ULTRALIFE CORP 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   The financial statements and schedules listed in Item 15(a)(1) are included in this Report beginning on page 40.     Page Report of Independent Registered Public Accounting Firm (PCAOB ID 317 ) 38     Consolidated Financial Statements:                Consolidated Balance Sheets as of December 31, 2021 and 2020 40     Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2021 and 2020 41     Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2021 and 2020 42     Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 43     Notes to Consolidated Financial Statements 44   37     Report of Independent Registered Public Accounting Firm     To the Shareholders and Board of Directors of Ultralife Corporation     Opinions on the Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Ultralife Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of (loss) income and comprehensive (loss) income, changes in shareholders' equity and cash flows for the years then ended and the related notes to the consolidated financial statements (collectively, the financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.   In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.   As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Excell Battery Group (Excell) from its assessment of internal control over financial reporting as of December 31, 2021, because it was acquired by the Company in a purchase business combination in the fourth quarter of 2021. We have also excluded Excell from our audit of internal control over financial reporting. Excell is a wholly owned subsidiary whose total assets (excluding acquired goodwill and other intangible assets which were included in management’s evaluation) and revenue represent approximately 6% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.   Basis for Opinions The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.   Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.   Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   38     Critical Audit   Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.   Estimate for excess, obsolete, and slow-moving inventory reserve   As discussed in Notes 1 and 4 to the financial statements, inventories are stated at the lower of cost or net realizable value with cost determined under the first-in, first-out method. The Company records provisions for excess, obsolete, and slow-moving inventory based on changes in customer demand, technology developments or other economic factors. The excess, obsolete, and slow-moving inventory reserve serves to reduce the Company’s inventory balance through a charge to cost of products sold.   The Company’s reserve for excess, obsolete, and slow-moving inventory is based upon assumptions related to expectations of future demand, product lifecycles, product support, technical obsolescence, regulatory requirements, and economic and market conditions. If the actual realization of excess, obsolete, and slow-moving inventory does not meet the Company’s assumptions future inventory adjustments would result in a decrease in gross margin. Due to the magnitude of the inventory and the subjectivity involved in estimating the reserve, we identified the evaluation of the reserve as a critical audit matter, which required a high degree of auditor judgment.   Addressing the matter involved performing subjective procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.  The primary procedures we performed include: obtaining an understanding of the process and assumptions used by management to develop the reserve for excess, obsolete, and slow-moving inventory; testing the effectiveness of controls over management’s estimate of reserves for excess, obsolete, and slow-moving inventory; testing management’s calculation of the reserve for excess, obsolete, and slow-moving inventory by: testing the completeness and accuracy of the source information used,  testing the mathematical accuracy of management’s calculations,  evaluating the reasonableness and consistency of methodology and assumptions applied by management,  and performing a retrospective review of the prior-year estimates used to identify potential bias of management judgements.   Goodwill Impairment Analysis   As discussed in Notes 1 and 4 to the financial statements, the Company performs its goodwill impairment test on an annual basis as of October 1st or whenever events and changes in circumstances indicate that the carrying value of a reporting unit might exceed its fair value. For each reporting unit the Company performed a quantitative test, which compares the fair value of the reporting unit to the carrying value of the respective reporting unit. The Company has identified five goodwill reporting units.   Management determines fair value of the respective reporting units using a discounted cash flow model.  Significant estimates and judgements used in this model include internal operating and cash flow forecasts, excess working capital requirements, and inputs to the weighted-average cost of capital used to discount future cash flows.   Future revenue and operating cash flow forecasts, the development of the weighted average cost of capital used to discount the future cash flows, and excess working capital requirements are subject to judgement based on sources utilized and the assessment of risks related to the cash flows.  Due to the subjectivity involved with the assumptions used to determine the fair value of the reporting units, we identified the goodwill impairment test as a critical audit matter, which required a high degree of auditor judgement.    Addressing the matter involved performing subjective procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.  The primary procedures we performed include: obtaining an understanding of the process and assumptions used by management to perform the impairment test,  testing the effectiveness of controls over management’s test for impairment,  and testing management’s impairment calculation by: testing the completeness and accuracy of the source information used, testing the mathematical accuracy of management’s calculations, evaluating the reasonableness and consistency of methodology and assumptions applied by management, performing a retrospective review of the prior-year estimates used to identify potential bias of management judgements, verifying certain third party data used by the Company in building their assumptions, and testing significant assumptions by developing independent expectations.  Professionals with specialized skills and knowledge were used to assist in evaluating certain methodologies and assumptions used in the model and performing sensitivity analysis on various inputs.   Excell Battery Group Purchase Price Allocation   As discussed in Notes 1 and 2 to the financial statements, effective December 13, 2021, the Company acquired all the outstanding shares of Excell Battery Group (Excell). The total net purchase price paid for the shares of Excell was approximately $23.5 million. The Company applied the acquisition method of accounting for the acquisition. Under this method, identifiable assets acquired and liabilities assumed are measured at their acquisition-date fair value. The Company used a valuation hierarchy, and utilized an independent third-party valuation specialist to determine the fair values used in this allocation. Intangible assets and goodwill represented an allocation of purchase price of the acquired business in the amount of approximately $8.8 million and $11.0 million, respectively.    The Company’s determination of the fair value used for the allocation of the purchase price is based upon assumptions of the future performance of Excell and includes work performed by a third-party valuation specialist. Due to the subjectivity involved in estimating the fair values and ultimate allocation of purchase price, we identified the fair value estimates for purchase price allocation of Excell intangible assets as a critical audit matter, which required a higher degree of auditor judgement as well as the use of professionals with specialized skill and knowledge.   Addressing the matter involved performing subjective procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.  The primary procedures we performed include:  obtaining an understanding of the process and assumptions used by management to develop the estimate of the purchase price allocation, obtaining an understanding of management’s controls relating to the purchase price allocation and tested the operating effectiveness of the controls, as necessary, engaging an internal valuation specialist to test certain assumptions and approaches used, testing cut-off of working capital at the acquisition date for any impact to the fair value assigned to the identifiable tangible and intangible assets acquired or liabilities assumed,  testing  management’s allocation, including testing of the completeness and accuracy of source information used, mathematical accuracy of management’s calculations, and evaluated reasonableness and consistency of methodology and assumption.   /s/ Freed Maxick CPAs, P.C.     We have served as the Company's auditor since 2016.   Rochester, New York March 8, 2022   39       ULTRALIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)       December 31,       2021     2020   ASSETS   Current Assets:                 Cash   $ 8,413     $ 10,653   Trade accounts receivable, net of allowance for doubtful accounts of $346 and $317 , respectively     20,232       21,054   Inventories, net     33,189       28,193   Prepaid expenses and other current assets     4,690       4,596   Total current assets     66,524       64,496   Property, plant and equipment, net     23,205       22,850   Goodwill     38,068       27,018   Other intangible assets, net     17,390       9,209   Deferred income taxes, net     11,472       11,836   Other noncurrent assets     2,879       2,292   Total assets   $ 159,538     $ 137,701                     LIABILITIES AND SHAREHOLDERS' EQUITY   Current Liabilities:                 Accounts payable   $ 9,823     $ 10,839   Current portion of long-term debt     2,000       1,361   Accrued compensation and related benefits     1,842       1,748   Accrued expenses and other current liabilities     5,259       4,758   Total current liabilities     18,924       18,706   Long-term debt, net     18,857       -   Deferred income taxes     2,254       515   Other noncurrent liabilities     1,760       1,557   Total liabilities     41,795       20,778                     Commitments and contingencies (Note 5)                                       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 – 20,522,427 shares and 20,373,519 shares, respectively; outstanding – 16,089,832 shares and 15,959,984 shares, respectively     2,052       2,037   Capital in excess of par value     186,518       185,464   Accumulated deficit     ( 47,832 )     ( 47,598 ) Accumulated other comprehensive loss     ( 1,653 )     ( 1,782 ) Treasury stock - at cost; 4,432,595 shares and 4,413,535 shares, respectively     ( 21,469 )     ( 21,321 ) Total Ultralife Corporation equity     117,616       116,800   Non-controlling interest     127       123   Total shareholders’ equity     117,743       116,923                     Total liabilities and shareholders' equity   $ 159,538     $ 137,701     The accompanying notes are an integral part of these consolidated financial statements.   