##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 27, 2010
 or
 o
    
    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 000-20852
 ULTRALIFE CORPORATION
  Delaware
    
    16-1387013(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 2000 Technology Parkway, Newark, New York 14513
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




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##### 



PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets  
June 27, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations 
Three- and six-month periods ended June 27, 2010 and June 28, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows 
Six-month periods ended June 27, 2010 and June 28, 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    38PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 6. Exhibits
    
    
    40Signatures
    
    
    41Index to Exhibits
    
    
    42EX-31.1EX-31.2EX-32
   2




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June 27,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,111
    
    
    $
    6,094Restricted cash
    
    
    452
    
    
    
    Trade accounts receivable (less allowance for doubtful accounts
of $598 at June 27, 2010 and $1,024 at December 31, 2009)
    
    
    27,895
    
    
    
    32,449Inventories
    
    
    38,607
    
    
    
    35,503Deferred tax asset  current
    
    
    288
    
    
    
    288Prepaid expenses and other current assets
    
    
    1,631
    
    
    
    1,624Total current assets
    
    
    70,984
    
    
    
    75,958Property, plant and equipment, net
    
    
    15,361
    
    
    
    16,648Other assets:Goodwill
    
    
    26,175
    
    
    
    25,436Intangible assets, net
    
    
    12,243
    
    
    
    13,064Security deposits and other long-term assets
    
    
    322
    
    
    
    6038,740
    
    
    
    38,560Total Assets
    
    $
    125,085
    
    
    $
    131,166LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of debt and capital lease obligations
    
    $
    12,729
    
    
    $
    19,082Accounts payable
    
    
    18,181
    
    
    
    19,177Income taxes payable
    
    
    61
    
    
    
    28Other current liabilities
    
    
    9,552
    
    
    
    9,847Total current liabilities
    
    
    40,523
    
    
    
    48,134Long-term liabilities:Debt and capital lease obligations
    
    
    297
    
    
    
    267Deferred tax liability  long-term
    
    
    4,223
    
    
    
    4,100Other long-term liabilities
    
    
    543
    
    
    
    551Total long-term liabilities
    
    
    5,063
    
    
    
    4,918Commitments and contingencies (Note 11)Shareholders equity:Ultralife equity:Preferred stock, par value $0.10 per share, authorized 1,000,000 shares;
none issued and outstanding
    
    
    
    
    
    
    Common stock, par value $0.10 per share, authorized 40,000,000 shares;
issued - 18,598,291 at June 27, 2010 and 18,384,916 at December 31, 2009
    
    
    1,861
    
    
    
    1,831Capital in excess of par value
    
    
    170,449
    
    
    
    169,064Accumulated other comprehensive loss
    
    
    (1,505
    )
    
    
    (1,256
    )Accumulated deficit
    
    
    (83,714
    )
    
    
    (84,021
    )87,091
    
    
    
    85,618Less Treasury stock, at cost  1,371,900 and 1,358,507 shares outstanding, respectively
    
    
    7,652
    
    
    
    7,558Total Ultralife equity
    
    
    79,439
    
    
    
    78,060Noncontrolling interest
    
    
    60
    
    
    
    54Total shareholders equity
    
    
    79,499
    
    
    
    78,114Total Liabilities and Shareholders Equity
    
    $
    125,085
    
    
    $
    131,166
   3




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Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    37,024
    
    
    $
    39,593
    
    
    $
    75,531
    
    
    $
    79,396Cost of products sold
    
    
    27,604
    
    
    
    32,813
    
    
    
    56,353
    
    
    
    64,835Gross margin
    
    
    9,420
    
    
    
    6,780
    
    
    
    19,178
    
    
    
    14,561Operating expenses:Research and development (including $115, $148, $260 and $258
respectively, of amortization of intangible assets)
    
    
    1,903
    
    
    
    2,514
    
    
    
    3,631
    
    
    
    4,494Selling, general, and administrative (including $263, $318, $613 and $549
respectively, of amortization of intangible assets)
    
