##### 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 28, 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 CORPORATION
  Delaware
    
    16-1387013(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 2000 Technology Parkway, Newark, New York 14513
  (Registrants telephone number, including area code)
  
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets -
June 28, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations -
Three- and six-month periods ended June 28, 2008 and June 30, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows -
Six-month periods ended June 28, 2008 and June 30, 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    28Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    40PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    41Item 4. Submission of Matters to a Vote of Security Holders
    
    
    42Item 6. Exhibits
    
    
    43Signatures
    
    
    44Index to Exhibits
    
    
    45EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



June 28,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    827
    
    
    $
    2,245Trade accounts receivable (less allowance for doubtful accounts
of $503 at June 28, 2008 and $485 at December 31, 2007)
    
    
    52,937
    
    
    
    26,540Inventories
    
    
    46,073
    
    
    
    35,098Due from insurance company
    
    
    
    
    
    
    152Deferred tax asset  current
    
    
    311
    
    
    
    309Prepaid expenses and other current assets
    
    
    1,402
    
    
    
    3,949Total current assets
    
    
    101,550
    
    
    
    68,293Property, plant and equipment, net
    
    
    19,030
    
    
    
    19,365Other assets:Goodwill
    
    
    21,246
    
    
    
    21,180Intangible assets, net
    
    
    12,129
    
    
    
    13,113Security deposits and other long-term assets
    
    
    73
    
    
    
    9733,448
    
    
    
    34,390Total Assets
    
    $
    154,028
    
    
    $
    122,048LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of debt and capital lease obligations
    
    $
    8,713
    
    
    $
    13,423Accounts payable
    
    
    34,979
    
    
    
    18,326Income taxes payable
    
    
    318
    
    
    
    Other current liabilities
    
    
    15,296
    
    
    
    10,083Total current liabilities
    
    
    59,306
    
    
    
    41,832Long-term liabilities:Debt and capital lease obligations
    
    
    4,683
    
    
    
    16,224Other long-term liabilities
    
    
    4,151
    
    
    
    985Total long-term liabilities
    
    
    8,834
    
    
    
    17,209Commitments and contingencies (Note 11)Minority interest in equity of subsidiaries
    
    
    31
    
    
    
    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 - 18,149,347 at June 28, 2008 and 17,208,862 at December 31, 2007
    
    
    1,808
    
    
    
    1,712Capital in excess of par value
    
    
    165,833
    
    
    
    152,070Accumulated other comprehensive income
    
    
    231
    
    
    
    69Accumulated deficit
    
    
    (79,614
    )
    
    
    (88,443
    )88,258
    
    
    
    65,408Less Treasury stock, at cost  728,690 shares outstanding
    
    
    2,401
    
    
    
    2,401Total shareholders equity
    
    
    85,857
    
    
    
    63,007Total Liabilities and Shareholders Equity
    
    $
    154,028
    
    
    $
    122,048
  3




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Three-Month Periods Ended
    
    
    Six-Month Periods EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    87,898
    
    
    $
    35,196
    
    
    $
    137,485
    
    
    $
    67,516Cost of products sold
    
    
    67,270
    
    
    
    26,579
    
    
    
    105,982
    
    
    
    51,398Gross margin
    
    
    20,628
    
    
    
    8,617
    
    
    
    31,503
    
    
    
    16,118Operating expenses:Research and development (including $158, $256, $317 and $509
respectively, of amortization of intangible assets)
    
    
    2,137
    
    
    
    1,688
    
    
    
    3,746
    
    
    
    3,302Selling, general, and administrative (including $368, $294,
$729 and $572
respectively, of amortization of intangible assets)
    
    
    8,554
    
    
    
    5,212
    
    
    
    15,457
    
    
    
    10,508Total operating expenses
    
    
    10,691
    
    
    
    6,900
    
    
    
    19,203
    
    
    
    13,810Operating income
    
    
    9,937
    
    
    
    1,717
    
    
    
    12,300
    
    
    
    2,308Other income (expense):Interest income
    
    
    2
    
    
    
