UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the fiscal year ended
OR
For the transition period from ____________ to ____________
Commission file number:
ULTRALIFE CORPORATION
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation of organization)
(Address of principal executive offices) (Zip Code) | (I.R.S. Employer Identification No.)
( (Registrant's telephone number, including area code:) |
Securities registered pursuant to Section 12(b) of the Act:
| | | |
| (Title of each class) | (Trading Symbol) | (Name of each exchange on which registered) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | |
| Non-accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
On June 30, 2021, the aggregate market value of the common stock held by non-affiliates as defined in Rule 405 under the Securities Act of 1933) of the registrant was approximately $
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of March 7, 2022, the registrant had
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s definitive proxy statement relating to the Annual Meeting of Shareholders are specifically incorporated by reference in Part III, Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K, except for the equity plan information required by Item 12 as set forth herein.
TABLE OF CONTENTS
| ITEM | PAGE | ||
| PART I | 1 | Business | 1 |
| 1A | Risk Factors | 14 | |
| 1B | Unresolved Staff Comments | 23 | |
| 2 | Properties | 23 | |
| 3 | Legal Proceedings | 23 | |
| 4 | Mine Safety Disclosures | 23 | |
| PART II | 5 | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 24 |
| 6 | Selected Financial Data | 24 | |
| 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | |
| 7A | Quantitative and Qualitative Disclosures About Market Risk | 36 | |
| 8 | Financial Statements and Supplementary Data | 37 | |
| 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 64 | |
| 9A | Controls and Procedures | 64 | |
| 9B | Other Information | 64 | |
| PART III | 10 | Directors, Executive Officers and Corporate Governance | 65 |
| 11 | Executive Compensation | 65 | |
| 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 65 | |
| 13 | Certain Relationships and Related Transactions, and Director Independence | 65 | |
| 14 | Principal Accountant Fees and Services | 65 | |
| PART IV | 15 | Exhibits, Financial Statement Schedules | 66 |
| Signatures | 68 | ||
PART I
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report contains certain forward-looking statements and information that are based on the beliefs of management as well as assumptions made by and information currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, the continued impact of COVID-19 and the related supply chain disruptions on our business, operating results and financial condition; our reliance on certain key customers; reduced U.S. and foreign military spending including the uncertainty associated with government budget approvals; our efforts to develop new commercial applications for our products; fluctuations in the price of oil and the resulting impact on the demand for downhole drilling; the unique risks associated with our China operations; potential disruptions in our supply of raw materials and components; our ability to retain top management and key personnel; possible breaches in information systems security and other disruptions in our information technology systems; our resources being overwhelmed by our growth; possible future declines in demand for the products that use our batteries or communications systems; potential costs attributable to the warranties we supply with our products and services; safety risks, including the risk of fire; variability in our quarterly and annual results and the price of our common stock; our entrance into new end-markets which could lead to additional financial exposure; our inability to comply with changes to the regulations for the shipment of our products; our customers’ demand falling short of volume expectations in our supply agreements; our exposure to foreign currency fluctuations; negative publicity concerning Lithium-ion batteries; possible impairments of our goodwill and other intangible assets; our ability to utilize our net operating loss carryforwards; the risk that we are unable to protect our proprietary and intellectual property; rules and procedures regarding contracting with the U.S. and foreign governments; exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; known and unknown environmental matters; possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; our ability to comply with government regulations regarding the use of “conflict minerals”; technological innovations in the non-rechargeable and rechargeable battery industries; and other risks and uncertainties, certain of which are beyond our control.
Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and developments in the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. When used in this report, the words “anticipate”, “believe”, “estimate”, “plan”, “intend”, “foresee”, “may”, “could”, “will”, “likely” or “expect” or words of similar import are intended to identify some, but not all, such forward-looking statements. For further discussion of certain of the matters described above and other risks and uncertainties, see “Risk Factors” in Item 1A of this Form 10-K Annual Report.
As used in this Form 10-K Annual Report, unless otherwise indicated, the terms the “Company”, “we”, “our” and “us” refer to Ultralife Corporation (“Ultralife”) and include 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.
Dollar amounts throughout this Form 10-K Annual Report are presented in thousands of dollars, except for per share amounts.
| ITEM 1. | BUSINESS |
General
We offer products and services ranging from power solutions to communications and electronics systems to customers across the globe in the government, defense and commercial sectors. With an emphasis on strong engineering and a collaborative approach to problem solving, we design and manufacture power and communications systems including: rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems and accessories, and custom engineered systems related to those product lines. We continually evaluate ways to grow, including the design, development and sale of new products, expansion of our sales force to penetrate new markets and territories, as well as seeking opportunities to expand through acquisitions.
We sell our products worldwide through a variety of trade channels, including original equipment manufacturers (“OEMs”), industrial and defense supply distributors, and directly to U.S. and foreign defense departments. We enjoy strong name recognition in our markets under our Ultralife® Batteries, Lithium Power®, McDowell Research®, AMTITM, ABLETM, ACCUTRONICS™, ACCUPRO™, ENTELLION™, SWE Southwest Electronic Energy Group™, SWE DRILL-DATA™, SWE SEASAFE™, Excell Battery Group and Criterion Gauge brands. We have sales, operations and product development facilities in North America, Europe and Asia.
We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes: Lithium 9-volt, cylindrical, thin cell and other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes: RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design. We believe that reporting performance at the gross profit level is the best indicator of segment performance. As such, we report segment performance at the gross profit level and operating expenses as Corporate charges. (See Note 10 in the notes to consolidated financial statements.)
Our website address is www.ultralifecorporation.com. We make available free of charge via a hyperlink on our website (see Investor Relations link on the website) our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports and statements as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). We will provide copies of these reports upon written request to the attention of Philip A. Fain, CFO, Treasurer and Secretary, Ultralife Corporation, 2000 Technology Parkway, Newark, New York, 14513. Our filings with the SEC are also available through the SEC website at www.sec.gov or at the SEC Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by calling 1-800-SEC-0330.
Battery & Energy Products
We manufacture and/or market a family of Lithium Manganese Dioxide (Li-MnO2), Lithium Manganese Dioxide Carbon Monofluoride (Li-CFx/MnO2) hybrid and Lithium Thionyl Chloride (Li-SOCl2) non-rechargeable batteries including 9-volt, HiRate® cylindrical, ThinCell®, and other form factors. Applications for our 9-volt batteries include: smoke alarms, wireless security systems and intensive care monitors, among many other devices. Our HiRate® and ThinCell® Lithium non-rechargeable batteries are sold primarily to the military and to OEMs in industrial markets for use in a variety of applications including radios, emergency radio beacons, search and rescue transponders, pipeline inspection gauges, portable medical devices and other specialty instruments and applications. Military applications for our non-rechargeable HiRate® batteries include: manpack and survival radios, night vision devices, targeting devices, chemical agent monitors and thermal imaging equipment. Our Lithium Thionyl Chloride batteries, sold under our ABLE and Ultralife brands as well as a private label brand, are used in a variety of applications including utility meters, wireless security devices, electronic meters, automotive electronics and geothermal devices. We believe that the chemistry of Lithium batteries provides significant advantages over other currently available non-rechargeable battery technologies. These advantages include: higher energy density, lighter weight, longer operating time, longer shelf life and a wider operating temperature range. Our non-rechargeable batteries also have relatively flat voltage profiles, which provide stable power. Conventional non-rechargeable batteries, such as alkaline batteries, have sloping voltage profiles that result in decreasing power output during discharge. While the price of our Lithium batteries is generally higher than alkaline batteries, the increased energy per unit of weight and volume of our Lithium batteries allow for longer operating times and less frequent battery replacements for our targeted applications.
We believe that our ability to design and produce lightweight, high-energy Lithium-ion and Nickel Metal Hydride (NiMH) rechargeable batteries and charging systems in a variety of custom sizes, shapes, and thicknesses offers substantial benefits to our customers. We market Lithium-ion and Nickel Metal Hydride rechargeable batteries comprising cells manufactured by qualified cell manufacturers. Our rechargeable products can be used in a wide variety of applications including communications, medical and other portable electronic devices.
Within this segment, we also seek to fund the development of new products that we hope will advance our technologies through contracts with both government agencies and private sector third parties.
We continue to be awarded development contracts with public and private customers resulting in intellectual property that we believe will enhance our efforts to commercialize new products that we develop. Revenues in this segment that pertain to product development may vary widely each year, depending upon the quantity and size of contracts awarded.
Revenues for this segment for the year ended December 31, 2021 were $87,083 and segment contribution (gross profit) was $21,063.
Communications Systems
Under our McDowell Research and AMTI brands, we design and manufacture a line of communications systems and accessories to support military communications requirements and under Ultralife Corporation brand provide system integration products and services for commercial requirements.
The military systems include RF amplifiers, power supplies, power cables, connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems and integrated communication systems for fixed or vehicle applications such as vehicle amplifier-adaptors (“VAA”) for multiple programs. These programs include Vehicle Installed Power Enhanced Rifleman Appliqué (“VIPER”) systems, U.S. Army Leader Radio Program, U.S. Army’s Security Force Assistance Brigades (“SFABs”) and SATCOM systems. All systems are packaged to meet specific customer needs in rugged enclosures to allow for their use in extreme environments. We market these products to all branches of the U.S. military and foreign defense organizations that we are permitted to sell our products to, as well as U.S. and international prime defense contractors.
The commercial products to date are integration of Information Technology capability into rugged cases, supporting use in various industries. We market these products to automotive, cellular carriers and manufacturing industries.
Revenues for this segment for the year ended December 31, 2021 were $11,184 and segment contribution (gross profit) was $3,579.
Corporate
We report revenues and cost of sales for the above operating segments. The balance of income and expense, including but not limited to research and development expenses, and selling, general and administrative expenses, are reported as Corporate operating expenses.
Corporate had no revenues for the year ended December 31, 2021 and our Corporate operating expenses for the year ended December 31, 2021 were $24,607.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations and the 2021 Consolidated Financial Statements and Notes thereto contained in this Form 10-K Annual Report for additional information on the expenses referred to above. For information relating to total assets by segment, revenues for the last two years by segment, and contribution by segment for the last two years, see Note 10 in the notes to consolidated financial statements.
History
Ultralife was formed as a Delaware corporation in December 1990. In March 1991, we acquired certain technology and assets from Eastman Kodak Company (“Kodak”) relating to its 9‑volt Lithium Manganese Dioxide non-rechargeable battery. In December 1992, we completed our initial public offering and became listed on NASDAQ.
In May 2006, we acquired ABLE New Energy Co., Ltd. (“ABLE”), an established manufacturer of Lithium batteries located in Shenzhen, China, which broadened our product offering, including a wide range of Lithium Thionyl Chloride and Lithium Manganese batteries, and provided additional exposure to new consumer markets.
In July 2006, we finalized the acquisition of substantially all the assets of McDowell Research, Ltd. (“McDowell”), a manufacturer of military communications accessories. This acquisition expanded our product distribution channels into the military communications area and strengthened our presence in global defense markets. During the second half of 2007, the operations of the Waco, Texas facility of McDowell were relocated to our Newark, New York facility. In January 2012, we relocated these operations to our Virginia Beach, Virginia facility in order to gain operational efficiencies.
In March 2008, we formed a joint venture, named Ultralife Batteries India Private Limited (“India JV”), with our distributor partner in India. The India JV assembles Ultralife power solution products and manages local sales and marketing activities, serving commercial, government and defense customers throughout India. We have invested cash into the India JV, as consideration for our 51% ownership stake in the India JV.
In March 2009, we acquired the tactical communications products business of Science Applications International Corporation. The tactical communications products business designs, develops and manufactures tactical communications products including: amplifiers, man-portable systems, cables, power solutions and ancillary communications equipment, which are sold by Ultralife under the brand name AMTI. The acquisition strengthened our communications systems business and provided us with direct entry into the handheld radio/amplifier market, complementing Ultralife’s communications systems offerings.
In January 2016, we acquired Accutronics Limited (“Accutronics”), a U.K. corporation based in Newcastle-under-Lyme, U.K., a leading independent designer and manufacturer of smart batteries and charger systems for high-performance, feature-laden portable and handheld electronic devices. With a portfolio encompassing custom battery design, development and manufacturing for OEM’s; standard smart batteries, chargers and accessories; and pre-engineered batteries and power solutions for specific applications, Accutronics primarily serves the portable medical device market throughout Europe. Medical applications include digital imaging, ventilators, anesthesia, endoscopy, patient monitoring, cardiopulmonary care, oxygen concentration and aspiration. We acquired Accutronics to advance our strategy of commercial revenue diversification, to expand our geographical penetration, and to achieve revenue growth from new product development. We are continuing to experience sales synergies between Accutronics and our existing commercial battery business as we cross-sell our existing products and the acquired Accutronics’ products to our respective customer bases.
On May 1, 2019, we acquired Southwest Electronic Energy Corporation, a Texas corporation (“SWE”), and a leading designer and manufacturer of high-performance smart battery systems and battery packs to customer specifications using lithium cells. SWE serves a variety of industrial markets, including oil and gas, remote monitoring, process control and marine, which demand uncompromised safety, service, reliability and quality. We acquired SWE as a bolt-on acquisition to further support our strategy of commercial revenue diversification by providing entry to the oil and gas exploration and production, and subsea electrification markets, which were previously unserved by Ultralife. Another key benefit of our acquisition of SWE includes obtaining a highly valuable technical team of battery pack and charger system engineers and technicians to add to our new product development-based revenue growth initiatives in our commercial end-markets particularly asset tracking, smart metering and other industrial applications.
On December 13, 2021, we acquired Excell Battery Canada Inc., a British Columbia corporation (“Excell Canada”), and 656700 B.C. Ltd., a British Columbia corporation (“656700”) and its wholly owned subsidiary, Excell Battery Corporation USA, a Texas corporation (“Excell USA” collectively, with Excell Canada and 656700, “Excell”), which operate under the name Excell Battery Group, based in Canada with U.S. operations, 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. We acquired Excell as an important component of our strategy to diversify commercial revenue and expand the end markets we serve. Acquiring Excell offers us opportunities to further scale our Battery & Energy Products business and drive the operating leverage of our business model, expand into OEM device verticals that we do not presently serve, enhance our contributed value to both our customers and realize cost synergies. Furthermore, Excell possesses experienced technical resources which we plan to utilize in progressing our global new product initiatives while adding a complementary line of highly engineered products that are costly for our customers to substitute with products of a competitor.
Products, Services and Technology
Battery & Energy Products
A non-rechargeable battery is used until discharged and then replaced. The principal competing non-rechargeable battery technologies are Carbon Zinc, Alkaline and Lithium. We manufacture a range of non-rechargeable battery products based on Lithium Manganese Dioxide, Lithium Manganese Dioxide Carbon Monofluoride hybrid, and Lithium Thionyl Chloride technologies.
Non-Rechargeable Batteries
We believe that the chemistry of Lithium batteries provides significant advantages over currently available non-rechargeable battery technologies, which include: lighter weight, longer operating time, longer shelf life, and a wider operating temperature range. Our non-rechargeable batteries also have relatively flat voltage profiles, which provide more stable power. Conventional non-rechargeable batteries, such as Alkaline batteries, have sloping voltage profiles that result in decreasing power during discharge. While the prices for our Lithium batteries are generally higher than commercially available Alkaline batteries produced by others, we believe that the increased energy per unit of weight and volume of our batteries will allow longer operating time and less frequent battery replacements for our targeted applications. As a result, we believe that our non-rechargeable batteries are priced competitively with other battery technologies on a price per unit of energy or volume basis.
Our non-rechargeable products include the following product configurations:
9‑Volt Lithium Battery. Our 9‑volt Lithium battery delivers a unique combination of the highest available energy density and stable voltage, which results in a longer operating life for the battery and, accordingly, fewer battery replacements. While our 9‑volt battery price is generally higher than conventional 9‑volt Carbon Zinc and Alkaline batteries, we believe the enhanced operating performance and decreased costs associated with longer battery life make our 9‑volt battery more cost effective than conventional batteries on a cost per unit of energy or volume basis when used in a variety of applications.
We market our 9-volt Lithium batteries to OEM, distributor and retail markets including industrial electronics, safety and security, and medical. Typical applications include: smoke alarms, wireless alarm systems, bone growth stimulators, telemetry devices, blood analyzers, ambulatory infusion pumps and parking meters. A significant portion of the sales of our 9-volt battery is to major smoke alarm OEMs for use in their long-life smoke alarms. We also manufacture our 9‑volt Lithium battery under private labels for a variety of companies. Additionally, we sell our 9‑volt battery to the broader consumer market through national and regional retail chains and online retailers.
We believe our current 9-volt battery manufacturing capacity is adequate to meet forecasted customer demand over the next three years.
Cylindrical Batteries. Featuring high energy, wide temperature range, long shelf life and operating life, our cylindrical cells and batteries, based on Lithium Manganese Dioxide, Lithium Manganese Dioxide Carbon Monofluoride hybrid and Lithium Thionyl Chloride technologies, represent some of the most advanced Lithium power sources currently available. We market a wide range of cylindrical non-rechargeable Lithium cells and batteries in various sizes under both the Ultralife HiRate and ABLE brands. These include: D, C, 5/4 C, 1/2 AA, 2/3 A, CR123A and other sizes, which are sold individually as well as packaged into multi-cell battery packs, including our leading BA-5390 military battery, an alternative to the competing Li-SO2 BA-5590 battery, a widely used battery type in the U.S. armed forces for portable applications. Our BA-5390 battery provides 50% to 100% more energy (mission time) than the BA-5590, and it is used in approximately 60 military applications. With the introduction of our Lithium Carbon Monofluoride hybrid chemistry, we now offer a D-cell that has 100% more energy than the competing Li-SO2 D-cell.
We market our line of Lithium cells and batteries to the OEM market for commercial, defense, medical, asset tracking and search and rescue applications, among others. Significant commercial applications include oil and gas, pipeline inspection equipment, automatic re-closers and oceanographic and subsea devices. Asset tracking applications include Radio Frequency Identification (“RFID”) systems. Among the defense uses are manpack radios, night vision goggles, chemical agent monitors and thermal imaging equipment. Medical applications include: Automated External Defibrillators (“AEDs”), infusion pumps and telemetry systems. Search and rescue applications include Emergency Locator Transmitters (“ELTs”) for aircraft and Emergency Position Indicating Radio Beacons (“EPIRBs”) for ships. Oil and gas applications include battery packs for downhole drilling applications such as Measurement While Drilling (“MWD”) and Logging While Drilling (“LWD”) and pipeline inspection.
Thin Cell Batteries. We manufacture a range of thin Lithium Manganese Dioxide batteries under the Thin Cell® brand. Thin Cell batteries are flat, lightweight batteries providing a unique combination of high energy, long shelf life, wide operating temperature range and very low profile. We are currently marketing these batteries to OEMs for applications such as displays, wearable medical devices, toll passes, theft detection systems, and RFID devices.
