest income		126			—			126			—			—			126
Interest expense		(1,424	)		—			(1,424	)		(121	)		(200)	(A)
														51	(B)		(1,694	)
Gain on insurance settlement		191			—			191			—			—			191
Loss on litigation settlement		—			—			—			(70	)		—			(70	)
Miscellaneous		311			—			311			(10	)		—			301
Income (loss) before income taxes		(3,753	)		—			(3,753	)		867			(266	)		(3,152	)
Income tax provision — current		—			—			—			—			—			—
Income tax provision — deferred		23,735			—			23,735			—			—			23,735
Total income taxes		23,735			—			23,735			—			—			23,735
Net Income (Loss)	$	(27,488	)	$	—		$	(27,488	)	$	867		$	(266	)	$	(26,887	)
Loss per share — basic	$	(1.84	)				$	(1.79	)							$	(1.74	)
Loss per share — diluted	$	(1.84	)				$	(1.79	)							$	(1.74	)
Weighted average shares outstanding — basic		14,906			473	(E)		15,379						100	(F)		15,479
Weighted average shares outstanding — diluted		14,906			473	(E)		15,379						100	(F)		15,479

See accompanying notes to unaudited pro forma condensed combined financial statements.

ULTRALIFE BATTERIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 29, 2007
(Amounts In Thousands, Except Per Share Amounts)

	Historical			Offering					Historical			Pro Forma			Pro Forma
	Ultralife			Proceeds		Sub-Total			SPS/RPS			Adjustments			Combined
ASSETS
Current assets:
Cash and cash equivalents	$	927		$	6,000	$	6,927		$	176		$	(6,000)	(H)	$	1,103
Trade accounts receivable, net		23,794			—		23,794			1,644			(244)	(L)		25,194
Inventories		29,931			—		29,931			927			—			30,858
Due from insurance company		148			—		148			—			—			148
Deferred tax asset — current		92			—		92			—			—			92
Prepaid expenses and other current assets		1,975			—		1,975			23			—			1,998
Total current assets		56,867			6,000		62,867			2,770			(6,244	)		59,393
Property, plant and equipment, net		19,623			—		19,623			1,299			(986)	(G)		19,936
Goodwill and intangible assets, net		22,725			—		22,725			—			54	(H)
													11,623	(J)		34,402
Other assets
Security deposits		73			—		73			—			—			73
Total Assets	$	99,288		$	6,000	$	105,288		$	4,069		$	4,447		$	113,804
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of debt and capital lease obligations	$	12,789		$	—	$	12,789		$	1,044		$	(22)	(G)	$	13,811
Accounts payable		13,331			—		13,331			1,639			54	(H)
													(244)	(L)		14,780
Other current liabilities		9,175			—		9,175			275			—			9,450
Total current liabilities		35,295			—		35,295			2,958			(212	)		38,041
Long-term liabilities:
Debt and capital lease obligations		20,324			—		20,324			1,084			(697)	(G)
													4,000	(H)		24,711
Other long-term liabilities		469			—		469			—			—			469
Total long-term liabilities		20,793			—		20,793			1,084			3,303			25,180
Shareholders’ equity:
Common stock, par value $0.10 per share		1,591			47		1,638			—			10	(I)
													—	(K)		1,648
Capital in excess of par value		136,725			5,953		142,678			475			(267)	(G)
													1,373	(I)
													(208)	(K)		144,051
Accumulated other comprehensive income		154			—		154			—			—			154
Retained earnings (accumulated deficit)		(92,892	)		—		(92,892	)		(448	)		448	(K)		(92,892	)
		45,578			6,000		51,578			27			1,356			52,961
Less — Treasury stock, at cost		2,378			—		2,378			—			—			2,378
Total shareholders’ equity		43,200			6,000		49,200			27			1,356			50,583
Total Liabilities and Shareholders’ Equity	$	99,288		$	6,000	$	105,288		$	4,069		$	4,447		$	113,804

See accompanying notes to unaudited pro forma condensed combined financial statements.

ULTRALIFE BATTERIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Amounts in Thousands, except Share Amounts)

Note 1: Basis of Presentation and Purchase Price Allocation

     On November 16, 2007, we completed the acquisition of all of the issued and outstanding shares of common stock of Stationary Power Services, Inc. (“SPS”), an infrastructure power management services firm specializing in engineering, installation and preventative maintenance of standby power systems, uninterruptible power supply systems, DC power systems and switchgear/control systems for the telecommunications, aerospace, technology, banking and information services industries. Immediately prior to the closing of the SPS acquisition, SPS distributed the real estate assets, along with the corresponding mortgage payable, to the original owner of SPS, as these assets and corresponding liability were not part of our acquisition of SPS. Also on November 16, 2007, we completed the acquisition of all of the issued and outstanding shares of common stock of Reserve Power Systems, Inc. (“RPS”), a supplier of lead acid batteries primarily for use by SPS in the design and installation of standby power systems.

     Under the terms of the stock purchase agreement for SPS, the initial purchase price of $10,000 consisted of $6,000 in cash and a $4,000 subordinated convertible promissory note to be held by the seller. In addition, on the achievement of certain post-acquisition sales milestones, Ultralife will issue up to an aggregate amount of 100,000 shares of Ultralife common stock. The $6,000 cash payment was financed by a portion of the net proceeds from a limited public offering that we completed on November 15, 2007, whereby 1,000,000 shares of Ultralife common stock were issued. Total net proceeds from the offering were $12,692, of which $6,000 was used for the SPS cash payment, and has been reflected in the proforma financial statements. The remaining net proceeds from the offering, which have not been reflected in the proforma financial statements, were used for a $3,500 prepayment on the subordinated convertible notes that were issued as partial consideration for the McDowell acquisition, for repayment of $1,000 of borrowings outstanding under our credit facility used to fund the ISC acquisition, and for general working capital purposes. The $4,000 subordinated convertible promissory note carries a three-year term, bears interest at the rate of 5% per year and is convertible at $15.00 per share into 266,667 shares of Ultralife’s common stock, with a forced conversion feature at $17.00 per share. We incurred $54 in acquisition related costs, which are included in the initial cost of the SPS investment of $10,054.

