UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the ~~fiscal~~ ~~quarter~~quarterly period ended March 31 ~~2019~~

, 2020

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

For the transition period from ____________ to ____________

Commission file number: 0-20852

ULTRALIFE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation of organization)

2000 Technology Parkway Newark, New York 14513

(Address of principal executive offices) (Zip Code)

16-1387013

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

(315) 332-7100

(Registrant's telephone number, including area code:)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.10 par value per share	ULBI	NASDAQ
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒

	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No☒

~~APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the~~As of April 28, 2020, the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐ had ~~Not applicable~~15,879,284

~~APPLICABLE ONLY TO CORPORATE ISSUERS:~~

~~Indicate the number of~~ shares ~~outstanding of each of the issuer’s classes~~ of common stock ~~as of the latest practicable date.~~

~~As of April 30, 2019, the registrant had 15,736,668 shares of common stock outstanding.~~outstanding.

ULTRALIFE CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019	3

	Consolidated Statements of Income and Comprehensive Income for the ~~Three Month~~Three-Month Periods Ended March 31, ~~2019~~2020 and ~~April 1, 2018~~ March 31, 2019	4

	Consolidated Statements of Cash Flows for the ~~Three Month~~Three-Month Periods Ended March 31, ~~2019~~2020 and ~~April 1, 2018~~March 31, 2019	5

	Consolidated Statements of Changes in Shareholders’ Equity for the ~~Three Month~~Three-Month Periods Ended March 31, ~~2019~~2020 and ~~April 1, 2018~~March 31, 2019	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18

Item 4.	Controls and Procedures	2425

PART II.	OTHER INFORMATION

Item 2.1A.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~Risk Factors	2526

Item 6.	Exhibits	2627

	Signatures	2728

March 31,

December 31,
2018

2019

Adjusted (1)

ASSETS
Current assets:

Cash
$ 21,240 $ 25,934
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $302 and $296, Respectively
13,938 16,015
Inventories, Net
27,906 22,843
Prepaid Expenses and Other Current Assets
2,397 2,368
Total Current Assets
65,481 67,160
Property, Equipment and Improvements, Net
12,398 10,744
Goodwill
20,251 20,109
Other Intangible Assets, Net
6,484 6,504
Deferred Income Taxes, Net
15,421 15,444
Other Noncurrent Assets
916 887
Total Assets
$ 120,951 $ 120,848

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:

Accounts Payable
$ 11,307 $ 9,919
Accrued Compensation and Related Benefits
1,364 1,494
Accrued Expenses and Other Current Liabilities
3,325 3,973
Total Current Liabilities
15,996 15,386
Deferred Income Taxes
564 591
Other Noncurrent Liabilities
468 408
Total Liabilities
17,028 16,385

Commitments and Contingencies (Note 10)

Shareholders' Equity:

Preferred Stock – Par Value $.10 Per Share; Authorized 1,000,000 Shares; None Issued
- -
Common Stock – Par Value $.10 Per Share; Authorized 40,000,000 Shares; Issued – 20,134,596

Shares at March 31, 2019 and 20,053,335 Shares at December 31, 2018; Outstanding – 15,733,414

Shares at March 31, 2019 and 15,920,585 at December 31, 2018
2,013 2,005
Capital in Excess of Par Value
183,163 182,630
Accumulated Deficit
(57,610 ) (58,035 )
Accumulated Other Comprehensive Loss
(2,351 ) (2,786 )
Treasury Stock - At Cost; 4,401,182 at March 31, 2019 and 4,132,750 Shares at December 31, 2018
(21,231 ) (19,266 )
Total Ultralife Corporation Equity
103,984 104,548
Non-Controlling Interest
(61 ) (85 )
Total Shareholders’ Equity
103,923 104,463

Total Liabilities and Shareholders' Equity
$ 120,951 $ 120,848

Three Month Periods Ended

March 31,

April 1,

2019

2018

Revenues
$ 18,882 $ 23,069
Cost of Products Sold
13,798 15,787
Gross Profit
5,084 7,282

Operating Expenses:

Research and Development
1,036 1,101
Selling, General and Administrative
3,500 3,825
Total Operating Expenses
4,536 4,926

Operating Income
548 2,356

Other Expenses:

Interest and Financing Expense
(5 ) (33 )
Miscellaneous
(53 ) (100 )
Total Other Expenses
(58 ) (133 )

Income Before Income Tax Provision
490 2,223
Income Tax Provision
(41 ) (55 )

Net Income
449 2,168

Net Income Attributable to Non-Controlling Interest
(24 ) (17 )

Net Income Attributable to Ultralife Corporation
425 2,151

Other Comprehensive Income:

Foreign Currency Translation Adjustments
435 752

Comprehensive Income Attributable to Ultralife Corporation
$ 860 $ 2,903

Net Income Per Share Attributable to Ultralife Common Shareholders – Basic
$ .03 $ .14

Net Income Per Share Attributable to Ultralife Common Shareholders – Diluted
$ .03 $ .13

Weighted Average Shares Outstanding – Basic
15,740 15,704
Potential Common Shares
485 498
Weighted Average Shares Outstanding – Diluted
16,225 16,202

	March 31,			December 31
	2020			2019
ASSETS
Current assets:
Cash	$	6,109		$	7,405
Trade accounts receivable, net of allowance for doubtful accounts of $311 and $324, respectively		35,750			30,106
Inventories, net		28,979			29,759
Prepaid expenses and other current assets		2,730			3,103
Total current assets		73,568			70,373
Property, plant and equipment, net		22,039			22,525
Goodwill		26,468			26,753
Other intangible assets, net		9,405			9,721
Deferred income taxes, net		12,887			13,222
Other noncurrent assets		1,783			1,963
Total Assets	$	146,150		$	144,557

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	11,731		$	9,388
Current portion of long-term debt		1,467			1,372
Accrued compensation and related benefits		1,597			1,655
Accrued expenses and other current liabilities		4,133			4,775
Total current liabilities		18,928			17,190
Long-term debt		15,354			15,780
Deferred income taxes		496			559
Other noncurrent liabilities		1,103			1,278
Total liabilities		35,881			34,807

Commitments and contingencies (Note 10)

Shareholders' equity:
Preferred stock – par value $.10 per share; authorized 1,000,000 shares; none issued		-			-
Common stock – par value $.10 per share; authorized 40,000,000 shares; issued – 20,281,516 shares at March 31, 2020 and 20,268,050 shares at December 31, 2019; outstanding – 15,879,284 shares at March 31, 2020 and 15,866,868 shares at December 31, 2019		2,028			2,026
Capital in excess of par value		184,550			184,292
Accumulated deficit		(51,771	)		(52,830	)
Accumulated other comprehensive loss		(3,338	)		(2,531	)
Treasury stock - at cost; 4,402,232 shares at March 31, 2020 and 4,401,182 shares at December 31, 2019		(21,239	)		(21,231	)
Total Ultralife Corporation equity		110,230			109,726
Non-controlling interest		39			24
Total shareholders’ equity		110,269			109,750

Total liabilities and shareholders' equity	$	146,150		$	144,557

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

	Three-month period ended
	March 31, 2020			March 31, 2019

Revenues	$	25,814		$	18,882
Cost of products sold		18,480			13,798
Gross profit		7,334			5,084

Operating expenses:
Research and development		1,548			1,036
Selling, general and administrative		4,301			3,500
Total operating expenses		5,849			4,536

Operating income		1,485			548

Other (expense) income:
Interest and financing expense		(174	)		(5	)
Miscellaneous income (expense)		82			(53	)
Total other expense		(92	)		(58	)

Income before income taxes		1,393			490
Income tax provision		319			41

Net income		1,074			449

Net income attributable to non-controlling interest		(15	)		(24	)

Net income attributable to Ultralife Corporation		1,059			425

Other comprehensive (loss) gain:
Foreign currency translation adjustments		(807	)		435

Comprehensive income attributable to Ultralife Corporation	$	252		$	860

Net income per share attributable to Ultralife common shareholders – basic	$	.07		$	.03

Net income per share attributable to Ultralife common shareholders – diluted	$	.07		$	.03

Weighted average shares outstanding – basic		15,875			15,740
Potential common shares		212			485
Weighted average shares outstanding - diluted		16,087			16,225

Three Month Periods Ended

March 31,

April 1,

2019

2018

OPERATING ACTIVITIES:

Net Income
$ 449 $ 2,168
Adjustments to Reconcile Net Income to Net Cash (Used In) Provided By Operating Activities:

Depreciation
447 484
Amortization of Intangible Assets
92 102
Amortization of Financing Fees
9 9
Stock-Based Compensation
185 139
Deferred Income Taxes
(5 ) (1 )
Changes in Operating Assets and Liabilities:

Accounts Receivable
2,076 (939 )
Inventories
(4,963 ) (502 )
Prepaid Expenses and Other Assets
(1 ) (86 )
Accounts Payable and Other Liabilities
1,166 (2,295 )
Net Cash Used In Operating Activities
(545 ) (921 )

INVESTING ACTIVITIES:

Purchases of Property, Equipment and Improvements
(2,581 ) (172 )
Net Cash Used In Investing Activities
(2,581 ) (172 )

FINANCING ACTIVITIES:

Cash Paid to Repurchase Common Stock
(1,957 ) -
Proceeds from Exercise of Stock Option
356 939
Tax Withholdings on Stock-Based Awards
(8 ) -
Net Cash (Used In) Provided By Financing Activities
(1,609 ) 939

Effect of Exchange Rate Changes on Cash
41 154

DECREASE IN CASH
(4,694 ) -

Cash, Beginning of Period
25,934 18,330
Cash, End of Period
$ 21,240 $ 18,330

	Three-month period ended
	March 31, 2020			March 31, 2019
OPERATING ACTIVITIES:
Net income	$	1,074		$	449
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		579			447
Amortization of intangible assets		149			92
Amortization of financing fees		12			9
Stock-based compensation		230			185
Deferred income taxes		242			(5	)
Changes in operating assets and liabilities:
Accounts receivable		(5,764	)		2,076
Inventories		596			(4,963	)
Prepaid expenses and other assets		604			(1	)
Accounts payable and other liabilities		1,913			1,166
Net cash used in operating activities		(365	)		(545	)

INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(565	)		(2,581	)
Proceeds from sale of equipment		120			-
Net cash used in investing activities		(445	)		(2,581	)

FINANCING ACTIVITIES:
Payment of credit facilities		(343	)		-
Proceeds from exercise of stock options		29			356
Tax withholdings on stock-based awards		(8	)		(8	)
Repurchase of common stock		-			(1,957	)
Net cash used in financing activities		(322	)		(1,609	)

Effect of exchange rate changes on cash		(164	)		41

DECREASE IN CASH		(1,296	)		(4,694	)

Cash, Beginning of period		7,405			25,934
Cash, End of period	$	6,109		$	21,240

Capital

Accumulated

Common Stock

in Excess

Other

Non-

Number of

of Par

Comprehensive

Accumulated

Treasury

Controlling

Shares

Amount

Value

Income (Loss)

Deficit

Stock

Interest

Total

��
Balance – December 31, 2017
19,670,928 $ 1,966 $ 180,211 $ (1,611 ) $ (82,894 ) $ (18,469 ) $ (154 ) $ 79,049
Cumulative Effect Adjustment (1)
(71 ) (71 )
Net Income
2,151 17 2,168
Stock Option Exercises
221,009 23 995 1,018
Stock-Based Compensation -Stock Options
123 123
Stock-Based Compensation -Restricted Stock
16 16
Foreign Currency Translation Adjustments
752 752
Cash settlement of outstanding options
(33 ) (33 )
Balance – April 1, 2018 (1)
19,891,937 $ 1,989 $ 181,312 $ (859 ) $ (80,814 ) $ (18,469 ) $ (137 ) $ 83,022

Balance – December 31, 2018 (1)
20,053,335 $ 2,005 $ 182,630 $ (2,786 ) $ (58,035 ) $ (19,266 ) $ (85 ) $ 104,463
Net Income
425 24 449
Share Repurchases
(1,957 ) (1,957 )
Stock Option Exercises
75,427 8 348 356
Stock-Based Compensation -Stock Options
174 174
Stock-Based Compensation -Restricted Stock
5,834 11 11
Tax Withholdings on Restricted Stock
(8 ) (8 )
Foreign Currency Translation Adjustments
435 435
Balance – March 31, 2019
20,134,596 $ 2,013 $ 183,163 $ (2,351 ) $ (57,610 ) $ (21,231 ) $ (61 ) $ 103,923

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

Balance – December 31, 2018		20,053,335	$	2,005	$	182,630	$	(2,786	)	$	(58,035	)	$	(19,266	)	$	(85	)	$	104,463
Net income											425						24			449
Share repurchases														(1,957	)					(1,957	)
Stock option exercises		75,427		8		348														356
Stock-based compensation – stock options						174														174
Stock-based compensation – restricted stock		5,834				11														11
Tax withholdings on restricted stock														(8	)					(8	)
Foreign currency translation adjustments								435												435
Balance – March 31, 2019		20,134,596	$	2,013	$	183,163	$	(2,351	)	$	(57,610	)	$	(21,231	)	$	(61	)	$	103,923


Balance – December 31, 2019		20,268,050	$	2,026	$	184,292	$	(2,531	)	$	(52,830	)	$	(21,231	)	$	24		$	109,750
Net income											1,059						15			1,074
Stock option exercises		7,633		1		28														29
Stock-based compensation – stock options						192														192
Stock-based compensation – restricted stock		5,833				38														38
Tax withholdings on restricted stock				1										(8	)					(7	)
Foreign currency translation adjustments								(807	)											(807	)
Balance – March 31, 2020		20,281,516	$	2,028	$	184,550	$	(3,338	)	$	(51,771	)	$	(21,239	)	$	39		$	110,269

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

1. BASIS OF PRESENTATION

The accompanying unaudited Consolidated Financial Statements of Ultralife Corporation ~~(the “Company”)~~ and its subsidiaries (the “Company” or “Ultralife”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the Consolidated Financial Statements have been included. Results for interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the Consolidated Financial Statements and related notes thereto contained in our Form 10-K for the year ended December 31, ~~2018.~~2019.

The December 31, ~~2018~~2019 consolidated balance sheet ~~data~~information referenced herein was derived from audited financial statements but does not include all disclosures required by GAAP.

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

~~Our~~Effective January 1, 2020, the Company’s interim fiscal periods are reported on a calendar month-basis to better align with fiscal period changes of our customer base. Prior to 2020, the Company’s monthly closing schedule iswas a 4/4/5 ~~weekly-based cycle for each fiscal quarter, as opposed to a calendar month-based~~week-based cycle for each fiscal quarter. ~~While the actual dates for the quarter-ends will~~We do not believe this change ~~slightly each year, we believe that there are not any material differences when making~~materially impacts quarterly comparisons.

Recently Adopted Accounting Guidance

~~Leases~~

Effective January 1, ~~2019,~~2020, the Company adopted Accounting Standards Update ~~2016-02~~(“ASU”) 2017-04, “Intangibles – ~~Leases~~Goodwill and Other (Topic ~~842)~~350) – Simplifying the Test for Goodwill Impairment”. The new standard eliminates the two-step process that required the identification of potential impairment and a separate measure of the actual impairment. Adoption of the new standard ~~did~~will not materially impact the ~~prior year~~Company’s consolidated statements of operations and cash flows. The prior year consolidated balance sheet has been revised for the effects of the new standard. The effects to our consolidated balance sheet as of December 31, 2018 are presented below.financial statements.

The Company adopted the new standard applying the modified retrospective approach. The Company measured and recognized leases upon adoption which had commenced as of the beginning or during the prior year. The package of practical expedients permitted under the transition guidance of the new standard was elected which allowed us to carry forward the historical lease classification and determination of whether an arrangement is or contains a lease on existing leases. The use-of-hindsight transition practical expedient was applied to determine the lease term for existing leases, which resulted in the lengthening of the lease term at commencement for one of our operating facilities.

At contract inception, the Company determines whether the arrangement is or contains a lease and determines the lease classification. The lease term is determined based on the noncancellable term of the lease adjusted to the extent optional renewal terms and termination rights are reasonably certain. Lease expense is recognized evenly over the lease term. Variable lease payments are recognized as period costs. The present value of remaining lease payments are recognized as a liability on the balance sheet with a corresponding right-of-use asset adjusted for prepaid or accrued lease payments. The Company uses its incremental borrowing rate for the discount rate, unless the interest rate implicit in the lease contract is readily determinable. The Company has adopted the practical expedients to not separate non-lease components from lease components and to not present short-term leases on the balance sheet.

~~The impact on the consolidated balance sheet as of December 31, 2018 is shown below.~~

~~Impact to Previously Reported Results~~

~~Consolidated Balance Sheet as of December 31, 2018:~~

As
Previously
Reported

Lease
Standard
Adjustment

As
Adjusted

Other noncurrent assets
$ 82 $ 805 $ 887
Prepaid expenses and other current assets
2,429 (61 ) 2,368
Accrued expenses and other current liabilities
3,534 439 3,973
Other noncurrent liabilities
32 376 408
Accumulated deficit
(57,964 ) (71 ) (58,035 )

~~See Note 9 for further disclosure regarding lease accounting.~~

RecentAccounting Guidance Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments”, which requires entities to measure all expected credit losses for financial assets held at the reporting data based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently assessing the impact that adopting this new accounting standard will have on our consolidated financial statements.

~~2. SUBSEQUENT EVENTS~~3.

~~Acquisition of Southwest Electronic Energy Corporation~~ACQUISITION

On May 1, 2019, ~~Ultralife Corporation~~the Company completed the acquisition of 100% of the issued and outstanding shares of Southwest Electronic Energy Corporation, a Texas corporation (“SWE”), for an aggregate purchase price of ~~$25.0 million in cash, net~~$26,190 inclusive of $942 cash acquired and ~~subject to customary~~ post-closing ~~working capital~~ adjustments.

SWE is a leading independent designer and manufacturer of high-performance smart battery systems and battery packs to customer specifications using lithium cells. SWE serves a variety of industrial markets, including oil & gas, remote monitoring, process control and marine, which demand uncompromised safety, service, reliability and quality. The Company acquired SWE as a bolt-on acquisition to further support our strategy of commercial revenue diversification by providing entry to the oil and gas exploration and production, and subsea electrification markets, which are currently unserved by Ultralife. Another key benefit includes obtaining a highly valuable technical team of battery pack and charger system engineers and technicians to add to our new product development-based revenue growth initiatives in our commercial end-markets particularly asset tracking, smart metering and other industrial applications.

The acquisition of SWE ~~acquisition~~ was completed pursuant to a Stock Purchase Agreement dated May 1, 2019 (the “Stock Purchase Agreement”) by and among Ultralife, SWE, Southwest Electronic Energy Medical Research Institute, a Texas non-profit (the “Seller”), and Claude Leonard ~~Benckenstein,~~Backstein, an individual (the “Shareholder”).

~~The aggregate purchase price for the SWE Acquisition was funded by the Company through a combination of cash on hand and borrowings under the Credit Facilities (see Note 3).~~

The Stock Purchase Agreement contains customary terms and conditions including representations, warranties and indemnification provisions. A portion of the consideration paid to the Seller ~~will be~~is being held in escrow for ~~post-closing adjustments and~~ indemnification purposes.

The aggregate purchase price for the acquisition was funded by the Company through a combination of cash on hand and borrowings under the Credit Facilities (see Note 4).

