2.	ACQUISITION

January

13,

2016,

Ultralife UK Limited (the “Merger Subsidiary”), a U.K. corporation and a wholly-owned subsidiary of Ultralife Corporation (the “Company”), completed the acquisition of all of the outstanding ordinary shares of Accutronics Limited (“Accutronics”), a U.K. corporation based in Newcastle-under-Lyme, U.K., from Intrinsic Equity Limited, Catapult Growth Fund Limited Partnership, MJF Pension Trustees Limited, Robert Andrew Phillips and Michael Allen (collectively, the “Sellers”). There are no material relationships between the Company or Merger Subsidiary and any of the Sellers, other than pertaining to this acquisition. Accutronics is a leading independent designer and manufacturer of smart batteries and charger systems for high-performance, feature-laden portable and handheld electronic devices and is classified in the Battery & Energy Products segment. The acquisition of Accutronics advances our strategy of commercial revenue diversification and expands our geographic reach within European OEM’s. With industry experts predicting mid-to-high single digit growth in the global medical batteries market, this strategic investment positions Ultralife well for further penetration of and growing revenue streams from an attractive commercial market.

The acquisition was completed pursuant to the terms of the Share Purchase Agreement dated

January

13,

2016

by and among the Merger Subsidiary and the Sellers. The Merger Subsidiary paid at the time of closing an aggregate purchase price of

£7,575

($10,976)

in cash, and in exchange the Merger Subsidiary received all of the outstanding shares of Accutronics ordinary stock. Monies to fund the purchase price were advanced to the Merger Subsidiary from the Company’s general corporate funds.

The purchase price was subject to adjustment based on the difference between actual and estimated amounts of working capital of Accutronics as well as the amount of net cash of Accutronics. The adjustment resulted in a final payment to the Sellers in the amount of

£133

February

24,

2016,

bringing the total aggregate purchase price to

£7,708

($11,161).

The purchase price allocation was determined in accordance with the accounting treatment of a business combination in Financial Accounting Standards Board (“FASB”) ASC Topic

805,

Business Combinations. Under the guidance, the fair value of the consideration was determined and the assets acquired and liabilities assumed have been recorded at their fair values at the date of the acquisition. The excess of the consideration paid over the estimated fair values has been recorded as goodwill.

The final allocation of purchase price to the assets acquired and liabilities assumed is presented in the table below (in thousands). Management is responsible for determining the fair value of the tangible and intangible assets acquired and liabilities assumed as of the date of acquisition. Management considered a number of factors, including reference to an analysis performed under FASB ASC Topic

805

solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The Company’s estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management’s assumptions, which would not reflect unanticipated events and circumstances that occur.

Cash	$	1,304
Accounts Receivable		1,344
Inventory		2,167
Prepaids and Other Current Assets		584
Property, Plant & Equipment		269
Identifiable Intangible Assets		4,374
Goodwill		4,487
Accounts Payable		(1,009	)
Accrued Expenses		(1,136	)
Income Taxes Payable		(111	)
Non-Current Liabilities		(209	)
Deferred Income Taxes		(74	)
Deferred Income Taxes on Intangible Assets		(829	)
Total Consideration	$	11,161

The goodwill included in the Company’s purchase price allocation presented above represents the value of Accutronics assembled and trained workforce, the incremental value that Accutronics engineering and technology will bring to the Company and the revenue growth expected to occur over time 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.

The identifiable intangible assets included in the Company’s purchase price allocation represent customer contracts and relationships of

$2,821,

intellectual property of

$1,132

and trade name of

$421

that are amortized straight-line over a period ranging from

years.

During the

three

month period ended

March

27,

2016,

direct acquisition costs of

$251

and increased cost of sales related to purchase accounting adjustments of

$91

for inventory acquired were recorded in the Company’s Consolidated Statement of Income and Comprehensive Income. Accutronics contributed revenue of

$2,486

and an operating loss of

$275

during the

three

month period ended

March

27,

2016

reflecting the purchase accounting adjustments and non-recurring costs directly related to the acquisition.

Set forth below is the unaudited pro forma results of the Company for the

three

-month period ended

March

27,

2016,

as if the acquisition occurred as of

January

2015.

The unaudited pro forma results for the

three

months ended

March

27,

2016

exclude direct acquisition costs of

$251

and cost of sales of

$91

related to the purchase accounting adjustments for inventory acquired. The operating results of Accutronics were not material for the period from

January

2016

to the acquisition date.

	Three Months Ended
	March 27, 2016

Revenue	$	20,833
Operating income	$	775
Net income attributable to Ultralife	$	607
Earnings per share:
Basic	$	.04
Diluted	$	.04

The unaudited pro forma results do not reflect the realization of any expected cost savings or other synergies from the acquisition of Accutronics as a result of restructuring activities, other cost savings initiatives or sales synergies following the completion of the business combination. Accordingly, these unaudited pro forma results are presented for informational purposes only and not necessarily indicative of what the actual results of operations of the combined Company would have been if the acquisition had occurred at the beginning of the

2015

period presented, nor are they indicative of future results of operations.