##### 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 March 29, 2008
 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 0-20852
 ULTRALIFE BATTERIES, INC.
  Delaware
    
    16-1387013(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 2000 Technology Parkway, Newark, New York 14513
 (315) 332-7100
 
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



PagePART I            FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets -
March 29, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations -
Three-month periods ended March 29, 2008
and March 31, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows -
Three-month periods ended March 29, 2008 and March 31, 2007
    
    
    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
    
    
    35Item 4. Controls and Procedures
    
    
    35PART II            OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    36Item 6. Exhibits
    
    
    37Signatures
    
    
    38Index to Exhibits
    
    
    39EX-31.1EX-31.2EX-32
  2




---



##### Table of Contents



March 29,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    734
    
    
    $
    2,245Trade accounts receivable (less allowance for doubtful accounts
of $508 at March 29, 2008 and $485 at December 31, 2007)
    
    
    39,396
    
    
    
    26,540Inventories
    
    
    40,225
    
    
    
    35,098Due from insurance company
    
    
    
    
    
    
    152Deferred tax asset  current
    
    
    302
    
    
    
    309Prepaid expenses and other current assets
    
    
    2,452
    
    
    
    3,949Total current assets
    
    
    83,109
    
    
    
    68,293Property, plant and equipment, net
    
    
    18,855
    
    
    
    19,365Other assets:Goodwill
    
    
    21,141
    
    
    
    21,180Intangible assets, net
    
    
    12,631
    
    
    
    13,113Security deposits
    
    
    105
    
    
    
    9733,877
    
    
    
    34,390Total Assets
    
    $
    135,841
    
    
    $
    122,048LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of debt and capital lease obligations
    
    $
    14,319
    
    
    $
    13,423Accounts payable
    
    
    21,226
    
    
    
    18,326Other current liabilities
    
    
    15,859
    
    
    
    10,083Total current liabilities
    
    
    51,404
    
    
    
    41,832Long-term liabilities:Debt and capital lease obligations
    
    
    5,235
    
    
    
    16,224Other long-term liabilities
    
    
    855
    
    
    
    985Total long-term liabilities
    
    
    6,090
    
    
    
    17,209Commitments and contingencies (Note 11)Minority interest in equity of subsidiaries
    
    
    11
    
    
    
    Shareholders 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 - 18,066,317 at March 29, 2008 and 17,208,862 at December 31, 2007
    
    
    1,798
    
    
    
    1,712Capital in excess of par value
    
    
    164,746
    
    
    
    152,070Accumulated other comprehensive income (loss)
    
    
    202
    
    
    
    69Accumulated deficit
    
    
    (86,009
    )
    
    
    (88,443
    )80,737
    
    
    
    65,408Less Treasury stock, at cost  728,690 shares outstanding
    
    
    2,401
    
    
    
    2,401Total shareholders equity
    
    
    78,336
    
    
    
    63,007Total Liabilities and Shareholders Equity
    
    $
    135,841
    
    
    $
    122,048
  3




---



##### Table of Contents



Three-Month Periods EndedMarch 29,
    
    
    March 31,2008
    
    
    2007Revenues
    
    $
    49,587
    
    
    $
    32,320Cost of products sold
    
    
    38,712
    
    
    
    24,819Gross margin
    
    
    10,875
    
    
    
    7,501Operating expenses:Research and development (including $159 and $253
respectively, of amortization of intangible assets)
    
    
    1,609
    
    
    
    1,614Selling, general, and administrative (including $361 and $278
respectively, of amortization of intangible assets)
    
    
    6,903
    
    
    
    5,296Total operating expenses
    
    
    8,512
    
    
    
    6,910Operating income
    
    
    2,363
    
    
    
    591Other income (expense):Interest income
    
    
    11
    
    
    
    14Interest expense
    
    
    (329
    )
    
    
    (657
    )Gain on insurance settlement
    
    
    39
    
    
    
    Gain on debt conversion
    
    
    313
    
    
    
    Minority interest in loss of subsidiaries
    
    
    13
    
    
    
    Miscellaneous
    
    
    69
    
    
    
    16Income (loss) before income taxes
    
    
    2,479
    
    
    
    (36
    )Income tax provision (benefit)-current
    
    
    54
    
    
    