The ~~acquisition~~purchase price allocation was determined in accordance with the accounting treatment of ~~SWE will be accounted for as~~ a business combination pursuant to FASB ASC Topic 805, Business Combinations (ASC 805). Accordingly, the fair value of the consideration was determined, and ~~accordingly,~~ the assets acquired and liabilities assumed ~~will be recognized~~have been recorded at their fair values at the date of the acquisition. The excess of the purchase price over the estimated fair values has been recorded as goodwill.

The allocation of purchase price to the assets acquired and liabilities assumed at the date of the acquisition is presented in the table below. Management is responsible for determining the fair value of the tangible and intangible assets acquired and liabilities assumed as of the date of acquisition. Management considered several factors, including reference to an analysis performed under ASC 805 solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The Company’s estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management’s assumptions, which would not reflect unanticipated events and circumstances that may occur.

Cash
$ 942
Accounts receivable
3,621
Inventories
4,685
Other current assets
431
Property, plant and equipment
9,177
Goodwill
6,534
Customer relationships
2,522
Trade name
1,127
Accounts payable
(1,060 )
Other current liabilities
(778 )
Deferred tax liability, net
(1,011 )
Net assets acquired
$ 26,190

The goodwill included in the Company’s purchase price allocation presented above represents the value of SWE’s assembled and trained workforce, the incremental value that SWE engineering and technology will bring to the Company and the revenue growth which is expected to occur over time which is attributable to increased market penetration from future new products and customers. The goodwill acquired in connection with the acquisition ~~date.~~ is not deductible for income tax purposes.

The operating results and cash flows of SWE ~~will be included~~are reflected in the Company’s consolidated financial statements from the date of ~~acquisition~~acquisition. SWE is included in the ~~Company's~~ Battery & Energy Products segment.

~~Due to~~For the ~~timing~~three months ended March 31, 2020, SWE contributed revenue of ~~the acquisition, the initial accounting is not yet complete. The Company is in the process~~$5,437 and net income of ~~preparing the preliminary estimate of the fair value of assets acquired and liabilities assumed and the associated adjustments for supplemental pro forma revenue and earnings information.~~

~~First Amendment Agreement~~

~~On May 1, 2019, in connection with the SWE acquisition, the Company entered into the First Amendment Agreement with KeyBank National Association. See Note 3 for further information.~~$271.

3.4. CREDIT FACILITY

On May 1, 2019, Ultralife, SWE, and CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), as borrowers, entered into the First Amendment Agreement (the “First Amendment Agreement”) with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent, to amend the Credit and Security Agreement by and among Ultralife and KeyBank dated May 31, 2017 (the “Credit Agreement”, and together with the First Amendment Agreement, the “Amended Credit Agreement”).

The Amended Credit Agreement, among other things, provides for a five-year, ~~$8.0 million~~$8,000 senior secured term loan (the “Term Loan Facility”) and extends the term of the ~~$30.0 million~~$30,000 senior secured revolving credit facility (the “Revolving Credit Facility”, and together with the Term Loan Facility, the “Credit Facilities”) through May 31, 2022. Up to six months prior to May 31, 2022, the Revolving Credit Facility may be increased to ~~$50.0 million~~$50,000 with the Bank’s concurrence.

Upon closing of the SWE ~~Acquisition~~acquisition on May 1, 2019, the Company drew down the full amount of the Term Loan Facility and ~~$6.8 million~~$6,782 under the Revolving Credit Facility. ~~The remaining availability under~~As of March 31, 2020, the Company had $6,791 outstanding principal on the Term Loan Facility, of which $1,467 is included in current portion of long-term debt on the balance sheet, and $10,182 outstanding principal on the Revolving Credit ~~Facility is subject to certain borrowing base limits based~~Facility. As of March 31, 2020, total unamortized debt issuance costs of $152 associated with the Amended Credit Agreement are classified as a reduction of long-term debt on ~~receivables and inventories.~~the balance sheet.

The Company is required to repay the borrowings under the Term Loan Facility in sixty (60) equal consecutive monthly payments commencing on May 31, 2019, in arrears, together with applicable interest. All unpaid principal and accrued and unpaid interest with respect to the Term Loan Facility is due and payable in full on April 30, 2024. All unpaid principal and accrued and unpaid interest with respect to the Revolving Credit Facility is due and payable in full on May 31, 2022. The Company may voluntarily prepay principal amounts outstanding at any time subject to certain restrictions.

In addition to the customary affirmative and negative covenants, the Company must maintain a consolidated fixed charge coverage ratio of equal to or greater than 1.15 to 1.0, and a consolidated senior leverage ratio of equal to or less than 2.5 to 1.0, each as defined in the Amended Credit Agreement. The Company was in full compliance with its covenants as of March 31, 2020.

Borrowings under the Credit Facilities are secured by substantially all the assets of the Company. Availability under the Revolving Credit Facility is subject to certain borrowing base limits based on receivables and inventories.

Interest will accrue on outstanding indebtedness under the Credit Facilities at the Base Rate or the Overnight LIBOR Rate, as selected by the Company, plus the applicable margin. The Base Rate is the higher of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 50 basis points, and (c) the Overnight LIBOR Rate plus one hundred basis points. The applicable margin ranges from zero to negative 50 basis points for the Base Rate and from 185 to 215 basis points for the Overnight LIBOR Rate and are determined based on the Company’s senior leverage ratio.

The Company must pay a fee of 0.1% to 0.2% based on the average daily unused availability under the Revolving Credit Facility.

Payments must be made by the Company to the extent borrowings exceed the maximum amount then permitted to be drawn on the Credit Facilities and from the proceeds of certain transactions. Upon the occurrence of an event of default, the outstanding obligations may be accelerated and the Bank will have other customary remedies including resort to the security interest the Company provided to the Bank.

4. ~~SHARE REPURCHASE PROGRAM~~

On October 31, 2018, the Company’s Board of Directors approved a share repurchase program (the “Share Repurchase Program”) which became effective on November 1, 2018, under which the Company is authorized to purchase up to 2.5 million shares of its outstanding common stock over a period not to exceed twelve months.

Under the Share Repurchase Program, shares may be purchased in open market transactions, including through block purchases, through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. The timing, manner, price and amount of any repurchase will be determined at the Company’s discretion and the Share Repurchase Program may be suspended, terminated or modified by the Company’s Board of Directors at any time for any reason and does not obligate the Company to purchase any specific number of shares. Under the Program, all purchases will be made in accordance with Securities Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of open market stock repurchases.

~~During the quarter ended March 31, 2019, we repurchased a total of 267,300 shares of our common stock for an aggregate consideration (including fees and commissions) of $1,957.~~

From the inception of the Share Repurchase Program on November 1, 2018, we repurchased a total of 372,974 shares of our common stock for an aggregate consideration (including fees and commissions) of $2,699.

6. SUPPLEMENTAL BALANCE SHEET INFORMATION

~~Cash~~Fair Value Measurements and Disclosures

The ~~Company had cash and restricted cash totaling $21,240 and $25,934 as~~fair value of financial instruments approximated their carrying values at March 31, ~~2019~~2020 and December 31, ~~2018, respectively.~~2019. The fair value of cash, trade accounts receivable, trade accounts payable, accrued liabilities, and the current portion of long-term debt approximates carrying value due to the short-term nature of these instruments. The carrying value of long-term debt approximates fair value, as the variable interest rates approximate current market rates.

Cash

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

	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Cash		$20,929		$25,583	$	5,862	$	7,135
Restricted Cash		311		351
Restricted cash						247		270
Total		$21,240		$25,934	$	6,109	$	7,405

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, restricted cash included ~~$228~~$166 and ~~$266,~~$188, respectively, relating to a government grant awarded in the People’s Republic of China to fund specified technological research and development initiatives. The grant proceeds are realized to income as a direct offset to expense as the related expenditures are incurred. For the ~~quarter~~three-month period ended March 31, ~~2019,~~2020, grant proceeds of ~~approximately $38~~$20 were realized to income.

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, restricted cash ~~includes~~included euro-denominated deposits of ~~$83~~$81 and ~~$85,~~$82, respectively, withheld by the Dutch tax authorities and ~~third party~~third-party VAT representatives in connection with a previously utilized logistics arrangement in the Netherlands.

Restricted cash is included as a component of the cash balance for purposes of the consolidated statements of cash flows.

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

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

March 31,

December 31,

2019

2018

Land
$ 123 $ 123
Buildings and Leasehold Improvements
8,284 8,267
Machinery and Equipment
51,772 51,261
Furniture and Fixtures
2,073 2,058
Computer Hardware and Software
5,889 5,590
Construction In Process
5,478 4,302
73,619 71,601
Less: Accumulated Depreciation
(61,221 ) (60,857 )
Property, Equipment and Improvements, Net
$ 12,398 $ 10,744

March 31,

December 31,

2020

2019

Land
$ 1,273 $ 1,273
Buildings and leasehold improvements
8,096 8,148
Machinery and equipment
62,239 62,562
Furniture and fixtures
2,105 2,112
Computer hardware and software
6,520 6,528
Construction in process
5,078 4,730
85,311 85,353
Less: Accumulated depreciation
(63,272 ) (62,828 )
Property, plant and equipment, net
$ 22,039 $ 22,525

Depreciation expense for property, plant and equipment was $579 and ~~improvements was~~ $447 ~~and $484~~ for the three-month periods ended March 31, ~~2019~~2020 and ~~April 1, 2018,~~March 31, 2019, respectively.

The following table summarizes the goodwill activity by segment for the three-month ~~periods~~period ended March 31, ~~2019 and April 1, 2018:~~2020.

