ulbi20240331

ulbi20240331_10q.htm

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 quarterly period ended March 31, 2024

☐ 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☒

As of April 22, 2024, the registrant had 16,466,594 shares of common stock outstanding.

ULTRALIFE CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	1

	Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three-Month Periods Ended March 31, 2024 and March 31, 2023	2

	Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2024 and March 31, 2023	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three-Month Periods Ended March 31, 2024 and March 31, 2023	4

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION

Item 6.	Exhibits	24

	Signatures	25

PART I. FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands except share amounts)

(Unaudited)

	March 31, 2024			December 31, 2023
ASSETS
Current assets:
Cash	$	10,099		$	10,278
Trade accounts receivable, net of allowance for expected credit losses of $300 and $300, respectively		35,278			31,761
Inventories, net		43,821			42,215
Prepaid expenses and other current assets		5,104			5,949
Total current assets		94,302			90,203
Property, plant and equipment, net		20,670			21,117
Goodwill		37,499			37,571
Other intangible assets, net		14,867			15,107
Deferred income taxes, net		9,873			10,567
Other noncurrent assets		3,340			3,711
Total assets	$	180,551		$	178,276

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,315		$	11,336
Current portion of long-term debt		2,000			2,000
Accrued compensation and related benefits		2,013			3,115
Accrued expenses and other current liabilities		6,048			7,279
Total current liabilities		23,376			23,730
Long-term debt		23,140			23,624
Deferred income taxes		1,675			1,714
Other noncurrent liabilities		3,415			3,781
Total liabilities		51,606			52,849

Commitments and contingencies (Note 8)

Stockholders’ 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 – 20,887,446 shares at March 31, 2024 and 20,783,607 shares at December 31, 2023; outstanding – 16,451,332 shares at March 31, 2024 and 16,347,493 shares at December 31, 2023		2,089			2,078
Capital in excess of par value		189,995			189,160
Accumulated deficit		(37,863	)		(40,754	)
Accumulated other comprehensive loss		(3,892	)		(3,660	)
Treasury stock - at cost; 4,436,114 shares at March 31, 2024 and 4,436,114 shares at December 31, 2023		(21,492	)		(21,492	)
Total Ultralife Corporation equity		128,837			125,332
Non-controlling interest		108			95
Total stockholders’ equity		128,945			125,427

Total liabilities and stockholders’ equity		180,551		$	178,276

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

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(In Thousands except per share amounts)

(Unaudited)

	Three-month period ended
	March 31, 2024			March 31, 2023

Revenues	$	41,927		$	31,916
Cost of products sold		30,457			24,480
Gross profit		11,470			7,436

Operating expenses:
Research and development		1,756			2,032
Selling, general and administrative		5,651			5,378
Total operating expenses		7,407			7,410

Operating income		4,063			26

Other (expense) income:
Interest and financing expense		(520	)		(424	)
Miscellaneous income (expense)		64			(70	)
Total other expense		(456	)		(494	)

Income (loss) before income taxes		3,607			(468	)
Income tax provision (benefit)		703			(133	)

Net income (loss)		2,904			(335	)

Net income attributable to non-controlling interest		(13	)		(11	)

Net income (loss) attributable to Ultralife Corporation		2,891			(346	)

Other comprehensive (loss) income:
Foreign currency translation adjustments		(232	)		197

Comprehensive income (loss) attributable to Ultralife Corporation	$	2,659		$	(149	)

Net income (loss) per share attributable to Ultralife common stockholders – basic	$	.18		$	(.02	)

Net income (loss) per share attributable to Ultralife common stockholders – diluted	$	.18		$	(.02	)

Weighted average shares outstanding – basic		16,396			16,135
Potential common shares		122			-
Weighted average shares outstanding - diluted		16,518			16,135

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

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Three-month period ended
	March 31, 2024			March 31, 2023
OPERATING ACTIVITIES:
Net income (loss)	$	2,904		$	(335	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		740			762
Amortization of intangible assets		228			209
Amortization of financing fees		16			16
Stock-based compensation		161			139
Deferred income taxes		650			(390	)
Changes in operating assets and liabilities:
Accounts receivable		(3,562	)		3,365
Inventories		(1,699	)		(6,026	)
Prepaid expenses and other assets		1,102			639
Accounts payable and other liabilities		(621	)		256
Net cash used in operating activities		(81	)		(1,365	)

INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(372	)		(497	)
Net cash used in investing activities		(372	)		(497	)

FINANCING ACTIVITIES:
Borrowings on revolving credit facility		-			2,300
Payments on term loan facility		(500	)		(500	)
Proceeds from exercise of stock options		685			-
Net cash provided by financing activities		185			1,800

Effect of exchange rate changes on cash		89			(46	)

DECREASE IN CASH		(179	)		(108	)

Cash, Beginning of period		10,278			5,713
Cash, End of period	$	10,099		$	5,605

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

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands except share amounts)

(Unaudited)

					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, 2022		20,570,710	$	2,057	$	187,405	$	(3,750	)	$	(47,951	)	$	(21,484	)	$	126	$	116,403
Net loss											(346	)					11		(335	)
Stock option exercises																			-
Stock-based compensation – stock options						138													138
Stock-based compensation – restricted stock						1													1
Foreign currency translation adjustments adjustments								197											197
Balance – March 31, 2023		20,570,710	$	2,057	$	187,544	$	(3,553	)	$	(48,297	)	$	(21,484	)	$	137	$	116,404


Balance – December 31, 2023		20,783,607	$	2,078	$	189,160	$	(3,660	)	$	(40,754	)	$	(21,492	)	$	95	$	125,427
Net income											2,891						13		2,904
Stock option exercises		103,839		11		674													685
Stock-based compensation – stock options						156													156
Stock-based compensation – restricted stock						5													5
Foreign currency translation adjustments adjustments								(232	)										(232	)
Balance – March 31, 2024		20,887,446	$	2,089	$	189,995	$	(3,892	)	$	(37,863	)	$	(21,492	)	$	108	$	128,945

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

ULTRALIFE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands except share and per share amounts)

(Unaudited)

1.	*BASIS OF PRESENTATION*

The accompanying unaudited consolidated financial statements of Ultralife Corporation 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 the information and notes 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, 2023.

The December 31, 2023 consolidated balance sheet 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.

Recently Adopted Accounting Guidance

None.

Recent Accounting Guidance Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

2.	*DEBT*

On December 13, 2021, Ultralife, Southwest Electronic Energy Corporation, a Texas corporation and wholly owned subsidiary of Ultralife (“SWE”), CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), Ultralife Excell Holding Corp., a Delaware corporation and wholly owned subsidiary of Ultralife (“UEHC”), Ultralife Canada Holding Corp., a Delaware corporation and wholly owned subsidiary of UEHC (“UCHC”), and Excell Battery Corporation USA, a Texas corporation and wholly owned subsidiary of UEHC (“Excell USA”), as borrowers, entered into the Second Amendment Agreement with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent, to amend the Credit and Security Agreement dated May 31, 2017 as amended by the First Amendment Agreement by and among Ultralife, SWE, CLB and KeyBank dated May 1, 2019 (the “Credit Agreement”). On November 28, 2022, Ultralife, SWE, CLB, UEHC, UCHC, Excell USA, and Excell Battery Canada ULC, a British Columbia unlimited liability corporation and wholly owned subsidiary of UCHC (“Excell Canada”), entered into that certain Third Amendment Agreement with KeyBank, to further amend the Credit Agreement to, among other things, facilitate the joinder of Excell Canada as a guarantor under the Credit Agreement and to replace the LIBOR benchmark thereunder with SOFR (the “Third Amendment Agreement”, and together with the Second Amendment Agreement and the Credit Agreement, the “Amended Credit Agreement”).

The Amended Credit Agreement, among other things, provides for a 5-year, $10,000 senior secured term loan (the “Term Loan Facility”) and extends the term of the $30,000 senior secured revolving credit facility (the “Revolving Credit Facility”, and together with the Term Loan Facility, the “Amended Credit Facilities”) through May 30, 2025. Up to six months prior to May 30, 2025, the Revolving Credit Facility may be increased to $50,000 with the Bank’s concurrence.

As of March 31, 2024, the Company had $5,667 outstanding principal on the Term Loan Facility, $2,000 of which is included in current portion of long-term debt on the balance sheet, and $19,580 outstanding on the Revolving Credit Facility. As of March 31, 2024, total unamortized debt issuance costs of $107, including placement, renewal and legal fees associated with the Amended Credit Agreement, are classified as a reduction of long-term debt on the balance sheet. Debt issuance costs are amortized to interest expense over the term of the Amended Credit Facilities.