40       ULTRALIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME (Dollars in Thousands, Except Per Share Amounts)       Year ended December 31,       2021     2020                     Revenues   $ 98,267     $ 107,712   Cost of products sold     73,625       78,553   Gross profit     24,642       29,159                     Operating expenses:                 Research and development     6,826       5,947   Selling, general and administrative     17,781       17,511   Total operating expenses     24,607       23,458                     Operating income     35       5,701                     Other expense (income):                 Interest and financing expense     242       436   Miscellaneous income     ( 56 )     ( 165 ) Gain on litigation settlement     -       ( 1,593 ) Total other expense (income)     186       ( 1,322 )                   (Loss) income before income taxes     ( 151 )     7,023   Income tax provision     79       1,692                     Net (loss) income     ( 230 )     5,331                     Net income attributable to non-controlling interest     4       99                     Net (loss) income attributable to Ultralife Corporation     ( 234 )     5,232                     Other comprehensive income:                 Foreign currency translation adjustments     129       749                     Comprehensive (loss) income attributable to Ultralife Corporation   $ ( 105 )   $ 5,981                     Net (loss) income per share attributable to Ultralife Corporation common shareholders – Basic   $ (.01 )   $ .33                     Net (loss) income per share attributable to Ultralife Corporation common shareholders – Diluted   $ (.01 )   $ .33                     Weighted average shares outstanding – Basic     16,037       15,902   Weighted average shares outstanding – Diluted     16,037       16,096     The accompanying notes are an integral part of these consolidated financial statements.   41       ULTRALIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’  EQUITY (Dollars in Thousands)       Common stock                                                       Number of shares     Amount     Capital in excess of par value     Accumulated other comprehensive income (loss)     Accumulated deficit     Treasury stock     Non- controlling interest     Total                                                                     Balance – December 31, 2019     20,268,050     $ 2,026     $ 184,292     $ ( 2,531 )   $ ( 52,830 )   $ ( 21,231 )   $ 24     $ 109,750                                                                     Net income                                     5,232               99       5,331   Stock option exercises     92,968       9       229                       ( 75 )             163   Stock-based compensation -stock options                     838                                       838   Stock-based compensation -restricted stock                     105                                       105   Vesting of restricted stock     12,501       2                               ( 15 )             ( 13 ) Foreign currency translation adjustments                             749                               749                                                                     Balance – December 31, 2020     20,373,519     $ 2,037     $ 185,464     $ ( 1,782 )   $ ( 47,598 )   $ ( 21,321 )   $ 123     $ 116,923                                                                     Net loss                                     ( 234 )             4       ( 230 ) Stock option exercises     133,907       13       385                       ( 133 )             265   Stock-based compensation -stock options                     618                                       618   Stock-based compensation -restricted stock                     53                                       53   Vesting of restricted stock     15,001       2       ( 2 )                     ( 15 )             ( 15 ) Foreign currency translation adjustments                             129                               129                                                                     Balance – December 31, 2021     20,522,427     $ 2,052     $ 186,518     $ ( 1,653 )   $ ( 47,832 )   $ ( 21,469 )   $ 127     $ 117,743     The accompanying notes are an integral part of these consolidated financial statements.   42       ULTRALIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)       Year ended December 31,       2021     2020   OPERATING ACTIVITIES:                 Net (loss) income   $ ( 230 )   $ 5,331   Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:                 Depreciation     2,906       2,340   Amortization of intangible assets     633       595   Amortization of financing fees     104       51   Stock-based compensation     671       943   Deferred income tax expense     ( 147 )     1,386   Gain on litigation settlement     -       ( 1,593 ) Changes in operating assets and liabilities:                 Accounts receivable     4,423       9,211   Inventories, gross     ( 1,296 )     1,799   Prepaid expenses and other assets     64       ( 134 ) Income taxes receivable and payable     ( 91 )     139   Accounts payable and other liabilities     (2,712 )     1,652   Net cash provided by operating activities     4,325       21,720                     INVESTING ACTIVITIES:                 Purchase of Excell, net of cash acquired     ( 23,519 )     -   Purchases of property, plant and equipment     (2,814 )     ( 3,101 ) Proceeds from sale of equipment     -       120   Net cash used in investing activities     (26,333 )     ( 2,981 )                   FINANCING ACTIVITIES:                 Proceeds from amended credit facilities     20,980       -   Payment of credit facilities     ( 1,474 )     ( 15,842 ) Proceeds from exercise of stock options     398       238   Tax withholdings on stock-based awards     ( 148 )     ( 90 ) Payment of debt issuance costs     ( 114 )     -   Net cash provided by (used in) financing activities     19,642       ( 15,694 )                   Effect of exchange rate changes on cash     126       203                     INCREASE (DECREASE) IN CASH     ( 2,240 )     3,248                     Cash - Beginning of year     10,653       7,405   Cash - End of year   $ 8,413     $ 10,653                                       Supplemental cash flow information:                 Construction in process in accounts payable   $ 135     $ 675   Income taxes paid   $ 324     $ 264   Interest paid   $ 142     $ 375     The accompanying notes are an integral part of these consolidated financial statements.   43     ULTRALIFE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands, Except Per Share Amounts)       Note 1 - Summary of Operations and Significant Accounting Policies   a. Description of Business   As used in this annual report, unless otherwise indicated, the terms “we”, “our” and “us” refer to Ultralife Corporation (“Ultralife”) and includes our wholly-owned subsidiaries, ABLE New Energy Co., Limited and its wholly-owned subsidiary ABLE New Energy Co., Ltd; Ultralife UK LTD and its wholly-owned subsidiary, Accutronics Ltd; Ultralife Batteries (UK) Ltd.; Southwest Electronic Energy Corporation and its wholly-owned subsidiary, CLB, INC.; Ultralife Excell Holding Corp. (“UEHC”); Ultralife Canada Holding Corp (“UCHC,” wholly owned by UEHC); Excell Battery Canada ULC (wholly owned by UCHC); 1336902 B.C. Unlimited Liability Company ( “1336902 B.C.”, wholly owned by UCHC); Excell Battery Corporation USA (wholly owned by 1336902 B.C.); and our majority-owned joint venture Ultralife Batteries India Private Limited.   We offer products and services ranging from power solutions to communications and electronics systems. Through our engineering and collaborative approach to problem solving, we serve government, defense and commercial customers across the globe. We design, manufacture, install and maintain power and communications systems including: rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems and accessories, and custom engineered systems. 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.   b. Principles of Consolidation   The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of Ultralife Corporation and our wholly owned subsidiaries: Ultralife Batteries (UK) Ltd., Ultralife UK LTD, and its wholly-owned subsidiary Accutronics Ltd, ABLE New Energy Co., Limited and its wholly-owned subsidiary ABLE New Energy Co., Ltd. (“ABLE” collectively), Southwest Electronic Energy Corporation and its wholly-owned subsidiary, CLB, INC. (“SWE” collectively), Ultralife Excell Holding Corp. (“UEHC”), Ultralife Canada Holding Corp (“UCHC,” wholly owned by UEHC), Excell Battery Canada ULC (wholly owned by UCHC), 1336902 B.C. Unlimited Liability Company ( “1336902 B.C.”, wholly owned by UCHC), Excell Battery Corporation USA (wholly owned by 1336902 B.C), and the majority-owned subsidiary Ultralife Batteries India Private Limited (“India JV”). Intercompany accounts and transactions have been eliminated in consolidation.   c. Management's Use of Judgment and Estimates   The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at year end and the reported amounts of revenues and expenses during the reporting period. Key areas affected by estimates include: (a) carrying value of goodwill and intangible assets; (b) reserves for excess and obsolete inventory, deferred tax assets, warranties, and bad debts; (c) valuation of assets acquired and liabilities assumed in business combinations; (d) various expense accruals; and (e) stock-based compensation. Our actual results could differ from these estimates.   