Battery &
Energy

Communi-
cations

Products

Systems

Total

Balance - December 31, 2017
$ 8,965 $ 11,493 $ 20,458
Effect of Foreign Currency Translation
240 - 240
Balance – April 1, 2018
9,205 11,493 20,698
Effect of Foreign Currency Translation
(589 ) - (589 )
Balance - December 31, 2018
8,616 11,493 20,109
Effect of Foreign Currency Translation
142 - 142
Balance – March 31, 2019
$ 8,758 $ 11,493 $ 20,251

Battery &
Energy

Communications

Products

Systems

Total

Balance – December 31, 2019
15,260 11,493 26,753
Effect of foreign currency translation
(285 ) - (285 )
Balance – March 31, 2020
$ 14,975 $ 11,493 $ 26,468

at March 31, 2019

Accumulated

Cost

Amortization

Net

Trademarks
$ 3,407 $ - $ 3,407
Customer Relationships
6,530 4,453 2,077
Patents and Technology
5,510 4,766 744
Distributor Relationships
377 377 -
Trade Name
379 123 256
Total Other Intangible Assets
$ 16,203 $ 9,719 $ 6,484

at March 31, 2020

Accumulated

Cost

Amortization

Net

Trademarks
$ 3,402 $ - $ 3,402
Customer relationships
8,922 4,768 4,154
Patents and technology
5,458 4,874 584
Distributor relationships
377 377 -
Trade name
1,487 222 1,265
Total
$ 19,646 $ 10,241 $ 9,405

at December 31, 2018

Accumulated

Cost

Amortization

Net

Trademarks
$ 3,405 $ - $ 3,405
Customer Relationships
6,471 4,392 2,079
Patents and Technology
5,486 4,725 761
Distributor Relationships
377 377 -
Trade Name
370 111 259
Total Other Intangible Assets
$ 16,109 $ 9,605 $ 6,504

at December 31, 2019

Accumulated

Cost

Amortization

Net

Trademarks
$ 3,403 $ - $ 3,403
Customer relationships
9,080 4,721 4,359
Patents and technology
5,521 4,869 652
Distributor relationships
377 377 -
Trade name
1,511 204 1,307
Total
$ 19,892 $ 10,171 $ 9,721

The change in the cost ~~value~~ of total intangible assets from December 31, ~~2018~~2019 to March 31, ~~2019~~2020 is a result of the effect of foreign currency translations.

Amortization expense for intangible assets was ~~$92~~$149 and ~~$102~~$92 for the three-month periods ended March 31, ~~2019~~2020 and ~~April 1, 2018,~~March 31, 2019, respectively. Amortization included in research and development expenses was ~~$33~~$31 and ~~$38~~$33 for the three-month periods ended March 31, ~~2019~~2020 and ~~April 1, 2018,~~March 31, 2019, respectively. Amortization included in selling, general and administrative expenses was ~~$59~~$118 and ~~$64~~$59 for the three-month periods ended March 31, ~~2019~~2020 and ~~April 1, 2018,~~March 31, 2019, respectively.

7. .STOCK-BASED COMPENSATION

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

Three-Month Periods Ended

March 31,

April 1,

2019

2018

Stock Options
$ 174 $ 123
Restricted Stock Grants
11 16
Total
$ 185 $ 139

Three-month period ended

March 31,

March 31,

2020

2019

Stock options
$ 192 $ 174
Restricted stock grants
38 11
Total
$ 230 $ 185

We have stock options outstanding from various stock-based employee compensation plans for which we record compensation cost relating to share-based payment transactions in our financial statements. As of March 31, ~~2019,~~2020, there was ~~$372~~$557 of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of ~~0.8 years.~~1.0 year.

The following table summarizes stock option activity for the three-month period ended March 31, ~~2019:~~2020:

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term (years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2019
1,576,087 $ 6.58
Granted
- -
Exercised
(75,427 ) 4.71
Forfeited or Expired
- -
Outstanding at March 31, 2019
1,500,660 $ 6.68 3.25 $ 5,574
Vested and Expected to Vest at March 31, 2019
1,409,243 $ 6.65 3.12 $ 5,280
Exercisable at March 31, 2019
1,031,701 $ 5.98 2.47 $ 4,377

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term (years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2020
1,541,792 $ 6.88
Granted
- -
Exercised
(7,633 ) 3.75
Forfeited or expired
(4,751 ) 8.12
Outstanding at March 31, 2020
1,529,408 $ 6.89 2.98 $ 478
Vested and expected to vest at March 31, 2020
1,438,369 $ 6.80 2.81 $ 478
Exercisable at March 31, 2020
1,092,278 $ 6.29 1.89 $ 478

Cash received from stock option exercises under our stock-based compensation plans for the three-month periods ended March 31, 2020 and March 31, 2019 was $29 and ~~April 1, 2018 was~~ $356, ~~and $939,~~ respectively.

In April 2019, 20,000 shares of restricted stock were awarded to certain of our employees at a weighted-average grant date fair value of $11.12 per share. In January 2018, 17,500 shares of restricted stock were awarded to certain of our ~~employees. These~~employees at a weighted-average grant date fair value of $7.16 per share. All outstanding restricted shares vest in equal annual installments over three years. ~~The weighted average grant date fair value of these awards was $7.16 per share.~~ Unrecognized compensation cost related to these restricted shares was ~~$42~~$107 at March 31, ~~2019.~~2020, which is expected to be recognized over a weighted average period of 1.9 years.

8. INCOME TAXES

Our effective tax rate for the ~~three months~~three-month periods ended March 31, ~~2019~~2020 and April 1, 2018 was 8% and 3%, respectively. The increase in our effective tax rate for the current quarter compared to the prior quarter was primarily due to the reversal of the valuation allowance on our U.S. deferred tax assets as of December 31, 2018.

~~Our effective tax rate for the three months ended~~ March 31, 2019 was ~~lower than the U.S. federal statutory rate~~22.9% and 8.4%, respectively. The period-over-period change was primarily ~~due~~attributable to discrete tax benefits ~~relating to the exercise~~realized on disqualifying dispositions of incentive stock options exercised by employees during the ~~period.~~three-month period ended March 31, 2019.

As of ~~March~~December 31, 2019, we have domestic net operating ~~losses~~loss (“NOL”) carryforwards of ~~$63,388,~~$58,400, which expire ~~2019~~2020 thru 2035, and domestic tax credits of ~~$1,817,~~$1,907, which expire 2028 thru ~~2037,~~2039, available to reduce future taxable income. As of March 31, 2020, Management has concluded it is more likely than not that these domestic NOL and credit carryforwards will be fully utilized.

As of March 31, ~~2019,~~2020, for certain past operations in the U.K., we continue to report a valuation allowance for NOL carryforwards of approximately $10,000, nearly all of which can be carried forward indefinitely. Utilization of the net operating losses may be limited due to the change in the past U.K. operation and cannot currently be used to reduce taxable income at our other U.K. subsidiary, Accutronics Ltd.

As of March 31, ~~2019,~~2020, we have not recognized a valuation allowance against our other foreign deferred tax assets, as realization is considered to be more likely than not.

As of March 31, ~~2019,~~2020, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations.

There were no unrecognized tax benefits related to uncertain tax positions at March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. Our U.S. tax matters for the years 2000 through ~~2018~~2019 remain subject to examination by the Internal Revenue Service (“IRS”) due to our net operating loss carryforwards. Our U.S. tax matters for the years 2000 through ~~2018~~2019 remain subject to examination by various state and local tax jurisdictions due to our net operating loss carryforwards. Our tax matters for the years 2010 through ~~2018~~2019 remain subject to examination by the respective foreign tax jurisdiction authorities.

9. OPERATING LEASES

The Company has operating leases predominantly for operating facilities. As of March 31, ~~2019,~~2020, the remaining lease terms on our operating leases range from ~~less than one year~~approximately 1 to ~~approximately 3~~4 years. Renewal options to extend our leases have been exercised. Termination options are not reasonably certain of exercise by the Company. There is no transfer of title or option to purchase the leased assets upon expiration. There are no residual value guarantees or material restrictive covenants. In July 2019, the Company entered into a five-year agreement to extend the operating lease term of its Shenzhen facility.

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

Three Months Ended

March 31,

April 1,

2019

2018

Operating Lease Cost
$ 145 $ 151
Variable Lease Cost
21 18
Total Lease Cost
$ 166 $ 169

Three-month period ended March 31,

2020

2019

Operating lease cost
$ 168 $ 145
Variable lease cost
18 21
Total lease cost
$ 186 $ 166

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	March 31,		April 1,		Three-month period ended March 31,
	2019		2018		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	150	$	153	$	164	$	150
Right-of-use assets obtained in exchange for lease liabilities:	$	131	$	-	$	-	$	131

10. COMMITMENTS AND CONTINGENCIES

a. Purchase Commitments

As of March 31, ~~2019,~~2020, we have made commitments to purchase approximately ~~$2,363~~$1,253 of production machinery and equipment.

b. Product Warranties

We estimate future warranty costs to be incurred for product failure rates, material usage and service costs in the development of our warranty obligations. Estimated future costs are based on actual past experience and are generally estimated as a percentage of sales over the warranty period. Changes in our product warranty liability during the first three months of ~~2019~~2020 and ~~2018~~2019 were as follows:

Three-Month Periods Ended

March 31,
2019

April 1,
2018

Accrued Warranty Obligations – Beginning
$ 95 $ 149
Accruals for Warranties Issued
5 14
Settlements Made
(5 ) (6 )
Accrued Warranty Obligations – Ending
$ 95 $ 157

Three-month period ended March 31,

2020

2019

Accrued warranty obligations – beginning
$ 195 $ 95
Accruals for warranties issued
27 5
Settlements made
(12 ) (5 )
Accrued warranty obligations – ending
$ 210 $ 95

c. Contingencies and Legal Matters

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

11. REVENUE RECOGNITION

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

Revenues recognized from prior period performance obligations for the three-month periods ended March 31, 2020 and 2019 were not material. Deferred revenue, unbilled revenue and deferred contract costs recorded on our consolidated balance sheets as of March 31, 2020 and December 31, 2019 were not material. As of March 31, 2020 and December 31, 2019, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, we have applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations.