    Income tax provision (benefit)-deferred
    
    
    (9
    )
    
    
    Total income taxes
    
    
    45
    
    
    
    Net income (loss)
    
    $
    2,434
    
    
    $
    (36
    )Earnings (loss) per share  basic
    
    $
    0.14
    
    
    $
    (0.00
    )Earnings (loss) per share  diluted
    
    $
    0.14
    
    
    $
    (0.00
    )Weighted average shares outstanding  basic
    
    
    17,027
    
    
    
    15,078Weighted average shares outstanding  diluted
    
    
    17,479
    
    
    
    15,078
  4




---



##### Table of Contents



Three-Month Periods EndedMarch 29,
    
    
    March 31,2008
    
    
    2007OPERATING ACTIVITIESNet income (loss)
    
    $
    2,434
    
    
    $
    (36
    )Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation and amortization of financing fees
    
    
    998
    
    
    
    963Amortization of intangible assets
    
    
    520
    
    
    
    531(Gain) loss on asset disposal
    
    
    (2
    )
    
    
    6Gain on insurance settlement
    
    
    (39
    )
    
    
    Foreign exchange gain
    
    
    (52
    )
    
    
    (18
    )Gain on debt conversion
    
    
    (313
    )
    
    
    Non-cash stock-based compensation
    
    
    487
    
    
    
    550Minority interest in loss of subsidiaries
    
    
    (13
    )
    
    
    Changes in deferred income taxes
    
    
    9
    
    
    
    Changes in operating assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    (12,812
    )
    
    
    1,183Inventories
    
    
    (5,074
    )
    
    
    (6,694
    )Prepaid expenses and other current assets
    
    
    1,636
    
    
    
    180Insurance receivable relating to fires
    
    
    197
    
    
    
    (153
    )Income taxes payable
    
    
    
    
    
    
    13Accounts payable and other liabilities
    
    
    8,765
    
    
    
    1,524Net cash used in operating activities
    
    
    (3,259
    )
    
    
    (1,951
    )INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (376
    )
    
    
    (534
    )Payments for acquired companies, net of cash acquired
    
    
    (21
    )
    
    
    (1,500
    )Net cash used in investing activities
    
    
    (397
    )
    
    
    (2,034
    )FINANCING ACTIVITIESNet change in revolving credit facilities
    
    
    896
    
    
    
    4,500Proceeds from issuance of common stock
    
    
    1,775
    
    
    
    214Principal payments on debt and capital lease obligations
    
    
    (555
    )
    
    
    (513
    )Net cash provided by in financing activities
    
    
    2,116
    
    
    
    4,201Effect of exchange rate changes on cash
    
    
    29
    
    
    
    16Change in cash and cash equivalents
    
    
    (1,511
    )
    
    
    232Cash and cash equivalents at beginning of period
    
    
    2,245
    
    
    
    720Cash and cash equivalents at end of period
    
    $
    734
    
    
    $
    952SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for income taxes
    
    $
    
    
    
    $
    2Cash paid for interest
    
    $
    428
    
    
    $
    568Noncash investing and financing activities:Purchase of property and equipment via notes payable
    
    $
    66
    
    
    $
    Conversion of convertible notes into shares of common stock
    
    $
    10,500
    
    
    $
    
  5




---



##### Table of Contents



2008 Activity
 Ultralife Batteries India Private Limited
  2007 Activity
 RedBlack Communications, Inc. (formerly Innovative Solutions Consulting, Inc.)
  6




---



##### Table of Contents



ASSETSCurrent assets:Cash
    
    $
    57Trade accounts receivables, net
    
    
    535Prepaid expenses and other current assets
    
    
    175Total current assets
    
    
    767Property, plant and equipment, net
    
    
    687Goodwill
    
    
    924Intangible Assets:Non-compete agreements
    
    
    180Total assets acquired
    
    
    2,558LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    
    720Accounts payable
    
    
    431Other current liabilities
    
    
    159Total current liabilities
    
    
    1,310Long-term liabilities:Debt
    
    
    188Total liabilities assumed
    
    
    1,498Total Purchase Price
    
    $
    1,060
  7




---



##### Table of Contents



Three-MonthPeriod Ended(in thousands, except per
    
    March 31,share data)
    