d. Reclassifications   Certain items previously reported in specific financial statement captions are reclassified to conform to the current presentation. There were no material reclassifications for the years ended December 31, 2021 and 2020.   e . Cash   Our cash balances may at times exceed federally insured limits.  We have not experienced any losses in these accounts and believe we are not exposed to any significant risk with respect to cash.   44     f. Accounts Receivable and Allowance for Doubtful Accounts   We extend credit to our customers in the normal course of business. We perform ongoing credit evaluations and generally do not require collateral. Payment terms are generally 30 days. Trade accounts receivable are recorded at their invoiced amounts, net of allowance for doubtful accounts. We evaluate the adequacy of our allowance for doubtful accounts quarterly. Accounts outstanding for longer than contractual payment terms are considered past due and are reviewed for collectability. We maintain reserves for potential credit losses based upon our historical experience and the aging of specific receivables. Receivable balances are written off when collection is deemed unlikely.   g. Inventories   Inventories are stated at the lower of cost or net realizable value with cost determined under the first‑in, first‑out (FIFO) method. We record provisions for excess, obsolete or slow-moving inventory based on changes in customer demand, technology developments or other economic factors.   h. Property, Plant and Equipment   Property, plant and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives. Estimated useful lives are as follows (in years):   Buildings 10 – 40 Machinery and Equipment  5 – 10 Furniture and Fixtures 5 – 10 Computer Hardware and Software 3 – 5 Leasehold Improvements Lesser of useful life or lease term   Betterments, renewals and extraordinary repairs that extend the life of the assets are capitalized. Other repairs and maintenance costs are expensed when incurred. When disposed, the cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is recognized in operating income.   i. Long-Lived Assets, Goodwill and Intangibles   We assess our long-lived assets for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable. For property, plant and equipment and amortizable intangible assets, this is accomplished by comparing the expected undiscounted future cash flows of the assets with the respective carrying amount as of the date of assessment. If the expected undiscounted future cash flows exceed the respective carrying amount as of the date of assessment, no impairment is recognized. Should aggregate undiscounted future cash flows be less than the carrying value, a write-down would be required, measured as the difference between the carrying value and the fair value of the asset. Fair value is estimated as the present value of expected discounted future cash flows. The discount rate used in our evaluation is an industry-based weighted average cost of capital.   Under the acquisition method of accounting, the purchase price paid, or the total consideration transferred, to consummate the acquisition is allocated to the identified tangible and intangible assets acquired and liabilities assumed based on their respective estimated fair values as of the acquisition date with the residual amount recorded to goodwill.  We do not amortize goodwill and intangible assets with indefinite lives, but instead evaluate these assets for impairment at least annually, or whenever events or circumstances indicate that impairment may exist. We amortize intangible assets that have definite lives so that the economic benefits of the intangible assets are being recognized over their estimated useful life.   The annual impairment test for goodwill consists of a comparison of the estimated fair value for each reporting unit to which goodwill is assigned to the carrying value of the respective reporting unit.  The annual impairment test for other indefinite-lived intangible assets consists of a comparison of the estimated fair value of each asset to the carrying value of the respective asset. If the estimated fair value of a reporting unit or other indefinite-lived intangible asset exceeds its respective carrying value, the goodwill or indefinite-lived intangible asset is considered not impaired. If carrying value of a reporting unit or indefinite-lived intangible asset exceeds its estimated fair value, the excess carrying value of the respective goodwill or indefinite-lived intangible asset is recognized as an impairment loss.   45     j. Translation of Foreign Currency   The financial statements of our foreign subsidiaries are translated from the functional currency into U.S. dollar equivalents, with translation adjustments recorded as the sole component of accumulated other comprehensive income (loss). Exchange gains and losses related to foreign currency transactions and balances denominated in currencies other than the functional currency are recognized in net income (loss).   k . 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.   Revenues recognized from prior period performance obligations for the years ended December 31, 2021 and 2020 were not material.   As of December 31, 2021 and 2020, 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.   Deferred revenue, unbilled revenue and deferred contract costs recorded on our consolidated balance sheets as of December 31, 2021 and 2020 were not material.   l. Warranty Reserves   We generally offer standard warranties against product defects. We do not offer separate service-type 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. Warranty costs are recorded as costs of products sold. Provision for warranty costs is recorded in other current liabilities and other long-term liabilities on our consolidated balance sheets based on the duration of the warranty.   m. Shipping and Handling Costs   Costs incurred by us related to shipping and handling are included in cost of products sold. Amounts charged to customers pertaining to these costs are reflected as revenue.   n. Sales Commissions   Sales commissions are expensed as incurred for contracts with an expected duration of one year or less. There were no sales commissions capitalized as of December 31, 2021 and 2020.   o. Research and Development   Research and development expenditures are charged to operations as incurred. The majority of research and development expenses pertain to salaries and benefits, developmental supplies, depreciation and other contracted services. For the years ended December 31, 2021 and 2020, we expended $ 8,042 and $ 7,316 , respectively, on research and development, including costs of $ 1,216 and $ 1,369 , respectively, on customer sponsored research and development activities, which are included in cost of goods sold.   p. Environmental Costs   Environmental expenditures that relate to current operations are expensed. Remediation costs that relate to an existing condition caused by past operations are accrued when it is probable that these costs will be incurred and can be reasonably estimated.   46     q. Income Taxes   We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Pursuant to ASC 740, a valuation allowance is recognized when the realizability of deferred tax assets is not more likely than not, on the basis of all available evidence, both positive and negative, weighted based on objective verifiability.   r. Concentration Related to Customers and Suppliers   One of our customers, a large defense primary contractor, comprised 20 % and 17 % of our total consolidated revenues for 2021 and 2020, respectively. Revenues for this customer represented 22 % and 20 % of our total Battery & Energy Products segment revenues for 2021 and 2020, respectively. There were no other customers that comprised greater than 10% of our total revenues during these years.   s. Fair Value Measurements and Disclosures   Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:     Level   1: Quoted prices in active markets for identical assets or liabilities.   Level   2: Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or that we corroborate with observable market data for substantially the full term of the related assets or liabilities.     Level   3: Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities.   The fair value of financial instruments approximated their carrying values at December 31, 2021 and 2020. 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. The carrying value of long-term debt approximates fair value, as the variable interest rates approximate current market rates.   47     t. Earnings Per Share   Basic earnings per share (“EPS”) is computed by dividing net income (loss) attributable to Ultralife Corporation by the weighted average shares of common stock outstanding for the period. Diluted EPS reflects the assumed exercise and conversion of dilutive outstanding stock options and unvested restricted stock, if any, applying the treasury stock method.   For the year ended December 31, 2021, 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 1,306,824 outstanding stock options and 11,664 unvested restricted stock awards not included in the calculation of diluted EPS for the year ended December 31, 2021, as the effect would be antidilutive. For the comparable year ended December 31, 2020, 526,244 outstanding stock options and 26,665 outstanding restricted stock awards were included in the calculation of diluted weighted average shares outstanding, resulting in 193,568 potential common shares included in the calculation of diluted EPS. There were 690,919 outstanding stock options not included in the calculation of diluted EPS for the year ended December 31, 2020, as the effect would be antidilutive.   u. Stock-Based Compensation   We have various stock-based employee compensation plans that are described more fully in Note 6. The compensation cost relating to share-based payment transactions is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity award).   