12. BUSINESS SEGMENT INFORMATION

We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes: ~~lithium~~Lithium 9-volt, cylindrical and various other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes: RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design. We believe that reporting performance at the gross profit level is the best indicator of segment performance. ~~As such, we report segment performance at the gross profit level and operating expenses as corporate charges.~~

The components of segment performance were as follows:

~~Three-Month Period Ended~~Three-month period ended March 31, 2020:

Battery & Energy Products

Communications
Systems

Corporate

Total

Revenues
$ 20,761 $ 5,053 $ - $ 25,814
Segment contribution
5,316 2,018 (5,849 ) 1,485
Other expense
(92 ) (92 )
Tax provision
(319 ) (319 )
Non-controlling interest
(15 ) (15 )
Net income attributable to Ultralife
$ 1,059

Three-month period ended March 31, 2019:

Battery &
Energy
Products

Communi-
cations
Systems

Corporate

Total

Revenues
$ 15,998 $ 2,884 $ - $ 18,882
Segment Contribution
4,410 674 (4,536 ) 548
Other Expense
(58 ) (58 )
Tax Provision
(41 ) (41 )
Non-Controlling Interest
(24 ) (24 )
Net Income Attributable to Ultralife
$ 425

~~Three-Month Period Ended~~ ~~April 1, 2018~~:

Battery &
Energy
Products

Communi-
cations
Systems

Corporate

Total

Revenues
$ 17,224 $ 5,845 $ - $ 23,069
Segment Contribution
5,036 2,246 (4,926 ) 2,356
Other Expense
(133 ) (133 )
Tax Provision
(55 ) (55 )
Non-Controlling Interest
(17 ) (17 )
Net Income Attributable to Ultralife
$ 2,151

Battery & Energy Products

Communications
Systems

Corporate

Total

Revenues
$ 15,998 $ 2,884 $ - $ 18,882
Segment contribution
4,410 674 (4,536 ) 548
Other income
(58 ) (58 )
Tax provision
(41 ) (41 )
Non-controlling interest
(24 ) (24 )
Net income attributable to Ultralife
$ 425

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

Commercial and Government/Defense Revenue Information:

Three-Month Period Ended March 31, 2019:	Total Revenue		Commercial			Government/ Defense
Three-month period ended March 31, 2020:									Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	15,998	$	10,010		$	5,988		$	20,761	$	14,802		$	5,959
Communications Systems		2,884		-			2,884			5,053		-			5,053
Total	$	18,882	$	10,010		$	8,872		$	25,814	$	14,802		$	11,012
				53	%		47	%				57	%		43	%

¹Sales classified to U.S. include shipments to U.S.-based prime contractors which in some cases may serve non-U.S. ~~projects~~projects.

I~~tem~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This report contains certain forward-looking statements and information that are based on the beliefs of management as well as assumptions made by and information currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, the effects of the novel coronavirus disease of 2019 (COVID-19); our reliance on certain key customers; possible future declines in demand for the products that use our batteries or communications systems; the unique risks associated with our China operations; potential costs because of the warranties we supply with our products and services; potential disruptions in our supply of raw materials and components; our efforts to develop new commercial applications for our products; reduced U.S. and foreign military spending including the uncertainty associated with government budget approvals; possible breaches in security and other disruptions; variability in our quarterly and annual results and the price of our common stock; safety risks, including the risk of fire; our entrance into new end-markets which could lead to additional financial exposure; fluctuations in the price of oil and the resulting impact on the level of downhole drilling; our ability to retain top management and key personnel; our resources being overwhelmed by our growth prospects; our inability to comply with changes to the regulations for the shipment of our products; our ~~resources being overwhelmed by our growth prospects; our ability to retain top management and key personnel; possible impairments of our goodwill and other intangible assets; our~~ customers’ demand falling short of volume expectations in our supply agreements; possible impairments of our goodwill and other intangible assets; negative publicity of Lithium-ion batteries; our exposure to foreign currency fluctuations; the risk that we are unable to protect our proprietary and intellectual property; rules and procedures regarding contracting with the U.S. and foreign governments; our ability to utilize our net operating loss carryforwards; exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; our ability to comply with government regulations regarding the use of “conflict minerals”; possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; known and unknown environmental matters; technological innovations in the non-rechargeable and rechargeable battery industries; and other risks and uncertainties, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those forward-looking statements described herein. When used in this report, the words ~~“anticipate”, “believe”, “estimate” or “expect”~~“anticipate,” “believe,” “estimate,” “expect,” “estimate,” “seek,” “project,” “intend,” “plan,” “may,” “will,” “should,” or words of similar import are intended to identify forward-looking statements. For further discussion of certain of the matters described above and other risks and uncertainties, see Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019, and Item 1A, “Risk Factors” in Part II of this Form 10-Q.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this quarterly report, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim any obligation to update any risk factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 to reflect new information or risks, future events or other developments.

The following discussion and analysis should be read in conjunction with the ~~accompanying~~ Consolidated Financial Statements and Notes thereto ~~appearing elsewhere~~ in Part I, Item 1 of this Form 10-Q, the Risk Factors in Part II, Item 1A of this Form 10-Q, and the ~~Risk Factors and our~~ Consolidated Financial Statements and Notes thereto ~~contained~~and Risk Factors in our Form 10-K for the year ended December 31, ~~2018.~~2019.

The financial information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in thousands of dollars, except for share and per share amounts.

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

We sell our products worldwide through a variety of trade channels, including original equipment manufacturers (“OEMs”), industrial and defense supply distributors, and directly to U.S. and international defense departments. We enjoy strong name recognition in our markets under our ~~Ultralife®~~Ultralife^® Batteries, Lithium ~~Power®~~Power^®, McDowell ~~Research®~~Research^®, ~~AMTITM, ABLETM,~~AMTI^TM, ABLE^TM, ACCUTRONICS™, ACCUPRO™, ENTELLION™, SWE Southwest Electronic Energy Group™, SWE DRILL-DATA™, and ~~ENTELLION™~~SWE SEASAFE™ brands. We have sales, operations and product development facilities in North America, Europe and Asia.

We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes: Lithium 9-volt, cylindrical, thin cell and other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes: RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design. We believe that reporting performance at the gross profit level is the best indicator of segment performance. As such, we report segment performance at the gross profit level and operating expenses as Corporate charges. See Note 1112 in the Notes to Consolidated Financial ~~Statements.~~Statements of this Form 10-Q.

Our website address is www.ultralifecorporation.com. We make available free of charge via a hyperlink on our website (see Investor Relations link on the website) our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports and statements as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). We will provide copies of these reports upon written request to the attention of Philip A. Fain, CFO, Treasurer and Secretary, Ultralife Corporation, 2000 Technology Parkway, Newark, New York, 14513. Our filings with the SEC are also available through the SEC website at www.sec.gov or at the SEC Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by calling 1-800-SEC-0330.

The novel coronavirus disease of 2019 (COVID-19) has created significant economic disruption and uncertainty around the world. The Company continues to closely monitor the developments surrounding COVID-19 and take actions to mitigate the business risks involved. During this challenging time, we remain focused on ensuring the health and safety of our employees by implementing the protocols established by public health officials and meeting the demand of our customers. As an essential supplier currently exempt from government-mandated shutdown directives, we are striving to ensure an uninterrupted flow of our mission critical products serving medical device, first responder, public safety, energy and national security customers. We have maintained normal operations at all our facilities with the exception of an approximately one-month closure of our China facility as was mandated by the Chinese government through early March 2020.

For the quarter ended March 31, 2020, our operating results were adversely affected by COVID-19, particularly as a result of the temporary shutdown of our China operation and supply chain disruptions. We estimate the effects of COVID-19 adversely impacted net income by approximately $500.

Refer to Item 1A “Risk Factors” in Part II of this Form 10-Q for risks and uncertainties related to COVID-19.

Consolidated revenues of ~~$18,882~~$25,814 for the three-month period ended March 31, ~~2019, decreased~~2020, increased by ~~$4,187~~$6,932 or ~~18.1%~~36.7%, ~~from $23,069~~over $18,882 during the three-month period ended ~~April~~March 31, 2019, reflecting the revenues of SWE, which was acquired by the Company on May 1, ~~2018,~~2019, and higher Communications Systems sales primarily due to ~~the timing differences in government/defense battery~~ shipments ~~and the start-up~~ of ~~production and shipment of Communications Systems products~~vehicle amplifier-adaptor systems to support the U.S. Army’s Network Modernization initiatives under the delivery orders announced in October 2018, which were less than Q1 2018 shipments of Vehicle Amplifier Adapters for the U.S. Army’s Special Force Assistance Brigades under a contract awarded in December 2017 and power supplies shipments to a large global defense prime contractor.2018.

Gross profit ~~for the three-month period ended March 31, 2019~~ was $7,334, or 28.4% of revenue, compared to $5,084, or 26.9% of ~~revenues, compared to $7,282 or 31.6% of revenues,~~revenue, for the same quarter a year ago. The ~~470 basis~~150-basis point ~~decrease in gross margin~~improvement resulted from ~~costs incurred~~efficiencies in the transition of vehicle amplifier-adaptor systems for the U.S. Army to ~~commence~~higher volume production partially offset by the impact of ~~Communications Systems large program awards announced in October 2018 for shipment in 2019 and the product mix~~an approximately one-month shutdown of our ~~shipments.~~China operation as mandated by the Chinese government in response to COVID-19.

Operating expenses ~~decreased~~increased to $5,849 during the three-month period ended March 31, 2020, compared to $4,536 during the three-month period ended March 31, ~~2019, compared to $4,926 during the three-month period ended April 1, 2018.~~2019. The ~~decrease~~increase of ~~$390~~$1,313 or ~~7.9%~~28.9% was attributable to ~~continued tight control over discretionary spending.~~$1,180 of operating expenses incurred by SWE during the 2020 period, and a $122 or 11.8% increase in core engineering and technology expenses for new product development and testing. Operating expenses as a percentage of sales decreased 130 basis points from 24.0% for the first quarter of 2019 to 22.7% for the current quarter.