Rechargeable Batteries
In contrast to non-rechargeable batteries, after a rechargeable battery is discharged, it can be recharged and reused many times. Generally, discharge and recharge cycles can be repeated hundreds or thousands of times in rechargeable batteries depending on the technology of the battery. The achievable number of cycles (cycle life) varies among technologies and is an important competitive factor. All rechargeable batteries experience a small, but measurable, loss in energy capacity with each cycle. The industry commonly reports cycle life in the number of cycles a battery can achieve until 80% of the battery’s initial energy capacity remains. In the rechargeable battery market, the principal competing technologies are Nickel Cadmium, Nickel Metal Hydride and Lithium-ion (including Lithium polymer) batteries. Rechargeable batteries are used in many applications, such as military radios, laptop computers, mobile telephones, portable medical devices, wearable devices and many other commercial, defense and consumer products.
Three important performance characteristics of a rechargeable battery are design flexibility, energy density and cycle life. Design flexibility refers to the ability of rechargeable batteries to be designed to fit a variety of shapes and sizes of battery compartments. Thin profile batteries with prismatic geometry provide the design flexibility to fit the battery compartments of today's electronic devices. Energy density refers to the total amount of electrical energy stored in a battery divided by the battery’s weight and volume as measured in watt-hours per kilogram and watt-hours per liter, respectively. High energy density batteries generally are longer lasting power sources providing longer operating time and necessitating fewer battery recharges. High energy density and long achievable cycle life are important characteristics for comparing rechargeable battery technologies. Greater energy density will permit the use of batteries of a given weight or volume for a longer time period. Accordingly, greater energy density will enable the use of smaller and lighter batteries with energy comparable to those currently marketed. Lithium-ion batteries, by the nature of their electrochemical properties, are capable of providing higher energy density than comparably sized batteries that utilize other chemistries and, therefore, tend to consume less volume and weight for a given energy content. Long achievable cycle life, particularly in combination with high energy density, is suitable for applications requiring frequent battery recharges, such as cellular telephones and laptop computers, and allows the user to charge and recharge many times before noticing a difference in performance. We believe that our Lithium-ion batteries generally have high energy density and a long cycle life.
Lithium-ion Cells and Batteries. We market a variety of Lithium-ion cells and rechargeable batteries comprised of cells manufactured by qualified cell manufacturers. These products are used in a wide variety of applications including communications, medical and other portable electronic devices.
Battery Charging Systems and Accessories. To provide our customers with complete power system solutions, we offer a wide range of rugged military and commercial battery charging systems and accessories including smart chargers, multi-bay charging systems and a variety of cables.
Multi-Kilowatt Module. Our Multi-Kilowatt Module Lithium-ion battery system is a large format battery utilizable for energy storage, battery back-up, and remote power applications. This product is a direct replacement of 1.25 kWh and larger capacity lead acid batteries in 24V or 48V applications. It can be connected in multiples to obtain higher-voltages and is capable of over 3,000 cycles while maintaining 80% of its capacity.
Technology Contracts. Our technology contract activities involve the development of new products or the enhancement of existing products through contracts with both government agencies and private sector third parties.
Communications Systems
Under our McDowell Research and AMTI brands, we design and manufacture a line of communications systems and accessories to support military communications systems, including RF amplifiers, power supplies, power cables, connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems and integrated communication systems for fixed or vehicle applications such as vehicle amplifier-adaptors and SATCOM systems. We package all systems to meet specific customer needs in rugged enclosures to allow their use in extreme environments and under our Ultralife Corporation brand provide system integration products and services for commercial requirements.
We offer a wide range of military communications systems and accessories designed to enhance and extend the operation of communications equipment such as vehicle-mounted, manpack and handheld transceivers. Our communications products include the following product configurations:
RF Amplifiers. Our RF amplifiers include: 20, 50 and 75-watt amplifiers and 20-watt accessories and kits. These amplifiers are used to extend the range of manpack and handheld tactical transceivers and can be used on mobile or fixed site applications.
Integrated Systems. Our integrated systems include: vehicle mounted systems; SATCOM systems; rugged, deployable case systems; multiband transceiver kits; enroute communications cases; and radio cases. These systems give communications operators everything that is needed to provide reliable links to support Command, Control, Communications, Computers, Cyber and Intelligence, Surveillance and Reconnaissance (“C5ISR”).
Power Systems. Our power systems include: universal AC/DC power supplies with battery backup for tactical manpack and handheld transceivers; ROVER™ power supplies; interoperable power adaptors and chargers; portable power systems and AC to DC power supplies, among many others. We can provide power supplies for virtually all tactical communications devices.
The commercial products to date are integration of Information Technology capability into rugged cases, supporting use in various industries. We market these products to automotive, cellular carriers and manufacturing industries.
Communications and Electronics. Our communications and electronics services include the design, integration, and fielding of portable, mobile and fixed-site communications systems.
Sales and Marketing
We employ a staff of sales and marketing personnel in North America, Europe and Asia. We sell our products and services directly to commercial customers, including OEMs, as well as government and defense agencies in the U.S. and abroad and have contractual arrangements with sales agents who market our products on a commission basis in defined territories. Every effort is made to adjust future prices when and if possible, but the ability to adjust prices is generally based on market conditions.
We also distribute some of our products through domestic and foreign distributors and retailers. These sales are generated primarily from customer purchase orders. We have several long-term contracts with the U.S. government and other customers. These contracts do not commit the customers to specific purchase volumes, nor to specific timing of purchase order releases, and they include fixed price agreements over various periods of time. In general, we do not believe our sales are seasonal, although we may sometimes experience seasonality for some of our military products based on the timing of government fiscal budget expenditures.
A significant portion of our business comes from sales of products and services to U.S. and foreign governments through various contracts. These contracts are subject to procurement laws and regulations that specify policies and procedures for acquiring goods and services. The procurement laws and regulations also contain guidelines for managing contracts after they are awarded, including conditions under which contracts may be terminated, in whole or in part, at the government’s convenience or for default. Failure to comply with applicable procurement laws or regulations can result in civil, criminal or administrative proceedings involving fines, penalties, suspension of payments, or suspension or debarment from government contracting or subcontracting for a period of time. Even if a contract is awarded there is no guarantee that the government will order product under the contract.
We have one major customer, a large global defense primary contractor, which comprised 20% of our total revenues in 2021, and 17% of our total revenues in 2020. There were no other customers that comprised greater than 10% of our total revenues during these years.
In 2021, sales to U.S. and foreign customers were approximately $48,819 and $49,448, respectively. In 2020, sales to U.S. and foreign customers were approximately $62,255 and $45,457, respectively.
Battery & Energy Products
We target sales of our non-rechargeable products to manufacturers of security and safety equipment, medical devices, search and rescue equipment, specialty instruments, oil and gas downhole drilling and pipe inspection equipment, point of sale equipment and metering applications, as well as users of military equipment. Our strategy is to develop sales and marketing alliances with OEMs and governmental agencies that utilize our batteries in their products, commit to cooperative research and development or marketing programs, and recommend our products for design-in or replacement use in their products. We are addressing these markets through direct contact by our sales and technical personnel, use of sales agents and stocking distributors, manufacturing under private label, and promotional activities.
We seek to capture a significant market share for our products within our targeted OEM markets, which we believe, if successful, will result in increased product awareness and sales at the end‑user or consumer level. We are also selling our 9‑volt battery to the consumer market through retail distribution channels. Most military procurements are done directly by the specific government organizations requiring products, based on a competitive bidding process. Additionally, we are typically required to successfully meet contractual specifications and to pass various qualifications testing for the products under contract by the military. Our inability to pass these tests for our new products in a timely fashion could have a material adverse effect on future growth prospects. When a government contract is awarded, there is a government procedure that permits unsuccessful companies to formally protest the award if they believe they were unjustly treated in the government’s bid evaluation process. A prolonged delay in the resolution of a protest, or a reversal of an award resulting from such a protest, could have a material adverse effect on our business, financial condition and results of operations.
We market our products to defense organizations in the U.S. and other countries. In October 2017, we were awarded an indefinite-delivery/indefinite-quantity contract by the Defense Logistics Agency for five years, with the potential to generate revenue of $49,800, to provide our hybrid lithium manganese dioxide/carbon monofluoride (CFx) non-rechargeable BA-5790 and BA-5795 batteries. Manufacturing and production deliveries under this award are expected to begin in 2022. In September 2019, we were awarded an indefinite-delivery/indefinite-quantity contract from the U.S. Government’s Defense Logistics Agency for up to five years, with the potential to generate revenue of $14,422, to provide our BA-5368 batteries. In May 2021 we were awarded an indefinite-delivery/indefinite-quantity contract form the U.S. Army for purchases of Conformal Wear Batteries not to exceed $168,000 during the three-year base award period with the potential for up to an additional $350,000 should the six one-year options be exercised. We are scheduled to complete First Article Testing under this contract in the second half of 2022. In December 2021, we were awarded an indefinite-delivery/indefinite-quantity contract not to exceed $9,900 for the U.S. Government’s Defense Logistics Agency for our lithium manganese dioxide, non-rechargeable BA-5390 batteries. The award consists of a three-year base contract with two one-year option periods.
We target sales of our Lithium-ion rechargeable batteries and charging systems to OEM customers, as well as distributors and resellers focused on our target markets. We respond to Requests for Proposals (“RFPs”) to design products for OEMs, and believe that our design capabilities, product characteristics and solution integration will encourage OEMs to incorporate our batteries into their product offerings, resulting in revenue growth opportunities for us.
We continue to expand our marketing activities as part of our strategic plan, a comprehensive forward-looking document which sets forth our strategic growth plans, tactical actions and financial projections over a rolling three-year period, to increase sales of our battery and energy products for commercial, standby, defense and communications applications, as well as hand-held devices, wearable devices and other electronic portable equipment. A key part of this expansion includes increasing our design and assembly capabilities as well as building our international network of distributors and value-added distributors.
At December 31, 2021 and 2020, our backlog related to Battery & Energy Products was approximately $55,300 and $34,600, respectively. The 60% year-over-year increase in our Battery & Energy Products backlog at December 31, 2021 primarily resulted from the demand for our medical batteries, which in some cases includes orders pushed into 2022 because of the supply chain disruptions experienced in 2021 and the backlog associated with our acquisition of Excell on December 13, 2021.
The 2021 year-end backlog is related to orders that are expected to ship throughout 2022 and does not include future shipments under the indefinite-delivery/indefinite-quantity Defense Logistics Agency awards for BA-5790/BA-5795 batteries ($49,800) and BA-5390 batteries ($9,900) and U.S. Army awards for Conformal Wearable Batteries ($168,000).
Communications Systems
We target sales of our communications systems, which include power solutions and accessories to support communications systems such as RF amplifiers, power supplies, power cables, connector assemblies, amplified speakers, equipment mounts, case equipment and integrated communication systems, to military OEMs and U.S. and allied foreign militaries. We sell our products directly and through authorized distributors to OEMs and to defense contractors and U.S. and foreign militaries. We market our products to defense organizations and OEMs in the U.S. and internationally.
We target sales of our communications systems, which include power solutions and accessories to support communications systems such as RF amplifiers, power supplies, power cables, connector assemblies, amplified speakers, equipment mounts, case equipment and integrated communication systems, to military OEMs and U.S. and allied foreign militaries. We sell our products directly and through authorized distributors to OEMs and to defense contractors and U.S. and foreign militaries. We market our products to defense organizations and OEMs in the U.S. and internationally.
Sales targets for commercial products include integrated systems for information technology equipment to support fixed, mobile and deployable locations. We sell our products directly to commercial businesses in the U.S.
At December 31, 2021 and 2020, our backlog related to Communications Systems orders was approximately $8,000 and $4,700, respectively. The 70% increase in our Communications Systems backlog at December 31, 2021 is primarily a result of a purchase order valued at approximately $4,200 to supply a global defense prime with our Vehicle Amplifier-Adaptors for the U.S. Army’s Leader Radio program. The 2021 year-end backlog is related to orders that are expected to ship throughout 2022.
Patents, Trade Secrets and Trademarks
We use our patented and unpatented proprietary information, know‑how and trade secrets to maintain and develop our competitive position. Despite our efforts to protect our proprietary information, there can be no assurance that others will neither develop the same or similar information independently nor unlawfully obtain access to our proprietary information, know-how and trade secrets. In addition, there can be no assurance that we would prevail if we asserted our intellectual property rights against third parties, or that third parties will not successfully assert infringement claims against us in the future. We believe, however, that our success depends more on the knowledge, ability, experience and technological expertise of our employees, than on the legal protection that our patents and other proprietary rights may or will afford.
We hold thirty-five patents issued in the U.S., six patents issued in the European Union member states, four patents issued in the European Union, four patents issued in Japan, four patents issued in South Korea, three patents issued in Canada, three patents issued in the United Kingdom, three patents issued in China, two patents issued in India, two patents issued in Norway, one patent issued in Australia, one patent issued in Hong Kong, one patent issued in Iceland, one patent issued in Taiwan, and one patent issued by the World Intellectual Property Organization. We believe our patents protect technology that makes automated production more cost-effective and protects important competitive features of our products. However, we do not consider our business to be dependent on patent protection.
As part of our employment commencement process, our 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 noncompetition and nonsolicitation provisions which are 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. Nevertheless, the enforceability of such agreements is subject to public policy limitations that vary from state to state and country by country so we cannot assure that they will be enforceable in accordance with their terms, if at all.
Trademarks are an important aspect of our business. We sell our products under a number of trademarks, which we own. The following are registered trademarks of ours: Ultralife®, Ultralife Thin Cell®, Ultralife HiRate®, Ultralife & design®, Ultra®, LithiumPower®, LithiumPower & Design®, SmartCircuit®, Smart Circuit®, Smart Circuit & design®, We Are Power®, AMTI®, ABLE™, ACCUTRONICS®, ACCUPRO®, ENTELLION®, Intelligent Power Vault®, McDowell Research®, RPS®, SWE Southwest Electronic Energy Group®, SWE DRILL-DATA®, and SWE SEASAFE®.
Manufacturing and Raw Materials
We manufacture our products from raw materials and component parts that we purchase. Our manufacturing facility in Newark, New York is ISO 9001 and ISO 13485 certified. Our manufacturing facilities in Calgary and Mississauga, Canada are ISO 9001 certified and in Vancouver, Canada is ISO 9001 and ISO 13485 certified. Our manufacturing facility in Shenzhen, China is ISO 9001, ISO 1401 and ISO 13485 certified. Our manufacturing facility in Missouri City, Texas is ISO 9001 and ISO 13485 certified and in Houston, Texas is ISO 9001 certified. Our manufacturing facilities in the United Kingdom are ISO 9001 and ISO 13485 certified. Our manufacturing facility in Virginia Beach, Virginia is ISO 9001 certified.
We expect our future raw material purchases to fluctuate based on global demand for our products, our knowledge regarding the timing of customer orders, the related need to build inventory in anticipation of orders and actual shipment dates. The prices and availability of raw materials were impacted by COVID/supply chain disruptions in 2021 and may continue to be affected in 2022.
Battery & Energy Products
Our Newark, New York and Shenzhen, China facilities have the capacity to produce cylindrical cells, 9-volt batteries, 3-volt battery and thin cells. Capacity, however, is also affected by demand for particular products, and product mix changes can produce bottlenecks in an individual operation, constraining overall capacity. We have acquired new machinery and equipment in areas where production bottlenecks have occurred in the past and we believe that we have sufficient capacity in these areas. We continually evaluate our requirements for additional capital equipment, and we believe that planned increases will be adequate to meet foreseeable customer demand.
Certain materials used in our products, other than rechargeable battery cells, are available only from a single source or a limited number of sources. Additionally, we may elect to develop relationships with a single or limited number of sources for materials that are otherwise generally available. Although we believe that alternative sources may in some cases be available to supply materials that could replace materials we use and that, if necessary, we would be able to redesign our products to make use of an alternative material provided extensive customer testing and recertification are not required, any interruption in our supply from any supplier that serves currently as our sole source could delay product shipments and adversely affect our financial performance and relationships with our customers. Although we have experienced interruptions of product deliveries by sole source and other suppliers in 2021 resulting in the delay of shipments to future periods, we cannot assure that these interruptions and delays will not have an adverse effect on us in the future.
Generally, the raw materials and components utilized for our rechargeable batteries are readily available from many sources. Although we believe that alternative sources are available to supply materials and components that could replace materials or components we use, any interruption in our supply from any supplier that serves currently as our sole source could delay product shipments and adversely affect our financial performance and relationships with our customers.
Our Newark, New York facility has the capacity to produce significant volumes of batteries and energy products. This operation generally manufacturers non-rechargeable battery cells, non-rechargeable and rechargeable battery packs, and chargers and is limited only by physical space and is not constrained by manufacturing equipment capacity which can accommodate significant additional volumes of product. Similarly, our China and United Kingdom facilities also have capacity to produce significant quantities of non-rechargeable batteries and rechargeable battery packs beyond current volumes and are not constrained by manufacturing equipment capacity. Our Missouri City, Texas facility has the capacity to produce significant quantities of non-rechargeable battery packs and is not constrained by manufacturing equipment capacity. We are in the process of assessing the capacity our Excell facilities in Houston, Texas and in Calgary, Mississauga and Vancouver, Canada to determine constraints associated with human capital resources or manufacturing equipment.
The total carrying value of our Battery & Energy Products inventory, including raw materials, work in process and finished goods, amounted to $25,677 and $20,714 as of December 31, 2021 and 2020, respectively. The year-over-year 24% increase primarily reflects an increase in materials, including rechargeable cells, required to fulfill the backlog for our batteries used in medical devices and the inventory associated with our acquisition of Excell on December 13, 2021. Management continuously monitors inventory levels in an effort to optimize such levels.
Communications Systems
In general, we believe that the raw materials and components utilized by us for our communications and commercial accessories and systems, including RF amplifiers, power supplies, cables, repeaters and integration kits and systems, are available from many sources. Although we believe that alternative sources are available to supply materials and components that could replace materials or components we use, any interruption in our supply from any supplier that serves currently as our sole source or any significant increase in lead times to provide components could delay product shipments and adversely affect our financial performance and relationships with our customers.
Our Virginia Beach, Virginia facility has the sufficient capacity to produce communications products and systems to meet current demand. This operation generally assembles products and is limited only by physical space and is not constrained by manufacturing equipment capacity.
The total carrying value of our Communications Systems inventory, including raw materials, work in process and finished goods, amounted to $7,512 and $7,479 as of December 31, 2021 and 2020, respectively. The year-over-year 0.4% increase is primarily related to the procurement of longer lead time components to meet the commitment dates of our backlog orders. Management continuously monitors inventory levels in an effort to optimize such levels.
