Ultralife Corp: Form 10-Q for the period ended Jun 30, 2025

Forward-Looking Statements

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 management 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, changes in economic conditions including inflation, tariffs, interest rates and supply chain disruptions affecting our business, revenues and earnings adversely; our reliance on certain key customers for a significant portion of our revenues; reductions or delays in U.S. and foreign military spending; our efforts to develop new products or new commercial applications for our products; potential disruptions in our supply of raw materials and components or material increases in their costs due to business conditions, new or additional tariffs, global conflicts or other factors not under our control; our resources being overwhelmed by our growth; breaches in information systems security and other disruptions in our information technology systems; our ability to recruit and retain top management and key personnel; the unique risks associated with our China operations; fluctuations in the price of oil and the resulting impact on the demand for downhole drilling; possible future declines in demand for the products that use our batteries or communications systems; safety risks, including the risk of fire inherent in the manufacture, use and transportation of Lithium batteries; variability in our quarterly and annual results and the price of our common stock; rising interest rates increasing the cost of our variable borrowings; purchases by our customers of product quantities not meeting the volume expectations in our supply agreements; the continued impact of pandemics that may arise, causing delays in the manufacture and delivery of our mission critical products to end customers; potential costs attributable to the warranties we supply with our products and services; our inability to comply with changes to the regulations for the shipment of our products; our entrance into new end-markets which could lead to additional financial exposure; negative publicity concerning Lithium-ion batteries; our exposure to foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; 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; possible impairments of our goodwill and other intangible assets; our ability to comply with government regulations including the use of “conflict minerals”; exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; known and unknown environmental matters; possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; 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,” “expect,” “seek,” “project,” “intend,” “plan,” “may,” “will,” “should,” “foresee,” “could,” “likely,” 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, 2024.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements do not guarantee future performance and that our actual results of operations, financial condition and liquidity and developments in 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 document, 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. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. 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 to disclose new or updated information about risks, future events or other developments.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the consolidated financial statements and notes thereto in Part I, Item 1 of this Form 10-Q, and the consolidated financial statements and notes thereto and risk factors in our Annual Report on Form 10-K for the year ended December 31, 2024.

The financial information in this MD&A is presented in thousands of dollars, except for share and per share amounts, unless otherwise specified.

General

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 related to those product lines. 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 territories, 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 foreign defense departments. We enjoy strong name recognition in our markets under our Ultralife®, Ultralife Thin Cell®, Ultralife HiRate®, Ultralife & design®, LithiumPower®, LithiumPower & Design®, SMART CIRCUIT®, SMARTCIRCUIT®, SMART CIRCUIT & design®, SODIUMPOWER®, SODIUMPOWER (design)®, WE. ARE. POWER®, AMTI®, ABLE™, ACCUTRONICS™, ACCUPRO™, ENTELLION™, McDowell Research®, SWE DRILL-DATA®, SWE SEASAFE (& DESIGN)®, SWE SEASAFE DIRECT®, SWE SOUTHWEST ELECTRONIC ENERGY CORP®, SWE Southwest Electronic Energy Group®, Excell Battery Group™ and Criterion Gauge™, POW-R BMS®, POW-R-BMS®, POW-R TOTE®. 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 segment contribution, as defined by gross profit less direct selling, general and administrative (“SG&A”) and research and development expenses, is the best indicator of segment performance. As such, we report segment results at the segment contribution level. Refer to Note 11 in the notes to Consolidated Financial Statements in Item 1 of Part 1 of this Form 10-Q.

Our website address is www.ultralifecorporation.com (http://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 (http://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.

Overview

Consolidated revenues of $48,561 for the three-month period ended June 30, 2025, increased by $5,578 or 13.0%, over $42,983 for the three-month period ended June 30, 2024, reflecting the inclusion of Electrochem and an increase in government/defense sales of 12.5% partially offset by a 20.4% decrease in commercial sales due to declines in medical and oil & gas sales.

Gross profit was $11,601, or 23.9% of revenue, for the three-month period ended June 30, 2025, compared to $11,563, or 26.9% of revenue, for the same quarter a year ago. The 300-basis point decline primarily resulted from sales product mix, higher tariff and freight costs, and lower factory throughput at some of our operations.