Operating income for the three-month period ended March 31, ~~2019~~2020 was $1,485 or 5.7% of revenues compared to $548 or 2.9% of revenues ~~compared to $2,356 or 10.2%~~ for the year-earlier period. The ~~decrease~~170.5% increase in operating income primarily resulted from ~~lower~~higher sales in our Communications Systems business and ~~the costs to transition to production to fulfill the large program awards announced in October 2018.~~profitability for SWE.

Net income attributable to Ultralife was ~~$425,~~$1,059, or ~~$.03~~$0.07 per share – basic and diluted, for the three-month period ended March 31, ~~2019~~2020, compared to ~~$2,151,~~$425, or ~~$0.14~~$0.03 per share – basic and ~~$0.13 per share –~~ diluted, for the three-month period ended ~~April 1, 2018.~~ March 31, 2019. Adjusted EPS was $0.08 on a diluted basis for the first quarter of 2020, representing a 212.4% increase over Adjusted EPS on a diluted basis of $0.03 for the 2019 period. Adjusted EPS excludes the provision for deferred income taxes which primarily represents non-cash charges (benefits) of $242 and ($5) for the 2020 and 2019 periods, respectively, for income taxes which will be fully offset by deferred tax assets including past U.S. net operating losses and tax credit carryforwards. See the section “Adjusted EPS” on Page 23 for a reconciliation of Adjusted EPS to EPS.

Adjusted EBITDA, defined as net income ~~(loss)~~ attributable to Ultralife before net interest expense, provision ~~(benefit)~~ for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expenses/income that we do not consider reflective of our ongoing operations, amounted to ~~$1,204~~$2,522 or ~~6.4%~~9.8% of revenues in the first quarter of ~~2019~~2020 compared to ~~$2,973~~$1,204 or ~~12.9%~~6.4% of revenues for the first quarter of ~~2018.~~2019. See the section “Adjusted EBITDA” ~~beginning~~ on ~~page 21~~Page 22 for a reconciliation of Adjusted EBITDA to net income attributable to Ultralife.

With ~~key amplifier product shipments now~~a backlog increasing approximately 20% over year-end 2019 to over $50 million, ample liquidity, end-market diversity and ~~robust opportunities for growth from our diversified set of commercial and government/defense customers ahead of us,~~tight control over discretionary spending, we ~~remain~~are well positioned ~~for another year of profitable~~to both sustain operations and continue investing in growth ~~in 2019.~~initiatives.

T~~hree-Month~~Three-Month Periods E~~nded~~ Ended March 31,~~, 201~~9 2020 and March 31, 2019~~April~~1~~, 201~~8

Revenues. Consolidated revenues for the three-month period ended March 31, ~~2019~~2020 amounted to ~~$18,882, a decrease~~$25,814, an increase of ~~$4,187,~~$6,932 or ~~18.1%~~36.7%, ~~from the $23,069 reported~~over $18,882 for the three-month period ended ~~April~~March 31, 2019. Overall, commercial sales increased 47.9% while government/defense sales increased 24.1% from the 2019 period. Revenues for the 2020 period include revenues of SWE which was acquired by the Company on May 1, ~~2018.~~2019.

Battery & Energy Products revenues ~~decreased $1,226,~~increased $4,763, or ~~7.1%~~29.8%, tofrom $15,998 ~~from $17,224~~ for the three-month period ended ~~April 1, 2018. Commercial revenues~~March 31, 2019 to $20,761 for the ~~first quarter of 2019 comprised 63% of total revenues for the segment and increased 4.0% over the prior year period. This~~three-month period ended March 31, 2020. The increase ~~primarily resulted from 10.4% revenue growth~~was attributable to ~~our medical customers,~~the $5,437 revenue of SWE partially offset by a $674 or 4.2% reduction in ~~the~~core sales due primarily to an approximately one-month shutdown of our ~~9-Volt batteries. Government~~China operation and ~~defense sales decreased 21.2% primarily due to the lumpiness of orders~~supply chain disruptions resulting from ~~some of our U.S. and international defense customers.~~COVID-19.

Communications Systems revenues ~~decreased $2,961,~~increased $2,169, or ~~50.7%~~75.2%, from $2,884 during the three-month period ended March 31, 2019 to ~~$2,884 from $5,845~~$5,053 for the three-month period ended ~~April 1, 2018.~~March 31, 2020. This ~~decrease~~increase is primarily ~~due~~attributable to ~~the initial start-up production and shipment~~higher shipments of ~~products~~vehicle amplifier-adaptor systems to support the U.S. Army’s Network Modernization initiatives under the delivery orders announced in October 2018 which were less than Q1 2018 shipments of Vehicle Amplifier Adapters for the U.S. Army’s Special Force Assistance Brigades under a contract awarded in December 2017 and power supplies shipments to a large global defense prime contractor.2018.

Cost of Products ~~Sold.~~Sold / Gross Profit. Cost of products sold totaled ~~$13,798~~$18,480 for the quarter ended March 31, ~~2019, a decrease~~2020, an increase of ~~$1,989,~~$4,682, or ~~12.6%~~33.9%, from the ~~$15,787~~$13,798 reported for the same three-month period a year ago. Consolidated cost of products sold as a percentage of total revenue ~~increased to~~decreased from 73.1% for the three-month period ended March 31, 2019 ~~from 68.4%~~to 71.6% for the three-month period ended ~~April 1, 2018.~~March 31, 2020. Correspondingly, consolidated gross margin ~~was~~increased from 26.9% for the three-month period ended March 31, 2019, ~~compared with 31.6%~~to 28.4% for the three-month period ended ~~April 1, 2018,~~March 31, 2020, primarily reflecting efficiencies in the transition of vehicle amplifier-adaptor systems for the U.S. Army to higher volume production and favorable sales mix ~~and costs incurred to commence the initial production of~~for our Communications Systems ~~products~~business. This increase was partially offset by the impact of an approximately one-month shutdown of our China operation as mandated by the Chinese government in response to ~~begin shipments under large program awards announced in October 2018.~~COVID-19.

For our Battery & Energy Products segment, gross profit for the first quarter of ~~2019~~2020 was ~~$4,410~~$5,316, an increase of $906 or ~~27.6% of revenues, a decrease of $626 or 12.4%~~20.5% from gross profit of ~~$5,036 or 29.2% of revenues,~~$4,410 for the first quarter of ~~2018. The decrease in~~2019. Battery & Energy Products’ gross margin of 25.6% decreased by 200 basis points from the 27.6% gross margin for ~~2019 was due~~the year-earlier period, reflecting the temporary shutdown of our China operation in response to ~~product mix.~~COVID-19, as well as the transitioning of new products to higher volume production.

For our Communications Systems segment, gross profit for the first quarter of ~~2019~~2020 was ~~$674~~$2,018 or ~~23.4%~~39.9% of revenues, ~~a decrease~~an increase of ~~$1,572~~$1,344 or ~~70.0%~~199.4%, from gross profit of ~~$2,246,~~$674, or ~~38.4%~~23.4% of revenues, for the first quarter of ~~2018.~~2019. The ~~decrease~~1,650-basis point increase in gross margin during ~~2019 was primarily due~~2020 is driven by the transition of vehicle amplifier-adaptor systems for the U.S. Army to ~~costs incurred to commence~~higher volume production ~~of large program awards announced in October 2018.~~and favorable sales mix.

Operating Expenses. ~~Total operating~~Operating expenses for the three-month period ended March 31, ~~2019 totaled~~2020 were $5,849, an increase of $1,313 or 28.9% over the $4,536 ~~a decrease of $390 or 7.9% from the $4,926 reported during~~for the three-month period ended ~~April 1, 2018.~~March 31, 2019. The ~~decrease resulted~~increase is attributable to $1,180 of operating expense incurred by SWE during the 2020 period, and a $122 or 11.8% increase in core engineering and technology expenses for new product development and testing. Operating expenses as a percentage of sales decreased 130 basis points from ~~continued tight control over discretionary spending in 2019.~~24.0% for the first quarter of 2019 to 22.7% for the 2020 first quarter.

Overall, operating expenses as a percentage of revenues were 22.7% for the quarter ended March 31, 2020 compared to 24.0% for the quarter ended March 31, ~~2019 compared to 21.4% for the quarter ended April 1, 2018.~~2019. Amortization expense associated with intangible assets related to our acquisitions was $149 for the first quarter of 2020 ($117 in selling, general and administrative expenses and $32 in research and development costs), including $61 for SWE ($61 in selling, general and administrative expenses), compared with $92 for the first quarter of 2019 ($59 in selling, general, and administrative expenses and $33 in research and development costs)~~, compared with $102 for the first quarter of 2018 ($64 in selling, general, and administrative expenses and $38 in research and development costs)~~. Research and development costs were ~~$1,036~~$1,548 for the three-month period ended March 31, ~~2019, a decrease~~2020, an increase of ~~$65~~$512 or ~~5.9%~~49.4%, from ~~$1,101~~$1,036 for the three-months ended ~~April 1, 2018.~~March 31, 2019. The ~~decrease primarily reflects the timing~~increase is attributable to $390 of research and development costs incurred by SWE and a $122 increase in core business investments for new product development and ~~testing costs associated with new products.~~testing. Selling, general, and administrative expenses ~~decreased $325~~increased $801 or ~~8.5%~~22.9%, to ~~$3,500 during~~$4,301 for the first quarter of ~~2019~~2020 from ~~$3,825 during~~$3,500 for the first quarter of ~~2018.~~2019. The ~~decrease~~increase is primarily attributable to ~~continued tight control over discretionary administrative spending.~~the acquisition of SWE which contributed $790 of direct costs, including intangible asset amortization of $61, for the first quarter of 2020.