Research and Development
We devote significant resources to research and development activities to improve the technological capabilities of our products and to design new products for customers’ applications. We conduct our research and development in Newark, New York; Virginia Beach, Virginia; Tallahassee, Florida; Missouri City, Texas; Newcastle-under-Lyme, United Kingdom; and Shenzhen, China. During 2021 and 2020, we expended $8,042 and $7,316, respectively, on research and development, including $1,216 and $1,369, respectively, on customer sponsored research and development activities, which are included in cost of goods sold. The year-over-year decrease in customer sponsored research and development is due to the timing of key projects and helped to offset our increased costs for the hiring of engineering resources to support new product development in our Battery & Energy Products business segment, including $801 pertaining to our May 2021 Conformal Wearable Battery award from the U.S. Army.
We expect that research and development expenditures in the future could increase by 10% or more over 2021 levels, based on current initiatives. These current initiatives include completing the development and testing of new battery and power solutions in our facilities in Newark, New York, Houston and Missouri City, Texas and Newcastle-under-Lyme, UK; our Thionyl Chloride battery project in China and new product initiatives for our Communications Systems business. Our expectation is that new product development is one of the factors that will drive our growth. As in the past, we will continue to make funding decisions for our research and development efforts based upon demand for customer applications.
Battery & Energy Products
We continue to internally develop non-rechargeable cells and batteries with the goal of broadening our product offering to our customers.
We continue to internally develop our rechargeable product portfolio, including batteries, battery management systems, cables and charging systems, as our customers’ needs for portable power continue to grow and new technologies become available.
The U.S. government sponsors research and development programs, which Ultralife participates in, designed to improve the performance and safety of existing battery systems and to develop new battery systems.
Communications Systems
We continue to internally develop a variety of communications accessories and systems for the global defense and commercial markets to meet the ever-changing demands of our customers.
Safety; Regulatory Matters; Environmental Considerations
Certain of the materials utilized in our batteries may pose safety problems if improperly used, stored, or handled. We have designed our batteries to minimize safety hazards both in manufacturing and in use. Our batteries are subject to the regulations noted below, among others.
The transportation of non-rechargeable and rechargeable Lithium batteries is regulated in the U.S. by the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”), and internationally by the International Civil Aviation Organization (“ICAO”) and corresponding International Air Transport Association (“IATA”), Dangerous Goods Regulations and the International Maritime Dangerous Goods Code (“IMDG”), and other country specific regulations. These regulations are based on the United Nations Recommendations on the Transport of Dangerous Goods Model Regulations and the United Nations Manual of Tests and Criteria. We currently ship our products pursuant to PHMSA, ICAO, IATA, IMDG and other country specific hazardous goods regulations. The regulations require companies to meet certain testing, packaging, labeling, marking and shipping paper specifications for safety reasons. We have not incurred, and do not expect to incur, any significant costs in order to comply with these regulations. We believe we comply with all current U.S. and international regulations for the shipment of our products, and we intend and expect to comply with any new regulations that are imposed. We have established our own testing facilities to ensure that we comply with these regulations. However, if we are unable to comply with any such new regulations, or if regulations are introduced that limit our or our customers’ ability to transport our products in a cost-effective manner, this could have a material adverse effect on our business, financial condition and results of operations.
The European Union’s Restriction of Hazardous Substances Directive (the “EU RoHS Directive”) places restrictions on the use of certain hazardous substances in electrical and electronic equipment. All applicable products sold in the European Union market must pass RoHS compliance. While this directive does not apply to batteries and does not currently affect our defense products, should any changes occur in the directive that would affect our products, we intend and expect to comply with any new regulations that are imposed. However, we cannot assure that the cost of complying with such new regulations would not have a material adverse effect on us. We believe our commercial chargers are substantially in compliance with the EU RoHS Directive.
The European Union’s Battery Directive “on batteries and accumulators and waste batteries and accumulators” (the “EU Battery Directive”) is intended to cover all types of batteries regardless of their shape, volume, weight, material composition or use. It is aimed at reducing mercury, cadmium, lead and other metals in the environment by minimizing the use of these substances in batteries and by treating and re-using old batteries. The EU Battery Directive applies to all types of batteries except those used to protect European member states’ security, for military purposes, or sent into space. To achieve these objectives, the EU Battery Directive prohibits the marketing of some batteries containing hazardous substances. It establishes schemes aimed at high level of collection and recycling of batteries with quantified collection and recycling targets. The EU Battery Directive sets out minimum rules for producer responsibility and provisions with regard to labeling of batteries and their removability from equipment. The EU Battery Directive requires product markings for batteries and accumulators to provide information on capacity and to facilitate reuse and safe disposal. We currently ship our products pursuant to the requirements of the EU Battery Directive.
The EU Battery Directive requires producers or importers of particular classes of electrical goods to be financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. This directive assigns levels of responsibility to companies doing business in European Union markets based on their relative market share. This directive calls on each European Union member state to enact enabling legislation to implement the directive. As additional European Union member states pass enabling legislation our compliance system should be sufficient to meet such requirements. Our current estimated costs associated with our compliance with these directives based on our current market share are not significant. However, we continue to evaluate the impact of these directives as European Union member states implement guidance, and actual costs could differ from our current estimates.
China’s “Management Methods for Restricted Use of Hazardous Substances in Electrical and Electronic Products” (“China RoHS 2”) provides a regulatory framework including hazardous substance restrictions similar to those imposed by the EU RoHS Directive. China RoHS 2 applies to methods for the control and reduction of pollution and other public hazards to the environment caused during the production, sale, and import of electrical and electronic products (“EEP”) in China. The regulatory framework of China RoHS 2 also now references the updated marking and labeling requirements under Standard SJ/T 11364-2014. The methods under China RoHS 2 only apply to EEP placed in the marketplace in China. We believe our compliance system is sufficient to meet our requirements under China RoHS 2. Our current estimated costs associated with our compliance with this regulation based on our current market share are not significant. However, we continue to evaluate the impact of this regulation, and actual costs could differ from our current estimates.
National, state and local laws impose various environmental controls on the manufacture, transportation, storage, use and disposal of batteries and of certain chemicals used in the manufacture of batteries. Although we believe that our operations are in material compliance with current environmental regulations, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities, costs and expenses. There can be no assurance that additional or modified regulations relating to the manufacture, transportation, storage, use and disposal of materials used to manufacture our batteries or restricting disposal of batteries will not be imposed or that such regulations will not have a material adverse effect on our business, financial condition and results of operations. In 2021 and 2020, we spent $208 and $260, respectively, on environmental compliance, including costs to properly dispose of potentially hazardous waste.
Since non-rechargeable and rechargeable Lithium battery chemistries react adversely with water and water vapor, certain of our manufacturing processes must be performed in a controlled environment with low relative humidity. Our Newark, New York and Shenzhen, China facilities contain dry rooms or glove box equipment, as well as specialized air-drying equipment.
In addition to the environmental regulations previously described, our products are subject to U.S. and international laws and regulations governing international trade and exports including but not limited to the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and trade sanctions against embargoed countries.
The ITAR is a set of U.S. government regulations that control the export and import of defense-related articles and services on the United States Munitions List. These regulations implement the provisions of the Arms Export Control Act, and are described in the Code of Federal Regulations. The Department of State Directorate of Defense Trade Controls interprets and enforces ITAR. Its goal is to safeguard U.S. national security and further U.S. foreign policy objectives.
The related EAR are enforced and interpreted by the Bureau of Industry and Security in the Commerce Department. The Department of Defense is also involved in the review and approval process. Inspections in support of import and export laws are performed at border crossings by Customs and Border Protection, an agency of the Department of Homeland Security.
Products and services developed and manufactured in our foreign locations are subject to the export and import controls of the nation in which the foreign location operates.
We believe we are in material compliance with these domestic and international export regulations. However, failure of compliance could have a material adverse effect on our business through possible fines, denial of export privileges, or loss of customers. Further, while we are not aware of any proposed changes to these regulations, any change in the scope or enforcement of export or import regulations or related legislation could have a material adverse effect on our business through increased costs of compliance or reduction in the international growth prospects available to us.
Based upon our current sales volumes, our future estimated costs associated with our compliance with ITAR, EAR, and the foreign export and import controls are not significant. However, we continue to evaluate the impact of these regulations, and actual costs could differ from our current estimates.
Battery & Energy Products
Our non-rechargeable battery products incorporate Lithium metal, which reacts with water and may cause fires if not handled properly. In the past, we have experienced fires that have temporarily interrupted certain manufacturing operations. We believe that we have adequate fire suppression systems and insurance, including business interruption insurance, to protect against the occurrence of fires and fire losses in our facilities.
Our 9‑volt battery, among other sizes, is designed to conform to the dimensional and electrical standards of the American National Standards Institute. Authorized certification bodies such as Underwriters Laboratories, Intertek and SGS have certified several of our products.
Communications Systems
We are not currently aware of any regulatory requirements regarding the disposal of our communications products.
Corporate
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Section 1502 (the “Dodd-Frank Act”) requires public companies to disclose whether tantalum, tin, gold and tungsten, commonly known as “conflict minerals,” are necessary to the functionality or production of a product manufactured by a public company and if those elements originated from armed groups in the Democratic Republic of Congo or adjoining countries. To comply with the Dodd-Frank Act, as implemented by SEC rules, we are required to perform due diligence inquiries of our suppliers to determine whether or not our products contain such minerals and from which countries and source (smelter) the minerals were obtained. Our annual report on Form SD was filed by the statutory due date of May 31, 2021 for the 2020 calendar year and we continue to utilize appropriate measures with our suppliers to better ascertain the origin of the conflict minerals in our products.
Competition
Competition in both the battery and communications systems markets is, and is expected to remain, intense. The competition ranges from development stage companies to major domestic and international companies, many of which have financial, technical, marketing, sales, manufacturing, distribution and other resources significantly greater than ours. We compete against companies producing batteries as well as companies producing communications systems. We compete on the basis of design flexibility, performance, price, reliability and customer support. There can be no assurance that our technologies and products will not be rendered obsolete by developments in competing technologies or services that are currently under development or that may be developed in the future or that our competitors will not market competing products and services that obtain market acceptance more rapidly than ours.
While we cannot assure that other entities will not attempt to take advantage of the growth of the battery market, the Lithium battery cell industry has certain technological and economic barriers to entry. The development of technology, equipment and manufacturing techniques and the operation of a facility for the automated production of Lithium battery cells require large capital expenditures, which may deter new competitors from commencing production. Through our experience in battery cell manufacturing, we have also developed significant production and design expertise in the non-rechargeable battery market, which we believe would be difficult for new competitors to reproduce without substantial time and expense.
Employees
As of December 31, 2021, we employed a total of 560 permanent and temporary employees: 440 in production, 79 in sales and administration, and 41 in research and development. None of our employees are represented by a labor union.
| ITEM 1A. | RISK FACTORS |
Our business faces many risks. As such, prospective investors and shareholders should carefully consider and evaluate all of the risk factors described below as well as other factors discussed in this Form 10-K Annual Report and in our other filings with the SEC. Any of these factors could adversely affect our business, financial condition and results of operations. Additional risks and uncertainties that are not currently known to us or that are not currently believed by us to be material may also harm our business operations and financial results. These risk factors may change from time to time and may be amended, supplemented, or superseded by updates to the risk factors contained in periodic reports on Form 10-Q and Form 10-K that we file with the SEC in the future.
Company Risk Factors
The COVID-19 pandemic may continue to create significant economic disruption and uncertainty around the world, may impact the health of our employees, suppliers and customers causing delays in the manufacture and delivery of our mission critical products to end customers, and may disrupt business with our collaborative business partners, which may continue to adversely impact our operating results.
The novel coronavirus disease of 2019 (COVID-19) has created significant economic disruption and uncertainty around the world. 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.
The lingering impact of these conditions on our business is uncertain and will depend on many evolving factors which we continue to monitor but cannot predict, including the duration and scope of the pandemic and its variants, resulting actions taken by governments, businesses and individuals, and the flow-through impact on operations and supply chains. Potential effects of COVID-19 that may adversely impact our future business include limited availability and/or increased cost of raw materials and components used in our products, reduced demand and/or pricing for our products, inability of our customers to pay for our products or remain solvent, and reduced availability of our workforce. Prolonged adverse effects of COVID-19 on our business could result in the impairment of long-lived assets including goodwill and other intangible assets. Further, we cannot predict all possible adverse effects the COVID-19 pandemic may cause. Consequently, there may be adverse effects in addition to those described in this Risk Factor. While we continue to closely monitor the developments surrounding COVID-19 and take actions when possible to mitigate the business risks involved, the potential effects of COVID-19 on our business, alone or taken together, may pose a material risk to our future operating results and financial condition.
A significant portion of our revenues is derived from certain key customers.
We have one customer, L3Harris Technologies, a large global defense primary contractor, which comprised 20% of our total revenues in 2021 and 17% of our total revenues in 2020. There were no other customers that comprised greater than 10% of our total revenues during these years. While we consider our relationship with our major customer to be good, the reduction, delay or cancellation of orders from this customer or any delays in payments beyond their payment terms, for any reason, would reduce our revenue and operating income and could materially and adversely affect our business, operating results and financial condition in other ways.
Our efforts to develop new products or new commercial applications for our products could be prolonged or could fail.
Although we develop certain products for new commercial applications, we cannot assure that these new products will be accepted due to the highly competitive nature of the industry. There are many new product and technology entrants into the markets into which we sell our products, and we must continually reassess the markets in which our products can be successful and seek to engage customers in those markets that will adopt our products for use in their products. In addition, these customers must be successful with their products in their markets for us to gain increased business. Increased competition, failure to gain customer acceptance of products, the introduction of competitive technologies or failure of our customers in their markets could have a further adverse effect on our business and reduce our revenue and operating income.
Reductions or delays in U.S. and foreign military spending could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our revenues is derived from contracts with U.S. and foreign militaries or OEMs that supply U.S. and foreign militaries. In the years ended December 31, 2021 and 2020, $34,188 or 35% and $45,382 or 42%, respectively, of our revenues were comprised of sales made directly or indirectly to U.S. and foreign militaries.
While significant gains have been made in commercial markets with our business, we are still highly dependent on sales to U.S. Government customers. The amounts and percentages of our net revenue that were derived from sales to U.S. Government customers, including the Department of Defense, whether directly or through prime contractors, was approximately $26,359 or 27% in 2021 and $38,900 or 36% in 2020. Therefore, any significant disruption or deterioration of our relationship with the U.S. Government or any prime defense contractor could significantly reduce our revenue. Our competitors continuously engage in efforts to expand their business relationships with the U.S. Government and will continue these efforts in the future, and the U.S. Government may choose to use other contractors or suppliers.
Budget and appropriations decisions made by the U.S. Government, including possible future sequestration periods or other similar formulaic reductions in federal expenditures, are outside of our control and have long-term consequences for our business. A decline in U.S. military expenditures could result in a reduction in the military’s demand for our products, which could have a material adverse effect on our business, financial condition and results of operations.
Our operations in China are subject to unique risks and uncertainties, including political shifts, tariffs and trade restrictions.
Our operating facility in China presents unique 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, the 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, and an outbreak of a contagious disease, related to COVID-19 or not, which may cause us or our suppliers and/or customers to temporarily suspend operations in the affected city or region. Any such disruptions could depress our earnings and have other material adverse effects on our business, financial condition and results of operations.
Notwithstanding the impact of COVID-19, our supply of raw materials and components could be disrupted or delayed due to business conditions, weather, or other factors not under our control, or the cost of those raw materials and components may materially increase.
Certain materials and components used in our products are available only from a single or a limited number of suppliers. As such in the present situation, some materials and components have been in short supply resulting in limited availability and/or increased costs. Additionally, we may elect to develop relationships with a single or limited number of suppliers for materials and components that are otherwise generally available. Due to our supplying defense products to the U.S. government, we could receive a government preference to continue to obtain critical supplies to meet military production needs. However, if the government did not provide us with a government preference in such circumstances or if the selected suppliers are not able to meet the necessary demand for the components, the difficulty in obtaining supplies could have a material adverse effect on our business, financial condition and results of operations. We believe that alternative suppliers are available to supply materials and components that could replace materials and components currently used and that, if necessary, we may be able to redesign our products to make use of such alternatives provided that the costs and timing of our customers recertifying the alternate materials and components where necessary is not deemed prohibitive by our customers or us. Nevertheless, any interruption in the supply from any supplier that serves as a sole source could delay product shipments and have a material adverse effect on our business, financial condition and results of operations. We have experienced interruptions of product deliveries by sole source and other suppliers in the past, most notably in 2021, and we cannot guarantee that we will not experience a continuation of material interruption of deliveries from sole source or other suppliers in the future. The present supply chain disruptions and increased component lead times resulting from COVID-19, have been exacerbated by the increased demand for Lithium-based cells from the electric vehicle manufacturers. While the latter has resulted in increased supply of such cells, meeting such demand may result in delays or even the discontinuation of the cells required for our products. Accordingly, these circumstances require us to regularly monitor all aspects of our supply chain and share the updates with our customers, to ensure that any potential supply interruptions are understood with all efforts taken to minimize.
With the potential for a significant post-COVID-19 rebound, our lead times for certain critical components from our suppliers could be extended even further, resulting in shipping delays causing us to miss contractual timelines. Our internal purchasing process is focused on the current economic environment, and lead times in the current environment are considered when placing orders from our vendors, but we cannot control the ability of our vendors or potential vendors to meet our delivery dates.
Additionally, we could continue to face increasing pricing pressure from our suppliers due to rising costs of these suppliers that could be passed on to us in higher prices for our raw materials, which could increase our cost of business, lower our margins and have other materially adverse effects on our business, financial condition and results of operations, should our pass though of these price increase not be accepted by our customers.
Notwithstanding the impact of COVID-19, fluctuations in the demand, supply and price of oil and gas and the resulting volatility in the level of downhole drilling could have a material adverse effect on our business, financial condition and results of operations.
The demand, supply and pricing fluctuations typically encountered in the oil and gas industry, especially over the past few years, have placed financial strain not only on the producers, but also the companies that provide oilfield services and equipment to them. The cyclicality in this industry, whether driven by geopolitical developments; international tensions; supply and demand economics; the introduction of new global, national, and industry-specific regulations; U.S. administration policies; and technology, is an ongoing reality. A significant downturn in the price of oil resulting in a decrease in downhole drilling will very likely have an adverse impact on our financial results. In response, we would expect to mitigate a portion, but not all, of this risk by seeking product/market diversification throughout our portfolio.
The loss of top management and key personnel could significantly harm our business, and our ability to put in place a succession plan and recruit experienced, competent management is critical to the success of the business.
The continuity of our officers and executive team is vital to the successful implementation of our business model and growth strategy designed to deliver sustainable, consistent profitability. A top management priority has been the development and implementation of a formal written succession plan to mitigate the risks associated with the loss of senior executives. This formal succession plan is updated annually and presented to our Board of Directors. There is no guarantee that we will be successful in our efforts to effectively implement our succession plan.