v. Segment Reporting   We have two operating segments – Battery & Energy Products and Communications Systems. The basis for determining our operating segments is the manner in which financial information is used in monitoring our operations. Management operates and organizes itself according to business units that comprise unique products and services across geographic locations.     w. Business Combinations   We allocate the purchase price of acquired businesses to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values on the acquisition date.  Any excess of the purchase price over the net fair value of the separately identifiable assets acquired and liabilities assumed is allocated to goodwill.  Management determines the fair values of identifiable intangible assets acquired based on historical data, estimated discounted future cash flows, expected royalty rates for trademarks and trade names, as well as certain other information. The valuation of assets acquired and liabilities assumed requires a number of judgments and is subject to change as additional information about the fair value of assets and liabilities becomes available. Additional information, which existed as of the acquisition date but unknown to us at that time, may become known during the remainder of the measurement period. This measurement period may not exceed twelve months from the acquisition date. We will recognize any adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustments are determined. Additionally, in the same period in which adjustments are recognized, we will record the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of any change to the provisional amounts, calculated as if the accounting adjustment had been completed at the acquisition date. Acquisition costs are expensed as incurred. The results of operations and cash flows of acquired businesses are included in our consolidated financial statements from the date of acquisition.   x. Leases   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 non-cancellable 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 is 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. See Note 8 for further disclosure regarding lease accounting.   y. Recent Accounting Pronouncements   Recently Adopted Accounting Guidance   Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2019 - 12, “Simplifying the Accounting for Income Taxes (Topic 740 )”. ASU 2019 - 12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. Adoption of the new standard did not materially impact the Company’s Consolidated Financial Statements.   Recent Accounting Guidance Not Yet Adopted   In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 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 date 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.   48       Note 2 – Acquisition   On December 13, 2021, the Company acquired all the outstanding shares of Excell for an aggregate net purchase price of $ 23,519 in cash.   On December 13, 2021, 1336889 B.C. Unlimited Liability Company, a British Columbia unlimited liability corporation and wholly-owned subsidiary of Ultralife Canada Holding Corp., a Delaware corporation (“UCHC”) and wholly-owned subsidiary of Ultralife Excell Holding Corp., a Delaware corporation (“UEHC”) and wholly-owned subsidiary of Ultralife Corporation, a Delaware corporation (“Ultralife” or the “Company”), completed the acquisition of all issued and outstanding shares of Excell Battery Canada Inc., a British Columbia corporation (“Excell Canada”) (the “Excell Canada Acquisition”), and, concurrently, 1336902 B.C. Unlimited Liability Company, a British Columbia unlimited liability corporation and wholly-owned subsidiary of UCHC, completed the acquisition of all issued and outstanding shares of 656700 B.C. LTD, a British Columbia corporation and sole owner of all issued and outstanding shares of Excell Battery Corporation USA, a Texas corporation (“Excell USA”, and together with Excell Canada, “Excell Battery Group” or “Excell”) (the “Excell USA Acquisition”, and together with the Excell Canada Acquisition, the “Excell Acquisition”).   Based in Canada with U.S. operations, Excell is a leading independent designer and manufacturer of high-performance smart battery systems, battery packs and monitoring systems to customer specifications. Excell serves a variety of industrial markets including downhole drilling, OEM industrial and medical devices, automated meter reading, ruggedized computers, and mining, marine and other mission critical applications which demand uncompromised safety, service, reliability and quality.   The Excell Canada Acquisition was completed pursuant to a Share Purchase Agreement dated December 13, 2021 ( the “Excell Canada Acquisition Agreement”) by and among 1336889 B.C. Unlimited Liability Company, Mark Kroeker, Randolph Peters, Brian Larsen, M. & W. Holdings Ltd., Karen Kroeker, Heather Peterson, Michael Kroeker, Nicholas Kroeker, Brentley Peters, Craig Peters, Kurtis Peters, Heather Larsen, Ian Kane, Carol Peters, and 0835205 B.C. LTD (the “Excell Canada Sellers”), Mark Kroeker in his capacity as the Excell Canada Sellers’ Representative, and Excell Canada. The Excell USA Acquisition was completed pursuant to a Share Purchase Agreement dated December 13, 2021 ( the “Excell USA Acquisition Agreement”, and together with the Excell Canada Acquisition Agreement, the “Excell Acquisition Agreements”) by and among 1336902 B.C. Unlimited Liability Company, M. & W. Holdings Ltd., Ian Kane, Sanford Capital Ltd., Arcee Enterprises Inc., and 0835205 B.C. Ltd. (the “Excell USA Sellers”, and together with the Excell Canada Sellers, the “Sellers”), Mark Kroeker in his capacity as the Excell USA Sellers’ Representative, and 656700 B.C. LTD. The Excell Acquisition Agreements contain customary terms and conditions including representations, warranties and indemnification provisions. A portion of the consideration paid to the Sellers will be held in escrow for indemnification purposes.   The Excell Acquisition was funded by the Company through a combination of cash on hand and borrowings under the Amended Credit Facilities (Note 3 ).   The Excell Acquisition was accounted for in accordance with the accounting treatment of a business combination pursuant to FASB ASC Topic 805, Business Combinations (“ASC 805” ).  Accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values on the acquisition date.  The excess of the purchase price over the estimated fair   49     value of the separately identifiable assets acquired and liabilities assumed was allocated to goodwill.  Management is responsible for determining the acquisition date fair value of the assets acquired and liabilities assumed, which requires the use of various assumptions and judgments that are inherently subjective.  The purchase price allocation presented below reflects all known information about the fair value of the assets acquired and liabilities assumed as of the acquisition date.  The purchase price allocation is subject to change should additional information existing as of the acquisition date about the fair value of the assets acquired and liabilities assumed become known.  The final purchase price allocation may reflect material changes in the valuation of assets acquired and liabilities assumed, including but not limited to intangible assets, fixed assets, deferred taxes, and residual goodwill.    Cash   $ 736   Accounts receivable     3,570   Inventories     3,622   Prepaid expenses and other current assets     785   Property, plant and equipment     429   Goodwill     11,019   Other intangible assets     8,830   Other noncurrent assets     991   Accounts payable     ( 1,450 ) Accrued compensation and related benefits     ( 540 ) Accrued expenses and other current liabilities     ( 720 ) Deferred tax liability, net     ( 2,213 ) Other noncurrent liabilities     ( 803 ) Net assets acquired   $ 24,256     The goodwill included in the Company’s purchase price allocation presented above represents the value of Excell’s assembled and trained workforce, the incremental value that Excell 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 is not deductible for income tax purposes.   Other intangible assets were valued using the income approach which requires a forecast of all expected future cash flows and the use of certain assumptions and estimates.  The following table summarizes the estimated fair value and annual amortization for each of the identifiable intangible assets acquired.                       Annual Amortization       Estimated Fair Value     Amortization Period (Years)     Year 1     Year 2     Year 3     Year 4     Year 5   Customer relationships   $ 4,070       15     $ 271     $ 271     $ 271     $ 271     $ 271   Trade name     3,150     Indefinite       -       -       -       -       -   Customer contracts     1,130       15       75       75       75       75       75   Backlog     360       1       360       -       -       -       -   Technology     120       7       17       17       17       17       17   Total   $ 8,830             $ 724     $ 364     $ 364     $ 364     $ 364     We acquired right-of-use assets and assumed lease liabilities of $ 960 for Excell’s operating facilities.  Right-of-use assets are classified as other noncurrent assets, and current and long-term lease liabilities are classified as accrued expenses and other current liabilities and other noncurrent liabilities, respectively, on the Company’s consolidated balance sheet.   The operating results and cash flows of Excell are reflected in the Company’s consolidated financial statements from the date of acquisition. Excell is included in the Battery & Energy Products segment.   For the year ended December 31, 2021, from the December 13, 2021 acquisition date, Excell contributed revenue of $ 1,131 and net loss of $ 128 , inclusive of a $ 121 increase in cost of products sold for the fair value step-up of acquired finished goods inventory sold during the period, and amortization expense of $ 30 on acquired identifiable intangible assets. Excell did not have operations from December 23, 2021 thru December 31, 2021 due to a planned holiday closure.   50     During the year ended December 31, 2021, the Company incurred acquisition-related costs and other non-recurring expenses of $ 354 directly attributable to the acquisition, including one -time accounting, legal and due diligence services.   The following supplemental pro forma information presents the combined results of operations, inclusive of the acquisition accounting adjustments and one -time expenses described above, as if the acquisition of Excell had been completed on January  1, 2020, the beginning of the comparable prior period.   