    18
    
    
    
    13
    
    
    
    32Interest expense
    
    
    (240
    )
    
    
    (604
    )
    
    
    (569
    )
    
    
    (1,261
    )Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    Gain on debt conversion
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    Minority interest in loss of subsidiaries
    
    
    15
    
    
    
    
    
    
    
    28
    
    
    
    Miscellaneous
    
    
    40
    
    
    
    167
    
    
    
    109
    
    
    
    183Income before income taxes
    
    
    9,754
    
    
    
    1,298
    
    
    
    12,233
    
    
    
    1,262Income tax provision-current
    
    
    264
    
    
    
    
    
    
    
    318
    
    
    
    Income tax provision-deferred
    
    
    3,095
    
    
    
    
    
    
    
    3,086
    
    
    
    Total income taxes
    
    
    3,359
    
    
    
    
    
    
    
    3,404
    
    
    
    Net income
    
    $
    6,395
    
    
    $
    1,298
    
    
    $
    8,829
    
    
    $
    1,262Earnings per share  basic
    
    $
    0.37
    
    
    $
    0.09
    
    
    $
    0.51
    
    
    $
    0.08Earnings per share  diluted
    
    $
    0.36
    
    
    $
    0.08
    
    
    $
    0.50
    
    
    $
    0.08Weighted average shares outstanding  basic
    
    
    17,309
    
    
    
    15,123
    
    
    
    17,155
    
    
    
    15,100Weighted average shares outstanding  diluted
    
    
    17,720
    
    
    
    15,331
    
    
    
    17,800
    
    
    
    15,320
  4




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Six-Month Periods EndedJune 28,
    
    
    June 30,2008
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    8,829
    
    
    $
    1,262Adjustments to reconcile net income
to net cash provided by operating activities:Depreciation and amortization of financing fees
    
    
    1,931
    
    
    
    1,916Amortization of intangible assets
    
    
    1,046
    
    
    
    1,081(Gain) loss on asset disposal
    
    
    (3
    )
    
    
    6Gain on insurance settlement
    
    
    (39
    )
    
    
    Foreign exchange gain
    
    
    (64
    )
    
    
    (153
    )Gain on debt conversion
    
    
    (313
    )
    
    
    Impairment
of long-lived assets
    
    
    138
    
    
    
    Non-cash stock-based compensation
    
    
    1,196
    
    
    
    1,031Minority interest in loss of subsidiaries
    
    
    (28
    )
    
    
    Changes in deferred income taxes
    
    
    3,086
    
    
    
    Changes in operating assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    (26,340
    )
    
    
    848Inventories
    
    
    (10,918
    )
    
    
    (4,282
    )Prepaid expenses and other current assets
    
    
    2,693
    
    
    
    688Insurance receivable relating to fires
    
    
    201
    
    
    
    (49
    )Income taxes payable
    
    
    318
    
    
    
    Accounts payable and other liabilities
    
    
    22,074
    
    
    
    (830
    )Net cash provided from operating activities
    
    
    3,807
    
    
    
    1,518INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (1,616
    )
    
    
    (1,370
    )Payments for acquired companies, net of cash acquired
    
    
    11
    
    
    
    (1,501
    )Net cash used in investing activities
    
    
    (1,605
    )
    
    
    (2,871
    )FINANCING ACTIVITIESNet change in revolving credit facilities
    
    
    (4,704
    )
    
    
    1,800Proceeds from issuance of common stock
    
    
    2,163
    
    
    
    312Principal payments on debt and capital lease obligations
    
    
    (1,113
    )
    
    
    (1,039
    )Net cash provided by (used in) financing activities
    
    
    (3,654
    )
    
    
    1,073Effect of exchange rate changes on cash
    
    
    34
    
    
    
    113Change in cash and cash equivalents
    
    
    (1,418
    )
    
    
    (167
    )Cash and cash equivalents at beginning of period
    
    
    2,245
    
    
    
    720Cash and cash equivalents at end of period
    
    $
    827
    
    
    $
    553SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for income taxes
    
    $
    
    
    