Because of the specialized, technical nature of our business, we are highly dependent on certain members of our management, sales, engineering and technical staffs. The loss of these employees could have a material adverse effect on our business, financial condition and results of operations. Our ability to effectively pursue our business strategy will depend upon, among other factors, the successful retention of our key personnel, recruitment of additional highly skilled and experienced managerial, sales, engineering and technical personnel, and the integration of such personnel obtained through business acquisitions. We cannot assure that we will be able to retain or recruit this type of personnel. An inability to hire sufficient numbers of people or to find people with the desired skills could result in greater demands being placed on limited management resources which could delay or impede the execution of our business plans and have other material adverse effects on our business, financial condition and results of operations.
Breaches in security, whether cyber or physical, and related disruptions and/or our inability to prevent or respond to such breaches, could diminish our ability to generate revenues or contain costs, compromise our assets, and negatively impact our business in other ways.
We face certain security threats, including threats to our information technology infrastructure, attempts to gain access to our proprietary or classified information, and threats to physical and cyber security. Our information technology networks and related systems are critical to the operation of our business and essential to our ability to successfully perform day-to-day operations. The risks of a security breach, cyber-attack, cyber intrusion, or disruption, particularly through actions taken by computer hackers, foreign governments and cyber terrorists, have increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Although we have acquired and developed systems and processes designed to protect our proprietary or classified information, they may not be sufficient and the failure to prevent these types of events could disrupt our operations, require significant management attention and resources, and could negatively impact our reputation among our customers and the public, which could have a negative impact on our financial condition, and weaken our results of operations and liquidity. In 2017, we formed a cyber security executive management committee (the “Committee”) with oversight responsibility to minimize the risk of breaches. In 2018, this Committee with the assistance of outside security consultants completed a comprehensive Systems Security Plan (“SSP”) and a Plan of Action & Milestones (“POAM”) in compliance with the requirements of National Institute of Standards and Technology (“NIST”) Special Publication 800-171, Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations. In 2019, the Company made further progress in implementing many of the security measures in our SSP and POAM, including increasing the security awareness across our employee base. In 2020 and 2021, we continued to make substantial progress towards achieving full implementation of all NIST 800-171 security standards, as well as the requirements under the Cybersecurity Maturity Model Certification (CMMC) framework released by the Department of Defense in 2020. The Committee continues to review all key aspects of cyber security utilizing our outside security consultants to ensure a robust plan is in place and provides quarterly updates to our Board. Despite these measures, we cannot eliminate the risk of such security breaches and the potential adverse impacts these breaches may have on our business and financial results.
A decline in demand for products using our batteries or communications systems could reduce demand for our products and/or our products could become obsolete resulting in lower revenues and profitability.
A substantial portion of our business depends on the continued demand for products using our batteries and communications systems sold by our customers, including OEMs. Our success depends significantly upon the success of those customers’ products in the marketplace. We are subject to many risks beyond our control that influence the success or failure of a particular product or service offered by a customer, including:
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competition faced by the customer in its particular industry, |
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market acceptance of the customer’s product or service, |
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the engineering, sales, marketing and management capabilities of the customer, |
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technical challenges unrelated to our technology or products faced by the customer in developing its products or services, and |
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the financial and other resources of the customer. |
The market for our products is characterized by changing technology and evolving industry standards, often resulting in product obsolescence or short product lifecycles. Although we believe that our products utilize state-of-the-art technology, there can be no assurance that competitors will not develop technologies or products that would render our technologies and products obsolete or less marketable. Many of the companies with which we compete have substantially greater resources than we do, and some have the capacity and volume of business to be able to produce their products more efficiently than we can. In addition, these companies are developing or have developed products using a variety of technologies that are expected to compete with our technologies. Furthermore, we have noted an increase in foreign competition, especially in Asia, over the last several years which tend to compete on price in the battery industry. If these companies successfully market their products in a manner that renders our technologies obsolete, this would reduce our revenue and operating income and could have other material adverse effects on our business, financial condition and results of operations.
We are subject to certain safety risks, including the risk of fire, inherent in the manufacture, use and transportation of Lithium batteries.
Due to the high energy inherent in Lithium batteries, our Lithium batteries can pose certain safety risks, including the risk of fire. We incorporate procedures in research, development, product design, manufacturing processes and the transportation of Lithium batteries that are intended to minimize safety risks, but we cannot assure that accidents will not occur or that our products will not be subject to recall for safety concerns. Although we currently carry insurance policies which cover loss of plant and machinery, leasehold improvements, inventory and business interruption, any accident, whether at the manufacturing facilities or from the use of the products, may result in significant production delays or claims for damages resulting from injuries or death. While we maintain what we believe to be sufficient casualty liability coverage to protect against such occurrences, these types of losses could reduce our available cash and our operating and net income and have other material adverse effects on our reputation, business, financial condition and results of operation.
Our growth and expansion strategy could strain or overwhelm our resources.
Rapid growth of our business could significantly strain management, operations and technical resources. If we are successful in obtaining rapid market growth of our products, we will likely be required to deliver large volumes of quality products to customers on a timely basis at a reasonable cost. For example, demand for our new or existing products combined with our ability to penetrate new markets and geographies or secure a major project award, could strain the current capacity of our manufacturing facilities and require additional capital resources, equipment and time to meet the required demand. We cannot assure, however, that our business will grow rapidly or that our efforts to expand manufacturing and quality control activities will be successful or that we will be able to satisfy commercial scale production requirements on a timely and cost-effective basis. During 2020, the Company experienced a 64% year-over-year increase in shipments of our medical batteries primarily in response to the higher demand for ventilators, respirators and infusion pumps caused by COVID-19. While we met all of our 2020 commitments to our medical customers and now exit 2021 with the highest backlog in Company history, this does not mean that rapid growth and demand for our products in all cases will be met by our resources without delay. Our recent acquisition of Excell in December 2021 provides an influx of highly experienced technical engineering talent along with facilities that have either been ISO 13485 certified for medical products or are in the process of such. This, combined with SWE’s ISO 13485 certification in 2021, provides further capacity to help meet the continued high level of demand for our products from the medical and other commercial sectors.
We also may be required to continue to improve our operations, management and financial systems and controls in order to remain competitive. The failure to manage growth and expansion effectively could have an adverse effect on our business, financial condition, and results of operations. We address these risks in the annual update of our three-year Strategic Plan which is presented to our Board of Directors.
Our quarterly and annual results and the price of our common stock could fluctuate significantly.
Our future operating results may vary significantly from quarter-to-quarter and from year-to-year depending on factors such as the timing and shipment of significant orders, new product introductions, the transition of new products to higher-volume production, major project wins, U.S. and foreign government demand, delays in customer releases of purchase orders, delays in receiving raw materials from vendors, the mix of distribution channels through which we sell our products and services and general economic conditions. Frequently, a substantial portion of our revenue in each quarter is generated from orders booked and fulfilled during that quarter. As a result, revenue levels are difficult to predict for each quarter. If revenue results are below expectations, operating results will be adversely affected as we have a sizeable base of fixed overhead costs that do not fluctuate much with changes in revenue. Due to such variances in operating results, we have sometimes failed to meet, and in the future may not meet, market expectations regarding our future operating results.
In addition to the uncertainties of quarterly and annual operating results, future announcements concerning us or our competitors, including technological innovations or commercial products, litigation or public concerns as to the safety or commercial value of one or more of our products, or the impact of economic or geopolitical factors on any of the markets segments we participate in may cause the market price of our common stock to fluctuate substantially, all of which may be unrelated to our operating results.
Our customers may not meet the volume expectations in our supply agreements.
We sell most of our products and services through supply agreements and contracts. While supply agreements and contracts contain volume-based pricing based on expected volumes, we cannot assure that adjustments to reflect volume shortfalls will be made under current industry practices because pricing is rarely adjusted retroactively when contract volumes are not achieved. Every effort is made to adjust future prices accordingly, but our ability to adjust prices is generally based on market conditions and we may not be able to adjust prices in various circumstances. This could have an adverse impact in the form of lost revenue or decreasing margins.
We may incur significant costs or liabilities to satisfy obligations under the terms of the warranties we supply and the contractual terms under which we sell our products and services.
With respect to our battery products, we typically offer warranties against any defects in manufacture or workmanship for a period up to one year from the date of purchase. With respect to our communications systems products, we now offer up to a three-year warranty. We provide a reserve for these potential warranty expenses, which is based on an analysis of historical warranty issues. There is no assurance that future warranty claims will be consistent with past history, and in the event we experience a significant increase in warranty claims, there is no assurance that our reserves will be sufficient. Excessive warranty claims could have a material adverse effect on our business, financial condition and results of operations.
Any inability to comply with changes to the regulations for the shipment of our products could limit our ability to transport our products to customers in a cost-effective manner and reduce our operating income and margins.
The transportation of Lithium batteries is regulated by the International Civil Aviation Organization (“ICAO”) and corresponding International Air Transport Association (“IATA”) Dangerous Goods Regulations and the International Maritime Dangerous Goods Code (“IMDG”) and in the U.S. by the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”). These regulations are based on the United Nations Recommendations on the Transport of Dangerous Goods Model Regulations and the United Nations Manual of Tests and Criteria. We currently ship our products pursuant to ICAO, IATA and PHMSA hazardous goods regulations. These regulations require companies to meet certain testing, packaging, labeling and shipping specifications for safety reasons. We have not incurred, and do not expect to incur, any significant costs in order to comply with these regulations. We believe we comply with all current U.S. and international regulations for the shipment of our products, and we intend and expect to comply with any new regulations that are imposed. We have established our own testing facilities to ensure that we comply with these regulations. If, however, we are unable to comply with any such new regulations, or if regulations are introduced that limit our ability to transport our products to customers in a cost-effective manner, this could reduce our operating income and margins, and have other material adverse effects on our business, financial condition and results of operations.
Our ability to use our net operating loss and tax credit carryforwards in the future may be limited, which could increase our tax liabilities and reduce our cash flow and net income.
At December 31, 2021, we had approximately $44,716 of U.S. net operating loss carryforwards and $2,239 of U.S. tax credit carryforward available to offset future taxable income. We continually assess the carrying value of these assets based on the relevant accounting standards. Based on our latest assessment at December 31, 2021, we believe it is more likely than not that our U.S. deferred tax assets will be fully realized. However, failure to achieve our business targets could result in future charges to our income tax provision if any of the net operating loss or tax credit carryforwards are not utilized. See discussion in Management’s Discussion & Analysis beginning on Page 25.
Our entrance into new markets could lead to additional exposure to financial risk or increased liability, and our failure to enter into those markets could lead to negative customer perception or loss of business from existing customers.
Our new products supporting our commercial diversification strategy will likely result in the introduction of our products in new end markets that we have not participate in before. These new market opportunities may carry certain risks that we may not have experienced in the past or that we may not be fully aware. While we perform extensive due diligence in the launch of our products in new end markets and mitigate our risks with our contracts and insurance coverage, we may not be fully aware of the risks that may exist until we gain more experience in these markets.
Negative publicity concerning Lithium-ion batteries may negatively impact the industries or markets we operate in.
We are unable to predict the impact, severity or duration of negative publicity related to fire/mishandling of Lithium-ion batteries or the environmental impact of their disposal, and how it may impact the industries or markets we serve. Ongoing negative attention being given to Lithium-ion batteries that are used in certain cellular phones or are integrated into the power systems of new commercial aircraft and electric motor vehicles may have an impact on the Lithium-ion battery industry as a whole, regardless of the design or usage of those batteries. The residual effects of such events could have an adverse effect on our business, financial condition, and results of operations.
Any impairment of goodwill and/or other indefinite-lived intangible assets could adversely impact our results of operations.
Our goodwill and other indefinite-lived intangible assets are subject to an impairment test on an annual basis. Additionally, goodwill and other indefinite-lived intangible assets are assessed for impairment whenever events and circumstances indicate that impairment may exist. Any excess carrying value of goodwill and/or other intangible assets resulting from an impairment assessment must be written off in the period of determination. In addition, from time to time, we may acquire a business which will require us to record goodwill and/or other indefinite-lived intangible assets based on the allocation of the total consideration transferred to consummate the acquisition to the identified tangible and intangible assets acquired and liabilities assumed based on their respective estimated fair values. We may subsequently experience unforeseen circumstances related to past or future acquisitions which may adversely impact the forecasted cash flows or other assumptions used to value these assets. Future determinations that the estimated fair value of our goodwill and/or indefinite-lived intangible assets is less than their respective carrying values may result in significant (non-cash) impairment charges which could have a material adverse impact on future results of operations.
We are subject to foreign currency fluctuations.
We maintain manufacturing operations in North America, Europe and China, and we export products to various countries. We purchase materials and sell our products in foreign currencies, and therefore currency fluctuations may impact our pricing of products sold and materials purchased. Sales to non-U.S. customers make up a significant percentage of our total revenues. For example, the percentage of our business with customers outside of the U.S. considerably increased in 2021 to 50% compared to 42% in 2020. A future strengthening of the U.S. dollar relative to our customers’ currencies could make our products relatively more expensive to them and, may adversely affect our sales levels and reduce profitability. In addition, our United Kingdom and China subsidiaries maintain their books in local currency and the translation of the subsidiary financial statements into U.S. dollars for our consolidated financial statements could have an adverse effect on our consolidated financial results due to changes in local currency value relative to the U.S. dollar. With the rapid pace of geopolitical events, it is difficult at this time to assess any future impact of currency fluctuation on the Company’s financial results, despite our proactive efforts to minimize the short-term risks of currency fluctuations. Accordingly, currency fluctuations could have a material adverse effect on our business, financial condition and results of operations by increasing our expenses and reducing our income. Finally, we maintain certain domestic U.S. cash balances denominated in foreign currencies, and the U.S. dollar equivalent of these balances fluctuates with changes in the foreign exchange rates between these currencies and the U.S. dollar.
A finding that our proprietary and intellectual property rights are not enforceable or invalid could allow our competitors and others to produce competing products based on our proprietary and intellectual property or limit our ability to continue to manufacture and market our products.
We believe our success depends more on the knowledge, ability, experience and technological expertise of our employees than on the legal protection of patents and other proprietary rights. However, we claim proprietary rights in various unpatented technologies, know-how, trade secrets and trademarks relating to our products and manufacturing processes. We cannot guarantee the degree of protection these various claims may or will afford, or that competitors will not independently develop or patent technologies that are substantially equivalent or superior to our technology. We protect our proprietary rights in our products and operations through contractual obligations, including nondisclosure agreements with certain employees, customers, consultants and strategic partners. There can be no assurance as to the degree of protection these contractual measures may or will afford. We have had patents issued and have patent applications pending in the U.S. and elsewhere. We cannot assure (1) that patents will be issued from any of these pending applications, or that the claims allowed under any issued patents will be sufficiently broad to protect our technology, (2) that any patents issued to us will not be challenged, invalidated or circumvented, or (3) as to the degree or adequacy of protection any patents or patent applications may or will afford. Further, if we are found to be infringing upon third party patents, we cannot assure that we will not be subjected to significant damages or will be able to obtain licenses with respect to such patents on acceptable terms, if at all. The failure to obtain necessary licenses could delay product shipments or the introduction of new products, and costly attempts to design around such patents could foreclose the development, manufacture or sale of products, all of which could materially adversely affect our business and the results of operations.
We are subject to the contract rules and procedures of the U.S. and foreign governments. These rules and procedures create significant risks and uncertainties for us that are not usually present in contracts with private parties.
We continue to develop battery products and communications systems to meet the needs of the U.S. and foreign governments. We compete in solicitations for awards of contracts. The receipt of an award, however, does not always result in the immediate release of an order and does not guarantee in any way any given volume of orders. Any delay of solicitations or anticipated purchase orders by, or future failure of, the U.S. or foreign governments to purchase products manufactured by us could have a material adverse effect on our business, financial condition and results of operations. In these scenarios we are also typically required to successfully meet contractual specifications and to pass various qualification-testing for the products under contract. Our inability to pass these tests in a timely fashion, as well as meet delivery schedules for orders released under contract, could have a material adverse effect on our business, financial condition and results of operations.
Additionally, when a U.S. government contract is awarded, there is a government procedure that permits unsuccessful companies to formally protest such award if they believe they were unjustly treated in the evaluation process. As a result of these protests, the government is precluded from proceeding under these contracts until the protests are resolved. A prolonged delay in the resolution of a protest, or a reversal of an award resulting from such a protest could have material adverse effects on our business, financial condition and results of operations.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act or other anti-corruption laws.
The FCPA, U.K. Bribery Act and other anti-corruption laws generally prohibit companies and their intermediaries from making improper payments (to foreign officials and otherwise) and require companies to keep accurate books and records and maintain appropriate internal controls. Our training program and policies mandate compliance with such laws. We operate in some parts of the world that have experienced governmental corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. If we are found to be liable for violations of anti-corruption laws (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others, including employees of our third-party partners or agents), we could suffer from civil and criminal penalties or other sanctions, incur significant internal investigation costs and suffer reputational harm.
We may incur significant costs because of known and unknown environmental matters.
National, state and local laws impose various environmental controls on the manufacture, transportation, storage, use and disposal of batteries and of certain chemicals used in the manufacture of batteries. We use and generate a variety of chemicals and other hazardous by-products in our manufacturing operations. These environmental laws govern, among other things, air emissions, wastewater discharges and the handling, storage and release of wastes and hazardous substances. Such laws and regulations can be complex and are subject to change. Although we believe that our operations are in substantial compliance with current environmental regulations and that, except as noted below, there are no environmental conditions that will require material expenditures for clean up at our present or former facilities or at facilities to which we have sent waste for disposal, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities. There can be no assurance that additional or modified regulations relating to the manufacture, transportation, storage, use and disposal of materials used to manufacture our batteries or restricting disposal of batteries will not be imposed, or as to how these regulations will affect us or our customers. Such changes in regulations could reduce our operating income and margins and have other material adverse effects on our business, financial condition and results of operations. We could incur substantial costs as a result of violations of environmental laws, including clean-up costs, fines and sanctions and third-party property damage or personal injury claims. Failure to comply with environmental requirements could also result in enforcement actions that materially limit or otherwise affect the operations of the facilities involved. Under certain environmental laws, a current or previous owner or operator of an environmentally contaminated site may be held liable for the entire cost of investigation, removal or remediation of hazardous materials at such property. This liability could result whether or not the owner or operator knew of, or was responsible for, the presence of any hazardous materials.
The EU RoHS Directive places restrictions on the use of certain hazardous substances in electrical and electronic equipment. All applicable products sold in the European Union market after July 1, 2006 must comply with EU RoHS Directive. While this directive does not apply to batteries and does not currently affect our defense products, should any changes occur in the directive that would affect our products, we intend and expect to comply with any new regulations that are imposed. Our commercial chargers are in compliance with this directive. Additional European Union directives, entitled the Waste Electrical and Electronic Equipment (“WEEE”) Directive and the Directive "on batteries and accumulators and waste batteries and accumulators", impose regulations affecting our non-defense products. These directives require producers or importers of particular classes of electrical goods to be financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. These directives assign levels of responsibility to companies doing business in European Union markets based on their relative market share. These directives call on each European Union member state to enact enabling legislation to implement the directive. As additional European Union member states pass enabling legislation our compliance system should be sufficient to meet such requirements. Our current estimated costs associated with our compliance with these directives based on our current market share are not significant. However, we continue to evaluate the impact of these directives as European Union member states implement guidance, and actual costs could differ from our current estimates.