Other Expense. Other expense totaled $92 for the three-month period ended March 31, 2020 compared to $58 for the three-month period ended March 31, ~~2019 compared to $133 for the three-month period ended April 1, 2018.~~2019. Interest and financing expense, ~~decreased $28,~~net of interest income, increased $169, from ~~$33~~$5 for the first quarter of ~~2018~~2019 to $5$174 for the comparable period in ~~2019.~~2020. The ~~decrease~~increase is due primarily to the ~~offsetting interest earned on our higher cash balances from~~financing for the ~~year-earlier period.~~SWE acquisition. Miscellaneous ~~expense~~income amounted to $82 for the first quarter of 2020 compared with miscellaneous expense of $53 for the first quarter of 2019, ~~compared with $100 for~~primarily representing foreign currency gains and losses, respectively, realized on the translation of U.S.-denominated transactions and balances of Accutronics (U.K.). The gains realized in the first quarter of ~~2018, primarily due~~2020 were attributable to the strengthening of the ~~U.S.~~U.S dollar ~~relative~~ to ~~Pounds~~the Pound Sterling ~~and~~by 6.2% (from the ~~Euro.~~beginning to the end of the quarter), versus losses realized in the year-earlier period due to a 2.4% weakening of the U.S dollar to the Pound Sterling.

Income Taxes. The tax provision for the ~~2019~~2020 first quarter was ~~$41~~$319 compared to ~~$55~~$41 for the first quarter of ~~2018.~~2019. Our effective tax rate increased to 22.9% for the first quarter of 2020 as compared to 8.4% for the first quarter of 2019, primarily due to discrete tax benefits realized on disqualifying dispositions of incentive stock options exercised by employees during the three-month period ended March 31, 2019. The income tax provision for the first quarter of 2020 is comprised of a $77 current provision for taxes expected to be paid on income from our foreign operations, representing a cash-based effective tax rate of 5.5%, and a non-cash $242 deferred provision for taxes to be fully offset by deferred tax assets including past U.S. net operating losses and tax credit carryforwards which we expect to carryforward to offset U.S. income taxes for the foreseeable future. See Note 8 in the Notes to Consolidated Financial Statements of this Form 10-Q for additional information regarding our income taxes.

Net Income Attributable to Ultralife. Net income attributable to Ultralife was ~~$425,~~$1,059, or ~~$.03~~$0.07 per share – basic and diluted, for the three-month period ended March 31, ~~2019~~2020, compared to ~~$2,151,~~$425, or ~~$0.14~~$0.03 per share – basic and ~~$0.13 per share –~~ diluted, for the three-month period ended ~~April 1, 2018.~~March 31, 2019. Adjusted EPS was $0.08 on a diluted basis for the first quarter of 2020, representing a 212.4% increase over Adjusted EPS on a diluted basis of $0.03 for the 2019 period. Adjusted EPS excludes the provision for deferred income taxes which represents non-cash charges (benefits) of $242 and ($5) for the 2020 and 2019 periods, respectively, for income taxes which will be fully offset by deferred tax assets including past U.S. net operating losses and tax credit carryforwards. See the section “Adjusted EPS” on Page 23 for a reconciliation of Adjusted EPS to EPS. Average weighted common shares outstanding used to compute diluted earnings per share ~~increased~~decreased from ~~16,202,314 in the first quarter of 2018 to~~ 16,224,790 in the first quarter of ~~2019.~~2019 to 16,086,744 in the first quarter of 2020. The ~~increase~~decrease in ~~2019~~2020 is attributable to stock option exercises since the first quarter of ~~2018~~2019 and ~~an increase~~a decrease in the weighted average stock price used to compute diluted shares from ~~$8.17 for the first quarter of 2018 to~~ $9.40 for the first quarter of 2019 ~~partially offset by~~to $6.71 for the ~~repurchase~~first quarter of ~~shares in the 2019 period.~~

In evaluating our business, we consider and use Adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure of our operating performance. We define Adjusted EBITDA as net income attributable to Ultralife before ~~net~~ interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense. We also use Adjusted EBITDA as a supplemental measure to review and assess our operating performance and to enhance comparability between periods. We also believe the use of Adjusted EBITDA facilitates investors’ understanding of operating performance from period to period by backing out potential differences caused by variations in such items as capital structures (affecting relative interest expense and stock-based compensation expense), the amortization of intangible assets acquired through our business acquisitions (affecting relative amortization expense and provision (benefit) for income taxes), the age and book value of facilities and equipment (affecting relative depreciation expense) and one-time charges/benefits relating to income taxes. We also present Adjusted EBITDA from operations because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. We reconcile Adjusted EBITDA to ~~Net~~net income attributable to Ultralife, the most comparable financial measure under ~~U.S. generally accepted accounting principles (“U.S. GAAP”).~~GAAP.

We use Adjusted EBITDA in our decision-making processes relating to the operation of our business together with ~~U.S.~~ GAAP financial measures such as operating income. We believe that Adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our ~~U.S.~~ GAAP results, while isolating the effects of depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance, and of stock-based compensation, which is a non-cash expense that varies widely among companies. We believe that by presenting Adjusted EBITDA, we assist investors in gaining a better understanding of our business on a going forward basis. We provide information relating to our Adjusted EBITDA so that securities analysts, investors and other interested parties have the same data that we employ in assessing our overall operations. We believe that trends in our Adjusted EBITDA are a valuable indicator of our operating performance on a consolidated basis and of our ability to produce operating cash flows to fund working capital needs, to service debt obligations and to fund capital expenditures.

The term Adjusted EBITDA is not defined under ~~U.S.~~ GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with ~~U.S.~~ GAAP. Our Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, Adjusted EBITDA should not be considered in isolation or as a substitute for net income attributable to Ultralife or other consolidated statement of operations data prepared in accordance with ~~U.S.~~ GAAP. Some of these limitations include, but are not limited to, the following:

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

	March 31,		December 31,
	2019		2018
Raw Materials	$	17,201	$	13,274
Work In Process		2,067		2,016
Finished Goods		8,638		7,553
Total	$	27,906	$	22,843

	March 31,		December 31,
	2020		2019
Raw materials	$	18,354	$	18,485
Work in process		3,036		2,548
Finished goods		7,589		8,726
Total	$	28,979	$	29,759

	Balance Sheet Classification	March 31, 2019			December 31, 2018			Balance sheet classification	March 31, 2020			December 31, 2019
Assets:
Operating lease right-of-use asset	Other noncurrent assets	$	844		$	805		Other noncurrent assets	$	1,685		$	1,866

Liabilities:
Current operating lease liability	Accrued expenses and other current liabilities	$	412		$	439		Accrued expenses and other current liabilities	$	621		$	620
Operating lease liability, net of current portion	Other noncurrent liabilities		436			376		Other noncurrent liabilities		1,072			1,247
Total operating lease liability	Total operating lease liability	$	848		$	815			$	1,693		$	1,867

Weighted-average remaining lease term (years)	Weighted-average remaining lease term (years)		2.3			2.1				3.5			3.7

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

Maturity of Operating Lease Liabilities
2019	$	307
2020		389			512
2021		160			461
2022		36			348
2023		-			358
Thereafter		-
2024					179
Total lease payments		892			1,858
Less: Imputed interest		(44	)		(165	)
Present value of remaining lease payments	$	848		$	1,693

	Total Number of Shares Purchased		Weighted Average Price Paid Per Share		Total Number of Shares Purchased As Part of Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program
January 2019		267,100		$7.29		372,774		2,127,226
February 2019		200		7.49		372,974		2,127,026
March 2019		-		-		372,974		2,127,026
Total		267,300				372,974

	March 31,			December 31, 2018
	2019			Adjusted (1)
ASSETS
Current assets:
Cash	$	21,240		$	25,934
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $302 and $296, Respectively		13,938			16,015
Inventories, Net		27,906			22,843
Prepaid Expenses and Other Current Assets		2,397			2,368
Total Current Assets		65,481			67,160
Property, Equipment and Improvements, Net		12,398			10,744
Goodwill		20,251			20,109
Other Intangible Assets, Net		6,484			6,504
Deferred Income Taxes, Net		15,421			15,444
Other Noncurrent Assets		916			887
Total Assets	$	120,951		$	120,848

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	11,307		$	9,919
Accrued Compensation and Related Benefits		1,364			1,494
Accrued Expenses and Other Current Liabilities		3,325			3,973
Total Current Liabilities		15,996			15,386
Deferred Income Taxes		564			591
Other Noncurrent Liabilities		468			408
Total Liabilities		17,028			16,385

Commitments and Contingencies (Note 10)

Shareholders' Equity:
Preferred Stock – Par Value $.10 Per Share; Authorized 1,000,000 Shares; None Issued		-			-
Common Stock – Par Value $.10 Per Share; Authorized 40,000,000 Shares; Issued – 20,134,596
Shares at March 31, 2019 and 20,053,335 Shares at December 31, 2018; Outstanding – 15,733,414
Shares at March 31, 2019 and 15,920,585 at December 31, 2018		2,013			2,005
Capital in Excess of Par Value		183,163			182,630
Accumulated Deficit		(57,610	)		(58,035	)
Accumulated Other Comprehensive Loss		(2,351	)		(2,786	)
Treasury Stock - At Cost; 4,401,182 at March 31, 2019 and 4,132,750 Shares at December 31, 2018		(21,231	)		(19,266	)
Total Ultralife Corporation Equity		103,984			104,548
Non-Controlling Interest		(61	)		(85	)
Total Shareholders’ Equity		103,923			104,463

Total Liabilities and Shareholders' Equity	$	120,951		$	120,848

	Three Month Periods Ended
	March 31,			April 1,
	2019			2018
Revenues	$	18,882		$	23,069
Cost of Products Sold		13,798			15,787
Gross Profit		5,084			7,282

Operating Expenses:
Research and Development		1,036			1,101
Selling, General and Administrative		3,500			3,825
Total Operating Expenses		4,536			4,926

Operating Income		548			2,356

Other Expenses:
Interest and Financing Expense		(5	)		(33	)
Miscellaneous		(53	)		(100	)
Total Other Expenses		(58	)		(133	)