The supplemental pro forma results do not reflect the realization of potential synergies or other cost reductions following the completion of the business combination. The supplemental pro forma results are presented for informational purposes only and should not be considered indicative of the financial position or results of operations had the acquisition been completed as of the dates indicated and does not purport to indicate the future combined financial position or results of operation.   Set forth below are the unaudited supplemental pro forma results of the Company and Excell for the years ended December 31, 2021 and 2020 as if the acquisition had occurred as of January  1, 2020.       Year Ended December 31,       2021     2020   Revenue   $ 118,467     $ 125,826   Operating income     1,450       4,489   Net Income attributable to Ultralife Corporation     1,367       4,081   Net income per share attributable to Ultralife Corporation:                 Basic   $ . 09     $ . 26   Diluted   $ . 08     $ . 25     The historical results of Excell reflected in the unaudited supplemental pro forma results for the year ended December 31, 2020 include a non-cash charge of $ 950 for the write-off of obsolete inventory in January 2020.   51       Note 3 – Debt   Credit Facilities   On December 13, 2021, Ultralife, Southwest Electronic Energy Corporation, a Texas corporation (“SWE”), CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), UEHC, UCHC and 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”, and together with the Second Amendment 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.   Upon closing of the Excell Acquisition on December 13, 2021, the Company drew down the full amount of the Term Loan Facility and $ 10,980 under the Revolving Credit Facility. As of December 31, 2021, the Company had $ 10,000 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 $ 10,980 outstanding on the Revolving Credit Facility. As of December 31, 2021, total unamortized debt issuance costs of $ 123 , 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.   Borrowings under the Amended Credit Facilities are secured by substantially all the assets of the Company and its subsidiaries.   Interest will accrue on outstanding indebtedness under the Amended 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 Second Amendment Agreement includes standard market provisions permitting the Bank to transition from LIBOR to a SOFR based rate, in its discretion   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.   52       Note 4 - Supplemental Balance Sheet Information   a. Cash and Restricted Cash   The Company had cash and restricted cash totaling $ 8,413 and $ 10,653 as of December 31, 2021 and 2020, respectively.       December 31,       2021     2020   Cash   $ 8,329     $ 10,562   Restricted cash     84       91   Total   $ 8,413     $ 10,653       As of December 31, 2021 and December 31, 2020, restricted cash included $ 84 and $ 91 , respectively, of 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. Restricted cash is included as a component of the cash balance for purposes of the consolidated statements of cash flows.   b. Inventory, Net   Inventories are stated at the lower of cost or net realizable value with cost determined under the first -in, first -out (FIFO) method. The composition of inventories, net was:       December 31,       2021     2020   Raw materials   $ 21,660     $ 17,277   Work in process     4,227       3,411   Finished products     7,302       7,505   Total   $ 33,189     $ 28,193     c. Property, Plant and Equipment   Major classes of property, plant and equipment consisted of the following:       December 31,       2021     2020   Land   $ 1,273     $ 1,273   Buildings and leasehold improvements     15,442       15,393   Machinery and equipment     63,780       61,048   Furniture and fixtures     2,588       2,235   Computer hardware and software     7,579       6,894   Construction in progress     761       1,227         91,423       88,070   Less – Accumulated depreciation     ( 68,218 )     ( 65,220 ) Total   $ 23,205     $ 22,850     Depreciation expense was $ 2,906 and $ 2,340 for the years ended December 31, 2021 and 2020, respectively.   53     d. Goodwill and Other Intangible Assets   The Company conducted its annual impairment test for goodwill and other indefinite-lived intangible assets as of October 1, 2021.  We identified five goodwill reporting units and four indefinite-lived intangible assets. We performed a quantitative impairment assessment of each goodwill reporting unit and indefinite-lived intangible asset. Based on the results of our quantitative impairment tests, and consideration of qualitative factors as of our test date and December 31, 2021, no impairments were identified.   The following table summarizes the goodwill activity by segment for the years ended December 31, 2021 and 2020:       Battery & Energy Products     Communications Systems     Total   Balance – January 1, 2021   $ 15,525     $ 11,493     $ 27,018   Acquisition of Excell     11,019       -       11,019   Effect of foreign currency translation     31       -       31   Balance – December 31, 2021   $ 26,575     $ 11,493     $ 38,068       The composition of intangible assets was:       December 31, 2021,       Cost     Accumulated amortization     Net   Customer relationships   $ 13,214     $ 5,484     $ 7,730   Patents and technology     5,667       5,126       541   Trade names     4,670       436       4,234   Trademarks     3,413       -       3,413   Other     1,490       18       1,472   Total other intangible assets   $ 28,454     $ 11,064     $ 17,390             December 31, 2020,       Cost     Accumulated amortization     Net   Customer relationships   $ 9,171     $ 5,115     $ 4,056   Patents and technology     5,557       5,014       543   Trade name     1,524       324       1,200   Trademarks     3,410       -       3,410   Total other intangible assets   $ 19,662     $ 10,453     $ 9,209     The change in the cost value of other intangible assets is a result of the Excell Acquisition (Note 2 ) and the effect of foreign currency translations.   Amortization of other intangible assets was included in the following financial statement captions:       Year ended December 31,       2021     2020   Research and development expense   $ 118     $ 124   Selling, general and administrative expense     515       471   Total   $ 633     $ 595     Future amortization expense of amortizable intangible assets will be approximately $ 1,286 , $ 938 , $ 927 , $ 927 and $ 783 for the five fiscal years ending December 31, 2022 through 2026, respectively.    54       Note 5 - Commitments and Contingencies   a. Legal Matters   We are subject to legal proceedings and claims that arise from time to time in the ordinary course of business.  We believe that the final disposition of any such matters of which we are currently aware 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 current or future legal 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.   On December 14, 2020, Ultralife was awarded a final settlement of $ 1,593 (net of fees) upon court approval and order authorizing distribution of settlement funds in a class action lawsuit (In Re: Lithium-ion Batteries Antitrust Litigation, 13 -MD- 02420 -YGR, United States District Court, Northern District of California).  At the time of the court order, the settlement funds were held in an escrow account controlled by the court for administrative purposes, and there remained no potential for appeal or reversal of the court order.  Based on all conditions present upon the court order, it was concluded that the net settlement amount was fully realizable.  Accordingly, a gain of $ 1,593 was recognized and was separately reported as gain on litigation settlement on the consolidated statement of income and comprehensive income for the year ended December 31, 2020. The corresponding amount due was collected in full in January 2021.   b. Indemnity   Our organizational documents provide that our directors or officers will be reimbursed for all expenses, to the fullest extent permitted by law arising out of their performance.   c. Purchase Commitments   As of December 31, 2021, we have made commitments to purchase approximately $ 630 of production machinery and equipment.   d. China   Our operating facility in China presents risks including, but not limited to, changes in local regulatory requirements, changes in labor laws, local wage laws, environmental regulations, taxes and operating licenses, compliance with U.S. regulatory requirements, including the Foreign Corrupt Practices Act, uncertainties as to application and interpretation of local laws and enforcement of contract and intellectual property rights, currency restrictions, currency exchange controls, fluctuations of currency, and currency revaluations, eminent domain claims, civil unrest, power outages, water shortages, labor shortages, labor disputes, increase in labor costs, rapid changes in government, economic and political policies, political or civil unrest, acts of terrorism, or the threat of boycotts, other civil disturbances and the possible impact of the imposition of tariffs by the U.S. Government on 9 Volt batteries that we manufacture in China as well as any retaliating trade policies or restrictions. Any such disruptions could depress our earnings and have other material adverse effects on our business, financial condition and results of operations.   e. Employment Contracts   We have an employment contract with Michael D. Popielec, our President and Chief Executive Officer, which remains in effect until terminated by either party.  This agreement provides for a base salary, as adjusted for increases at the discretion of our Board of Directors, and includes incentive bonuses based upon attainment of specified quantitative and qualitative performance goals.  This agreement also provides for severance payments in the event of specified events of termination of employment.  In addition, this agreement provides for a lump sum payment in the event of termination of employment in connection with a change in control.   