ULTRALIFE CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures – Disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures. Management, under the supervision and with the participation of our President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer and Treasurer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report. Management has concluded that our disclosure control and procedures were not effective as of December 31, 2024, as a result of a material weakness in our internal control over financial reporting, as described below. Notwithstanding the material weakness identified, management believes that the Consolidated Financial Statements included in this Annual Report on Form 10-K present fairly, in all material respects, the financial position of the Company at December 31, 2024 and December 31, 2023 and the consolidated results of operations and cash flows for each of the years then ended in conformity with U.S. generally accepted accounting principles. Management ’ s Report on Internal Control Over Financial Reporting – Management, under the supervision and with the participation of our President and Chief Executive Officer and Chief Financial Officer and Treasurer, is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) 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. 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 Electrochem which we acquired on October 31, 2024, as discussed in Note 2 to the consolidated financial statements. Total net income of Electrochem from the date of acquisition included in our consolidated results represented 14.5% of our consolidated net income for the year ended December 31, 2024. Total assets of Electrochem (excluding acquired goodwill and other intangible assets which were included in management’s evaluation) represented 16.4% of our consolidated total assets as of December 31, 2024. Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on our evaluation, we have concluded that, while we believe that the Consolidated Financial Statements included in this Annual Report on Form 10-K are free of material misstatement, there is a material weakness in our internal control over financial reporting attributable to our need for additional accounting personnel to provide a full complement of accounting and reporting expertise commensurate with the growth of the Company both organic and through acquisitions. As a result of the material weakness identified, management has concluded that our internal control over financial reporting was not effective as of December 31, 2024. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by Freed Maxick P.C., our independent registered public accounting firm, as stated in their report included in Part II, Item 8 of this Annual Report on Form 10-K. 67 Remediation Efforts to Address the Material Weaknesses – Management has already taken steps to remediate our identified material weakness and will continue to take further steps until the remediation is complete. The Company is currently seeking to hire additional personnel including certified public accountants to augment the experience and expertise of our accounting team and provide for a full complement of resources commensurate with the Company’s continued growth. During the fourth quarter of 2024, we hired a highly experienced individual as VP of Financial Growth, Transition & Efficiency and in the first quarter of 2025 we hired a Controller for Electrochem. Until all of the necessary resources are in place, expected to occur in 2025, the current members of our accounting team will continue their best efforts to provide additional oversight. We believe that with this interim additional oversight, coupled with the additional personnel we are in the process of recruiting and hiring, will allow us to execute business process controls more quickly and ensure a greater level of monitoring whether controls are present and functioning. Remediation will be deemed complete once our corrective actions are fully implemented and further evaluation is performed, including testing, to conclude that our internal control over financial reporting is effective. Changes in Internal Control over Financial Reporting –There have been no changes in our internal control over financial reporting that occurred during the fourth quarter of the fiscal year covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Limitations on the Effectiveness of Controls – Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that its objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Furthermore, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons or by the collusion of two or more persons. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 68 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 2025 Annual Meeting of Stockholders, 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 1,106,436 $ 7.15 1,707,440 Equity compensation plans not approved by security holders - - - Total 1,106,436 $ 7.15 1,707,440 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. 69 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. Auditor information: Freed Maxick P.C. (f/k/a Freed Maxick CPAs, P.C.) Rochester, New York PCAOB ID 317 (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 2.1 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 70 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) 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 10.8 Third Amendment Agreement, dated November 28, 2022, by and among Ultralife Corporation, Southwest Electronic Energy Corporation, CLB, Inc., Ultralife Excell Holding Corp., Ultralife Canada Holding Corp., Excell Battery Corporation USA, Excell Battery Canada ULC and KeyBank National Association Exhibit 10.8 of the Form 10-K for the year ended December 31, 2022, filed March 31, 2013 10.9 Stock Purchase Agreement dated September 27, 2024 Exhibit 10.1 of the Form 8-K filed on October 3, 2024 10.10 Credit and Security Agreement dated as of October 31, 2024 Exhibit 10.2 of the Form 8-K filed on November 6, 2024 21 Subsidiaries Filed herewith 23.1 Consent of Freed Maxick P.C. (f/k/a 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 97.1 Ultralife Corporation Policy for the Recovery of Erroneously Awarded Compensation Exhibit 97.1 of the Form 10-K for the year ended December 31, 2023, filed March 21, 2024 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, 2024 and December 31, 2023, (ii) Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2024 and December 31, 2023, (iii) Consolidated Statements of Cash Flows for the years ended December 31, 2024 and December 31, 2023, (iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024 and December 31, 2023, and (v) Notes to Consolidated Financial Statements. 71 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: April 1, 2025 /s/ Michael E. Manna Michael E. Manna 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: April 1, 2025 /s/ Michael E. Manna Michael E. Manna President, Chief Executive Officer and Director (Principal Executive Officer) Date: April 1, 2025 /s/ Philip A. Fain Philip A. Fain Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: April 1, 2025 /s/ Janie Goddard Janie Goddard (Director) Date: April 1, 2025 /s/ Thomas L. Saeli Thomas L. Saeli (Director) Date: April 1, 2025 /s/ Robert W. Shaw II Robert W. Shaw II (Director) Date: April 1, 2025 /s/ Bradford T. Whitmore Bradford T. Whitmore (Director) 72