The remaining availability under the Revolving Credit Facility is subject to certain borrowing base limits based on trade receivables and inventories.

The Company is required to repay the borrowings under the Term Loan Facility in equal consecutive monthly payments commencing on February 1, 2022, 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 January 1, 2027. All unpaid principal and accrued and unpaid interest with respect to the Revolving Credit Facility is due and payable in full on May 30, 2025. 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 senior leverage ratio, as defined in the Amended Credit Agreement, of equal to or less than 3.5 to 1.0 for the fiscal quarters ending December 31, 2022 and March 31, 2023, and equal to or less than 3.0 to 1.0 for the fiscal quarters ending June 30, 2023 and thereafter. The Company was in full compliance with its covenants under the Amended Credit Agreement as of March 31, 2024.

Borrowings under the Amended Credit Facilities are secured by substantially all the assets of the Company and its subsidiaries.

Upon the effectiveness of the Third Amendment Agreement, interest accrues on outstanding indebtedness under the Amended Credit Facilities at the Daily Simple SOFR Rate, plus an index spread adjustment of 0.10%, plus the applicable margin. The applicable margin ranges from 185 to 215 basis points and is determined based on the Company’s senior leverage ratio.

The Company must pay a fee of 0.15% to 0.25% 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 Amended 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.

3.	*EARNINGS PER SHARE*

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) attributable to Ultralife Corporation by the weighted average shares outstanding during the period. Diluted EPS includes the dilutive effect of securities, if any, and is calculated using the treasury stock method.

For the three-month period ended March 31, 2024, there were 539,358 outstanding stock options and 5,229 unvested restricted stock awards included in the calculation of diluted weighted average shares outstanding, as such securities were dilutive, resulting in 122,515 potential common shares included in the calculation of diluted EPS. There were 524,502 outstanding stock options for the three-month period ended March 31, 2024 not included in EPS as the effect would be anti-dilutive.

For the comparable three-month period ended March 31, 2023, there were no outstanding awards included in the calculation of diluted weighted average shares outstanding and no potential common shares included in the calculation of diluted EPS, as no securities were dilutive. There were 1,420,611 outstanding stock options and 2,500 unvested restricted stock awards not included in the calculation of diluted EPS for the three-month period ended March 31, 2023, as the effect would be antidilutive.

4.	*SUPPLEMENTAL BALANCE SHEET INFORMATION*

Fair Value Measurements and Disclosures

The fair value of financial instruments approximated their carrying values at March 31, 2024 and December 31, 2023. The fair value of cash, accounts receivable, accounts payable, accrued liabilities, and the current portion of long-term debt approximates carrying value due to the short-term nature of these instruments.

Cash

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

	March 31,		December 31,
	2024		2023
Cash	$	10,099	$	10,196
Restricted cash		-		82
Total	$	10,099	$	10,278

As December 31, 2023, restricted cash of $82 represented euro-denominated deposits withheld by the Dutch tax authorities and third-party VAT representatives in connection with a previously utilized logistics arrangement in the Netherlands. During the quarter ended March 31, 2024, the deposits were returned to the Company and no longer restricted. As of March 31, 2024, there was no cash classified as restricted cash. Restricted cash as of December 31, 2023 is included as a component of the cash balance for purposes of the consolidated statements of cash flows.

Inventories, Net

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

	March 31,		December 31,
	2024		2023
Raw materials	$	30,168	$	29,098
Work in process		3,593		3,187
Finished goods		10,060		9,930
Total	$	43,821	$	42,215

Property, Plant and Equipment, Net

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

	March 31,			December 31,
	2024			2023
Land	$	1,273		$	1,273
Buildings and leasehold improvements		16,007			15,998
Machinery and equipment		57,427			57,584
Furniture and fixtures		2,818			2,845
Computer hardware and software		7,770			7,868
Construction in process		1,695			2,033
		86,990			87,601
Less: Accumulated depreciation		(66,320	)		(66,484	)
Property, plant and equipment, net	$	20,670		$	21,117

Depreciation expense for property, plant and equipment was $740 and $762 for the three-month periods ended March 31, 2024 and March 31, 2023, respectively.