    $
    Cash paid for interest
    
    $
    641
    
    
    $
    1,155Noncash investing and financing activities:Purchase of property and equipment via notes payable
    
    $
    66
    
    
    $
    410Conversion of convertible notes into shares of common stock
    
    $
    10,500
    
    
    $
    
  5




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




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ASSETSCurrent assets:Cash
    
    $
    57Trade accounts receivables, net
    
    
    535Prepaid expenses and other current assets
    
    
    175Total current assets
    
    
    767Property, plant and equipment, net
    
    
    687Goodwill
    
    
    976Intangible Assets:Non-compete agreements
    
    
    180Total assets acquired
    
    
    2,610LIABILITIESCurrent 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
    
    $
    1,112
 7




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Three-Month
    
    Six-MonthPeriod Ended
    
    Period Ended(in thousands, except per
    
    June 30,
    
    June 30,share data)
    
    2007
    
    2007Revenues
    
    $
    35,704
    
    
    $
    68,638Net Income
    
    $
    931
    
    
    $
    891Earnings per share  Basic
    
    $
    0.06
    
    
    $
    0.06Earnings per share  Diluted
    
    $
    0.06
    
    
    $
    0.06
 Stationary Power Services, Inc. and Reserve Power Systems, Inc.
   8




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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
    
    
    5,383Intangible Assets:Trademarks
    
    
    1,300Patents and Technology
    
    
    440Customer Relationships
    
    
    4,600Other Assets:Security deposits
    
    
    12Total assets acquired
    
    
    15,503
 9




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##### 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
    
    $
    11,323
    Three-Month
    
    Six-MonthPeriod Ended
    
    Period Ended(in thousands, except per
    
    June 30,
    
    June 30,share data)
    
    2007
    
    2007Revenues
    
    $
    37,149
    
    
    $
    71,121Net Income
    
    $
    1,361
    
    
    $
    1,302Earnings per share  Basic
    
    $
    0.09
    
    
    $
    0.08Earnings per share  Diluted
    
    $
    0.09
    
    
    $
    0.08
 10




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##### Table of Contents



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
    
    
    78
    
    
    
    194
    
    
    
    776
    
    
    
    
    
    
    
    1,048Effect of foreign currency
translations
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68Balance at June 30, 2007
    
    
    1,385
    
    
    
    2,615
    
    
    
    10,460
    
    
    
    
    
    
    
    14,460Acquisition of RedBlack
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    905
    
    
    
    905Acquisition of SPS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,825
    
    
    
    3,825Acquisition of RPS
    
    
    
    
    
    
    1,672
    
    
    
    
    
    
    
    
    
    
    
    1,672Adjustments to purchase
price allocation
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250Effect of foreign currency
translations
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68Balance at December 31, 2007
    
    
    1,703
    
    
    
    4,287
    
    
    
    10,460
    
    
    
    4,730
    
    
    
    21,180Adjustments to purchase
price allocation
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    (63
    )
    
    
    (43
    )Effect of foreign currency
translations
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109Balance at June 28, 2008
    
    $
    1,812
    
    
    $
    4,307
    
    
    $
    10,460
    
    
    $
    4,667
    
    
    $
    21,246
   June 28, 2008AccumulatedGross Assets
    
    
    Amortization
    
    
    NetTrademarks
    
    $
    4,405
    
    
    $
    
    
    
    $
    4,405Patents and technology
    
    
    4,096
    
    
    
    1,994
    
    
    
    2,102Customer relationships
    
    
    7,547
    
    
    
    2,268
    
    
    
    5,279Distributor relationships
    
    
    350
    
    
    
    156
    
    
    
    194Non-compete agreements
    
    
    393
    
    
    
    244
    
    
    
    149Total intangible assets
    
    $
    16,791
    
    
    $
    4,662
    
    
    $
    12,129
 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




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Three-Month Periods Ended
    
    Six-Month Periods EndedJune 28,
    
    June 30,
    
    June 28,
    
    June 30,(Shares in thousands)
    