    
    7,106
    
    
    
    10,591
    
    
    
    14,282
    
    
    
    18,649Total operating expenses
    
    
    9,009
    
    
    
    13,105
    
    
    
    17,913
    
    
    
    23,143Operating income (loss)
    
    
    411
    
    
    
    (6,325
    )
    
    
    1,265
    
    
    
    (8,582
    )Other income (expense):Interest income
    
    
    (1
    )
    
    
    1
    
    
    
    2
    
    
    
    4Interest expense
    
    
    (222
    )
    
    
    (350
    )
    
    
    (719
    )
    
    
    (532
    )Miscellaneous
    
    
    (120
    )
    
    
    (209
    )
    
    
    (79
    )
    
    
    (198
    )Income (loss) before income taxes
    
    
    68
    
    
    
    (6,883
    )
    
    
    469
    
    
    
    (9,308
    )Income tax provision-current
    
    
    10
    
    
    
    
    
    
    
    34
    
    
    
    2Income tax provision-deferred
    
    
    41
    
    
    
    95
    
    
    
    122
    
    
    
    184Total income taxes
    
    
    51
    
    
    
    95
    
    
    
    156
    
    
    
    186Net income (loss)
    
    
    17
    
    
    
    (6,978
    )
    
    
    313
    
    
    
    (9,494
    )Net (income) loss attributable to noncontrolling interest
    
    
    3
    
    
    
    14
    
    
    
    (6
    )
    
    
    18Net income (loss) attributable to Ultralife
    
    $
    20
    
    
    $
    (6,964
    )
    
    $
    307
    
    
    $
    (9,476
    )Net income (loss) attributable to Ultralife common shareholders  basic
    
    $
    0.00
    
    
    $
    (0.41
    )
    
    $
    0.02
    
    
    $
    (0.56
    )Net income (loss) attributable to Ultralife common shareholders  diluted
    
    $
    0.00
    
    
    $
    (0.41
    )
    
    $
    0.02
    
    
    $
    (0.56
    )Weighted average shares outstanding  basic
    
    
    17,164
    
    
    
    16,894
    
    
    
    17,089
    
    
    
    17,024Weighted average shares outstanding  diluted
    
    
    17,169
    
    
    
    16,894
    
    
    
    17,094
    
    
    
    17,024
   4




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Six-Month Periods EndedJune 27,
    
    
    June 28,2010
    
    
    2009OPERATING ACTIVITIESNet income (loss)
    
    $
    313
    
    
    $
    (9,494
    )Adjustments to reconcile net income (loss)
to net cash used in operating activities:Depreciation and amortization of financing fees
    
    
    1,940
    
    
    
    1,939Amortization of intangible assets
    
    
    873
    
    
    
    807Gain on long-lived asset disposal and write-offs
    
    
    (299
    )
    
    
    Foreign exchange loss
    
    
    104
    
    
    
    191Non-cash stock-based compensation
    
    
    557
    
    
    
    1,077Changes in deferred income taxes
    
    
    122
    
    
    
    184Changes in operating assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    4,521
    
    
    
    420Inventories
    
    
    (3,186
    )
    
    
    (8,094
    )Prepaid expenses and other current assets
    
    
    (347
    )
    
    
    225Income taxes payable
    
    
    33
    
    
    
    (567
    )Accounts payable and other liabilities
    
    
    (1,308
    )
    
    
    339Net cash provided from (used in) operating activities
    
    
    3,323
    
    
    
    (12,973
    )INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (554
    )
    
    
    (1,253
    )Proceeds from asset disposal
    
    
    463
    
    
    
    Change in restricted cash
    
    
    (452
    )
    
    
    Payments for acquired companies, net of cash acquired
    
    
    (137
    )
    
    
    (6,763
    )Net cash used in investing activities
    
    
    (680
    )
    
    
    (8,016
    )FINANCING ACTIVITIESNet change in revolving credit facilities
    
    
    (6,240
    )
    