Goodwill

The following table summarizes the goodwill activity by segment for the three-month period ended March 31, 2024.

	Battery & Energy			Communications
	Products			Systems		Total
Balance – December 31, 2023	$	26,078		$	11,493	$	37,571
Effect of foreign currency translation		(72	)		-		(72	)
Balance – March 31, 2024	$	26,006		$	11,493	$	37,499

Other Intangible Assets, Net

The composition of other intangible assets was:

	at March 31, 2024
			Accumulated
	Cost		Amortization		Net
Customer relationships	$	13,072	$	6,796	$	6,276
Patents and technology		5,597		5,344		253
Trade names		4,645		673		3,972
Trademarks		3,400		-		3,400
Other		1,500		534		966
Total other intangible assets	$	28,214	$	13,347	$	14,867

	at December 31, 2023
			Accumulated
	Cost		Amortization		Net
Customer relationships	$	13,092	$	6,656	$	6,436
Patents and technology		5,606		5,322		284
Trade names		4,647		647		4,000
Trademarks		3,402		-		3,402
Other		1,500		515		985
Total other intangible assets	$	28,247	$	13,140	$	15,107

The change in the cost of total intangible assets from December 31, 2023 to March 31, 2024 is the effect of foreign currency translations.

Amortization expense for intangible assets was $228 and $209 for the three-month periods ended March 31, 2024 and March 31, 2023, respectively. Amortization included in selling, general and administrative expenses was $203 and $185 for the three-month periods ended March 31, 2024 and March 31, 2023, respectively. Amortization included in research and development expenses was $25 and $24 for the three-month periods ended March 31, 2024 and March 31, 2023, respectively.

5.	*STOCK-BASED COMPENSATION*

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

	Three-month period ended
	March 31,		March 31,
	2024		2023
Stock options	$	156	$	138
Restricted stock grants		5		1
Total	$	161	$	139

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, 2024, there was $699 of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of 1.3 years.

The following table summarizes stock option activity for the three-month period ended March 31, 2024:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2024		1,250,595		$	7.10
Granted		3,460			6.84
Exercised		(103,839	)		6.60
Forfeited or expired		(86,356	)	$	8.96
Outstanding at March 31, 2024		1,063,860		$	7.00		4.22	$	2,258
Vested and expected to vest at March 31, 2024		964,552		$	7.07		4.06	$	1,987
Exercisable at March 31, 2024		604,537		$	7.50		2.92	$	1,018

Cash received from stock option exercises under our stock-based compensation plans for the three-month periods ended March 31, 2024 and March 31, 2023 was $685 and $0, respectively.

Restricted stock awards vest in equal annual installments over three (3) years. Unrecognized compensation cost related to unvested restricted shares at March 31, 2024 and March 31, 2023, respectively, was $31 and $2.

6.	*INCOME TAXES*

Our effective tax rate for the three-month periods ended March 31, 2024 and March 31, 2023 was 19.5% and 28.4%, respectively. The period-over-period change was primarily attributable to the geographic mix of our operating results.

As of December 31, 2023, we have domestic net operating loss (“NOL”) carryforwards of $27,200, which expire 2031 through 2035, and domestic tax credits of $2,900, which expire 2028 through 2043, available to reduce future taxable income. As of March 31, 2024, management has concluded it is more likely than not that these domestic NOL and credit carryforwards will be fully utilized.

As of March 31, 2024, for certain past operations in the U.K., we continue to report a valuation allowance for NOL carryforwards of approximately $9,800, 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. There are no other deferred tax assets related to the past U.K. operations.

As of March 31, 2024, 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, 2024, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations, other than earnings generated in the U.K.

There were no unrecognized tax benefits related to uncertain tax positions at March 31, 2024 and December 31, 2023.

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 2020 thru 2022 remain subject to IRS examination. Our U.S. tax matters for 2001-2002, 2005-2007, 2009, and 2011-2015 also remain subject to IRS examination due to the remaining availability of net operating loss carryforwards generated in those years. Our U.S. tax matters for 2013 thru 2022 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years 2013 thru 2022 remain subject to examination by the respective foreign tax jurisdiction authorities.

7.	*OPERATING LEASES*

The Company has operating leases predominantly for operating facilities. As of March 31, 2024, the remaining lease terms on our operating leases range from approximately less than one (1) year to eight (8) years. Lease terms include renewal options reasonably certain of exercise. 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.