Operating expenses were $9,345 for the three-month period ending June 30, 2025, compared to $7,646 for the three-month period ended June 30, 2024, reflecting the inclusion of Electrochem’s results, a 25.3% increase in new product development costs related to continued investment in our product offering, the strengthening of our sales and marketing leadership team to expedite organic growth and further leverage our global brand and resources, and certain one-time, non-recurring costs. Operating expenses for the 2025 three-month period were 19.2% of revenue compared to 17.8% of revenue for the year-earlier three-month period.

Operating income for the three-month period ended June 30, 2025 was $2,256, or 4.6% of revenues, compared to $3,917, or 9.1% of revenues, for the year-earlier period. The decrease in operating income primarily resulted from a decline in Communications Systems sales, lower gross margin for our Battery & Energy Products segment, and the increase in operating expenses, including $326 in one-time, non-recurring costs and purchase accounting adjustments.

Other expense for the second quarter of 2025 was $1,143 compared to $71 for the year-earlier quarter. The increase for the 2025 period primarily reflects the increase in interest expense relating to our acquisition of Electrochem on October 31, 2024 and the payment of $235 from our insurance carrier in the second quarter of 2024 pertaining to the ransomware cyberattack experienced by the Company in the first quarter of 2023.

Net income attributable to Ultralife Corporation was $879, or $0.05 per share – basic and diluted, for the three-month period ended June 30, 2025, compared to $2,969, or $0.18 per share – basic and diluted, for the three-month period ended June 30, 2024.

Adjusted EBITDA, defined as net income attributable to Ultralife Corporation 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 $4,055, or 8.4% of revenues, for the second quarter of 2025, compared to $5,415, or 12.6% of revenues, for the second quarter of 2024. See the section “Adjusted EBITDA” on page 26 for a reconciliation of adjusted EBITDA to net income attributable to Ultralife Corporation.

Notwithstanding the challenges experienced in the second quarter, we expect improved results in the second half of the year and into 2026. We expect our Communications Systems business to rebound from a tough first half, and we are also beginning to see early purchase orders from long-term new product programs for our battery business, a rebound in demand from our medical and oil & gas customers, sustained growth in global defense spending, and an expanding opportunity pipeline across both businesses. Our priorities remain converting long-term new product development efforts into revenue, advancing vertical integration in the oil & gas segment, and maintaining a strong focus on operational efficiency initiatives to deliver sustainable profitable growth and maximizing the value of our global brand.

Results of Operations

Three-Month Periods Ended June 30, 2025 and June 30, 2024

Revenues. Consolidated revenues for the three-month period ending June 30, 2025 were $48,561, an increase of $5,578, or 13.0%, over $42,983 for the three-month period ended June 30, 2024. Overall, government/defense sales increased 12.5% and commercial sales decreased 20.4%, when excluding the 2025 sales of Electrochem.

Battery & Energy Products revenues increased $9,184, or 25.0%, from $36,683 for the three-month period ended June 30, 2024 to $45,867 for the three-month period ended June 30, 2025. The revenue growth was attributable to the inclusion of Electrochem. Excluding Electrochem, sales were essentially flat year-over-year with government/defense sales increasing $5,515 or 61.1%, reflecting strong demand from a U.S.-based global prime, offset by a decrease in commercial sales of $5,630 or 20.4%, primarily reflecting declines of 39.0% in medical sales and a 23.1% in oil and gas sales.

Communications Systems sales decreased $3,606, or 57.2%, from $6,300 for the three-month period ended June 30, 2024 to $2,694 for the three-month period ended June 30, 2025. The decrease was primarily attributable to shipments in the prior year of integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor magnified by delays in the timing of purchase orders during the 2025 second quarter.

Cost of Products Sold / Gross Profit. Cost of products sold totaled $36,960 for the quarter ended June 30, 2025, an increase of $5,540, or 17.6%, from the $31,420 reported for the same three-month period a year ago. Consolidated cost of products sold as a percentage of total revenue increased from 73.1% for the three-month period ended June 30, 2024 to 76.1% for the three-month period ended June 30, 2025. Correspondingly, consolidated gross margin decreased from 26.9% for the three-month period ended June 30, 2024, to 23.9% for the three-month period ended June 30, 2025, primarily reflecting unfavorable sales product mix for our Battery & Energy Products segment, higher tariff and freight costs, and lower factory throughput at some of our operations.

For our Battery & Energy Products segment, gross profit for the second quarter of 2025 was $10,835, an increase of $882 or 8.9% from gross profit of $9,953 for the second quarter of 2024. Battery & Energy Products’ gross margin of 23.6% decreased by 350-basis points from the 27.1% gross margin for the year-earlier period, primarily due to sales mix reflecting declines of 39.0% in medical battery sales and 23.1% in oil & gas battery sales and higher tariff and freight costs.