    
    23,900Proceeds from issuance of common stock
    
    
    
    
    
    
    310Proceeds from issuance of debt
    
    
    
    
    
    
    751Principal payments on debt and capital lease obligations
    
    
    (242
    )
    
    
    (1,192
    )Purchase of treasury stock
    
    
    
    
    
    
    (3,326
    )Net cash provided from (used in) financing activities
    
    
    (6,482
    )
    
    
    20,443Effect of exchange rate changes on cash
    
    
    (144
    )
    
    
    (157
    )Change in cash and cash equivalents
    
    
    (3,983
    )
    
    
    (703
    )Cash and cash equivalents at beginning of period
    
    
    6,094
    
    
    
    1,878Cash and cash equivalents at end of period
    
    $
    2,111
    
    
    $
    1,175SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for income taxes
    
    $
    
    
    
    $
    605Cash paid for interest
    
    $
    437
    
    
    $
    449Noncash investing and financing activities:Issuance of common stock for purchase of acquired companies
    
    $
    858
    
    
    $
    Purchase of property and equipment via notes payable
    
    $
    159
    
    
    $
    102
   5




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##### Table of Contents



1.
    
    BASIS OF PRESENTATION
     2.
    
    ACQUISITIONS AND JOINT VENTURES
  AMTI TM Brand
    6




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ASSETSCurrent assets:Cash
    
    $
    Trade accounts receivable, net
    
    
    693Inventories
    
    
    2,534Total current assets
    
    
    3,227Property, plant and equipment, net
    
    
    339Goodwill
    
    
    1,033Intangible Assets:Trademarks
    
    
    450Patents and Technology
    
    
    800Customer Relationships
    
    
    970Total assets acquired
    
    
    6,819LIABILITIESCurrent liabilities:Accounts payable
    
    
    801Other current liabilities
    
    
    301Total current liabilities
    
    
    1,102Long-term liabilities:Other long-term liabilities
    
    
    Total liabilities assumed
    
    
    1,102Total Purchase Price
    
    $
    5,717
   7




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3.
    
    INVENTORIES
  June 27, 2010
    
    
    December 31, 2009Raw materials
    
    $
    20,713
    
    
    $
    19,743Work in process
    
    
    5,993
    
    
    
    6,044Finished goods
    
    
    11,901
    
    
    
    9,716$
    38,607
    
    
    $
    35,503
 4.
    
    PROPERTY, PLANT AND EQUIPMENT
  June 27, 2010
    
    
    December 31, 2009Land
    
    $
    123
    
    
    $
    123Buildings and leasehold improvements
    
    
    6,187
    
    
    
    6,127Machinery and equipment
    
    
    43,827
    
    
    
    43,996Furniture and fixtures
    
    
    1,846
    
    
    
    1,829Computer hardware and software
    
    
    3,377
    
    
    
    3,397Construction in progress
    
    
    1,218
    
    
    
    1,32456,578
    
    
    
    56,796Less: Accumulated depreciation
    
    
    41,217
    
    
    
    40,148$
    15,361
    
    
    $
    16,648
   8




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5.
    
    GOODWILL AND INTANGIBLE ASSETS
   Battery &
    
    
    Communications
    
    
    EnergyEnergy Products
    
    
    Systems
    
    
    Services
    
    
    TotalBalance at December 31, 2008
    
    $
    2,072
    
    
    $
    14,262
    
    
    $
    6,609
    
    
    $
    22,943Adjustments to purchase price
allocation
    
    
    
    
    
    
    838
    
    
    
    322
    
    
    
    1,160Acquisition of AMTI
    
    
    
    
    
    
    1,261
    
    
    
    
    
    
    
    1,261Effect of foreign currency
translations
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Balance at June 28, 2009
    
    
    2,069
    
    
    
    16,361
    
    
    
    6,931
    
    
    
    25,361Adjustments to purchase price
allocation
    
    
    