    2008
    
    2007
    
    2008
    
    2007Net Income (a)
    
    $
    6,395
    
    
    $
    1,298
    
    
    $
    8,829
    
    
    $
    1,262Effect of Dilutive Securities:Convertible Notes Payable
    
    
    50
    
    
    
    
    
    
    
    115
    
    
    
    Net Income  Adjusted (b)
    
    $
    6,445
    
    
    $
    1,298
    
    
    $
    8,944
    
    
    $
    1,262Average Shares Outstanding  Basic (c)
    
    
    17,309
    
    
    
    15,123
    
    
    
    17,155
    
    
    
    15,100Effect of Dilutive Securities:Stock Options / Warrants
    
    
    132
    
    
    
    202
    
    
    
    248
    
    
    
    215Restricted Stock
    
    
    12
    
    
    
    6
    
    
    
    30
    
    
    
    5Convertible Notes Payable
    
    
    267
    
    
    
    
    
    
    
    367
    
    
    
    Average Shares Outstanding  Diluted (d)
    
    
    17,720
    
    
    
    15,331
    
    
    
    17,800
    
    
    
    15,320EPS  Basic (a/c)
    
    $
    0.37
    
    
    $
    0.09
    
    
    $
    0.51
    
    
    $
    0.08EPS  Diluted (b/d)
    
    $
    0.36
    
    
    $
    0.08
    
    
    $
    0.50
    
    
    $
    0.08
   12




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13




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##### Table of Contents



Six-Month
    
    Six-MonthPeriod Ended
    
    Period EndedJune 28, 2008
    
    June 30, 2007Risk-free interest rate
    
    
    2.33
    %
    
    
    4.54
    %Volatility factor
    
    
    59.46
    %
    
    
    57.99
    %Dividends
    
    
    0.00
    %
    
    
    0.00
    %Weighted average expected life (years)
    
    
    3.55
    
    
    
    3.75
   14




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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, 2008
    
    
    1,769,463
    
    
    $
    11.51Options granted
    
    
    197,000
    
    
    
    13.19Options exercised
    
    
    (158,485
    )
    
    
    7.29Options forfeited
    
    
    (4,500
    )
    
    
    9.84Options expired
    
    
    
    
    
    
    Shares under option at June 28, 2008
    
    
    1,803,478
    
    
    $
    12.06
    
    
    4.35 years
    
    $
    1,856Vested and expected to vest as of
June 28, 2008
    
    
    1,688,891
    
    
    $
    12.11
    
    
    4.27 years
    
    $
    1,784Options exercisable at June 28, 2008
    
    
    1,084,806
    
    
    $
    12.37
    
    
    3.44 years
    
    $
    1,436
        Weighted AverageNumber of Shares
    
    
    Grant Date Fair ValueUnvested at December 31, 2007
    
    
    91,903
    
    
    $
    11.28Granted
    
    
    
    
    
    
    Vested
    
    
    (17,874
    )
    
    
    11.13Forfeited
    
    
    
    
    
    
    Unvested at June 28, 2008
    
    
    74,029
    
    
    $
    11.25
 15




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##### Table of Contents



Three-Month Periods
    
    
    Six-Month PeriodsEnded
    
    
    EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    6,395
    
    
    $
    1,298
    
    
    $
    8,829
    
    
    $
    1,262Foreign currency translation adjustments
    
    
    16
    
    
    
    213
    
    
    
    181
    
    
    
    340Change in fair value of derivatives,
net of tax
    
    
    13
    
    
    
    (1
    )
    
    
    (19
    )
    
    
    (13
    )Total comprehensive income
    
    $
    6,424
    
    
    $
    1,510
    
    
    $
    8,991
    
    
    $
    1,589
   June 28, 2008
    
    December 31, 2007Raw materials
    
    $
    29,864
    
    
    $
    22,613Work in process
    
    
    8,703
    
    
    
    7,493Finished goods
    
    
    10,258
    
    
    
    7,32548,825
    
    
    
    37,431Less: Reserve for obsolescence
    
    
    2,752
    
    
    