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

	Three-month period ended March 31,
	2024		2023
Operating lease cost	$	262	$	241
Variable lease cost		28		28
Total lease cost	$	290	$	269

Supplemental cash flow information related to leases was as follows:

	Three-month period ended March 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	265	$	226
Right-of-use assets obtained in exchange for lease liabilities:	$	-	$	-

Supplemental consolidated balance sheet information related to leases was as follows:

	Balance sheet classification	March 31, 2024			December 31, 2023
Assets:
Operating lease right-of-use asset	Other noncurrent assets	$	3,177		$	3,589

Liabilities:
Current operating lease liability	Accrued expenses and other current liabilities	$	780		$	894
Operating lease liability, net of current portion	Other noncurrent liabilities		2,350			2,644
Total operating lease liability		$	3,130		$	3,538

Weighted-average remaining lease term (years)			5.2			5.3

Weighted-average discount rate			6.3	%		4.5	%

Future minimum lease payments as of March 31, 2024 are as follows:

Maturity of operating lease liabilities
2024	$	620
2025		691
2026		618
2027		639
2028		642
Thereafter		458
Total lease payments		3,668
Less: Imputed interest		(538	)
Present value of remaining lease payments	$	3,130

8.	*COMMITMENTS AND CONTINGENCIES*

Purchase Commitments

As of March 31, 2024, we have made commitments to purchase approximately $330 of production machinery and equipment.

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 2024 and 2023 were as follows:

	Three-month period ended March 31,
	2024			2023
Accrued warranty obligations – beginning	$	547		$	323
Accruals for warranties issued		141			84
Settlements made		(49	)		(21	)
Accrued warranty obligations – ending	$	639		$	386

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, there exists the possibility that ultimate resolution of these matters could have a material adverse impact on the Company’s financial position, results of operations or cash flows. We are not aware of any such situations at this time.

9.	*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. 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. 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.

Separately priced extended warranty contracts are offered on certain Communications Systems products for a duration of up to eight (8) years. Extended warranties are treated as separate performance obligations and recognized to revenue evenly over the term of the respective contract. Revenue not yet recognized on extended warranty contracts is recorded as deferred revenue on the consolidated balance sheet. For the quarter ended March 31, 2024, revenue recognized on extended warranties was $72.

As of March 31, 2024, there was deferred revenue on extended warranty contracts of $1,335, comprised of $287 expected to be recognized as revenue within one (1) year and classified as accrued expenses and other current liabilities on our consolidated balance sheet, and $1,048 expected to be recognized as revenue over the remaining duration of the respective contracts and classified as other noncurrent liabilities on our consolidated balance sheet.

As of December 31, 2023, there was deferred revenue on extended warranty contracts of $1,407, comprised of $287 expected to be recognized as revenue within one (1) year and classified as accrued expenses and other current liabilities on our consolidated balance sheet, and $1,120 expected to be recognized as revenue evenly over the remaining duration of the respective contracts and classified as other noncurrent liabilities on our consolidated balance sheet.

As of March 31, 2024 and December 31, 2023, the Company had no other 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.

10.

BUSINESS SEGMENT INFORMATION

We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes 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.

Three-month period ended March 31, 2024:

	Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	34,989	$	6,938	$	-		$	41,927
Segment contribution		8,986		2,484		(7,407	)		4,063
Other expense						(456	)		(456	)
Tax provision						(703	)		(703	)
Non-controlling interest						(13	)		(13	)
Net income attributable to Ultralife Corporation								$	2,891

Three-month period ended March 31, 2023:

	Battery & Energy Products		Communications Systems		Corporate			Total
Revenues	$	28,470	$	3,446	$	-		$	31,916
Segment contribution		6,512		924		(7,410	)		26
Other expense						(494	)		(494	)
Tax benefit						133			133
Non-controlling interest						(11	)		(11	)
Net loss attributable to Ultralife Corporation								$	(346	)

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, 2024:

	Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	34,989	$	24,140		$	10,849
Communications Systems		6,938		-			6,938
Total	$	41,927	$	24,140		$	17,787
				58	%		42	%

Three-month period ended March 31, 2023:

Total

Revenue

Commercial

Government/

Defense

Battery & Energy Products

SEC Form 10-Q filed by Ultralife Corporation