    
    
    
    (45
    )
    
    
    117
    
    
    
    72Effect of foreign currency
translations
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Balance at December 31, 2009
    
    
    2,072
    
    
    
    16,316
    
    
    
    7,048
    
    
    
    25,436Adjustments to purchase price
allocation
    
    
    
    
    
    
    (183
    )
    
    
    912
    
    
    
    729Effect of foreign currency
translations
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Balance at June 27, 2010
    
    $
    2,082
    
    
    $
    16,133
    
    
    $
    7,960
    
    
    $
    26,175
      9




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June 27, 2010AccumulatedGross Assets
    
    
    Amortization
    
    
    NetTrademarks
    
    $
    4,856
    
    
    $
    
    
    
    $
    4,856Patents and technology
    
    
    5,121
    
    
    
    3,113
    
    
    
    2,008Customer relationships
    
    
    9,827
    
    
    
    4,551
    
    
    
    5,276Distributor relationships
    
    
    354
    
    
    
    251
    
    
    
    103Non-compete agreements
    
    
    393
    
    
    
    393
    
    
    
    Total intangible assets
    
    $
    20,551
    
    
    $
    8,308
    
    
    $
    12,243
 December 31, 2009AccumulatedGross Assets
    
    
    Amortization
    
    
    NetTrademarks
    
    $
    4,856
    
    
    $
    
    
    
    $
    4,856Patents and technology
    
    
    5,119
    
    
    
    2,852
    
    
    
    2,267Customer relationships
    
    
    9,772
    
    
    
    3,972
    
    
    
    5,800Distributor relationships
    
    
    352
    
    
    
    215
    
    
    
    137Non-compete agreements
    
    
    393
    
    
    
    389
    
    
    
    4Total intangible assets
    
    $
    20,492
    
    
    $
    7,428
    
    
    $
    13,064
   6.
    
    DEBT
   10




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Excess Availability
    
    LIBOR Rate PlusGreater than $10,000
    
    
    4.00
    %Greater than $7,500 but less than or equal to $10,000
    
    
    4.25
    %Greater than $5,000 but less than or equal to $7,500
    
    
    4.50
    %Greater than $3,000 but less than or equal to $5,000
    
    
    4.75
    %
     11




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7.
    
    SHAREHOLDERS EQUITY
             12




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Six-Month Periods EndedJune 27,
    
    
    June 28,2010
    
    
    2009Risk-free interest rate
    
    
    2.11
    %
    
    
    1.44
    %Volatility factor
    
    
    79.48
    %
    
    
    68.40
    %Dividends
    
    
    0.00
    %
    
    
    0.00
    %Weighted average expected life (years)
    
    
    3.51
    
    
    
    3.57
   13




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##### Table of Contents



WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber
    
    
    Exercise Price
    
    
    Contractual
    
    
    Intrinsicof Shares
    
    
    Per Share
    
    
    Term
    
    
    ValueShares under option at January 1, 2010
    
    
    1,805,107
    
    
    $
    10.99Options granted
    
    
    268,000
    
    
    
    4.47Options exercised
    
    
    
    
    
    
    Options forfeited
    
    
    (88,830
    )
    
    
    5.72Options expired
    
    
    (180,962
    )
    
    
    12.65Shares under option at June 27, 2010
    
    
    1,803,315
    
    
    $
    10.12
    
    
    3.84 years
    
    
    $
    262Vested and expected to vest as of June 27, 2010
    
    
    1,683,603
    
    
    $
    10.41
    
    
    3.69 years
    
    
    $
    219Options exercisable at June 27, 2010
    
    
    1,115,246
    
    
    $
    12.91
    
    
    2.39 years
    
    
    $
    
        Six-MonthPeriod EndedJune 28, 2009Number of shares awarded
    
    
    24,786Weighted average fair value per share
    
    $
    10.58Aggregate total value
    
    $
    246
  14




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##### Table of Contents



Weighted AverageNumber of Shares
    
    
    Grant Date Fair ValueUnvested at December 31, 2009
    
    
    46,527
    
    
    $
    11.42Granted
    
    
    
    
    
    
    Vested
    
    
    (9,944
    )
    
    
    12.69Forfeited
    
    
    (26,500
    )
    
    
    10.74Unvested at June 27, 2010
    
    
    10,083
    
    
    $
    11.96
  8.
    