The EU Battery Directive is intended to cover all types of batteries regardless of their shape, volume, weight, material composition or use. It is aimed at reducing mercury, cadmium, lead and other metals in the environment by minimizing the use of these substances in batteries and by treating and re-using old batteries. This directive applies to all types of batteries except those used to protect European member states’ security, for military purposes, or sent into space. To achieve these objectives, the EU Battery Directive prohibits the marketing of some batteries containing hazardous substances. It establishes processes aimed at high levels of collection and recycling of batteries with quantified collection and recycling targets. The directive sets out minimum rules for producer responsibility and provisions with regard to labeling of batteries and their removability from equipment. Product markings are required for batteries and accumulators to provide information on capacity and to facilitate reuse and safe disposal. We currently ship our products pursuant to the requirements of the directive. Our current estimated costs associated with our compliance with these directives based on our current market share are not significant. However, we continue to evaluate the impact of these directives as European Union member states implement guidance, and actual costs could differ from our current estimates.
The China RoHS 2 directive provides a regulatory framework, including similar hazardous substance restrictions as are imposed by the EU RoHS Directive, and applies to methods for the control and reduction of pollution and other public hazards to the environment caused during the production, sale, and import of EEP in China affecting a broad range of electronic products and parts. The regulatory framework of China RoHS 2 also now references the updated marking and labeling requirements under Standard SJ/T 11364-2014. The methods under China RoHS 2 only apply to EEP placed in the marketplace in China. We believe our compliance system is sufficient to meet our requirements under China RoHS 2. Our current estimated costs associated with our compliance with this regulation based on our current market share are not significant. However, we continue to evaluate the impact of this regulation, and actual costs could differ from our current estimates.
A number of domestic and international communities are prohibiting the landfill disposal of batteries and requiring companies to make provisions for product recycling. Of particular note are the EU Batteries Directive and the New York State Rechargeable Battery Recycling Law. We are committed to responsible product stewardship and ongoing compliance with these and future statutes and regulations. The compliance costs associated with current recycling statutes and regulations are not expected to be significant at this time. However, we continue to evaluate the impact of these regulations, and actual costs could differ from our current estimates and additional laws could be enacted by these and other states which entail greater costs of compliance.
The U.S. and foreign governments can audit our contracts with their respective defense and government agencies and, under certain circumstances, can adjust the economic terms, delivery schedule or other terms of those contracts.
A portion of our business comes from sales of products and services to the U.S. and foreign governments through various contracts. These contracts are subject to procurement laws and regulations that lay out policies and procedures for acquiring goods and services. The procurement laws and regulations also contain guidelines for managing contracts after they are awarded, including conditions under which contracts may be terminated, in whole or in part, at the government’s convenience or for default. Failure to comply with the procurement laws or regulations can result in civil, criminal or administrative proceedings involving fines, penalties, suspension of payments, or suspension or disbarment from government contracting or subcontracting for a period of time, which could have a material adverse effect on the Company.
Compliance with government regulations regarding the use of "conflict minerals" may result in increased costs and risks to the Company.
As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Act"), the SEC has promulgated disclosure requirements regarding the use of certain minerals, which are mined from the Democratic Republic of Congo and adjoining countries, known as conflict minerals. We are required to perform due diligence inquiries of our supply chain and publicly disclose whether we manufacture (as defined in the Act) any products that contain conflict minerals and could incur significant costs related to implementing a process that will meet the mandates of the Act. Additionally, customers typically rely on us to provide critical data regarding the parts they purchase, including conflict mineral information. Our material sourcing is broad-based and multi-tiered, and we may not be able to easily verify the origins for conflict minerals used in the products we sell. We have many suppliers, and each provides conflict mineral information in a different manner, if at all. Accordingly, because our supply chain is complex, we may face reputational challenges if we are unable to sufficiently verify the origins of conflict minerals used in our products. Additionally, customers may demand that the products they purchase be free of conflict minerals. This may limit the number of suppliers that can provide products in sufficient quantities to meet customer demand or at competitive prices.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 2. | PROPERTIES |
As of December 31, 2021, we own two buildings in Newark, New York comprising approximately 250,000 square feet, which serve operations primarily in the Battery & Energy Products operating segment. Our corporate headquarters are located in our Newark, New York facility. We own one building in Missouri City, Texas comprising 69,000 square feet, which houses our SWE business. We also lease approximately 97,000 square feet in two buildings on one campus in Shenzhen, China, approximately 25,000 square feet in six buildings in a contiguous area in Newcastle-under-Lyme, United Kingdom, and approximately 30,000 square feet in four facilities for our Excell business located in Houston, Texas and Calgary, Mississauga and Vancouver, Canada which serve operations in the Battery & Energy Products operating segment. The Shenzhen, China campus location includes a dormitory facility. We lease approximately 32,500 square feet in a facility in Virginia Beach, Virginia, which serves operations in the Communications Systems operating segment. We also lease sales and administrative offices, as well as manufacturing and production facilities, in India, which serve operations in the Battery & Energy Products operating segment. Our research and development efforts for our Battery & Energy Products are conducted at our Newark, New York, Missouri City, Texas, Newcastle-under-Lyme, United Kingdom and Shenzhen, China facilities, while our research and development efforts for our Communications Systems products are conducted in our leased facilities in Tallahassee, Florida and in Virginia Beach, Virginia. We believe that our facilities are adequate and suitable for our current needs.
| ITEM 3. | LEGAL PROCEEDINGS |
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.
We are subject to legal proceedings and claims that arise from time to time in the normal course of business. We believe that the final disposition of any such matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, recognizing that legal matters are subject to inherent uncertainties, there exists the possibility that ultimate resolution of these matters could have a material adverse impact on the Company’s financial position, results of operations or cash flows. We are not aware of any such situations at this time.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Ultralife’s common stock is listed on the NASDAQ Global Market under the symbol “ULBI.”
Holders
As of February 1, 2022, there were approximately 6,400 registered holders of record of our common stock.
Purchases of Equity Securities by the Issuer
There were no purchases of our common stock by the Company during the years ended December 31, 2021 and December 31, 2020.
Dividends
We have never declared or paid any cash dividends on our capital stock. Pursuant to our current credit facility, we are precluded from paying any dividends. We intend to retain earnings, if any, to finance future operations and expansion and, therefore, do not anticipate paying any cash dividends in the foreseeable future. Any future payment of dividends will depend upon our financial condition, capital requirements and earnings, as well as upon other factors that our Board of Directors may deem relevant.
| ITEM 6. | [RESERVED] |
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto appearing in Item 8 of this Form 10-K.
The financial information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in thousands of dollars, except for share and per share amounts. All figures presented below represent results from continuing operations, unless otherwise specified.
General
We offer products and services ranging from power solutions to communications and electronics systems to customers across the globe in the government, defense and commercial sectors. With an emphasis on strong engineering and a collaborative approach to problem solving, we design, manufacture, install and maintain power and communications systems including rechargeable and non-rechargeable batteries, communications and electronics systems and accessories and custom engineered systems. We sell our products internationally 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.
We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes Lithium 9-volt, cylindrical, thin cell and various other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories, such as cables. The Communications Systems segment includes RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, 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. As such, we report segment performance at the gross profit level and operating expenses as Corporate charges.
We continually evaluate ways to grow, including opportunities to expand through mergers, acquisitions and joint ventures, which we believe can broaden the scope of our products and services, expand operating and market opportunities and provide the ability to enter new lines of business synergistic with our portfolio of product offerings.
In January 2016, we acquired Accutronics Limited (“Accutronics”), a U.K. corporation based in Newcastle-under-Lyme, U.K., a leading independent designer and manufacturer of smart batteries and charger systems for high-performance, feature-laden portable and handheld electronic devices. We acquired Accutronics to advance our strategy of commercial revenue diversification, to expand our geographic penetration, and to achieve revenue growth from new product development.
On May 1, 2019, we acquired Southwest Electronic Energy Corporation, a Texas corporation (“SWE”), and a leading designer and manufacturer of high-performance smart battery systems and battery packs to customer specifications using lithium cells. SWE serves a variety of industrial markets, including oil and gas, remote monitoring, process control and marine, which demand uncompromised safety, service, reliability and quality. We acquired SWE as a bolt-on acquisition to further support our strategy of commercial revenue diversification by providing entry to the oil and gas exploration and production, and subsea electrification markets, which were previously unserved by us. Another key benefit includes obtaining a highly valuable technical team of battery pack and charger system engineers and technicians to add to our new product development-based revenue growth initiatives in our commercial end-markets particularly asset tracking, smart metering and other industrial applications.
On December 13, 2021, we acquired Excell Battery Canada Inc., a British Columbia corporation (“Excell Canada”) and 656700 B.C. Ltd., a British Columbia corporation (“656700”) and its wholly owned subsidiary, Excell Battery Corporation USA, a Texas corporation (“Excell USA” collectively, with Excell Canada and 656700, “Excell”), which operate under the name Excell Battery Group, 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, and mining, marine and other mission critical applications which demand uncompromised safety, service, reliability and quality. We acquired Excell as an important component of our strategy to diversify commercial revenue and expand the end markets we serve. Acquiring Excell offers us opportunities to further scale our Battery & Energy Products business and drive the operating leverage of our business model, expand into OEM device verticals that we do not presently serve, enhance our contributed value to our customers and realize cost synergies. Furthermore, Excell possesses experienced engineering and technical resources which we plan to utilize in progressing our global new product initiatives while adding a complementary line of highly engineered products that are costly to switch out.
Currently, we do not experience significant seasonal sales trends in either of our operating segments, although sales to the U.S. Department of Defense and other international defense organizations can be sporadic based on the needs of those particular customers and allocated funding levels.
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 meeting the demand of our customers. As an essential supplier currently exempt from government-mandated shutdown directives, we are striving to ensure an uninterrupted flow of our mission critical products serving medical device, first responder, public safety, energy and national security customers. For 2021, we have maintained normal operations at all our facilities.
For 2021, we estimate that the net impact of COVID-19 was a reduction to sales of approximately $11,000, a reduction to operating income of approximately $4,500 and a reduction to net income of approximately $3,400 or approximately $0.21 per diluted share. Increased lead times on components from suppliers and other COVID-19 related logistics matters significantly impacted both our internal and our customers manufacturing schedules, resulting in delays in our shipments to future periods. While demand for medical batteries, especially those used in ventilators, respirators and infusion pumps, remained at a high rate in 2021, our ability to service certain large orders was impacted by overall disruptions in supply chains and operations. These disruptions also impacted our shipments in industrial and government/defense markets. 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.
Consolidated revenues decreased by $9,445 or 8.8% to $98,267 for the year ended December 31, 2021 compared to $107,712 for the year ended December 31, 2020. During 2021, we experienced revenue declines of 5.2% for our Battery & Energy Products business and 29.2% for our Communications Systems business. This 2021 performance reflected a $1,749 or 2.8% increase in sales to our commercial customers and a $11,194 or 24.7% decrease in sales to government and defense customers. The increase in our commercial business was due primarily to a $3,878 or 26.2% increase in sales to industrial customers including those serviced by our China facility, a $3,513 or 26.9% rebound in sales to the oil and gas market and the initial sales contribution of $1,131 from Excell, partially offset by a $6,784 or a 19.7% decrease in sales to medical customers reflecting the 2020 surge in sales driven by the initial demand for our batteries used in ventilators, respirators, infusion pumps and other medical devices attributable to COVID-19 without the supply chain disruptions experienced in 2021.
The decrease in government and defense sales primarily resulted from the fulfillment of two large orders in 2020 – shipments of our legacy BA-5390 batteries in the amount of $4,875 to the U.S. Department of Defense under a spot purchase announced in December 2019 and shipments of vehicle amplifier-adaptor systems in the amount of $5,680 to support the U.S. Army’s Network Modernization initiatives completing the delivery orders announced in October 2018. During 2021, the U.S. Department of Defense did not place an order for additional shipments of 5390 batteries, although in December 2021 we received a firm-fixed price, indefinite delivery/indefinite quantity contact not to exceed $9,900 over a three-year base period with two one-year option periods. In October 2021 we were awarded a purchase order valued at approximately $4,200 to supply a global defense prime with our Vehicle Amplifier-Adaptors for the U.S. Army’s Leader radio program. However, due to supply chain lead times, shipments will commence in 2022.
Gross margin decreased to 25.1% for the year ended December 31, 2021 from 27.1% for the year ended December 31, 2020. The 200-basis point decrease was due primarily to costs incurred for the transition of new products to high volume production in 2021, incremental costs associated with lower factory throughput due to the supply chain disruptions associated with COVID-19 and unfavorable sales product mix.
Operating expenses increased by $1,149 or 4.9% to $24,607 during the year ended December 31, 2021, compared to $23,458 during the year ended December 31, 2020. The increase in operating expenses reflects our continued investment in engineering resources for new product development, including $801 for resources dedicated to the May 2021 indefinite-delivery/indefinite-quantity contract form the U.S. Army for purchases of Conformal Wear Batteries not to exceed $168,000 during the three-year base award period with the potential for up to an additional $350,000 should the six one-year options be exercised. In addition, the 2021 period includes $564 fully attributable to Excell, including $354 of one-time direct acquisition costs reflecting customary legal, audit and due diligence fees. Both periods reflected our continued tight control over discretionary spending.
Other expense totaled $186 for the year-ended December 31, 2021 compared to income of $1,322 for the year ended December 31, 2020. 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). 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. Excluding this gain in 2020, other expense totaled $271. The reduction in 2021 is a result of lower interest expense with the continued reduction of debt incurred with the financing for the SWE acquisition. This debt was paid in full in 2021.
Income tax provision was $79 for the year ended December 31, 2021 compared to $1,692 for the year-ended December 31, 2020. Our effective tax rate was (52.3%) for 2021, as compared to 24.1% for 2020, primarily due to the geographic mix of earnings. The income tax provision for the 2021 period is comprised of a $226 current provision for taxes expected to be paid on income primarily from our foreign operations, representing a cash-based effective tax rate of (150%) on a consolidated basis, and a $147 deferred tax benefit which represents a non-cash benefit primarily for U.S. net operating losses which are expected to fully offset future U.S. taxable income. The income tax provision for the 2020 period is comprised of a $306 current provision for taxes on income primarily from our foreign operations, representing a cash-based effective tax rate of 4.4%, and a $1,386 deferred tax provision which primarily represents non-cash charges for U.S. taxes which are expected to be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future.
Net loss attributable to Ultralife was $234 for 2021 as compared to net income of $5,232 for 2020. Net loss attributable to Ultralife common shareholders per diluted share was $0.01 for 2021 compared to net income of $0.33 per diluted share for 2020. Reflecting the use of net operating losses and tax credits on U.S. generated income, adjusted earnings per diluted share was a loss of $0.02 for 2021 compared to income of $0.41 for 2020. See the section “Adjusted EPS” on page 32 for a reconciliation of adjusted EPS to EPS.
Adjusted EBITDA, defined as net income (loss) attributable to Ultralife before net interest expense, provision (benefit) for income taxes, depreciation and amortization, plus/minus income/expense that we do not consider reflective of our continuing operations, amounted to $4,418 for the year ended December 31, 2021 compared to $11,289 for the prior year. See the section “Adjusted EBITDA” beginning on page 31 for a reconciliation of adjusted EBITDA to net income attributable to Ultralife.
The Company’s liquidity remains solid, with cash on hand of $8,413, working capital of $47,600 and a current ratio of 3.5. As of December 31, 2020, the Company had cash on hand of $10,653, working capital of $45,790 and a current ratio of 3.4.
As we look ahead, we believe our backlog, durable customer relationships and new product initiatives anchor our view that our long-term profitable growth drivers and strategy are sound and achievable.
Results of Operations
Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020:
| Year Ended December 31, |
Increase/ |
|||||||||||
| 2021 |
2020 |
(Decrease) |
||||||||||
| Revenues: |
||||||||||||
| Battery & Energy Products |
$ | 87,083 | $ | 91,907 | $ | (4,824 | ) | |||||
| Communications Systems |
11,184 | 15,805 | (4,621 | ) | ||||||||
| Total |
98,267 | 107,712 | (9,445 | ) | ||||||||
| Cost of Products Sold: |
||||||||||||
| Battery & Energy Products |
66,021 | 68,507 | (2,486 | ) | ||||||||
| Communications Systems |
7,604 | 10,046 | (2,442 | ) | ||||||||
| Total |
73,625 | 78,553 | (4,928 | ) | ||||||||
| Gross Profit: |
||||||||||||
| Battery & Energy Products |
21,063 | 23,400 | (2,337 | ) | ||||||||
| Communications Systems |
3,579 | 5,759 | (2,180 | ) | ||||||||
| Total |
24,642 | 29,159 | (4,517 | ) | ||||||||
| Operating Expenses |
24,607 | 23,458 | 1,149 | |||||||||
| Operating Income |
35 | 5,701 | (5,666 | ) | ||||||||
| Other Expense (Income), Net |
186 | (1,322 | ) | 1,508 | ||||||||
| Income Before Taxes |
(151 | ) | 7,023 | (7,174 | ) | |||||||
| Income Tax Provision |
79 | 1,692 | (1,613 | ) | ||||||||
| Net (Loss) Income |
(230 | ) | 5,331 | (5,561 | ) | |||||||
| Net Income Attributable to Non-Controlling Interest |
4 | 99 | (95 | ) | ||||||||
| Net (Loss) Income Attributable to Ultralife |
$ | (234 | ) | $ | 5,232 | $ | (5,466 | ) | ||||
| Net (Loss) Income Attributable to Ultralife Common Shares – Basic |
$ | (0.01 | ) | $ | 0.33 | $ | (0.34 | ) | ||||
| Net (Loss) Income Attributable to Ultralife Common Shares – Diluted |
$ | (0.01 | ) | $ | 0.33 | $ | (0.34 | ) | ||||
| Weighted Average Shares Outstanding –Basic |
16,036,676 | 15,902,108 | 134,568 | |||||||||
| Weighted Average Shares Outstanding – Diluted |
16,036,676 | 16,095,676 | (59,000 | ) | ||||||||
Revenues. Total revenues for the year ended December 31, 2021 amounted to $98,267, a decrease of $9,445, or 8.8% from the $107,712 reported for the year ended December 31, 2020.