    2,333$
    46,073
    
    
    $
    35,098
   June 28, 2008
    
    December 31, 2007Land
    
    $
    123
    
    
    $
    123Buildings and leasehold improvements
    
    
    5,147
    
    
    
    5,104Machinery and equipment
    
    
    43,543
    
    
    
    43,252Furniture and fixtures
    
    
    1,502
    
    
    
    1,229Computer hardware and software
    
    
    2,555
    
    
    
    2,359Construction in progress
    
    
    1,991
    
    
    
    1,09054,861
    
    
    
    53,157Less: Accumulated depreciation
    
    
    35,831
    
    
    
    33,792$
    19,030
    
    
    $
    19,365
  16




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Balance at December 31, 2007
    
    $
    501Accruals for warranties issued
    
    
    541Settlements made
    
    
    (173
    )Balance at June 28, 2008
    
    $
    869
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Three-Month Period Ended June 28, 2008
 Non-
    
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    InstallationProducts
    
    
    Products
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    17,699
    
    
    $
    4,490
    
    
    $
    61,946
    
    
    $
    3,763
    
    
    $
    
    
    
    $
    87,898Segment contribution
    
    
    2,251
    
    
    
    821
    
    
    
    16,741
    
    
    
    815
    
    
    
    (10,691
    )
    
    
    9,937Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )
    
    
    (238
    )Gain on debt
conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    0Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    55Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (264
    )
    
    
    (264
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,095
    )
    
    
    (3,095
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,395Total assets
    
    $
    46,848
    
    
    $
    19,773
    
    
    $
    68,469
    
    
    $
    14,993
    
    
    $
    3,945
    
    
    $
    154,028
 Three-Month Period Ended June 30, 2007
 Non-Rechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    TechnologyProducts
    
    
    Products
    
    
    Accessories
    
    
    Contracts
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    22,808
    
    
    $
    4,561
    
    
    $
    7,688
    
    
    $
    139
    
    
    $
    
    
    
    $
    35,196Segment contribution
    
    
    6,201
    
    
    
    943
    
    
    
    1,451
    
    
    
    22
    
    
    
    (6,900
    )
    
    
    1,717Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (586
    )
    
    
    (586
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167
    
    
    
    167Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,298Total assets
    
    $
    51,410
    
    
    $
    18,459
    
    
    $
    25,440
    
    
    $
    74
    
    
    $
    4,634
    
    
    $
    100,017
 Six-Month Period Ended June 28, 2008
 Non-
    
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    InstallationProducts
    
    
    Products
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    32,315
    
    
    $
    11,228
    
    
    $
    86,000
    
    
    $
    7,942
    
    
    $
    
    
    
    $
    137,485Segment contribution
    
    
    5,307
    
    
    
    2,022
    
    
    
    22,862
    
    
    
    1,312
    
    
    
    (19,203
    )
    
    
    12,300Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (556
    )
    
    
    (556
    )Gain on debt
conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    313Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176
    
    
    
    176Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (318
    )
    
    
    (318
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,086
    )
    
    
    (3,086
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,829Total assets
    
    $
    46,848
    
    
    $
    19,773
    
    
    $
    68,469
    
    
    $
    14,993
    
    
    $
    3,945
    
    
    $
    154,028
 Six-Month Period Ended June 30, 2007
 Non-Rechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    TechnologyProducts
    
    
    Products
    
    
    Accessories
    
    
    Contracts
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    40,966
    
    
    $
    10,090
    
    
    $
    16,179
    
    
    $
    281
    
    
    $
    
    
    
    $
    67,516Segment contribution
    
    
    10,749
    
    
    
    2,305
    
    
    
    2,971
    
    
    
    93
    
    
    
    (13,810
    )
    
    
    2,308Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,229
    )
    
    
    (1,229
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183
    
    
    
    183Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,262Total assets
    
    $
    51,410
    
    
    $
    18,459
    
    
    $
    25,440
    
    
    $
    74
    
    
    $
    4,634
    
    
    $
    100,017
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General
    28