Income Before Income Tax Provision		490			2,223
Income Tax Provision		(41	)		(55	)

Net Income		449			2,168

Net Income Attributable to Non-Controlling Interest		(24	)		(17	)

Net Income Attributable to Ultralife Corporation		425			2,151

Other Comprehensive Income:
Foreign Currency Translation Adjustments		435			752

Comprehensive Income Attributable to Ultralife Corporation	$	860		$	2,903

Net Income Per Share Attributable to Ultralife Common Shareholders – Basic	$	.03		$	.14

Net Income Per Share Attributable to Ultralife Common Shareholders – Diluted	$	.03		$	.13

Weighted Average Shares Outstanding – Basic		15,740			15,704
Potential Common Shares		485			498
Weighted Average Shares Outstanding – Diluted		16,225			16,202

	Three Month Periods Ended
	March 31,			April 1,
	2019			2018
OPERATING ACTIVITIES:
Net Income	$	449		$	2,168
Adjustments to Reconcile Net Income to Net Cash (Used In) Provided By Operating Activities:
Depreciation		447			484
Amortization of Intangible Assets		92			102
Amortization of Financing Fees		9			9
Stock-Based Compensation		185			139
Deferred Income Taxes		(5	)		(1	)
Changes in Operating Assets and Liabilities:
Accounts Receivable		2,076			(939	)
Inventories		(4,963	)		(502	)
Prepaid Expenses and Other Assets		(1	)		(86	)
Accounts Payable and Other Liabilities		1,166			(2,295	)
Net Cash Used In Operating Activities		(545	)		(921	)

INVESTING ACTIVITIES:
Purchases of Property, Equipment and Improvements		(2,581	)		(172	)
Net Cash Used In Investing Activities		(2,581	)		(172	)

FINANCING ACTIVITIES:
Cash Paid to Repurchase Common Stock		(1,957	)		-
Proceeds from Exercise of Stock Option		356			939
Tax Withholdings on Stock-Based Awards		(8	)		-
Net Cash (Used In) Provided By Financing Activities		(1,609	)		939

Effect of Exchange Rate Changes on Cash		41			154

DECREASE IN CASH		(4,694	)		-

Cash, Beginning of Period		25,934			18,330
Cash, End of Period	$	21,240		$	18,330

	As Previously Reported			Lease Standard Adjustment			As Adjusted
Other noncurrent assets	$	82		$	805		$	887
Prepaid expenses and other current assets		2,429			(61	)		2,368
Accrued expenses and other current liabilities		3,534			439			3,973
Other noncurrent liabilities		32			376			408
Accumulated deficit		(57,964	)		(71	)		(58,035	)

Cash	$	942
Accounts receivable		3,621
Inventories		4,685
Other current assets		431
Property, plant and equipment		9,177
Goodwill		6,534
Customer relationships		2,522
Trade name		1,127
Accounts payable		(1,060	)
Other current liabilities		(778	)
Deferred tax liability, net		(1,011	)
Net assets acquired	$	26,190

	Battery & Energy			Communi- cations
	Products			Systems		Total
Balance - December 31, 2017	$	8,965		$	11,493	$	20,458
Effect of Foreign Currency Translation		240			-		240
Balance – April 1, 2018		9,205			11,493		20,698
Effect of Foreign Currency Translation		(589	)		-		(589	)
Balance - December 31, 2018		8,616			11,493		20,109
Effect of Foreign Currency Translation		142			-		142
Balance – March 31, 2019	$	8,758		$	11,493	$	20,251

	Battery & Energy			Communications
	Products			Systems		Total
Balance – December 31, 2019		15,260			11,493		26,753
Effect of foreign currency translation		(285	)		-		(285	)
Balance – March 31, 2020	$	14,975		$	11,493	$	26,468

	at March 31, 2019
			Accumulated
	Cost		Amortization		Net
Trademarks	$	3,407	$	-	$	3,407
Customer Relationships		6,530		4,453		2,077
Patents and Technology		5,510		4,766		744
Distributor Relationships		377		377		-
Trade Name		379		123		256
Total Other Intangible Assets	$	16,203	$	9,719	$	6,484

	at March 31, 2020
			Accumulated
	Cost		Amortization		Net
Trademarks	$	3,402	$	-	$	3,402
Customer relationships		8,922		4,768		4,154
Patents and technology		5,458		4,874		584
Distributor relationships		377		377		-
Trade name		1,487		222		1,265
Total	$	19,646	$	10,241	$	9,405

	at December 31, 2018
			Accumulated
	Cost		Amortization		Net
Trademarks	$	3,405	$	-	$	3,405
Customer Relationships		6,471		4,392		2,079
Patents and Technology		5,486		4,725		761
Distributor Relationships		377		377		-
Trade Name		370		111		259
Total Other Intangible Assets	$	16,109	$	9,605	$	6,504

	at December 31, 2019
			Accumulated
	Cost		Amortization		Net
Trademarks	$	3,403	$	-	$	3,403
Customer relationships		9,080		4,721		4,359
Patents and technology		5,521		4,869		652
Distributor relationships		377		377		-
Trade name		1,511		204		1,307
Total	$	19,892	$	10,171	$	9,721

	Three-Month Periods Ended
	March 31,		April 1,
	2019		2018
Stock Options	$	174	$	123
Restricted Stock Grants		11		16
Total	$	185	$	139

	Three-month period ended
	March 31,		March 31,
	2020		2019
Stock options	$	192	$	174
Restricted stock grants		38		11
Total	$	230	$	185

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2019		1,576,087		$	6.58
Granted		-			-
Exercised		(75,427	)		4.71
Forfeited or Expired		-			-
Outstanding at March 31, 2019		1,500,660		$	6.68		3.25	$	5,574
Vested and Expected to Vest at March 31, 2019		1,409,243		$	6.65		3.12	$	5,280
Exercisable at March 31, 2019		1,031,701		$	5.98		2.47	$	4,377

	Three-month period ended March 31,
	2020		2019
Operating lease cost	$	168	$	145
Variable lease cost		18		21
Total lease cost	$	186	$	166

	Three-Month Periods Ended
	March 31, 2019			April 1, 2018
Accrued Warranty Obligations – Beginning	$	95		$	149
Accruals for Warranties Issued		5			14
Settlements Made		(5	)		(6	)
Accrued Warranty Obligations – Ending	$	95		$	157

	Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	20,761	$	5,053	$	-		$	25,814
Segment contribution		5,316		2,018		(5,849	)		1,485
Other expense						(92	)		(92	)
Tax provision						(319	)		(319	)
Non-controlling interest						(15	)		(15	)
Net income attributable to Ultralife								$	1,059

	Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	15,998	$	2,884	$	-		$	18,882
Segment Contribution		4,410		674		(4,536	)		548
Other Expense						(58	)		(58	)
Tax Provision						(41	)		(41	)
Non-Controlling Interest						(24	)		(24	)
Net Income Attributable to Ultralife								$	425

	Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	15,998	$	2,884	$	-		$	18,882
Segment contribution		4,410		674		(4,536	)		548
Other income						(58	)		(58	)
Tax provision						(41	)		(41	)
Non-controlling interest						(24	)		(24	)
Net income attributable to Ultralife								$	425

Three-Month Period Ended April 1, 2018:	Total Revenue		Commercial			Government/ Defense
Three-month period ended March 31, 2019:									Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	17,224	$	9,626		$	7,598		$	15,998	$	10,010		$	5,988
Communications Systems		5,845		-			5,845			2,884		-			2,884
Total	$	23,069	$	9,626		$	13,443		$	18,882	$	10,010		$	8,872
				42	%		58	%				53	%		47	%

	Three-Month Periods Ended
	March 31,		April 1,
	2019		2018

Net Income Attributable to Ultralife	$	425	$	2,151
Add:
Interest and Financing Expense, Net		5		33
Income Tax Provision		41		55
Depreciation Expense		447		484
Amortization of Intangible Assets and Financing Fees		101		111
Stock-Based Compensation Expense		185		139
Adjusted EBITDA	$	1,204	$	2,973

	Three-month period ended
	March 31,		March 31,
	2020		2019

Net income attributable to Ultralife	$	1,059	$	425
Add:
Interest expense		174		5
Income tax provision		319		41
Depreciation expense		579		447
Amortization of intangible assets and financing fees		161		101
Stock-based compensation expense		230		185
Adjusted EBITDA	$	2,522	$	1,204

	Three-month period ended
	March 31, 2020						March 31, 2019
	Amount		Per Basic Share		Per Diluted Share		Amount			Per Basic Share		Per Diluted Share
Net income attributable to Ultralife Corporation	$	1,059	$	.07	$	.07	$	425		$	.03	$	.03
Deferred tax provision		242		.01		.01		(5	)		-		-
Adjusted net income attributable to Ultralife Corporation	$	1,301	$	.08	$	.08	$	420		$	.03	$	.03

Weighted average shares outstanding				15,875		16,087					15,740		16,225

Exhibit Index	Exhibit Description	Incorporated Byby Reference from

31.1	Rule 13a-14(a) / 15d-14(a) CEO Certifications	Filed herewith
31.2	Rule 13a-14(a) / 15d-14(a) CFO Certifications	Filed herewith
32	Section 1350 Certifications	Filed herewith
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.LAB	XBRL Taxonomy Label Linkbase Document
101.PRE	XBRL Taxonomy Presentation Linkbase Document
101.DEF	XBRL Taxonomy Definition Document

		ULTRALIFE CORPORATION
		(Registrant)

	Date: ~~May~~ ~~2, 2019~~April 30, 2020	By: /s/ Michael D. Popielec
		Michael D. Popielec
		President and Chief Executive Officer
		(Principal Executive Officer)

	Date: ~~May 2, 2019~~April 30, 2020	By: /s/ Philip A. Fain
		Philip A. Fain
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and
		Principal Accounting Officer)