Battery & Energy Products revenues decreased $4,824, or 5.2%, for the year ended December 31, 2021 as compared to the prior year. Commercial revenues of this business increased 1,749 or 2.8% from 2020 and now comprise 73.6% of total segment sales versus 67.8% last year. The year-over-year increase primarily resulted from a $3,878 or 26.2% increase in sales to industrial customers including those serviced by our China facility (i.e., Lithium/Thin Cell battery sales increased 104.0% and 9-volt batteries increased 15.0%), a $3,513 or 26.9% rebound in sales to the oil and gas market (i.e., downhole drilling battery sales increased 26.8%, pipeline inspection batteries increase 24.1% and marine and oceanography batteries increased 35.0%) and the initial sales contribution of $1,131 from Excell, partially offset by a $6,784 or 19.7% decrease in sales to medical customers reflecting the 2020 surge in sales driven by the initial demand for our batteries used in ventilators, respirators, infusion pumps and other medical devices attributable to COVID-19 without the supply chain disruptions experienced in 2021. Government and defense sales of this business decreased $6,573 or 22.2% from 2020 and now comprise 26.4% of total segment sales versus 32.2% last year. The decrease primarily reflects the non-recurrence in 2021 of an order received in December 2019 from the U.S. Department of Defense for our legacy 5390 batteries which was completed in 2020 with the shipment of $4,875. In addition, we experienced delayed shipments to a large global defense prime contractor attributable to supply chain disruptions which comprised a large portion of the remaining variance.
Communications Systems revenues decreased $4,621 or 29.2% for the year ended December 31, 2021 as compared to the prior year. This decrease is primarily attributable to 2020 shipments of vehicle amplifier-adaptor systems in the amount of $5,680 to support the U.S. Army’s Network Modernization initiatives completing the delivery of orders announced in October 2018. In October 2021 we were awarded a purchase order valued at approximately $4,200 to supply a global defense prime with our Vehicle Amplifier-Adaptors for the U.S. Army’s Leader radio program. However, due to supply chain lead times, shipments will commence in 2022.
Our order backlog at December 31, 2021 was $63,324, an increase of $24,032 or 61.2% from the backlog at December 31, 2020 which was $39,292. Excluding Excell which was purchased on December 13, 2021, the backlog exiting 2021 was $53,166 which represents an increase of $13,874 or 35.3% compared to 2020. For our Battery & Energy Products business, the backlog increased $20,744 or 60.0% to $55,346 from $34,602 when including Excell and increased $10,586 or 30.6% to $45,188 when excluding Excell. The year-over-year increase when excluding Excell is primarily driven by the demand for our medical batteries, which in some cases includes orders pushed into 2022 because of the supply chain disruptions experienced in 2021. The 2021 year-end backlog is related to orders expected to ship in the next year and does not include future shipments under the indefinite delivery/indefinite quantity U.S. Department of Defense award for our BA-5390 batteries ($9,900), BA-5790/BA-5795 batteries ($49,800) and Conformal Wearable Batteries ($168,000/$350,000). For our Communications Systems business, the backlog increased $3,288 or 70.1% to $7,978 from $4,690. The year-over-year increase is primarily a result of a purchase order valued at approximately $4,200 to supply a global defense prime with our Vehicle Amplifier-Adaptors for the U.S. Army’s Leader radio program. The 2021 year-end backlog is related to orders that are expected to ship throughout 2022.
Cost of Products Sold and Gross Profit. Cost of products sold for the year ended December 31, 2021 decreased $4,928 or 6.3% from the year ended December 31, 2020. Consolidated cost of products sold as a percentage of total revenue increased from 72.9% for the year ended December 31, 2020 to 74.9% for the year ended December 31, 2021. Correspondingly, consolidated gross margin was 25.1% for the year ended December 31, 2021, compared with 27.1% for the year ended December 31, 2020. The 200-basis point decline in gross margin is due primarily to costs incurred for the transition of new products to high volume production in 2021, incremental costs associated with lower factory throughput due to the supply chain disruptions associated with COVID-19 and unfavorable sales product mix.
For our Battery & Energy Products segment, the cost of products sold decreased $2,486 or 3.6%, from the year ended December 31, 2020. Battery & Energy Products’ gross profit for 2021 was $21,062 or 24.2% of revenues, a decrease of $2,338 or 10.0% from gross profit of $23,400, or 25.5% of revenues, for 2020. Battery & Energy Products’ gross margin decreased for the year ended December 31, 2021 by 130 basis points from the prior year to 24.2%, reflecting lower factory volume and incremental costs due to supply chain disruptions associated with COVID-19, costs associated with the transition of new products to higher volume production and unfavorable sales product mix.
For our Communications Systems segment, the cost of products sold decreased by $2,442 or 24.3% from the year ended December 31, 2020. Communications Systems’ gross profit for the year ended December 31, 2021 was $3,580 or 32.0% of revenues, a decrease of $2,179 or 37.8% from gross profit of $5,759 or 36.4% of revenues, for the year ended December 31, 2020. The 440 basis points decrease in gross margin during 2021 to 32.0% is primarily due to lower factory throughput in 2021 and sales mix between years, predominantly higher sales of Vehicle Amplifier-Adaptor systems to fulfill U.S. Army orders in 2020.
Operating Expenses. Total operating expenses for the year ended December 31, 2021 increased $1,149 or 4.9% from the year ended December 31, 2020. The increase in operating expenses reflects our continued investment in engineering resources for new product development, including $801 for resources dedicated to the May 2021 indefinite-delivery/indefinite-quantity contract form the U.S. Army for purchases of Conformal Wear Batteries not to exceed $168,000 during the three-year base award period with the potential for up to an additional $350,000 should the six one-year options be exercised. In addition, the 2021 period includes $564 fully attributable to Excell, including $354 of one-time direct acquisition costs reflecting customary legal, audit and due diligence fees. Both periods reflected our continued tight control over discretionary spending.
Overall, operating expenses as a percentage of revenues was 25.0% for the year ended December 31, 2021 compared to 21.8% for the comparable 2020 period. Amortization expense associated with intangible assets related to our acquisitions increased to $633 for the year-ended December 31, 2021 ($515 in selling, general and administrative expenses and $118 in research and development costs) from $595 for the year ended December 31, 2020 ($471 in selling, general and administrative expenses and $124 in research and development costs). This increase was due to our acquisition of Excell in December 2021. Research and development costs were $6,826 in 2021, an increase of $879 or 14.8%, from $5,947 reported in 2020. This increase is largely attributable to the hiring of engineering resources to support new product development in our Battery & Energy Products business segment, including $801 pertaining to our May 2021 Conformal Wearable Battery award from the U.S. Army. Selling, general, and administrative expenses increased $270 or 1.5%, to $17,781 for the year ended December 31, 2021 from $17,511 for the year ended December 31, 2020. The 2021 expenses include $564 attributable to Excell, including $354 of one-time direct acquisition costs reflecting customary legal, audit and due diligence fees. We continued tight control over discretionary spending across the Company.
Other (Income) Expense. Other expense totaled $186 for the year ended December 31, 2021 compared to income of $1,322 for the year ended December 31, 2020. Other income for 2020 includes a $1,593 litigation gain (net of fees) recognized upon resolution of Ultralife’s claim in a class action lawsuit in December 2020. Interest and financing expense, net of interest income, decreased $193 or 44.4% to $242 for 2021 from $436 for 2020 due to the 2021 continued reduction and pay-off of the debt relating to the May 1, 2019 acquisition of SWE. Miscellaneous income amounted to $56 for 2021 compared to $165 for 2020, primarily due to transactions impacted by foreign currency fluctuation between the U.S. dollar, pound sterling and euro.
Income Taxes. The income tax provision was $79 for the year ended December 31, 2021 compared to $1,692 for the year-ended December 31, 2020. Our effective tax rate was (52.3%) for 2021, as compared to 24.1% for 2020, primarily due to the geographic mix of earnings. The income tax provision for the 2021 period is comprised of a $226 current provision for taxes expected to be paid on income primarily from our foreign operations, representing a cash-based effective tax rate of (150%) on a consolidated basis, and a $147 deferred tax benefit which represents a non-cash benefit primarily for U.S. net operating losses which are expected to fully offset future U.S. taxable income. The income tax provision for the 2020 period is comprised of a $306 current provision for taxes on income primarily from our foreign operations, representing a cash-based effective tax rate of 4.4%, and a $1,386 deferred tax provision which primarily represents non-cash charges for U.S. taxes which are expected to be fully offset by net operating loss and tax credit carryforwards for the foreseeable future.
Net (Loss) Income Attributable to Ultralife. Net loss attributable to Ultralife was $234 for 2021 as compared to net income of $5,232 for 2020. Net loss attributable to Ultralife common shareholders per diluted share was $0.01 for 2021 compared to net income of $0.33 per diluted share for 2020. Adjusted loss per diluted share was $0.02 for 2021, reflecting the exclusion of the $147 non-cash deferred tax benefit for 2021, compared to adjusted earnings per diluted share of $0.41 for 2020, excluding the $1,386 deferred tax provision which primarily represents non-cash charges for U.S. tax which are expected to be fully offset by net operating losses and tax credit carryforwards for the foreseeable future. See the section “Adjusted EPS” on page 32 for a reconciliation of adjusted EPS to EPS. The net adverse impact of COVID-19 on EPS for 2021 was approximately $0.21. Weighted average common shares outstanding used to compute diluted earnings per share decreased from 16,095,676 for the 2020 period to 16,036,676 for the 2021 period, mainly due to the 2021 net loss which resulted in the use of basic weighted average common shares to compute diluted earnings per share.
Adjusted EBITDA
In evaluating our business, we consider and use Adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure of our operating performance. We define Adjusted EBITDA as net income (loss) attributable to Ultralife before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expense/income that we do not consider reflective of our ongoing continuing operations. We also use Adjusted EBITDA as a supplemental measure to review and assess our operating performance and to enhance comparability between periods. We also believe the use of Adjusted EBITDA facilitates investors’ understanding of operating performance from period to period by backing out potential differences caused by variations in such items as capital structures (affecting relative interest expense and stock-based compensation expense), the amortization of intangible assets acquired through our business acquisitions (affecting relative amortization expense and provision (benefit) for income taxes), the age and book value of facilities and equipment (affecting relative depreciation expense) and one-time charges/benefits relating to income taxes. We also present Adjusted EBITDA from operations because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. We reconcile Adjusted EBITDA to Net income (loss) attributable to Ultralife, the most comparable financial measure under GAAP.
We use Adjusted EBITDA in our decision-making processes relating to the operation of our business together with GAAP financial measures such as operating income. We believe that Adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance, and of stock-based compensation, which is a non-cash expense that varies widely among companies. We believe that by presenting Adjusted EBITDA, we assist investors in gaining a better understanding of our business on a going forward basis. We provide information relating to our Adjusted EBITDA so that securities analysts, investors and other interested parties have the same data that we employ in assessing our overall operations. We believe that trends in our Adjusted EBITDA are a valuable indicator of our operating performance on a consolidated basis and of our ability to produce operating cash flows to fund working capital needs, to service debt obligations and to fund capital expenditures.
The term Adjusted EBITDA is not defined under GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. Our Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, Adjusted EBITDA should not be considered in isolation or as a substitute for net income attributable to Ultralife or other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include, but are not limited to, the following:
| a. |
Adjusted EBITDA does not reflect (1) our cash expenditures or future requirements for capital expenditures or contractual commitments; (2) changes in, or cash requirements for, our working capital needs; (3) the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; (4) income taxes or the cash requirements for any tax payments; and (5) all of the costs associated with operating our business; |
| b. |
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA from continuing operations does not reflect any cash requirements for such replacements; |
| c. |
While stock-based compensation is a component of cost of products sold and operating expenses, the impact on our consolidated financial statements compared to other companies can vary significantly due to such factors as assumed life of the stock-based awards and assumed volatility of our common stock; and |
| d. |
Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only on a supplemental basis. Neither current nor potential investors in our securities should rely on Adjusted EBITDA as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of Adjusted EBITDA to net income attributable to Ultralife.
| Year ended December 31, |
||||||||
| 2021 |
2020 |
|||||||
| Net (loss) income attributable to Ultralife |
$ | (234 | ) | $ | 5,232 | |||
| Add: |
||||||||
| Interest and financing expense, net |
242 | 436 | ||||||
| Income tax provision |
79 | 1,692 | ||||||
| Depreciation expense |
2,906 | 2,340 | ||||||
| Amortization of intangible assets |
633 | 646 | ||||||
| Stock-based compensation expense |
671 | 943 | ||||||
| Non-cash purchase accounting adjustments |
121 | - | ||||||
| Adjusted EBIDTA |
$ | 4,418 | $ | 11,289 | ||||
Adjusted EPS
In evaluating our business, we consider and use Adjusted EPS, a non-GAAP financial measure, as a supplemental measure of our business performance in addition to GAAP financial measures. We define Adjusted EPS as net income (loss) attributable to Ultralife Corporation excluding the provision for deferred taxes divided by our weighted average shares outstanding on both a basic and diluted basis. We believe that this information is useful in providing period-to-period comparisons of our results by reflecting the portion of our tax provision that we expect will be offset by our U.S. net operating loss carryforwards and other tax credits for the foreseeable future. We reconcile Adjusted EPS to EPS, the most comparable financial measure under GAAP. Neither current nor potential investors in our securities should rely on Adjusted EPS as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of Adjusted EPS to EPS and net income attributable to Ultralife.
Adjusted EPS is calculated as follows for the periods presented:
| Year Ended December 31, |
||||||||||||||||||||||||
| 2021 |
2020 |
|||||||||||||||||||||||
| Amount |
Per Basic Share |
Per Diluted Share |
Amount |
Per Basic Share |
Per Diluted Share |
|||||||||||||||||||
| Net (loss) income attributable to Ultralife Corporate |
$ | (234 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | 5,232 | $ | 0.33 | $ | 0.33 | |||||||||
| Deferred tax (benefit) provision |
(147 | ) | (0.01 | ) | (0.01 | ) | 1,386 | 0.09 | 0.08 | |||||||||||||||
| Adjusted net (loss) income attributable to Ultralife Corporation |
$ | (381 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | 6,618 | $ | 0.42 | $ | 0.41 | |||||||||
| Weighted average shares outstanding |
16,037 | 16,037 | 15,902 | 16,096 | ||||||||||||||||||||
Liquidity and Capital Resources
Cash Flows and General Business Matters
As of December 31, 2021, cash totaled $8,413 (including restricted cash of $84), a decrease of $2,240 from the $10,653 as of December 31, 2020, primarily attributable to $23,519 cash paid (net of $736 cash acquired) for the Excell acquisition on December 13, 2021, funded in large part by borrowings of $20,980 from the Company’s credit facilities, and cash in advance payments of approximately $3,000 made to certain vendors to secure raw material components to help service our backlog in an efficient and timely manner, partially offset by cash generated from our operations.
For the year ended December 31, 2021, we generated $4,325 cash from our operations, as compared to $21,720 cash generated from operations for the year ended December 31, 2020. In 2021, cash generated from operating activities consisted of net loss of $230 and a deferred tax benefit of $147, offset by non-cash expenses of depreciation, amortization, and stock-based compensation totaling $4,314 and a $388 increase attributable to reduced net working capital. For the year ended December 31, 2020, cash generated from operating activities of $21,720 was attributable to net income of $5,331, a deferred tax provision of $1,386, non-cash expenses of depreciation, amortization, and stock-based compensation totaling $3,929, and a $12,667 reduction in net working capital, partially offset by a gain of $1,593 recognized upon resolution of Ultralife’s claim in a class action lawsuit.
Cash used in investing activities was $26,333 for the year ended December 31, 2021 attributable to our acquisition of Excell for an aggregate net purchase price of 23,519, and capital expenditures of $2,814. For the year ended December 31, 2020, cash used in investing activities was $2,981, primarily attributable to capital expenditures.
Cash provided by financing activities for the year ended December 31, 2021 was $19,642, largely representing draws on our credit facilities totaling $20,980, to finance the Excell acquisition. For the year ended December 31, 2020, cash used in financing activities was $15,694, primarily representing the paydown of borrowings to finance the May 2019 acquisition of SWE, for which the $1,474 balance was fully paid during 2021.
We continue to have significant U.S. net operating loss carryforwards available to utilize as an offset to taxable income. As of December 31, 2021, none of our U.S. net operating loss carryforwards have expired. See Note 7 to the consolidated financial statements for additional information.
Going forward, we expect positive operating cash flow and the availability under our Revolving Credit Facility will be sufficient to meet our obligations for both financing and investing.
Commitments
On December 13, 2021, in connection with financing the Excell acquisition (see Note 2 to the consolidated financial statements), the Company drew down $10,000 on its Term Loan Facility and $10,980 under its Revolving Credit Facility. As of December 31, 2021, the Company had $10,000 outstanding principal on the Term Loan Facility, of which $2,000 was due to be paid over the next twelve months, and $10,980 outstanding principal on the Revolving Credit Facility. The Company is in full compliance with its debt covenants under the Credit Facilities.
As of December 31, 2021, we had made commitments to purchase approximately $630 of production machinery and equipment.
With respect to our battery products, we typically offer warranties against any defects due to product manufacture or workmanship for up to one year from the date of purchase. With respect to our communications accessory products, we typically offer a three-year warranty. We provide for a reserve for these potential warranty expenses, which is based on an analysis of historical warranty issues. There is no assurance that future warranty claims will be consistent with past history, and in the event we experience a significant increase in warranty claims, there is no assurance that our reserves would be sufficient. This could have a material adverse effect on our business, financial condition and results of operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The above discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires the application of accounting policies and the use of estimates. The accounting policies most important to the preparation of the consolidated financial statements and estimates that require management’s most difficult, subjective or complex judgments are described below.
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. 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. 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.
Our contracts with customers generally have an original expected duration of less 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.
Valuation of Inventory:
Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in, first-out (“FIFO”) method. Our inventory includes raw materials, work in process and finished goods. We recognize provisions for excess, obsolete or slow-moving inventory. Inherent in our estimates of net realizable value in determining inventory valuation are assumptions related to expectations of future demand for our products, product lifecycles, product support, technical obsolescence, regulatory requirements, and economic and market conditions. Estimates related to the valuation of inventory are susceptible to changes as the underlying assumptions are continuously evaluated. If our assumptions are adversely different from those estimated by management, inventory adjustments to reduce inventory values would result in an increase in inventory write-offs and a decrease in gross margins.
Goodwill and Other Indefinite Lived Intangible Assets:
Under the acquisition method of accounting, 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 other intangible assets with indefinite lives, but instead evaluate these assets for impairment at least annually and whenever events or circumstances indicate that impairment may exist.
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 the other intangible assets with an indefinite life 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.
We conducted our 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. The estimated fair value of each reporting unit was determined using a discounted cash flow model. The estimated fair value of each indefinite-lived intangible asset was determined using other income-based valuation models. Significant estimates and assumptions were used to estimate fair value, including our 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. Other key assumptions used to value the trademarks and customer relationships included royalty rates and attrition rates, respectively. The significant estimates and assumptions used in these valuations are subject to judgment based on sources utilized and the assessment of risks related to our internal forecasts. Based on the results of our impairment test, and consideration of qualitative factors, no impairments were identified. Estimated fair value exceeded carrying value for all reporting units and other indefinite-lived intangible assets by more than 10%. There is a possibility that our goodwill and other intangible assets could be impaired in the future should there be a significant change in the significant estimates and assumptions used in our impairment assessment.