As part of our employment commencement process, employees are required to enter into agreements providing for confidentiality of certain information and the assignment of rights to inventions made by them while employed by us. These agreements also contain certain non-competition and non-solicitation provisions effective during the employment term and for varying periods thereafter depending on position and location. There can be no assurance that we will be able to enforce these agreements. All of our employees agree to abide by the terms of a Code of Ethics policy that provides for the confidentiality of certain information received during the course of their employment.   55     f. 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 years ended December 31, 2021 and 2020 were as follows:       2021     2020   Balance, January 1   $ 149     $ 195   Provision for warranties issued     142       200   Settlements made     ( 158 )     ( 246 ) Balance, December 31   $ 133     $ 149         Note 6 - Shareholders' Equity   We recorded non-cash stock compensation expense in each period as follows:       Year ended December 31,       2021     2020   Stock options   $ 618     $ 838   Restricted stock     53       105   Total   $ 671     $ 943     We have various stock-based employee compensation plans, for which compensation cost is recognized in the financial statements. The cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).   Our shareholders have approved various equity-based plans that permit the grant of stock options, restricted stock and other equity-based awards. In addition, our shareholders have approved the grant of stock options outside of these plans.   In June 2004, our shareholders adopted the 2004 Long-Term Incentive Plan ( “2004 LTIP”) pursuant to which we were authorized to issue up to 750,000 shares of common stock and grant stock options, restricted stock awards, stock appreciation rights and other stock-based awards. Through shareholder approved amendments to the LTIP in 2006, 2008, 2011, and 2013, the total number of shares authorized under the 2004 LTIP was increased to 2,900,000 .   In June 2014, our shareholders approved the 2014 Long-Term Incentive Plan ( “2014 LTIP”) as the successor plan to the 2004 LTIP that expired on June 10, 2014. Under the 2014 LTIP, a total of 1,750,000 shares of common stock were made available for grant of awards. In July 2021, our shareholders approved an amendment to the 2014 LTIP to increase the total number shares of our common stock authorized to be issued pursuant to the 2014 LTIP to 2,750,000 . Of the total number of shares of common stock available for awards under the 2014 LTIP, no more than 800,000 shares of common stock may be used for awards other than stock options and stock appreciation rights.  Grants under the 2014 LTIP may be awarded through June 2, 2024.   Stock options granted under the LTIPs are either Incentive Stock Options (“ISOs”) or Non-Qualified Stock Options (“NQSOs”). Key employees are eligible to receive ISOs and NQSOs; however, directors and consultants are eligible to receive only NQSOs. Stock options vest over a three -year period and expire on the seventh anniversary of the grant date. As of December 31, 2021, there were 1,306,824 stock options outstanding under the 2014 LTIP. There were no stock options outstanding under the 2004 LTIP.   As of December 31, 2021, there was $ 850 of total unrecognized compensation costs related to outstanding stock options, which we expect to recognize over a weighted average period of 1.4 years.   56     We use the Black-Scholes option-pricing model to estimate fair value of stock-based awards. The following weighted average assumptions were used to value options granted during the years ended December 31, 2021 and 2020:       Year ended December 31,       2021     2020   Risk-free interest rate     1.0 %     0.4 % Volatility factor     50 %     49 % Weighted average expected life (years)     4.8       5.3   Forfeiture rate     10.0 %     10.0 % Dividends     0.0 %     0.0 %   We used a Monte Carlo simulation option-pricing model to estimate the fair value of market performance stock-based awards, of which there were no new awards for the years ended December 31, 2021 and 2020.   We calculate expected volatility for stock options by taking an average of historical volatility over the expected term. The computation of expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant. Forfeiture rates are calculated by dividing unvested shares forfeited by beginning shares outstanding. The pre-vesting forfeiture rate is calculated yearly and is determined using a historical twelve -quarter rolling average of the forfeiture rates.   The following tables summarize data for the stock options issued by us:   Year ended December 31, 2021       Number of shares     Weighted average exercise price per share     Weighted average remaining contractual term     Aggregate intrinsic value   Shares under option – January 1     1,217,163     $ 6.50                   Options granted     340,500       6.78                   Options exercised     ( 204,429 )     4.39                   Options forfeited or expired     ( 46,410 )     7.44                   Shares under option – December 31     1,306,824     $ 6.87       4.22     $ 504   Vested and expected to vest - December 31     1,189,175     $ 6.86       4.05     $ 492                                     Options exercisable – December 31     745,288     $ 6.85       2.80     $ 439       Year ended December 31, 2020       Number of shares     Weighted average exercise price per share   Shares under option – January 1     1,541,792     $ 6.88   Options granted     256,000       6.51   Options exercised     ( 355,797 )     6.08   Options forfeited or expired     ( 224,832 )     9.76   Shares under option – December 31     1,217,163     $ 6.50                     Options exercisable – December 31     738,452     $ 5.82     57       The following table represents additional information about stock options outstanding at December 31, 2021:           Option outstanding     Options exercisable   Range of exercise prices   Number of outstanding options     Weighted- average remaining contractual life     Weighted- average exercise price     Number of options exercisable     Weighted- average exercise price   $3.71 - $ 5.31     325,579       2.68     $ 4.58       240,579     $ 4.34   $5.71 - $ 6.51     321,411       4.36       6.28       166,602       6.07   $6.69 - $ 7.16     205,750       6.45       6.97       11,667       7.09   $8.25 - $ 9.96     454,084       4.22       8.88       326,440       9.08                                                 $3.71 - $ 9.96     1,306,824       4.22     $ 6.87       745,288     $ 6.85     The weighted average fair value of options granted during the years ended December 31, 2021 and 2020 was $ 2.90 and $ 2.78 , respectively. The total intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) exercised during the years ended December 31, 2021 and 2020 was $ 738 and $ 427 , respectively.   Cash received from stock option exercises under our stock-based compensation plans for the years ended December 31, 2021 and 2020 was $ 398 and $ 238 , respectively.   Restricted shares vest in equal annual installments over three years. As of December 31, 2021, there was $ 17 of total unrecognized compensation costs related to outstanding restricted shares, which we expect to recognize over a weighted average period of 1.2 years   There were 941,986 shares of common stock available for future issuance under equity compensation plans as of December 31, 2021.   58       Note 7 - Income Taxes   For the years ended December 31, 2021 and 2020, we recognized income tax expense of $ 79 and $ 1,692 , respectively.       Year ended December 31,       2021     2020   Current:                 State   $ 16     $ 23   Foreign     210       283         226       306   Deferred:                 Federal     ( 158 )     1,673   Foreign     11       ( 287 )       ( 147 )     1,386   Total income tax provision   $ 79     $ 1,692     Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:       December 31,       2021     2020   Deferred tax assets:                 Net operating loss carryforwards   $ 12,567     $ 12,481   Tax credit carryforwards     2,239       2,070   Intangible assets     1,412       1,352   Accrued expenses, reserves and other     1,996       2,176   Research and development     1,999       984   Total deferred tax assets     20,213       19,063   Valuation allowance for deferred tax assets     ( 2,697 )     ( 1,942 ) Net deferred tax assets     17,516       17,121                     Deferred tax liabilities:                 Property, plant and equipment     ( 79 )     ( 262 ) Intangible assets     ( 8,219 )     ( 5,538 ) Total deferred tax liabilities     ( 8,298 )     ( 5,800 )                   Net deferred tax assets   $ 9,218     $ 11,321     Net deferred tax assets (liabilities) are comprised of the following balance sheet amounts:       December 31,       2021     2020                     Deferred tax assets   $ 11,472     $ 11,836   Deferred tax liabilities     ( 2,254 )     ( 515 )     $ 9,218     $ 11,321     For financial reporting purposes, net (loss) income from continuing operations before income taxes is as follows:       Year ended December 31,       2021     2020   United States   $ ( 704 )   $ 6,586   Foreign     553       437       $ ( 151 )   $ 7,023     59     The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income from continuing operations before income taxes as follows:       Year ended December 31,       2021     2020                     Statutory income tax rate     21 %     21 % Increase (decrease) in tax provision resulting from:                 Equity compensation     11.6       4.5   Acquisition-related costs     ( 34.7 )       Income tax credits     72.7       ( 2.3 ) Foreign tax rate change     ( 89.7 )     -   Foreign tax rates     ( 15.5 )     0.1   States taxes     ( 10.8 )     0.3   Other     ( 7.0 )     0.5   Effective income tax rate     ( 52.4 )%     24.1 %   As of December 31, 2021, it was concluded that it is more likely than not that our U.S. deferred tax assets will be fully realized on the basis of management’s assessment.  In evaluating the realizability of our U.S. deferred tax assets, management considered all available evidence and concluded that positive factors, including our sustained profitability and continued improvement in our ability to achieve internal earnings forecasts, outweighed all negative factors, including our history of operating losses (prior to 2015 ) and historical operating volatility.  