    INCOME TAXES
    Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2010
    
    
    2009
    
    
    2010
    
    
    2009Income (Loss) before Incomes Taxes (a)
    
    $
    68
    
    
    $
    (6,883
    )
    
    $
    469
    
    
    $
    (9,308
    )Total Income Tax Provision (b)
    
    $
    51
    
    
    $
    95
    
    
    $
    156
    
    
    $
    186Effective Tax Rate (b/a)
    
    
    75.0
    %
    
    
    1.4
    %
    
    
    33.3
    %
    
    
    2.0
    %
   15




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9.
    
    EARNINGS PER SHARE
    16




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##### Table of Contents



Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2010
    
    
    2009
    
    
    2010
    
    
    2009Net Income (Loss) attributable to Ultralife
    
    $
    20
    
    
    $
    (6,964
    )
    
    $
    307
    
    
    $
    (9,476
    )Net Income (Loss) attributable to
participating securities (unvested
restricted stock awards) (10,000, -0-,
25,000 and -0- shares, respectively)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss) attributable to Ultralife
common shareholders (a)
    
    
    20
    
    
    
    (6,964
    )
    
    
    307
    
    
    
    (9,476
    )Effect of Dilutive Securities:Convertible Notes Payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss) attributable to Ultralife
common shareholders  Adjusted (b)
    
    $
    20
    
    
    $
    (6,964
    )
    
    $
    307
    
    
    $
    (9,476
    )Average Common Shares Outstanding Basic (c)
    
    
    17,164,000
    
    
    
    16,894,000
    
    
    
    17,089,000
    
    
    
    17,024,000Effect of Dilutive Securities:Stock Options / Warrants
    
    
    5,000
    
    
    
    
    
    
    
    5,000
    
    
    
    Convertible Notes Payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average Common Shares Outstanding Diluted (d)
    
    
    17,169,000
    
    
    
    16,894,000
    
    
    
    17,094,000
    
    
    
    17,024,000EPS  Basic (a/c)
    
    $
    0.00
    
    
    $
    (0.41
    )
    
    $
    0.02
    
    
    $
    (0.56
    )EPS  Diluted (b/d)
    
    $
    0.00
    
    
    $
    (0.41
    )
    
    $
    0.02
    
    
    $
    (0.56
    )
    17




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##### Table of Contents



10.
    
    COMPREHENSIVE INCOME
  Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss) attributable to Ultralife
    
    $
    20
    
    
    $
    (6,964
    )
    
    $
    307
    
    
    $
    (9,476
    )Foreign currency translation adjustments
    
    
    85
    
    
    
    916
    
    
    
    (249
    )
    
    
    862Change in fair value of derivatives
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    11Total comprehensive income (loss)
    
    $
    105
    
    
    $
    (6,044
    )
    
    $
    58
    
    
    $
    (8,603
    )
 11.
    
    COMMITMENTS AND CONTINGENCIES
     Balance at December 31, 2009
    
    $
    1,182Accruals for warranties issued
    
    
    (224
    )Settlements made
    
    
    (28
    )Balance at June 27, 2010
    
    $
    930
      18




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12.
    