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Results of Operations
 Three-month periods ended June 28, 2008 and June 30, 2007
 Revenues.
 29




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Cost of Products Sold.
 Operating Expenses.
 Other Income (Expense).
 Income Taxes.
  30




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Net Income.
 Six-month periods ended June 28, 2008 and June 30, 2007
 Revenues.
 Cost of Products Sold.
 31




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Operating Expenses.
 Other Income (Expense).
 Income Taxes.
  Net Income.
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Adjusted EBITDA
    
    
    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
 33




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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 Period Ended
    
    
    Six-Month Period EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    6,395
    
    
    $
    1,298
    
    
    $
    8,829
    
    
    $
    1,262Add: interest expense, net
    
    
    238
    
    
    
    586
    
    
    
    556
    
    
    
    1,229Add: income tax provision
    
    
    3,359
    
    
    
    
    
    
    
    3,404
    
    
    
    Add: depreciation expense
    
    
    933
    
    
    
    953
    
    
    
    1,931
    
    
    
    1,916Add: amortization expense
    
    
    526
    
    
    
    550
    
    
    
    1,046
    
    
    
    1,081Add: stock-based
compensation expense
    
    
    709
    
    
    
    481
    
    
    
    1,196
    
    
    
    1,031Less: gain on debt conversion
    
    
    
    
    
    
    
    
    
    
    (313
    )
    
    
    Adjusted EBITDA
    
    $
    12,160
    
    
    $
    3,868
    
    
    $
    16,649
    
    
    $
    6,519
 Liquidity and Capital Resources
      34




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Outlook
  36




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Recent Accounting Pronouncements and Developments
     37




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Critical Accounting Policies
   39




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PART II OTHER INFORMATION
 
     41




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(a)
    
    On June 5, 2008, we held our Annual Meeting of Shareholders.(b)
    
    At the Annual Meeting, our shareholders elected to the Board of Directors all
eight nominees for Director with the following votes:
 DIRECTOR
    
    FOR
    
    AGAINSTCarole Lewis Anderson
    
    
    15,225,060
    
    
    
    409,648Patricia C. Barron
    
    
    15,112,607
    
    
    
    522,101Anthony J. Cavanna
    
    
    15,216,420
    
    
    
    418,288Paula H. J. Cholmondeley
    
    
    14,789,065
    
    
    
    845,643Daniel W. Christman
    
    
    15,225,160
    
    
    
    409,548John D. Kavazanjian
    
    
    15,188,586
    
    
    
    446,122Ranjit C. Singh
    
    
    15,226,200
    
    
    
    408,508Bradford T. Whitmore
    
    
    15,388,129
    
    
    
    246,579
 (c)
    
    At the Annual Meeting, our shareholders voted for the ratification of the
selection of BDO Seidman, LLP as our independent registered public accounting firm for
2008 with the following votes:
 FOR
    
    AGAINST
    
    ABSTENTIONS15,236,783
    
    
    347,502
    
    
    
    50,422
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(d)
    
    At the Annual Meeting, our shareholders voted for the approval of the change of
corporate name to Ultralife Corporation with the following votes:
 FOR
    
    AGAINST
    
    ABSTENTIONS15,487,108
    
    
    94,389
    
    
    
    53,208
 (e)
    
    At the Annual Meeting, our shareholders voted to amend the Companys Amended
and Re-stated 2004 Long-Term Incentive Plan by increasing from 1.5 million to 2
million the number of shares authorized to be issued pursuant to that plan with the
following votes:
 FOR
    
    AGAINST
    
    ABSTENTIONS
    
    BROKER NON-VOTE6,931,833
    
    
    1,004,679
    
    
    
    50,638
    
    
    
    7,647,559
 
  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
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ULTRALIFE CORPORATION(Registrant)Date: August 6, 2008
    By:
    /s/ John D. KavazanjianJohn D. KavazanjianPresident and Chief Executive OfficerDate: August 6, 2008
    By:
    /s/ Robert W. FishbackRobert W. FishbackVice President - Finance and Chief
Financial Officer 44




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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
 45