    2007Revenues
    
    $
    32,934Net Loss
    
    $
    (40
    )Loss per share  Basic
    
    $
    (0.00
    )Loss per share  Diluted
    
    $
    (0.00
    )
 Stationary Power Services, Inc. and Reserve Power Systems, Inc.
    8




---



##### Table of Contents



ASSETSCurrent assets:Cash
    
    $
    111Trade accounts receivables, net
    
    
    1,594Inventories
    
    
    1,687Prepaid expenses and other current assets
    
    
    52Total current assets
    
    
    3,444Property, plant and equipment, net
    
    
    324Goodwill
    
    
    5,368Intangible Assets:Trademarks
    
    
    1,300Patents and Technology
    
    
    440Customer Relationships
    
    
    4,600Other Assets:Security deposits
    
    
    12Total assets acquired
    
    
    15,488
 9




---



##### Table of Contents



LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    
    1,277Accounts payable
    
    
    1,958Other current liabilities
    
    
    788Total current liabilities
    
    
    4,023Long-term liabilities:Debt
    
    
    137Other long-term liabilities
    
    
    20Total liabilities assumed
    
    
    4,180Total Purchase Price
    
    $
    11,308
    Three-MonthPeriod Ended(in thousands, except per
    
    March 31,share data)
    
    2007Revenues
    
    $
    33,972Net Loss
    
    $
    (59
    )Loss per share  Basic
    
    $
    (0.00
    )Loss per share  Diluted
    
    $
    (0.00
    )
 10




---



##### Table of Contents



3.
    
    GOODWILL AND OTHER INTANGIBLE ASSETS
   Non-
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    Rechargeable
    
    Communications
    
    InstallationProducts
    
    Products
    
    Systems
    
    Services
    
    TotalBalance at December 31, 2006
    
    $
    1,239
    
    
    $
    2,421
    
    
    $
    9,684
    
    
    $
    
    
    
    $
    13,344Adjustments to purchase price allocation
    
    
    77
    
    
    
    53
    
    
    
    211
    
    
    
    
    
    
    
    341Effect of foreign currency translations
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Balance at March 31, 2007
    
    
    1,303
    
    
    
    2,474
    
    
    
    9,895
    
    
    
    
    
    
    
    13,672Acquisition of RedBlack
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    905
    
    
    
    905Acquisition of SPS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,825
    
    
    
    3,825Acquisition of RPS
    
    
    
    
    
    
    1,672
    
    
    
    
    
    
    
    
    
    
    
    1,672Adjustments to purchase price allocation
    
    
    251
    
    
    
    141
    
    
    
    565
    
    
    
    
    
    
    
    957Effect of foreign currency translations
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149Balance at December 31, 2007
    
    
    1,703
    
    
    
    4,287
    
    
    
    10,460
    
    
    
    4,730
    
    
    
    21,180Adjustments to purchase price allocation
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    (116
    )
    
    
    (110
    )Effect of foreign currency translations
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71Balance at March 29, 2008
    
    $
    1,774
    
    
    $
    4,293
    
    
    $
    10,460
    
    
    $
    4,614
    
    
    $
    21,141
   March 29, 2008AccumulatedGross Assets
    
    Amortization
    
    NetTrademarks
    
    $
    4,403
    
    
    $
    
    
    
    $
    4,403Patents and technology
    
    
    4,087
    
    
    
    1,829
    
    
    
    2,258Customer relationships
    
    
    7,526
    
    
    
    1,943
    
    
    
    5,583Distributor relationships
    
    
    343
    
    
    
    141
    
    
    
    202Non-compete agreements
    
    
    392
    
    
    
    207
    
    
    
    185Total intangible assets
    
    $
    16,751
    
    
    $
    4,120
    
    
    $
    12,631
 December 31, 2007AccumulatedGross Assets
    
    Amortization
    
    NetTrademarks
    
    $
    4,399
    
    
    $
    
    
    
    $
    4,399Patents and technology
    
    
    4,069
    
    
    
    1,662
    
    
    
    2,407Customer relationships
    
    
    7,489
    
    
    
    1,608
    
    
    
    5,881Distributor relationships
    
    
    329
    
    
    
    123
    
    
    
    206Non-compete agreements
    
    
    390
    
    
    
    170
    
    
    
    220Total intangible assets
    
    $
    16,676
    
    
    $
    3,563
    
    
    $
    13,113
 11




---



##### Table of Contents



4.
    