    BUSINESS SEGMENT INFORMATION
   21




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Three-Month Period Ended June 27, 2010
 Battery &Energy
    
    
    Communications
    
    
    EnergyProducts
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    22,405
    
    
    $
    11,242
    
    
    $
    3,377
    
    
    $
    
    
    
    $
    37,024Segment contribution
    
    
    5,065
    
    
    
    3,941
    
    
    
    414
    
    
    
    (9,009
    )
    
    
    411Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (223
    )
    
    
    (223
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    (120
    )Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    (41
    )Noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Net income attributable to Ultralife
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20Total assets
    
    $
    55,468
    
    
    $
    44,337
    
    
    $
    18,963
    
    
    $
    6,317
    
    
    $
    125,085
 Three-Month Period Ended June 28, 2009
 Battery &Energy
    
    
    Communications
    
    
    EnergyProducts
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    25,634
    
    
    $
    10,357
    
    
    $
    3,602
    
    
    $
    
    
    
    $
    39,593Segment contribution
    
    
    4,296
    
    
    
    2,321
    
    
    
    163
    
    
    
    (13,105
    )
    
    
    (6,325
    )Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (349
    )
    
    
    (349
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (209
    )
    
    
    (209
    )Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    (95
    )Noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    14Net income attributable to Ultralife
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (6,964
    )Total assets
    
    $
    62,817
    
    
    $
    54,642
    
    
    $
    20,380
    
    
    $
    4,824
    
    
    $
    142,663
 Six-Month Period Ended June 27, 2010
 Battery &Energy
    
    
    Communications
    
    
    EnergyProducts
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    45,808
    
    
    $
    24,308
    
    
    $
    5,415
    
    
    $
    
    
    
    $
    75,531Segment contribution
    
    
    10,001
    
    
    
    8,844
    
    
    
    333
    
    
    
    (17,913
    )
    
    
    1,265Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (717
    )
    
    
    (717
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (79
    )
    
    
    (79
    )Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122
    )
    
    
    (122
    )Noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Net income attributable to Ultralife
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    307Total assets
    
    $
    55,468
    
    
    $
    44,337
    
    
    $
    18,963
    
    
    $
    6,317
    
    
    $
    125,085
  22




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Six-Month
Period Ended June 28, 2009
 Battery &Energy
    
    
    Communications
    
    
    EnergyProducts
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    48,626
    
    
    $
    21,622
    
    
    $
    9,148
    
    
    $
    
    
    
    $
    79,396Segment contribution
    
    
    8,096
    
    
    
    5,937
    
    
    
    528
    
    
    
    (23,143
    )
    
    
    (8,582
    )Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (528
    )
    
    
    (528
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (198
    )
    
    
    (198
    )Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184
    )
    
    
    (184
    )Noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Net income
attributable to
Ultralife
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (9,476
    )Total assets
    
    $
    62,817
    
    
    $
    54,642
    
    
    $
    20,380
    
    
    $
    4,824
    
    
    $
    142,663
 13.
    
    FAIR VALUE OF FINANCIAL INSTRUMENTS
  14.
    
    RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
    23




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24




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General
    25




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Overview
     26




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Results of Operations
 Three-month periods ended June 27, 2010 and June 28, 2009
 Revenues.
    Cost of Products Sold.
    27




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Operating Expenses.
 Other Income (Expense).
 Income Taxes.
 Three-Month Periods EndedJune 27,
    
    
    June 28,2010
    
    
    2009Income (Loss) before Incomes Taxes (a)
    
    $
    68
    
    
    $
    (6,883
    )Total Income Tax Provision (b)
    
    $
    51
    
    
    $
    95Effective Tax Rate (b/a)
    
    
    75.0
    %
    
    
    1.4
    %
   28




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Net Income (Loss) Attributable to Ultralife.
 Six-month periods ended June 27, 2010 and June 28, 2009
 Revenues.
    Cost of Products Sold.
  29




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Operating Expenses.
 Other Income (Expense).
  30




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Income Taxes.
 Six-Month Periods EndedJune 27,
    
    
    June 28,2010
    
    
    2009Income (Loss) before Incomes Taxes (a)
    
    $
    469
    
    
    $
    (9,308
    )Total Income Tax Provision (b)
    
    $
    156
    
    
    $
    186Effective Tax Rate (b/a)
    