For our Communications Systems segment, gross profit for the second quarter of 2025 was $766 or 28.4% of revenues, compared to gross profit of $1,610 or 25.6% of revenues for the second quarter of 2024. The 280-basis point increase in gross margin was primarily due to favorable sales mix, partially offset by the volume throughput impact of the 57.2% decrease in revenues.

Operating Expenses. Operating expenses for the three-month period ended June 30, 2025 were $9,345, an increase of $1,699 or 22.2% from the $7,646 for the three-month period ended June 30, 2024. The increase is primarily attributable to the inclusion of $654 for Electrochem, a 25.3% increase in new product development costs related to continued investment in our product offering, and increase of 3.7% for the strengthening of our sales and marketing leadership team to expedite organic growth and further leverage our global brand and resources, and certain one-time, non-recurring expenses which include costs related to our acquisition of Electrochem. Both periods reflected continued tight control over discretionary spending.

Overall, operating expenses were 19.2% of revenue for the quarter ending June 30, 2025 compared to 17.8% of revenue for the quarter ended June 30, 2024. Amortization expense associated with intangible assets related to our acquisitions was $410 for the second quarter of 2025 ($378 in selling, general and administrative expenses and $32 in research and development costs), compared with $227 for the second quarter of 2024 ($202 in selling, general, and administrative expenses and $25 in research and development costs). Research and development costs were $2,318 for the three-month period ended June 30, 2025, an increase of $321 or 16.1%, from $1,997 for the three-month period ended June 30, 2024. The increase is attributable to new product development costs related to continued investment in our product offering as we aggressively pursue both government/defense and commercial opportunities. Selling, general, and administrative expenses were $7,027 for the three-month period ended June 30, 2025, an increase of $1,378 or 24.4% from $5,649 for the second quarter of 2024. The period-over-period increase was primarily attributable to the inclusion of Electrochem, the strengthening of our sales and marketing leadership team to expedite organic growth and further leverage our global brand and resources, and certain one-time, non-recurring expenses which include costs related to our acquisition of Electrochem.

Other Expense. Other expense totaled $1,143 for the three-month period ended June 30, 2025 compared to $71 for the three-month period ended June 30, 2024. Interest and financing expense increased $574, or 137.3%, from $418 for the second quarter of 2024 to $992 for the comparable period in 2025 resulting from the financing of the Electrochem acquisition on October 31, 2024. Miscellaneous expense (income) amounted to $151 for the second quarter of 2025 compared to ($347) for the second quarter of 2024, primarily attributable to a 2024 payment of $235 from our insurance carrier pertaining to the ransomware cyberattack experienced by the Company in the first quarter of 2023 and foreign exchange gains and losses due to fluctuations in foreign currency exchange rates.

Income Taxes. For the three-month period ended June 30, 2025, Ultralife recognized an income tax provision of $243, comprised of a current benefit of $22 and a deferred tax provision of $265 which primarily represents non-cash charges for U.S. taxes which we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. This compares to a tax provision of $853 comprised of a current provision of $109 and deferred expense of $744 for the three-month period ended June 30, 2024. Our effective tax rate was 21.8% for the second quarter of 2025 as compared to 22.2% for the second quarter of 2024, primarily attributable to the geographic mix of our operating results. See Note 7 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q for additional information regarding our income taxes.

Net Income Attributable to Ultralife Corporation. Net income attributable to Ultralife Corporation was $879, or $0.05 per share – basic and diluted, for the three-month period ended June 30, 2025, compared to $2,969, or $0.18 per share – basic and diluted, for the three-month period ended June 30, 2024. Adjusted EPS was $0.07 per share on a diluted basis for the second quarter of 2025, compared to an adjusted $0.22 per share for the 2024 period. Adjusted EPS excludes the provision for deferred taxes of $265 and $744 for the 2025 and 2024 periods, respectively, which primarily represent non-cash charges for U.S. income taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. See section “Adjusted Earnings Per Share” on page 28 for a reconciliation of adjusted EPS to EPS.

Weighted average shares outstanding used to compute diluted earnings per share decreased from 16,825,321 for the second quarter of 2024 to 16,656,408 for the second quarter of 2025. The decrease is attributable to stock option exercises since the second quarter of 2024 offset by a decrease in the average stock price used to compute diluted shares from $10.65 for the second quarter of 2024 to $5.93 for the second quarter of 2025. Accordingly, dilutive shares of 257,068 were added to basic weighted average shares for the 2024 period compared to 21,856 for the 2025 period.