    EARNINGS (LOSS) PER SHARE
    Three-Month PeriodsEndedMarch 29,
    
    March 31,(In thousands, except per share data)
    
    2008
    
    2007Net Income (Loss) (a)
    
    $
    2,434
    
    
    $
    (36
    )Average Shares Outstanding  Basic (b)
    
    
    17,027
    
    
    
    15,078Effect of Dilutive Securities:Stock Options / Warrants
    
    
    414
    
    
    
    Restricted Stock Awards
    
    
    38
    
    
    
    Average Shares Outstanding  Diluted (c)
    
    
    17,479
    
    
    
    15,078EPS  Basic (a/b)
    
    $
    0.14
    
    
    $
    (0.00
    )EPS  Diluted (a/c)
    
    $
    0.14
    
    
    $
    (0.00
    )
  5.
    
    STOCK-BASED COMPENSATION
   12




---



##### Table of Contents



13




---



##### Table of Contents



Three-MonthPeriod EndedMarch 29,2008Risk-free interest rate
    
    
    3.30
    %Volatility factor
    
    
    52.74
    %Dividends
    
    
    0.00
    %Weighted average expected life (years)
    
    
    3.76
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber
    
    
    Exercise Price
    
    
    Contractual
    
    
    Intrinsicof Shares
    
    
    Per Share
    
    
    Term
    
    
    ValueShares under option at January 1, 2008
    
    
    1,769,463
    
    
    $
    11.51Options granted
    
    
    50,000
    
    
    
    12.74Options exercised
    
    
    (75,455
    )
    
    
    10.48Options forfeited
    
    
    (2,000
    )
    
    
    9.84Options expired
    
    
    
    
    
    
    Shares under option at March 29, 2008
    
    
    1,742,008
    
    
    $
    11.59
    
    
    4.21 years
    
    $
    2,708Vested and expected to vest as of
March 29, 2008
    
    
    1,627,976
    
    
    $
    11.64
    
    
    4.13 years
    
    $
    2,577Options exercisable at March 29, 2008
    
    
    1,022,180
    
    
    $
    12.30
    
    
    3.36 years
    
    $
    1,683
   14




---



##### Table of Contents



Weighted AverageNumber of Shares
    
    
    Grant Date Fair ValueUnvested at December 31, 2007
    
    
    91,903
    
    
    $
    11.28Granted
    
    
    
    
    
    
    Vested
    
    
    (10,637
    )
    
    
    11.50Forfeited
    
    
    
    
    
    
    Unvested at March 29, 2008
    
    
    81,266
    
    
    $
    11.25
  6.
    
    COMPREHENSIVE INCOME
  Three-Month PeriodsEndedMarch 29,
    
    March 31,2008
    
    2007Net income (loss)
    
    $
    2,434
    
    
    $
    (36
    )Foreign currency translation adjustments
    
    
    165
    
    
    
    127Change in fair value of derivatives, net of tax
    
    
    (32
    )
    
    
    (12
    )Total comprehensive income
    
    $
    2,567
    
    
    $
    79
 15




---



##### Table of Contents



7.
    
    INVENTORIES
  March 29, 2008
    
    December 31, 2007Raw materials
    
    $
    25,522
    
    
    $
    22,613Work in process
    
    
    7,711
    
    
    
    7,493Finished goods
    
    
    9,178
    
    
    
    7,32542,411
    
    
    
    37,431Less: Reserve for obsolescence
    
    
    2,186
    
    
    
    2,333$
    40,225
    
    
    $
    35,098
 8.
    
    PROPERTY, PLANT AND EQUIPMENT
  March 29, 2008
    
    December 31, 2007Land
    
    $
    123
    
    
    $
    123Buildings and leasehold improvements
    
    
    5,137
    
    
    
    5,104Machinery and equipment
    
    
    43,363
    
    
    
    43,252Furniture and fixtures
    
    
    1,471
    
    
    
    1,229Computer hardware and software
    
    
    2,502
    
    
    
    2,359Construction in progress
    
    
    1,069
    
    
    
    1,09053,665
    
    
    
    53,157Less: Accumulated depreciation
    
    
    34,810
    
    
    
    33,792$
    18,855
    
    
    $
    19,365
  9.
    