Impairment of Long-Lived Assets:
We assess our long-lived assets for impairment whenever events or circumstances indicate their carrying amounts may not be recoverable. 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. 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 either through the assistance of an independent valuation or as the present value of expected discounted future cash flows. The discount rate used by us in our evaluation is an industry-based weighted average cost of capital. If the expected undiscounted future cash flows exceed the respective carrying amount as of the date of assessment, no impairment charge is recognized.
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.
As of December 31, 2021, we 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 2035, 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. As of December 31, 2021, we have not recognized a valuation allowance against our other foreign deferred tax assets, as we believe that it is more likely than not that they will be realized. We will continue to evaluate the realizability of our deferred tax assets in future periods.
Stock-Based Compensation:
We recognize compensation cost relating to share-based payment transactions in our 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). We calculate implied volatility for stock options based on an average of historical volatility over the expected life of the awards. The computation of expected term is determined based on historical experience of similar awards, giving consideration to the contractual terms of the awards and the vesting period. 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. Our awards are generally valued using the Black-Scholes method. If required, our market-based awards are valued using a Monte Carlo simulation.
Business Combinations:
We account for businesses acquired using the acquisition method of accounting. Under this method, all acquisition-related costs are expensed as incurred, and 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. As part of this process, we identify and attribute values and estimated lives to property and equipment and intangible assets acquired. These determinations involve significant estimates and assumptions, including those with respect to future cash flows, discount rates and asset lives, and therefore require considerable judgment. These determinations affect the amount of depreciation and amortization expense recognized in future periods. The results of operations of acquired businesses are included in the consolidated statements of income and comprehensive income beginning on the respective acquisition date.
Warranties:
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 and related reserves are based on actual past experience and are generally estimated as a percentage of sales over the warranty period.
Environmental Issues:
Environmental expenditures, if any, that relate to current operations, are generally 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.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a smaller reporting company, we are not required to provide this information.
| 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 |
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 |
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.
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/
We have served as the Company's auditor since 2016.
March 8, 2022
| ULTRALIFE CORPORATION AND SUBSIDIARIES |
|||||||
| CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) |
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Trade accounts receivable, net of allowance for doubtful accounts of and , respectively | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Deferred income taxes, net | ||||||||
| Other noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Current portion of long-term debt | ||||||||
| Accrued compensation and related benefits | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net | ||||||||
| Deferred income taxes | ||||||||
| Other noncurrent liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 5) | ||||||||
| Shareholders' Equity: | ||||||||
| Preferred stock – par value per share; authorized shares; issued | ||||||||
| Common stock – par value per share; authorized shares; issued – shares and shares, respectively; outstanding – shares and shares, respectively | ||||||||
| Capital in excess of par value | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock - at cost; shares and shares, respectively | ( | ) | ( | ) | ||||
| Total Ultralife Corporation equity | ||||||||
| Non-controlling interest | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
| The accompanying notes are an integral part of these consolidated financial statements. |
| 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 | $ | $ | ||||||
| Cost of products sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Research and development | ||||||||
| Selling, general and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating income | ||||||||
| Other expense (income): | ||||||||
| Interest and financing expense | ||||||||
| Miscellaneous income | ( | ) | ( | ) | ||||
| Gain on litigation settlement | ( | ) | ||||||
| Total other expense (income) | ( | ) | ||||||
| (Loss) income before income taxes | ( | ) | ||||||
| Income tax provision | ||||||||
| Net (loss) income | ( | ) | ||||||
| Net income attributable to non-controlling interest | ||||||||
| Net (loss) income attributable to Ultralife Corporation | ( | ) | ||||||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustments | ||||||||
| Comprehensive (loss) income attributable to Ultralife Corporation | $ | ( | ) | $ | ||||
| Net (loss) income per share attributable to Ultralife Corporation common shareholders – Basic | $ | ) | $ | |||||
| Net (loss) income per share attributable to Ultralife Corporation common shareholders – Diluted | $ | ) | $ | |||||
| Weighted average shares outstanding – Basic | ||||||||
| Weighted average shares outstanding – Diluted | ||||||||
| The accompanying notes are an integral part of these consolidated financial statements. |
| 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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||
| Stock option exercises | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation -stock options | ||||||||||||||||||||||||||||||||
| Stock-based compensation -restricted stock | ||||||||||||||||||||||||||||||||
| Vesting of restricted stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ||||||||||||||||||||||||||||||||
| Balance – December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock option exercises | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation -stock options | ||||||||||||||||||||||||||||||||
| Stock-based compensation -restricted stock | ||||||||||||||||||||||||||||||||
| Vesting of restricted stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | ||||||||||||||||||||||||||||||||
| Balance – December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. |
| ULTRALIFE CORPORATION AND SUBSIDIARIES |
|||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) |
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of financing fees | ||||||||
| Stock-based compensation | ||||||||
| Deferred income tax expense | ( | ) | ||||||
| Gain on litigation settlement | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventories, gross | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Income taxes receivable and payable | ( | ) | ||||||
| Accounts payable and other liabilities | ) | |||||||
| Net cash provided by operating activities | ||||||||
| INVESTING ACTIVITIES: | ||||||||
| Purchase of Excell, net of cash acquired | ( | ) | ||||||
| Purchases of property, plant and equipment | ) | ( | ) | |||||
| Proceeds from sale of equipment | ||||||||
| Net cash used in investing activities | ) | ( | ) | |||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from amended credit facilities | ||||||||
| Payment of credit facilities | ( | ) | ( | ) | ||||
| Proceeds from exercise of stock options | ||||||||
| Tax withholdings on stock-based awards | ( | ) | ( | ) | ||||
| Payment of debt issuance costs | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ||||||||
| INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| Cash - Beginning of year | ||||||||
| Cash - End of year | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Construction in process in accounts payable | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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.
| 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 | – | ||
| Machinery and Equipment | – | ||
| Furniture and Fixtures | – | ||
| Computer Hardware and Software | – | ||
| Leasehold Improvements | | ||
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.
| 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 $
| 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.
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
| 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.
| 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
| 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.
Note 2 – Acquisition
On December 13, 2021, the Company acquired all the outstanding shares of Excell for an aggregate net purchase price of $
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
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 | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment | ||||
| Goodwill | ||||
| Other intangible assets | ||||
| Other noncurrent assets | ||||
| Accounts payable | ( | ) | ||
| Accrued compensation and related benefits | ( | ) | ||
| Accrued expenses and other current liabilities | ( | ) | ||
| Deferred tax liability, net | ( | ) | ||
| Other noncurrent liabilities | ( | ) | ||
| Net assets acquired | $ |
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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Trade name | Indefinite | - | - | - | - | - | ||||||||||||||||||||||
| Customer contracts | ||||||||||||||||||||||||||||
| Backlog | ||||||||||||||||||||||||||||
| Technology | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
We acquired right-of-use assets and assumed lease liabilities of $
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 $
During the year ended December 31, 2021, the Company incurred acquisition-related costs and other non-recurring expenses of $
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 | $ | $ | ||||||
| Operating income | ||||||||
| Net Income attributable to Ultralife Corporation | ||||||||
| Net income per share attributable to Ultralife Corporation: | ||||||||
| Basic | $ | . | $ | . | ||||
| Diluted | $ | . | $ | . | ||||
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 $
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 -year, $
Upon closing of the Excell Acquisition on December 13, 2021, the Company drew down the full amount of the Term Loan Facility and $
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
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
The Company must pay a fee of
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.
Note 4 - Supplemental Balance Sheet Information
| a. | Cash and Restricted Cash |
The Company had cash and restricted cash totaling $
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
As of December 31, 2021 and December 31, 2020, restricted cash included $
| 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 | $ | $ | ||||||
| Work in process | ||||||||
| Finished products | ||||||||
| Total | $ | $ | ||||||
| c. | Property, Plant and Equipment |
Major classes of property, plant and equipment consisted of the following:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Land | $ | $ | ||||||
| Buildings and leasehold improvements | ||||||||
| Machinery and equipment | ||||||||
| Furniture and fixtures | ||||||||
| Computer hardware and software | ||||||||
| Construction in progress | ||||||||
| Less – Accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation expense was $
| 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
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 | $ | $ | $ | |||||||||
| Acquisition of Excell | ||||||||||||
| Effect of foreign currency translation | ||||||||||||
| Balance – December 31, 2021 | $ | $ | $ | |||||||||
The composition of intangible assets was:
| December 31, 2021, | ||||||||||||
| Cost | Accumulated amortization | Net | ||||||||||
| Customer relationships | $ | $ | $ | |||||||||
| Patents and technology | ||||||||||||
| Trade names | ||||||||||||
| Trademarks | ||||||||||||
| Other | ||||||||||||
| Total other intangible assets | $ | $ | $ | |||||||||
| December 31, 2020, | ||||||||||||
| Cost | Accumulated amortization | Net | ||||||||||
| Customer relationships | $ | $ | $ | |||||||||
| Patents and technology | ||||||||||||
| Trade name | ||||||||||||
| Trademarks | ||||||||||||
| Total other intangible assets | $ | $ | $ | |||||||||
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 | $ | $ | ||||||
| Selling, general and administrative expense | ||||||||
| Total | $ | $ | ||||||
Future amortization expense of amortizable intangible assets will be approximately $
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 $
| 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 $
| 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.
| 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 | $ | $ | ||||||
| Provision for warranties issued | ||||||||
| Settlements made | ( | ) | ( | ) | ||||
| Balance, December 31 | $ | $ | ||||||
Note 6 - Shareholders' Equity
We recorded non-cash stock compensation expense in each period as follows:
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Stock options | $ | $ | ||||||
| Restricted stock | ||||||||
| Total | $ | $ | ||||||
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
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
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 -year period and expire on the anniversary of the grant date. As of December 31, 2021, there were
As of December 31, 2021, there was $
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 | % | % | ||||||
| Volatility factor | % | % | ||||||
| Weighted average expected life (years) | ||||||||
| Forfeiture rate | % | % | ||||||
| Dividends | % | % | ||||||
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 | $ | |||||||||||||||
| Options granted | ||||||||||||||||
| Options exercised | ( | ) | ||||||||||||||
| Options forfeited or expired | ( | ) | ||||||||||||||
| Shares under option – December 31 | $ | $ | ||||||||||||||
| Vested and expected to vest - December 31 | $ | $ | ||||||||||||||
| Options exercisable – December 31 | $ | $ | ||||||||||||||
| Year ended December 31, 2020 | ||||||||
| Number of shares | Weighted average exercise price per share | |||||||
| Shares under option – January 1 | $ | |||||||
| Options granted | ||||||||
| Options exercised | ( | ) | ||||||
| Options forfeited or expired | ( | ) | ||||||
| Shares under option – December 31 | $ | |||||||
| Options exercisable – December 31 | $ | |||||||
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 | - | $ | $ | $ | ||||||||||||||||||
| $5.71 | - | $ | ||||||||||||||||||||
| $6.69 | - | $ | ||||||||||||||||||||
| $8.25 | - | $ | ||||||||||||||||||||
| $3.71 | - | $ | $ | $ | ||||||||||||||||||
The weighted average fair value of options granted during the years ended December 31, 2021 and 2020 was $
Cash received from stock option exercises under our stock-based compensation plans for the years ended December 31, 2021 and 2020 was $
Restricted shares vest in equal annual installments over years. As of December 31, 2021, there was $
There were
Note 7 - Income Taxes
For the years ended December 31, 2021 and 2020, we recognized income tax expense of $
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Current: | ||||||||
| State | $ | $ | ||||||
| Foreign | ||||||||
| Deferred: | ||||||||
| Federal | ( | ) | ||||||
| Foreign | ( | ) | ||||||
| ( | ) | |||||||
| Total income tax provision | $ | $ | ||||||
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 | $ | $ | ||||||
| Tax credit carryforwards | ||||||||
| Intangible assets | ||||||||
| Accrued expenses, reserves and other | ||||||||
| Research and development | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance for deferred tax assets | ( | ) | ( | ) | ||||
| Net deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Property, plant and equipment | ( | ) | ( | ) | ||||
| Intangible assets | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | $ | ||||||
Net deferred tax assets (liabilities) are comprised of the following balance sheet amounts:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Deferred tax assets | $ | $ | ||||||
| Deferred tax liabilities | ( | ) | ( | ) | ||||
| $ | $ | |||||||
For financial reporting purposes, net (loss) income from continuing operations before income taxes is as follows:
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| United States | $ | ( | ) | $ | ||||
| Foreign | ||||||||
| $ | ( | ) | $ | |||||
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 | % | % | ||||||
| Increase (decrease) in tax provision resulting from: | ||||||||
| Equity compensation | ||||||||
| Acquisition-related costs | ( | ) | ||||||
| Income tax credits | ( | ) | ||||||
| Foreign tax rate change | ( | ) | ||||||
| Foreign tax rates | ( | ) | ||||||
| States taxes | ( | ) | ||||||
| Other | ( | ) | ||||||
| Effective income tax rate | ( | )% | % | |||||
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 $
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 $
As of December 31, 2021, we have recognized a valuation allowance against our other foreign deferred tax assets.
There were
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 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 2005-2007 and 2011-2020 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years through 2020 remain subject to examination by the respective foreign tax jurisdiction authorities.
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 (
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 | $ | $ | ||||||
| Variable lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
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 | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease liabilities: | $ | $ | ||||||
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 | $ | $ | ||||||
| Liabilities: | |||||||||
| Current operating lease liability | Accrued expenses and other current liabilities | $ | $ | ||||||
| Operating lease liability, net of current portion | Other noncurrent liabilities | ||||||||
| Total operating lease liability | $ | $ | |||||||
| Weighted-average remaining lease term (years) | |||||||||
| Weighted-average discount rate | % | % | |||||||
Future minimum lease payments as of December 31, 2021 are as follows:
| Maturity of Operating Lease Liabilities | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total lease payments | $ | |||
| Less: Imputed interest | ( | ) | ||
| Present value of remaining lease payments | $ |
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
Note 10 - Business Segment Information
We report our results in
2021:
| Battery & Energy Products | Communications Systems | Corporate | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Segment contribution | ( | ) | ||||||||||||||
| Other expense | ||||||||||||||||
| Income tax expense | ||||||||||||||||
| Non-controlling interest | ||||||||||||||||
| Net loss attributable to Ultralife | $ | ( | ) | |||||||||||||
| Total assets | $ | $ | $ | |||||||||||||
| Capital expenditures | $ | $ | $ | $ | ||||||||||||
| Goodwill | $ | $ | $ | |||||||||||||
| Depreciation and amortization of intangible assets | $ | $ | $ | $ | ||||||||||||
| Stock-based compensation | $ | $ | $ | $ | ||||||||||||
2020:
| Battery & Energy Products | Communications Systems | Corporate | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Segment contribution | ( | ) | ||||||||||||||
| Other income | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ||||||||||||||||
| Non-controlling interest | ||||||||||||||||
| Net income attributable to Ultralife | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Capital expenditures | $ | $ | $ | $ | ||||||||||||
| Goodwill | $ | $ | $ | |||||||||||||
| Depreciation and amortization of intangible assets | $ | $ | $ | $ | ||||||||||||
| Stock-based compensation | $ | $ | $ | $ | ||||||||||||
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 $
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 | $ | $ | $ | |||||||||
| Communications Systems | ||||||||||||
| Total | $ | $ | $ | |||||||||
| % | % | |||||||||||
Year ended December 31, 2020:
| Total Revenue | Commercial | Government/ Defense | ||||||||||
| Battery & Energy Products | $ | $ | $ | |||||||||
| Communications Systems | ||||||||||||
| Total | $ | $ | $ | |||||||||
| % | % | |||||||||||
U.S. and Non-U.S. Revenue Information1:
Year ended December 31, 2021:
| Total Revenue | United States | Non-United States | ||||||||||
| Battery & Energy Products | $ | $ | $ | |||||||||
| Communications Systems | ||||||||||||
| Total | $ | $ | $ | |||||||||
| % | % | |||||||||||
Year ended December 31, 2020:
| Total Revenue | United States | Non-United States | ||||||||||
| Battery & Energy Products | $ | $ | $ | |||||||||
| Communications Systems | ||||||||||||
| Total | $ | $ | $ | |||||||||
| % | % | |||||||||||
1 Sales classified to U.S. include shipments to U.S.-based prime contractors which in some cases may serve non-U.S. projects.
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 $
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.
| 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.
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.
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 |
Exhibit 2.1 of the Form 8-K filed on December 16, 2021 |
|||
| 2.2 |
Exhibit 2.2 of the Form 8-K filed on December 16, 2021 |
|||
| 2.3 |
Exhibit 10.1 of the Form 8-K filed on May 2, 2019 |
|||
| 2.4 |
Exhibit 2.2 of the Form 10-K for the year ended December 31, 2015, filed March 2, 2016 |
|||
| 3.1 |
Exhibit 3.1 of the Form 10-K for the year ended December 31, 2008, filed March 13, 2009 |
|||
| 3.2 |
Exhibit 3.2 of the Form 8-K filed December 9, 2011 |
|||
| 4.1 |
Exhibit 4.1 of the Form 10-K for the year ended December 31, 2008, filed March 13, 2009 |
|||
| 4.2 |
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) |
| 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† |
Appendix B of Form DEF 14A filed on June 1, 2021 |
|||
| 10.4 |
Exhibit 10.1 of the Form 8-K filed on June 6, 2017 |
|||
| 10.5 |
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 |
Exhibit 10.1 of the Form 8-K filed on December 16, 2021 |
|||
| 21 |
Filed herewith |
|||
| 23.1 |
Filed herewith |
|||
| 31.1 |
Filed herewith |
|||
| 31.2 |
Filed herewith |
|||
| 32 |
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.
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) |
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| Date: March 8, 2022 |
/s/ Ranjit C. Singh |
||
| Ranjit C. Singh (Director) |
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| Date: March 8, 2022 |
/s/ Bradford T. Whitmore |
||
| Bradford T. Whitmore (Director) |
Exhibit 21
SUBSIDIARIES
We have a 100% ownership interest in Ultralife Batteries (UK) LTD, incorporated in the United Kingdom.
We have a 100% ownership interest in ABLE New Energy Co., Limited, incorporated in Hong Kong, which has a 100% ownership interest in ABLE New Energy Co., Ltd, incorporated in the People’s Republic of China.
We have a 100% ownership interest in Ultralife Energy Services Corporation, incorporated in Florida.
We have a 51% ownership interest in Ultralife Batteries India Private Limited, incorporated in India.
Through our ownership interest in Ultralife UK LTD, we have a 100% controlling interest in Accutronics, Ltd., also incorporated in the United Kingdom.
We have 100% ownership interest in Southwest Electronic Energy Corporation and its wholly-owned subsidiary, CLB, Inc. (collectively “SWE”), both incorporated in Texas.