    
    33.3
    %
    
    
    2.0
    %
    Net Income (Loss) Attributable to Ultralife.
 Adjusted EBITDA
   31




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
    
    Adjusted EBITDA (1) does not reflect our cash expenditures or future requirements
for capital expenditures or contractual commitments; (2) does not reflect changes in,
or cash requirements for, our working capital needs; (3) does not reflect the
interest expense, or the cash requirements necessary to service interest or principal
payments, on our debt; (4) does not reflect income taxes or the cash requirements for
any tax payments; and (5) does not reflect all of the costs associated with operating
our business;
    
    although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized often will have to be replaced in the future, and Adjusted
EBITDA does not reflect any cash requirements for such replacements;
    
    while stock-based compensation is a component of cost of products sold and
operating expenses, the impact on our consolidated financial statements compared to
other companies can vary significantly due to such factors as assumed life of the
stock-based awards and assumed volatility of our common stock; and
    
    other companies may calculate Adjusted EBITDA differently than we do, limiting its
usefulness as a comparative measure.
  32




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Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss) attributable
to Ultralife
    
    $
    20
    
    
    $
    (6,964
    )
    
    $
    307
    
    
    $
    (9,476
    )Add: interest expense, net
    
    
    223
    
    
    
    349
    
    
    
    717
    
    
    
    528Add: income tax provision
    
    
    51
    
    
    
    95
    
    
    
    156
    
    
    
    186Add: depreciation expense
    
    
    936
    
    
    
    997
    
    
    
    1,940
    
    
    
    1,939Add: amortization expense
    
    
    378
    
    
    
    466
    
    
    
    873
    
    
    
    807Add: stock-based compensation
expense
    
    
    236
    
    
    
    541
    
    
    
    557
    
    
    
    1,077Adjusted EBITDA
    
    $
    1,844
    
    
    $
    (4,516
    )
    
    $
    4,550
    
    
    $
    (4,939
    )
 Liquidity and Capital Resources
       33




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Debt Commitments
    Excess Availability
    
    LIBOR Rate PlusGreater than $10,000
    
    
    4.00
    %Greater than $7,500 but less than or equal to $10,000
    
    
    4.25
    %Greater than $5,000 but less than or equal to $7,500
    
    
    4.50
    %Greater than $3,000 but less than or equal to $5,000
    
    
    4.75
    %
    34




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Equity Transactions
        35




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Other Matters
     Outlook
   Recent Accounting Pronouncements and Developments
   36




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37




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Critical Accounting Policies
   
   
     38




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PART II OTHER INFORMATION
 
     39




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ExhibitIndex
    
    Description of Document
    
    Incorporated By Reference from:10.1
    
    
    Amendment No. 2 to the Asset Purchase
Agreement dated October 31, 2008 by and
among U.S. Energy Systems, Inc., Ken Cotton,
Shawn OConnell, Simon Baitler, and the
Registrant and Stationary Power Services,
Inc. dated April 27, 2010
    
    Exhibit 10.9 of the Form 10-Q
for the quarter ended March
28, 2010, filed May 7, 201010.2
    
    
    Addendum to Employment Agreement between the
Registrant and John D. Kavazanjian
    
    Exhibit 99.1 of Form 8-K filed
on May 27, 201031.1
    
    
    Rule 13a-14(a) / 15d-14(a) CEO Certifications
    
    Filed herewith31.2
    
    
    Rule 13a-14(a) / 15d-14(a) CFO Certifications
    
    Filed herewith32
    
    
    Section 1350 Certifications
    
    Filed herewith
 
    
    Management contract or compensatory plan or arrangement.  40




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ULTRALIFE CORPORATION
(Registrant)Date: August 4, 2010
    By:
    /s/ John D. KavazanjianJohn D. KavazanjianPresident and Chief Executive Officer
(Principal Executive Officer)Date: August 4, 2010
    By:
    /s/ Philip A. FainPhilip A. FainChief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)  41




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##### Table of Contents



31.1
    
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
  42