Our assessment also considered our ability to fully utilize before expiration our domestic net operating loss carryforwards, which expire 2022 thru 2037, and our general business tax credit carryforwards, which expire 2028 thru 2039.   As of December 31, 2021, our domestic net operating loss carryforwards and general business tax credits were $ 44,716 and $ 2,239 , respectively.   As of December 31, 2021, for certain past operations in the U.K., we continue to report a valuation allowance for net operating loss carryforwards of approximately $ 11,000 , nearly all of which can be carried forward indefinitely. Management has concluded that utilization of the U.K. net operating losses may be limited due to the change in the past U.K. operation, and that they cannot currently be used to reduce taxable income of our other U.K. subsidiary, Accutronics Ltd. There are no other deferred tax assets related to the past U.K. operations.   As of December 31, 2021, we have not recognized a valuation allowance against our other foreign deferred tax assets.   There were no unrecognized tax benefits related to uncertain tax positions at December 31, 2021 and 2020.   As of December 31, 2021, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations, other than earnings generated in the U.K.   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.  In August 2020, the Internal Revenue Service (“IRS”) completed its examination of the Company’s federal tax returns for 2016 - 2018 with no material adjustments identified.  Our U.S. tax matters for 2020 and 2019 remain subject to IRS examination.  Our U.S. tax matters for 2002, 2005 - 2007 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 2002, 2005 - 2007 and 2011 - 2020 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years 2011 through 2020 remain subject to examination by the respective foreign tax jurisdiction authorities.   60       Note 8 – Operating Leases   The Company has operating leases predominantly for operating facilities.  As of December 31, 2021, the remaining lease terms on our operating leases range from approximately one ( 1 ) year to ten ( 10 ) 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:       Year ended December 31,       2021     2020   Operating lease cost   $ 762     $ 703   Variable lease cost     79       75   Total lease cost   $ 841     $ 778     Supplemental cash flow information related to leases was as follows:       Year ended December 31,       2021     2020   Cash paid for amounts included in the measurement of lease liabilities:                 Operating cash flows from operating leases   $ 744     $ 688   Right-of-use assets obtained in exchange for lease liabilities:   $ 1,020     $ 875     Supplemental balance sheet information related to leases was as follows:         December 31,     Balance Sheet Classification   2021     2020   Assets:                   Operating lease right-of-use asset Other noncurrent assets   $ 2,581     $ 2,189                       Liabilities:                   Current operating lease liability Accrued expenses and other current liabilities   $ 867     $ 680   Operating lease liability, net of current portion Other noncurrent liabilities     1,743       1,524   Total operating lease liability   $ 2,610     $ 2,204                       Weighted-average remaining lease term (years)     4.5       3.3                       Weighted-average discount rate     4.5 %     4.5 %   Future minimum lease payments as of December 31, 2021 are as follows:   Maturity of Operating Lease Liabilities         2022   $ 889   2023     894   2024     434   2025     139   2026     140   Thereafter     424   Total lease payments   $ 2,920   Less: Imputed interest     ( 310 ) Present value of remaining lease payments   $ 2,610     61       Note 9 - 401 (k) Retirement Benefit Plan   We maintain a defined contribution 401 (k) plan covering substantially all employees. Employees can contribute a portion of their salary or wages as prescribed under Section 401 (k) of the Internal Revenue Code and, subject to certain limitations, we may, at the discretion of our Board of Directors, authorize an employer contribution based on a portion of the employees' contributions. For the year ended December 31, 2021, the Company matched 100 % on the first 3 % and 50 % on the next 2 % contributed by the employee, or a maximum of 4 % of the employee’s income. For the year ended December 31, 2020, the Company matched 50 % on the first 6 % contributed by the employee, or a maximum of 3 % of the employee’s income. For 2021 and 2020, we contributed $ 586 and $ 466 , respectively, to the 401 (k) plan.       Note 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.    2021:     Battery & Energy Products     Communications Systems     Corporate     Total   Revenue   $ 87,083     $ 11,184     $ -     $ 98,267   Segment contribution     21,063       3,579       ( 24,607 )     35   Other expense                 186       186   Income tax expense                     79       79   Non-controlling interest                     4       4   Net loss attributable to Ultralife                           $ ( 234 )                                   Total assets   $ 110,633     $ 25,359     $ 23,546       159,538   Capital expenditures   $ 2,104     $ 255     $ 455     $ 2,814   Goodwill   $ 26,575     $ 11,493       -     $ 38,068   Depreciation and amortization of intangible assets   $ 2,847     $ 326     $ 366     $ 3,539   Stock-based compensation   $ 298     $ 125     $ 248     $ 671     2020:     Battery & Energy Products     Communications Systems     Corporate     Total   Revenue   $ 91,907     $ 15,805     $ -     $ 107,712   Segment contribution     23,400       5,759       ( 23,458 )     5,701   Other income                 ( 1,322 )     ( 1,322 ) Income tax expense                     1,692       1,692   Non-controlling interest                     99       99   Net income attributable to Ultralife                           $ 5,232                                     Total assets   $ 85,112     $ 26,425     $ 26,164     $ 137,701   Capital expenditures   $ 3,031     $ -     $ 70     $ 3,101   Goodwill   $ 15,525     $ 11,493       -     $ 27,018   Depreciation and amortization of intangible assets   $ 2,269     $ 342     $ 324     $ 2,935   Stock-based compensation   $ 446     $ 155     $ 342     $ 943     Long-lived assets (comprised of property, plant and equipment; goodwill; and other intangible assets) held outside the U.S., principally in Canada, United Kingdom and China, were $ 26,762 and $ 12,456 as of December 31, 2021 and 2020, respectively.   62     The following tables disaggregate our business segment revenues by major source and geography.   Commercial and Government/Defense Revenue Information:   Year ended December 31, 2021:       Total Revenue     Commercial     Government/ Defense   Battery & Energy Products   $ 87,083     $ 64,079     $ 23,004   Communications Systems     11,184       -       11,184   Total   $ 98,267     $ 64,079     $ 34,188                 65 %     35 %   Year ended December 31, 2020:       Total Revenue     Commercial     Government/ Defense   Battery & Energy Products   $ 91,907     $ 62,330     $ 29,577   Communications Systems     15,805       -       15,805   Total   $ 107,712     $ 62,330     $ 45,382                 58 %     42 %   U.S. and Non-U.S. Revenue Information 1 :   Year ended December 31, 2021:       Total Revenue     United States     Non-United States   Battery & Energy Products   $ 87,083     $ 43,298     $ 43,785   Communications Systems     11,184       5,521       5,663   Total   $ 98,267     $ 48,819     $ 49,448                 50 %     50 %   Year ended December 31, 2020:       Total Revenue     United States     Non-United States   Battery & Energy Products   $ 91,907     $ 49,930     $ 41,977   Communications Systems     15,805       12,325       3,480   Total   $ 107,712     $ 62,255     $ 45,457                 58 %     42 %   1 Sales classified to U.S. include shipments to U.S.-based prime contractors which in some cases may serve non-U.S. projects.   63       Note 11 – Impact of COVID- 19   The COVID- 19 pandemic 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 in addition to working closely with our customers and suppliers to meet the demand for our mission critical products serving medical device, first responder, public safety, energy and national security customers in an efficient and economically responsible manner.    COVID- 19 adversely impacted our operating results during 2021 with an estimated negative impact to sales and operating profit of $ 11,000 and $ 4,500 , respectively, primarily as a result of overall disruptions in supply chains and operations impacting both commercial and government/defense markets.  While we have maintained normal business operations at all our facilities throughout the year, the supply chain disruptions including increased lead times on key components experienced within our business and by our customers, impacted our work schedules and timing of shipments.  We exited 2021 with a backlog of $ 53,166 , excluding Excell, representing an increase of $ 13,874 million or 35.3 % from year-end 2020, largely attributable to the supply chain disruptions pushing shipments into 2022.   The extent to which COVID- 19 may further impact our business is uncertain and will depend on many factors which we continue to monitor but cannot predict or fully control, including the duration and scope of the pandemic and its variants, resulting actions taken by governments, businesses and individuals, limited availability and/or increased cost of raw materials and components used in our products, and the flow-through impact on operations and supply chains. Prolonged adverse effects of COVID- 19 on our business could result in the impairment of long-lived assets including goodwill and other intangible assets.  While we cannot predict the lingering effects the COVID- 19 pandemic may cause, we will continue to work closely with our customers and suppliers to take actions when possible and within our control to mitigate the business risks involved.   64       ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   None.     ITEM 9A.   