    DEBT
   16




---



##### Table of Contents



17




---



##### Table of Contents



10.
    
    INCOME TAXES
   18




---



##### Table of Contents



11.
    
    COMMITMENTS AND CONTINGENCIES
    19




---



##### Table of Contents



Balance at December 31, 2007
    
    $
    501Accruals for warranties issued
    
    
    182Settlements made
    
    
    (38
    )Balance at March 29, 2008
    
    $
    645
    20




---



##### Table of Contents



21




---



##### Table of Contents



12.
    
    BUSINESS SEGMENT INFORMATION
  Three-Month Period Ended March 29, 2008
 Non-
    
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    InstallationProducts
    
    
    Products
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    14,616
    
    
    $
    6,738
    
    
    $
    24,054
    
    
    $
    4,179
    
    
    $
    
    
    
    $
    49,587Segment contribution
    
    
    3,056
    
    
    
    1,201
    
    
    
    6,121
    
    
    
    497
    
    
    
    (8,512
    )
    
    
    2,363Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (318
    )
    
    
    (318
    )Gain on debt
conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    313Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    121Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    9Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,434Total assets
    
    $
    46,166
    
    
    $
    23,154
    
    
    $
    45,544
    
    
    $
    16,050
    
    
    $
    4,927
    
    
    $
    135,841
 22




---



##### Table of Contents



Three-Month Period Ended March 31, 2007
 Non-Rechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    TechnologyProducts
    
    
    Products
    
    
    Accessories
    
    
    Contracts
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    18,158
    
    
    $
    5,529
    
    
    $
    8,491
    
    
    $
    142
    
    
    $
    
    
    
    $
    32,320Segment contribution
    
    
    4,548
    
    
    
    1,362
    
    
    
    1,520
    
    
    
    71
    
    
    
    (6,910
    )
    
    
    591Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (643
    )
    
    
    (643
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (36
    )Total assets
    
    $
    51,627
    
    
    $
    17,517
    
    
    $
    27,239
    
    
    $
    95
    
    
    $
    5,618
    
    
    $
    102,096
 13.
    
    FIRE AT MANUFACTURING FACILITY
  14.
    
    RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
   23




---



##### Table of Contents



24




---



##### Table of Contents



General
   25




---



##### Table of Contents



Results of Operations
 Three-month periods ended March 29, 2008 and March 31, 2007
 Revenues.
 26




---



##### Table of Contents



Cost of Products Sold.
 Operating Expenses.
 Other Income (Expense).
 Income Taxes.
  27




---



##### Table of Contents



Net Income (Loss).
 Adjusted EBITDA
    28




---



##### Table of Contents




    
    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.
  Three-Month PeriodsEndedMarch 29,
    
    
    March 31,2008
    
    
    2007Net income (loss)
    
    $
    2,434
    
    
    $
    (36
    )Add: interest expense, net
    
    
    318
    
    
    
    643Add: income tax provision
    
    
    45
    
    
    
    Add: depreciation expense
    
    
    998
    
    
    
    963Add: amortization expense
    
    
    520
    
    
    
    531Add: stock-based compensation
expense
    
    
    487
    
    
    
    550Less: gain on debt conversion
    
    
    (313
    )
    
    
    Adjusted EBITDA
    
    $
    4,489
    
    
    $
    2,651
 Liquidity and Capital Resources
  29




---



##### Table of Contents



30




---



##### Table of Contents



31




---



##### Table of Contents



32




---



##### Table of Contents



Outlook
  Recent Accounting Pronouncements and Developments
    33




---



##### Table of Contents



Critical Accounting Policies
   34




---



##### Table of Contents



35




---



##### Table of Contents



PART II OTHER INFORMATION
 
     36




---



##### 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
 37




---



##### Table of Contents



ULTRALIFE BATTERIES, INC.(Registrant)Date: May 7, 2008
    
    By:
    
    /s/ John D. KavazanjianJohn D. KavazanjianPresident and Chief Executive OfficerDate: May 7, 2008
    
    By:
    
    /s/ Robert W. FishbackRobert W. FishbackVice President  Finance and ChiefFinancial Officer
 38




---



##### 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
 39