Six-Month Periods Ended June 30, 2025 and June 30, 2024

Revenues. Consolidated revenues for the six-month period ended June 30, 2025 were $99,307, an increase of $14,397, or 17.0%, over $84,910 for the six-month period ended June 30, 2024. Overall, government/defense sales increased $5,209 or 15.7% and commercial sales increased $9,188 or 17.7%. Excluding Electrochem sales of $16,921 for the 2025 period, sales declined $2,524 or 3.0% with Communication Systems sales declining $6,119 or 46.2% and Battery & Energy Products Sales increasing $3,595 or 5.0%.

Battery & Energy Products revenues increased $20,516, or 28.6%, from $71,672 for the six-month period ended June 30, 2024 to $92,188 for the six-month period ended June 30, 2025. The increase reflects sales of $16,921 for Electrochem and organic growth of $3,595 or 5.0% attributable to an $11,328 or 57.0% increase in government/defense sales and a $7,733 or 14.9% decrease in commercial sales. The increase in government/defense sales primarily reflects continued strong demand from our largest U.S.-based global prime. The decrease in commercial sales was driven by a $5,724 or 27.2% decline in medical sales due to timing of purchases from OEM’s and a $3,191 or 16.5% decrease in oil & gas sales due primarily to general economic and geo-political conditions.

Communications Systems revenues decreased $6,119 or 46.2%, from $13,238 for the six-month period ended June 30, 2024 to $7,119 for the six-month period ended June 30, 2025. This decrease was primarily attributable to 2024 shipments of integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor under an ongoing allied country government/defense modernization program, and power systems to a U.S.-based global prime, magnified by delays in the timing of purchase orders during the first half of 2025.

Operating Expenses. Operating expenses for the six-month period ended June 30, 2025 were $18,691, an increase of $3,638 or 24.2% from the $15,053 for the six-month period ended June 30, 2024. Excluding 2025 Electrochem and one-time M&A and other non-recurring expenses of $2,179, operating expenses increased $1,459 or 9.7%. The increase is primarily attributable to new product development costs related to continued investment in our product offering and the strengthening of our sales and marketing leadership team to expedite organic growth and further leverage our global brand and resources. Both periods reflected continued tight control over discretionary spending.

Overall, operating expenses as a percentage of revenues were 18.8% for the six-month period ended June 30, 2025 compared to 17.7% for the six-month period ended June 30, 2024. Amortization expense associated with intangible assets related to our acquisitions was $815 for the first six months of 2024 ($754 in selling, general and administrative expenses and $61 in research and development costs), compared with $455 for the first six months of 2024 ($405 in selling, general, and administrative expenses and $50 in research and development costs). Research and development costs were $4,722 for the six-month period ended June 30, 2025, an increase of $969 or 25.8%, from $3,753 for the six months ended June 30, 2024. Selling, general, and administrative expenses increased $2,669, or 23.6%, from $11,300 for the first six months of 2024 to $13,969 for the first six months of 2025. The period-over-period increase was primarily attributable to the inclusion of Electrochem, the strengthening of our sales and marketing leadership team to expedite organic growth and further leverage our global brand and resources, and certain one-time, non-recurring expenses which include costs related to our acquisition of Electrochem.

Other Expense. Other expense totaled $2,096 for the six-month period ended June 30, 2025 compared to $527 for the six-month period ended June 30, 2024. Interest and financing expense increased $1,086, or 115.8%, from $938 for the first half of 2024 to $2,024 for the comparable period in 2025 resulting from the financing of the Electrochem acquisition on October 31, 2024. Miscellaneous expense (income) amounted to $72 for the first half of 2025 compared to ($411) for the first half of 2024, primarily attributable to a 2024 payment of $235 from our insurance carrier pertaining to the ransomware cyberattack experienced by the Company in the first quarter of 2023 and foreign exchange gains and losses due to fluctuations in foreign currency exchange rates.

Income Taxes. The income tax provision for the 2025 six-month period was $810 compared to $1,556 for the 2024 six-month period. Our effective tax rate increased to 22.8% from 20.9% for the 2024 period, primarily due to the geographic mix of our operating results. The income tax provision for the first six months of 2025 is comprised of a $201 current provision for taxes expected to be paid on income primarily in foreign jurisdictions and a $609 deferred tax provision which primarily represents non-cash charges for U.S. income taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. For the comparable 2024 period, the income tax provision was comprised of a $162 current provision for taxes expected to be paid on income primarily in foreign jurisdictions and an $1,394 deferred tax provision which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. See Note 7 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q for additional information regarding our income taxes.