CONTROLS AND PROCEDURES   Evaluation of Disclosure Controls and Procedures – Our president and chief executive officer (principal executive officer) and our chief financial officer and treasurer (principal financial officer) have evaluated our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of the end of the period covered by this annual report. Based on this evaluation, our president and chief executive officer and chief financial officer and treasurer concluded that our disclosure controls and procedures were effective as of such date.   Changes in Internal Controls Over Financial Reporting –There has been no change in our internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)) that occurred during the fourth quarter of the fiscal year covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.   Management ’ s Report on Internal Control Over Financial Reporting – Our management team is responsible for establishing and maintaining adequate internal control over our financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of the inherent limitations of internal control systems, our internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.   Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on our assessment, we concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on those criteria.   In accordance with guidance issued by the SEC, registrants are permitted to exclude acquisitions from the final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred while integrating the acquired operations. Our management’s evaluation of internal control over financial reporting excluded Excell, which we acquired on December 13, 2021, as discussed in Note 2 to the consolidated financial statements. Total revenue of Excell from the date of acquisition included in our consolidated results represented 1% of our consolidated revenues for the year ended December 31, 2021. Total assets of Excell (excluding acquired goodwill and other intangible assets which were included in management’s evaluation) represented 6% of our consolidated total assets as of December 31, 2021.   Freed Maxick CPAs, P.C., an independent registered public accounting firm, which has audited and reported on the consolidated financial statements contained in this Annual Report on Form 10-K, has audited the effectiveness of the Company’s internal control over financial reporting as stated in their report, which is included in Part II, Item 8.     ITEM 9B. OTHER INFORMATION   None.   65     PART III   The information required by Part III, other than as set forth in Item 12, and each of the following items is omitted from this report and will be presented in our definitive proxy statement (“Proxy Statement”) to be filed pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year covered by this report, in connection with our 2022 Annual Meeting of Shareholders, which information included therein is incorporated herein by reference.     ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   The sections entitled “Election of Directors”, “Executive Officers”, “Delinquent Section 16(a) Reports Compliance” and “Corporate Governance” in the Proxy Statement are incorporated herein by reference.     ITEM 11. EXECUTIVE COMPENSATION   The sections entitled “Executive Compensation”, “Directors Compensation”, “Employment Arrangements” and “Compensation and Management Committee” in the Proxy Statement are incorporated herein by reference.     ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   The section entitled “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” in the Proxy Statement is incorporated herein by reference.   Equity Compensation Plan Information   Plan Category   Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)     Weighted-average exercise price of outstanding options, warrants and rights (b)     Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)                             Equity compensation plans approved by security holders     1,306,824     $ 6.87       941,986                             Equity compensation plans not approved by security holders     -       -       -                             Total     1,306,824     $ 6.87       941,986     See Note 6 in the notes to consolidated financial statements for additional information.     ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   The section entitled “Corporate Governance – General” in the Proxy Statement is incorporated herein by reference.     ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES   The section entitled “Proposal to Ratify the Selection of Independent Registered Accounting Firm - Principal Accountant Fees and Services” in the Proxy Statement is incorporated herein by reference.   66     PART IV   ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES   (a)          Documents filed as part of this report:     1. Financial Statements   The financial statements and schedules required by this Item 15 are set forth in Part II, Item 8 of this Form 10-K.   (b)           Exhibits . The following exhibits are filed as a part of this report:   Exhibit Index   Description of Document   Filed Herewith or Incorporated by Reference from: 2.1   Share Purchase Agreement, dated December 13, 2021, by and among 1336889 B.C. Unlimited Liability Company, Mark Kroeker, Randolph Peters, Brian Larsen, M. & W. Holdings Ltd., Karen Kroeker, Heather Peterson, Michael Kroeker, Nicholas Kroeker, Brentley Peters, Craig Peters, Kurtis Peters, Heather Larsen, Ian Kane, Carol Peters, 0835205 B.C. LTD, and Excell Battery Canada Inc.   Exhibit 2.1 of the Form 8-K filed on December 16, 2021 2.2   Share Purchase Agreement, dated December 13, 2021, by and among 1336902 B.C. Unlimited Liability Company, M. & W. Holdings Ltd., Ian Kane, Sanford Capital Ltd., Arcee Enterprises Inc., 0835205 B.C. Ltd., and 656700 B.C. LTD   Exhibit 2.2 of the Form 8-K filed on December 16, 2021 2.3   Stock Purchase Agreement, dated May 1, 2019, by and among Ultralife Corporation, Southwest Electronic Energy Corporation, Southwest Electronic Energy Medical Research Institute, and Claude Leonard Benckenstein   Exhibit 10.1 of the Form 8-K filed on May 2, 2019 2.4   Stock Purchase Agreement Relating to Accutronics Limited by and between Robert Andrew Phillips and Others and Ultralife Corporation   Exhibit 2.2 of the Form 10-K for the year ended December 31, 2015, filed March 2, 2016 3.1   Restated Certificate of Incorporation   Exhibit 3.1 of the Form 10-K for the year ended December 31, 2008, filed March 13, 2009 3.2   Amended and Restated By-laws   Exhibit 3.2 of the Form 8-K filed December 9, 2011 4.1   Specimen Stock Certificate   Exhibit 4.1 of the Form 10-K for the year ended December 31, 2008, filed March 13, 2009 4.2   Description of Registrant’s Securities   Exhibit 4.2 of the Form 10-K/A for the year ended December 31, 2019, filed April 28, 2020 10.1*   Amendment to the Agreement relating to rechargeable batteries   Exhibit 10.24 of our Form 10-K for the fiscal year ended June 30, 1996 (this Exhibit may be found in SEC File No. 0-20852)   67     10.2†   Employment Agreement between the Registrant and Michael D. Popielec dated December 6, 2010   Exhibit 10.40 of the Form 10-K for the year ended December 31, 2010, filed March 15, 2011 10.3†   Ultralife Corporation Amended 2014 Long-Term Incentive Plan   Appendix B of Form DEF 14A filed on June 1, 2021 10.4   Credit and Security Agreement between Ultralife Corporation and KeyBank National Association dated May 31, 2017   Exhibit 10.1 of the Form 8-K filed on June 6, 2017 10.5   First Amendment Agreement, dated May 1, 2019, by and among Ultralife Corporation, Southwest Electronic Energy Corporation, CLB, INC., and KeyBank National Association   Exhibit 10.1 of the Form 8-K filed on May 2, 2019 10.6†   Amendment No. 1 to Ultralife Corporation Amended 2014 Long-Term Incentive Plan   Appendix A of Form DEF 14A filed on June 1, 2021 10.7   Second Amendment Agreement, dated December 13, 2021, by and among Ultralife Corporation, Southwest Electronic Energy Corporation, CLB, INC., Ultralife Excell Holding Corp., Ultralife Canada Holding Corp., Excell Battery Corporation USA, and KeyBank National Association   Exhibit 10.1 of the Form 8-K filed on December 16, 2021 21   Subsidiaries   Filed herewith 23.1   Consent of Freed Maxick CPAs, P.C.   Filed herewith 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   Inline XBRL Instance Document   Filed herewith 101.SCH   Inline XBRL Taxonomy Extension Schema Document   Filed herewith 101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document   Filed herewith 101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document   Filed herewith 101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document   Filed herewith 101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document   Filed herewith 104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)   Filed herewith   * Confidential treatment has been granted as to certain portions of this exhibit.   † Management contract or compensatory plan or arrangement.   Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020, (ii) Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2021 and December 31, 2020, (iii) Consolidated Statements of Cash Flows for the years ended December 31, 2021 and December 31, 2020, (iv) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2021 and December 31, 2020, and (v) Notes to Consolidated Financial Statements.   68     SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.       ULTRALIFE CORPORATION           Date: March 8, 2022   /s/ Michael D. Popielec                                        Michael D. Popielec       President, Chief Executive Officer and Director     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.   Date: March 8, 2022   /s/ Michael D. Popielec                                        Michael D. Popielec       President, Chief Executive Officer and Director       (Principal Executive Officer)           Date: March 8, 2022   /s/ Philip A. Fain                                                            Philip A. Fain       Chief Financial Officer and Treasurer       (Principal Financial Officer and Principal       Accounting Officer)           Date: March 8, 2022   /s/ Thomas L. Saeli                                                      Thomas L. Saeli (Director)           Date: March 8, 2022   /s/ Robert W. Shaw II                                                     Robert W. Shaw II (Director)           Date: March 8, 2022   /s/ Ranjit C. Singh                                         Ranjit C. Singh (Director)           Date: March 8, 2022   /s/ Bradford T. Whitmore                 Bradford T. Whitmore (Director)     69