     Under the terms of the stock purchase agreement for RPS, the initial purchase price consisted of 100,000 shares of Ultralife common stock, valued at $1,383. In addition, on the achievement of certain post-acquisition sales milestones, Ultralife will pay the sellers, in cash, 5% of sales up to the operating plan, and 10% of sales that exceed the operating plan, for the remainder of the calendar year 2007 and for calendar years 2008, 2009 and 2010. The additional contingent cash consideration is payable in annual installments, and excludes sales made to SPS, which historically have comprised substantially all of RPS’s sales.

     As a result of the adoption of Financial Accounting Standards Board Interpretation No. 46(R), “Consolidation of Variable Interest Entities”, SPS determined that RPS was a variable interest entity of which SPS was the primary beneficiary. Therefore, the historical consolidated financial statements for SPS/RPS include the accounts of SPS and RPS, with all significant intercompany accounts and transactions eliminated.

     The following table represents the preliminary allocation of the purchase price to assets acquired and liabilities assumed as of the proforma balance sheet:

ASSETS
Current assets:
Cash	$	176
Trade accounts receivables, net		1,644
Inventories		927
Prepaid expenses and other current assets		23
Total current assets		2,770
Property, plant and equipment, net		313
Goodwill		11,677
Total assets acquired		14,760
LIABILITIES
Current liabilities:
Current portion of long-term debt		1,022
Accounts payable		1,639
Other current liabilities		275
Total current liabilities		2,936
Long-term liabilities:
Debt		387
Total liabilities assumed		3,323
Total Purchase Price	$	11,437

     The estimated excess of the purchase price over the net tangible and intangible assets acquired of $(240) was recorded as goodwill in the amount of $11,677. We are in the process of completing the valuations of certain tangible and intangible assets acquired with the new business; however the amounts of these assets cannot be reasonably estimated at the date of this filing so the entire estimated excess purchase price has been allocated to goodwill. We expect that the ultimate purchase price allocation will include adjustments to the fair values of identifiable intangible assets, including trademarks, patents and technology, and customer relationships. The intangible assets will include indefinite life assets and amortizable assets, for which the amortizable assets will be amortized over their weighted-average estimated useful lives of approximately eight to fifteen years. The final allocation of the excess of the purchase price over the net assets acquired is subject to revision based upon our final review of valuation assumptions. The acquired goodwill will be assigned to the rechargeable products and the design and installation services segments and is expected to be fully deductible for income tax purposes.

Note 2: Pro Forma Adjustments

The unaudited pro forma condensed combined statements of operations include the adjustments necessary to give effect to the acquisition as if it had occurred on January 1, 2006, along with the distribution of real estate assets and the corresponding mortgage payable as contemplated by the stock purchase agreement. The unaudited pro forma condensed combined statements of operations reflect the allocation of the acquisition cost to the fair value of tangible and intangible assets acquired and liabilities assumed as described in Note 1. The unaudited pro forma condensed combined balance sheets include the adjustments necessary to give effect to the acquisition as if it occurred on September 29, 2007, along with the distribution of real estate assets and the corresponding mortgage payable as contemplated by the stock purchase agreement. No pro forma adjustments were required to conform SPS/RPS’s accounting policies to Ultralife’s accounting policies.

(A)	Adjustment to record impact of interest expense relating to the $4,000 convertible note payable issued in connection with SPS’s acquisition purchase price, which bears interest at 5%.
(B)	Adjustment to record impact on interest expense that would not have been incurred for the mortgage payable that was not assumed by Ultralife in the SPS acquisition.
(C)	Adjustment to eliminate intercompany sales and purchases between Ultralife and SPS/RPS.
(D)	Adjustment to record rent expense that would have been incurred for the building that was not acquired by Ultralife in the SPS acquisition, net of the reduction in depreciation expense for the building.
(E)	Adjustment to record issuance of shares under the limited public offering for the net proceeds portion applicable to the SPS cash payment.
(F)	Adjustment to record the issuance of 100,000 shares of Ultralife common stock in connection with RPS’s acquisition purchase price.
(G)	Adjustment to eliminate SPS assets not acquired and SPS liabilities not assumed in connection with Ultralife’s acquisition of all the issued and outstanding shares of common stock of SPS.
(H)	Adjustment to record the $6,000 cash payment and the issuance of the $4,000 convertible note payable in connection with SPS’s acquisition purchase price, along with the accrual of $54 in capitalized acquisition costs.
(I)	Adjustment to record the issuance of 100,000 shares of Ultralife common stock in connection with RPS’s acquisition purchase price, valued at $1,383.
(J)	Adjustment to record the goodwill associated with the allocation of the SPS/RPS acquisition purchase price at September 29, 2007.
(K)	Adjustment to eliminate SPS/RPS’s equity associated with the allocation of the SPS/RPS acquisition purchase price.
(L)	Adjustment to eliminate intercompany receivables and payables between Ultralife and SPS/RPS as of September 29, 2007.