Net Income Attributable to Ultralife. Net income attributable to Ultralife was $2,744, or $0.17 per share – basic and diluted for the six-month period ended June 30, 2025, compared to $5,860, or $0.36 per share – basic and $0.35 per share - diluted, for the six-month period ended June 30, 2024. Adjusted EPS was $0.20 per share on a diluted basis for the 2025 period, compared to $0.44 for the 2024 period. Adjusted EPS excludes the provision for deferred taxes of $609 and $1,394 for the 2025 and 2024 periods, respectively, which primarily represents non-cash charges for U.S. income taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. See the section “Adjusted Earnings Per Share” on Page 28 for a reconciliation of adjusted EPS to EPS.

Weighted average shares outstanding used to compute diluted earnings per share increased from 16,661,175 for the first six months of 2024 to 16,671,000 for the first six months of 2025. The increase is attributable to stock option exercises since the second quarter of 2024 mitigated by a decrease in the average stock price used to compute diluted shares from $9.41 for the six-month period ended June 30, 2024 to $6.36 for the six-month period ended June 30, 2025. Accordingly diluted shares of 37,237 were added to basic weighted average shares in 2025 compared to 179,112 in 2024.

Adjusted EBITDA

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 Corporation before interest expense, provision for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expense/income that we do not consider reflective of our ongoing continuing operations. We also use adjusted EBITDA as a supplemental measure to review and assess our operating performance and to enhance comparability between periods. We 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 income attributable to Ultralife Corporation, the most comparable financial measure under GAAP.

We use adjusted EBITDA in our decision-making processes relating to the operation of our business together with GAAP financial measures such as operating income (loss). We believe that adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while eliminating 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 GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with 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 Corporation or other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include, but are not limited to, the following:

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

We compensate for these limitations by relying primarily on our 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 loss attributable to Ultralife Corporation.

Adjusted EBITDA is calculated as follows for the periods presented:

27

Adjusted Earnings Per Share

In evaluating our business, we consider and use adjusted earnings per share (“EPS”), a non-GAAP financial measure, as a supplemental measure of our business performance. We define adjusted EPS as net income (loss) attributable to Ultralife Corporation excluding the provision (benefit) for deferred income taxes divided by our weighted average shares outstanding on both a basic and diluted basis. We believe that this information is useful in providing period-to-period comparisons of our results by reflecting the portion of our tax provision that will be predominantly offset by our U.S. net operating loss carryforwards and other tax credits for the foreseeable future. We reconcile adjusted EPS to EPS, the most comparable financial measure under GAAP. Neither current nor potential investors in our securities should rely on adjusted EPS as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of adjusted EPS to EPS and net income (loss) attributable to Ultralife Corporation.

Adjusted EPS is calculated as follows for the periods presented:

28

Liquidity and Capital Resources

As of June 30, 2025, cash totaled $10,941, as compared to $6,854 at December 31, 2024. The increase largely reflects cash generated by our operations during the period, partially offset by a reduction in our outstanding debt.

For the six-month period ended June 30, 2025, cash generated from operations was $9,303, as compared to $8,844 generated for the six-month period ended June 30, 2024. For the 2025 period, cash generated from operations was comprised of net income of $2,749 plus non-cash items totaling $3,977 for depreciation, amortization, stock-based compensation, and deferred taxes, partially offset by $2,577 attributable to working capital.

Cash used in investing activities for the six months ended June 30, 2025 was $1,995 for capital expenditures, primarily reflecting investments in equipment for new products transitioning to higher-volume manufacturing.

Cash used in financing activities for the six months ended June 30, 2025 was $3,338, representing a $3,375 reduction in our outstanding debt and $24 of debt issuance costs paid, partially offset by $61 in cash generated from employee stock option exercise proceeds during the period.

We continue to have significant U.S. net operating loss carryforwards available to utilize as an offset to future taxable income. See Note 7 to the consolidated financial statements in Item 1 of Part 1 of this Form 10-Q for additional information.

Going forward, we expect positive operating cash flow and the availability of borrowings under our Revolving Credit Facility will be sufficient to meet our general funding requirements for the foreseeable future.

To provide flexibility in accessing the capital markets, on March 30, 2021, the Company filed a shelf registration statement on Form S-3 (File No. 333-254846) (the “Prior Registration Statement”) registering securities in an aggregate amount of $100,000,000. None of the $100,000,000 of registered securities were sold under the Prior Registration Statement (the “Unsold Securities”). Under the rules of the Securities and Exchange Commission (the “SEC”) the Prior Registration Statement was set to expire on April 2, 2024. Therefore, on March 29, 2024, the Company filed a new shelf registration statement on Form S-3 (File No. 333-278360) (the “New Registration Statement”) to replace the Prior Registration Statement. The New Registration Statement includes all $100,000,000 of the Unsold Securities registered on the Prior Registration Statement. The SEC declared the New Registration Statement effective May 7, 2024. Pursuant to Rule 415(a)(6) under Securities Act of 1933, as amended (the “Securities Act”), the offering of the Unsold Securities under the Prior Registration Statement was deemed terminated as of the date of effectiveness of the New Registration Statement. Upon the filing of an appropriate prospectus supplement or supplements under the New Registration Statement, we may offer and sell our securities from time to time in one or more offerings, at our discretion. We intend to use the net proceeds resulting from any sales of these securities for general corporate purposes which may include, but are not limited to, potential acquisitions of complementary businesses or technologies, strategic capital expenditures to expand and protect our competitive position, and investments in the development of transformational, competitively differentiated products for attractive growth markets.

Commitments

As of June 30, 2025, the Company had $51,625 outstanding on the Term Loan and no amounts outstanding on the Revolving Credit Facility. The Company was in full compliance with its debt covenants under the Credit Facilities as of June 30, 2025.

As of June 30, 2025, we have made commitments to purchase approximately $1,408 of production machinery and equipment.

Critical Accounting Policies

Management exercises judgment in making important decisions pertaining to choosing and applying accounting policies and methodologies in many areas. Not only are these decisions necessary to comply with GAAP, but they also reflect management’s view of the most appropriate manner in which to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 to the consolidated financial statements in our 2024 Annual Report on Form 10-K should be reviewed for a greater understanding of how our financial performance is recorded and reported.

During the first six months of 2025, there were no significant changes in the manner in which our significant accounting policies were applied or in which related assumptions and estimates were developed.

Evaluation of Disclosure Controls and Procedures

Management, under the supervision and with the participation of our President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer and Treasurer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this quarterly report. Management has concluded that our disclosure control and procedures were not effective as of June 30, 2025 because of the existing material weakness in our internal control over financial reporting as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2024.

Notwithstanding the material weakness identified, management believes that the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with U.S. generally accepted accounting principles for each of the periods presented.

Remediation Efforts to Address Material Weaknesses

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on our evaluation, management concluded that there is a material weakness in our internal control over financial reporting attributable to our need for additional accounting personnel to provide a full complement of accounting and reporting expertise commensurate with the growth of the Company both organic and through acquisitions. As a result of the material weakness identified, management concluded that our internal control over financial reporting was not effective as of December 31, 2024. The material weakness was not yet fully remediated as of June 30, 2025.

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

Management has already taken steps to remediate our identified material weakness and will continue to take further steps until the remediation is complete. The Company is currently seeking to hire additional personnel including certified public accountants to augment the experience and expertise of our accounting team and provide for a full complement of resources commensurate with the Company’s continued growth. During the fourth quarter of 2024, we hired a highly experienced individual as VP of Financial Growth, Transition & Efficiency and in the first quarter of 2025 we hired a Controller for Electrochem. Until all of the necessary resources are in place, expected to occur in 2025, the current members of our accounting team will continue their best efforts to provide additional oversight. We believe that with this interim additional oversight, coupled with the additional personnel we are in the process of recruiting and hiring, will allow us to execute business process controls more quickly and ensure a greater level of monitoring whether controls are present and functioning.

Remediation will be deemed complete once our corrective actions are fully implemented and further evaluation is performed, including testing, to conclude that our internal control over financial reporting is effective.

Changes in Internal Control Over Financial Reporting

To continue our improvement in internal controls over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)) during the second quarter and continuing after the quarter, we have re-organized our Corporate Accounting organization and have hired additional highly experienced CPA’s, MBA’s and other personnel, including a Director, Internal Audit & Sox Compliance. We believe that the reorganization and the additional resources will be a major step in strengthening our internal control over financial reporting as the Company continues to grow on a global basis.