We have 100% ownership interest in Ultralife Excell Holding Corp., a Delaware corporation, which has 100% ownership interest in Ultralife Canada Holding Corp., a Delaware corporation, which has 100% ownership interest in Excell Battery Canada ULC, a British Columbia unlimited liability corporation, and 100% ownership interest in 1336902 B.C. Unlimited Liability Company, a British Columbia unlimited liability corporation, which has 100% ownership interest in Excell Battery Corporation USA, a Texas corporation.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-136737, 333-136738, 333-155347, 333-155349, 333-179235, 333-203037, 333-258107) and Form S-3 (Registration No. 333-254846) of our report dated March 8, 2022, relating to the consolidated financial statements and effectiveness of internal control over financial reporting of Ultralife Corporation appearing in this Annual Report on Form 10-K for the year ended December 31, 2021.
/s/ Freed Maxick CPAs, P.C.
Rochester, New York
March 8, 2022
Exhibit 31.1
I, Michael D. Popielec, certify that:
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1. |
I have reviewed this annual report on Form 10-K of Ultralife Corporation; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 8, 2022 | /s/ Michael D. Popielec | |
| Michael D. Popielec | ||
| President and Chief Executive Officer |
Exhibit 31.2
I, Philip A. Fain, certify that:
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1. |
I have reviewed this annual report on Form 10-K of Ultralife Corporation; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
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c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 8, 2022 | /s/ Philip A. Fain | |
| Philip A. Fain | ||
| Chief Financial Officer and Treasurer |
Exhibit 32
Section 1350 Certification
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), Michael D. Popielec and Philip A. Fain, the President and Chief Executive Officer and Chief Financial Officer and Treasurer, respectively, of Ultralife Corporation, certify that (i) the Annual Report on Form 10-K for the year ended December 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Ultralife Corporation.
A signed original of this written statement required by Section 906 has been provided to Ultralife Corporation and will be retained by Ultralife Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: March 8, 2022 | /s/ Michael D. Popielec | |
| Michael D. Popielec | ||
| President and Chief Executive Officer | ||
| Date: March 8, 2022 | /s/ Philip A. Fain | |
| Philip A. Fain | ||
| Chief Financial Officer and Treasurer |
This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate this certification by reference.
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Trade accounts receivable, allowance for doubtful accounts | $ 346 | $ 317 |
| Preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
| Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued (in shares) | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
| Common stock, shares authorized (in shares) | 40,000,000 | 40,000,000 |
| Common stock, shares issued (in shares) | 20,522,427 | 20,373,519 |
| Common stock, shares outstanding (in shares) | 16,089,832 | 15,959,984 |
| Treasury stock, shares (in shares) | 4,432,595 | 4,413,535 |
Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
AOCI Attributable to Parent [Member] |
Retained Earnings [Member] |
Treasury Stock [Member] |
Noncontrolling Interest [Member] |
Total |
|---|---|---|---|---|---|---|---|
| Balance (in shares) at Dec. 31, 2019 | 20,268,050 | ||||||
| Balance at Dec. 31, 2019 | $ 2,026 | $ 184,292 | $ (2,531) | $ (52,830) | $ (21,231) | $ 24 | $ 109,750 |
| Net (loss) income | 5,232 | 99 | $ 5,331 | ||||
| Stock option exercises (in shares) | 92,968 | 355,797 | |||||
| Stock option exercises | $ 9 | 229 | (75) | $ 163 | |||
| Stock-based compensation -stock options | 838 | 838 | |||||
| Stock-based compensation -restricted stock | 105 | 105 | |||||
| Vesting of restricted stock (in shares) | 12,501 | ||||||
| Vesting of restricted stock | $ 2 | (15) | (13) | ||||
| Foreign currency translation adjustments | 749 | 749 | |||||
| Vesting of restricted stock | $ (2) | 15 | $ 13 | ||||
| Balance (in shares) at Dec. 31, 2020 | 20,373,519 | 15,959,984 | |||||
| Balance at Dec. 31, 2020 | $ 2,037 | 185,464 | (1,782) | (47,598) | (21,321) | 123 | $ 116,923 |
| Net (loss) income | (234) | 4 | $ (230) | ||||
| Stock option exercises (in shares) | 133,907 | 204,429 | |||||
| Stock option exercises | $ 13 | 385 | (133) | $ 265 | |||
| Stock-based compensation -stock options | 618 | 618 | |||||
| Stock-based compensation -restricted stock | 53 | 53 | |||||
| Vesting of restricted stock (in shares) | 15,001 | ||||||
| Vesting of restricted stock | $ (2) | 2 | 15 | 15 | |||
| Foreign currency translation adjustments | 129 | 129 | |||||
| Vesting of restricted stock | $ 2 | (2) | (15) | $ (15) | |||
| Balance (in shares) at Dec. 31, 2021 | 20,522,427 | 16,089,832 | |||||
| Balance at Dec. 31, 2021 | $ 2,052 | $ 186,518 | $ (1,653) | $ (47,832) | $ (21,469) | $ 127 | $ 117,743 |
Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 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 | 0 | (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: | ||
| Purchases of property, plant and equipment | (2,814) | (3,101) |
| Proceeds from sale of equipment | 0 | 120 |
| Net cash used in investing activities | (26,333) | (2,981) |
| FINANCING ACTIVITIES: | ||
| Proceeds from amended credit facilities | 20,980 | 0 |
| 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) | 0 |
| 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 |
| UEHC [Member] | ||
| INVESTING ACTIVITIES: | ||
| Purchase of Excell, net of cash acquired | $ (23,519) | $ 0 |
Note 1 - Summary of Operations and Significant Accounting Policies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Description and Accounting Policies [Text Block] |
Note 1 - Summary of Operations and Significant Accounting Policies
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.
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.
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.
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.
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.
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.
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.
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):
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.
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.
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).
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.
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.
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).
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.
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.
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.
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.
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Note 2 - Acquisition |
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| Business Combination Disclosure [Text Block] |
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
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.
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.
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.
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.
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.
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Note 3 - Debt |
12 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Debt Disclosure [Text Block] |
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 -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 basis points. The applicable margin ranges from 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.
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Note 4 - Supplemental Balance Sheet Information |
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| Supplemental Balance Sheet Disclosures [Text Block] |
Note 4 - Supplemental Balance Sheet Information
The Company had cash and restricted cash totaling $8,413 and $10,653 as of December 31, 2021 and 2020, respectively.
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.
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:
Major classes of property, plant and equipment consisted of the following:
Depreciation expense was $2,906 and $2,340 for the years ended December 31, 2021 and 2020, respectively.
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:
The composition of intangible assets was:
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:
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.
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Note 5 - Commitments and Contingencies |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Text Block] |
Note 5 - Commitments and Contingencies
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.
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.
As of December 31, 2021, we have made commitments to purchase approximately $630 of production machinery and equipment.
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.
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.
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:
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Note 6 - Shareholders' Equity |
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| Shareholders' Equity and Share-based Payments [Text Block] |
Note 6 - Shareholders' Equity
We recorded non-cash stock compensation expense in each period as follows:
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 -year period and expire on the 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.
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:
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:
The following table represents additional information about stock options outstanding at December 31, 2021:
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 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.
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Note 7 - Income Taxes |
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| Income Tax Disclosure [Text Block] |
Note 7 - Income Taxes
For the years ended December 31, 2021 and 2020, we recognized income tax expense of $79 and $1,692, respectively.
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:
Net deferred tax assets (liabilities) are comprised of the following balance sheet amounts:
For financial reporting purposes, net (loss) income from continuing operations before income taxes is as follows:
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:
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 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 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 2005-2007 and 2011-2020 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years through 2020 remain subject to examination by the respective foreign tax jurisdiction authorities.
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Note 8 - Operating Leases |
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| Lessee, Operating Leases [Text Block] |
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:
Supplemental cash flow information related to leases was as follows:
Supplemental balance sheet information related to leases was as follows:
Future minimum lease payments as of December 31, 2021 are as follows:
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Note 9 - 401(k) Retirement Benefit Plan |
12 Months Ended |
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| Notes to Financial Statements | |
| Retirement Benefits [Text Block] |
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 |
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| Segment Reporting Disclosure [Text Block] |
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:
2020:
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.
The following tables disaggregate our business segment revenues by major source and geography.
Commercial and Government/Defense Revenue Information:
Year ended December 31, 2021:
Year ended December 31, 2020:
U.S. and Non-U.S. Revenue Information1:
Year ended December 31, 2021:
Year ended December 31, 2020:
1 Sales classified to U.S. include shipments to U.S.-based prime contractors which in some cases may serve non-U.S. projects.
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Note 11 - Impact of COVID-19 |
12 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Effect of Covid-19 Pandemic [Text Block] |
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. |
Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||
| Consolidation, Policy [Policy Text Block] |
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.
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| Use of Estimates, Policy [Policy Text Block] |
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.
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| Reclassification, Comparability Adjustment [Policy Text Block] |
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.
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| Cash and Cash Equivalents, Policy [Policy Text Block] |
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.
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| Receivable [Policy Text Block] |
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.
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| Inventory, Policy [Policy Text Block] |
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.
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| Property, Plant and Equipment, Policy [Policy Text Block] |
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):
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.
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| Goodwill and Intangible Assets, Policy [Policy Text Block] |
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.
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| Foreign Currency Transactions and Translations Policy [Policy Text Block] |
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).
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| Revenue [Policy Text Block] |
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.
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| Guarantees, Indemnifications and Warranties Policies [Policy Text Block] |
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.
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| Shipping and Handling Costs [Policy Text Block] |
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.
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| Sales Commissions [Policy Text Block] |
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.
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| Research and Development Expense, Policy [Policy Text Block] |
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.
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| Environmental Cost, Expense Policy [Policy Text Block] |
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.
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| Income Tax, Policy [Policy Text Block] |
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.
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| Concentration Risk, Credit Risk, Policy [Policy Text Block] |
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.
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| Fair Value Measurement, Policy [Policy Text Block] |
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:
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.
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| Earnings Per Share, Policy [Policy Text Block] |
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.
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| Share-based Payment Arrangement [Policy Text Block] |
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).
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| Segment Reporting, Policy [Policy Text Block] |
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.
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| Business Combinations Policy [Policy Text Block] |
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.
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| Lessee, Leases [Policy Text Block] |
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.
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| New Accounting Pronouncements, Policy [Policy Text Block] |
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.
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Note 1 - Summary of Operations and Significant Accounting Policies (Tables) |
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| Property, Plant and Equipment, Estimated Useful Life [Table Text Block] |
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Note 2 - Acquisition (Tables) |
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| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] |
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| Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block] |
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| Business Acquisition, Pro Forma Information [Table Text Block] |
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Note 4 - Supplemental Balance Sheet Information (Tables) |
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| Cash, Cash Equivalents and Investments [Table Text Block] |
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| Schedule of Inventory, Current [Table Text Block] |
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| Property, Plant and Equipment [Table Text Block] |
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| Schedule of Goodwill [Table Text Block] |
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| Schedule of Finite-Lived Intangible Assets [Table Text Block] |
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Note 5 - Commitments and Contingencies (Tables) |
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| Schedule of Product Warranty Liability [Table Text Block] |
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Note 6 - Shareholders' Equity (Tables) |
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Note 7 - Income Taxes (Tables) |
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| Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] |
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| Schedule of Deferred Tax Assets and Liabilities [Table Text Block] |
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| Schedule of Net Deferred Tax Liabilities [Table Text Block] |
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| Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block] |
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| Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] |
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Note 8 - Operating Leases (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Lease, Cost [Table Text Block] |
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Note 10 - Business Segment Information (Tables) |
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| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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| Schedule of Revenues from External Customers by Business Segment Sector [Table Text Block] |
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| Revenue from External Customers by Geographic Areas [Table Text Block] |
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Note 1 - Summary of Operations and Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Research and Development Expense, Gross | $ 8,042 | $ 7,316 |
| Customer Funded Research and Development Expense Included in Cost of Goods Sold | $ 1,216 | $ 1,369 |
| Weighted Average Number Diluted Shares Outstanding Adjustment, Total (in shares) | 193,568 | |
| Restricted Stock [Member] | ||
| Incremental Common Shares Attributable to Share-based Payment Arrangements, Total (in shares) | 0 | 26,665 |
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 11,664 | |
| Share-based Payment Arrangement, Option [Member] | ||
| Incremental Common Shares Attributable to Share-based Payment Arrangements, Total (in shares) | 0 | 526,244 |
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 1,306,824 | 690,919 |
| Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Large Defense Primary Contractor, 1 [Member] | ||
| Concentration Risk, Percentage | 20.00% | 17.00% |
| Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Large Defense Primary Contractor, 1 [Member] | Battery & Energy Products Segment [Member] | ||
| Concentration Risk, Percentage | 22.00% | |
| Customer Concentration Risk [Member] | Revenue, Segment Benchmark [Member] | Two Customers [Member] | Battery & Energy Products Segment [Member] | ||
| Concentration Risk, Percentage | 20.00% | |
Note 1 - Summary of Operations and Significant Accounting Policies - Property, Plant and Equipment Estimated Useful Life (Details) |
12 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Building [Member] | Minimum [Member] | |
| Estimated useful lives (Year) | 10 years |
| Building [Member] | Maximum [Member] | |
| Estimated useful lives (Year) | 40 years |
| Machinery and Equipment [Member] | Minimum [Member] | |
| Estimated useful lives (Year) | 5 years |
| Machinery and Equipment [Member] | Maximum [Member] | |
| Estimated useful lives (Year) | 10 years |
| Furniture and Fixtures [Member] | Minimum [Member] | |
| Estimated useful lives (Year) | 5 years |
| Furniture and Fixtures [Member] | Maximum [Member] | |
| Estimated useful lives (Year) | 10 years |
| Computer Equipment [Member] | Minimum [Member] | |
| Estimated useful lives (Year) | 3 years |
| Computer Equipment [Member] | Maximum [Member] | |
| Estimated useful lives (Year) | 5 years |
| Leasehold Improvements [Member] | |
| Leasehold Improvements | Lesser of useful life or lease term |
Note 2 - Acquisition (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 13, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Revenues, Total | $ 98,267 | $ 107,712 | |
| UEHC [Member] | |||
| Business Combination, Consideration Transferred, Total | $ 23,519 | ||
| Operating Lease, Right-of-Use Asset | 960 | ||
| Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual | 1,131 | ||
| Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual | 128 | ||
| Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Inventory | 121 | ||
| Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Intangibles | 30 | ||
| Business Combination, Acquisition Related Costs | $ 354 | ||
| UEHC [Member] | Fair Value Adjustment to Inventory [Member] | |||
| Revenues, Total | $ 950 | ||
Note 2 - Acquisition - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|---|
| Goodwill | $ 38,068 | $ 27,018 | |
| UEHC [Member] | |||
| 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 | $ 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 |
Note 2 - Acquisition - Estimated Fair Value and Annual Amortization (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 30, 2021 |
Dec. 31, 2021 |
|
| Finite-Lived Intangible Asset, Expected Amortization, Year One | $ 1,286 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Two | 938 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Three | 927 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Four | 927 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Five | 783 | |
| UEHC [Member] | ||
| Finite-Lived Intangible Asset, Expected Amortization, Year One | $ 724 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Two | 364 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Three | 364 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Four | 364 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Five | 364 | |
| Total, estimated fair value | 8,830 | $ 8,830 |
| Customer Relationships [Member] | UEHC [Member] | ||
| Finite-lived, estimated fair value | $ 4,070 | |
| Amortization period (Year) | 15 years | |
| Finite-Lived Intangible Asset, Expected Amortization, Year One | $ 271 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Two | 271 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Three | 271 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Four | 271 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Five | 271 | |
| Trade Names [Member] | UEHC [Member] | ||
| Indefinite-lived, estimated fair value | 3,150 | |
| Customer Contracts [Member] | UEHC [Member] | ||
| Finite-lived, estimated fair value | $ 1,130 | |
| Amortization period (Year) | 15 years | |
| Finite-Lived Intangible Asset, Expected Amortization, Year One | $ 75 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Two | 75 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Three | 75 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Four | 75 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Five | 75 | |
| Backlog [Member] | UEHC [Member] | ||
| Finite-lived, estimated fair value | $ 360 | |
| Amortization period (Year) | 1 year | |
| Finite-Lived Intangible Asset, Expected Amortization, Year One | $ 360 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Two | 0 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Three | 0 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Four | 0 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Five | 0 | |
| Technology-Based Intangible Assets [Member] | UEHC [Member] | ||
| Finite-lived, estimated fair value | $ 120 | |
| Amortization period (Year) | 7 years | |
| Finite-Lived Intangible Asset, Expected Amortization, Year One | $ 17 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Two | 17 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Three | 17 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Four | 17 | |
| Finite-Lived Intangible Asset, Expected Amortization, Year Five | $ 17 |
Note 2 - Acquisition - Pro Forma Information (Details) - UEHC [Member] - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Revenue | $ 118,467 | $ 125,826 |
| Operating income | 1,450 | 4,489 |
| Net Income attributable to Ultralife Corporation | $ 1,367 | $ 4,081 |
| Basic (in dollars per share) | $ 9 | $ 26 |
| Diluted (in dollars per share) | $ 8 | $ 25 |
Note 3 - Debt (Details Textual) - Amended Credit Agreement [Member] $ in Thousands |
Dec. 13, 2021
USD ($)
|
Jun. 30, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021
USD ($)
|
|---|---|---|---|---|---|
| Debt Issuance Costs, Gross | $ 123 | ||||
| Term Loan Facility [Member] | Long-term Debt, Current Maturities [Member] | |||||
| Secured Debt, Total | 2,000 | ||||
| Revolving Credit Facility [Member] | |||||
| Proceeds from Long-term Lines of Credit | $ 10,980 | ||||
| Secured Debt, Total | 10,000 | ||||
| Long-term Line of Credit, Total | $ 10,980 | ||||
| Revolving Credit Facility [Member] | Minimum [Member] | |||||
| Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.15% | ||||
| Revolving Credit Facility [Member] | Maximum [Member] | |||||
| Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.25% | ||||
| Revolving Credit Facility [Member] | Fed Funds Effective Rate Overnight Index Swap Rate [Member] | |||||
| Debt Instrument, Basis Spread on Variable Rate | 0.50% | ||||
| Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||||
| Debt Instrument, Basis Spread on Variable Rate | 1.00% | ||||
| Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member] | |||||
| Debt Instrument, Basis Spread on Variable Rate | 1.85% | ||||
| Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member] | |||||
| Debt Instrument, Basis Spread on Variable Rate | 2.15% | ||||
| Revolving Credit Facility [Member] | Base Rate [Member] | Minimum [Member] | |||||
| Debt Instrument, Basis Spread on Variable Rate | 0.00% | ||||
| Revolving Credit Facility [Member] | Base Rate [Member] | Maximum [Member] | |||||
| Debt Instrument, Basis Spread on Variable Rate | (0.50%) | ||||
| Revolving Credit Facility [Member] | Forecast [Member] | |||||
| Maximum Consolidated Senior Leverage Ratio | 3.0 | 3.5 | 3.5 | ||
| KeyBank [Member] | Term Loan Facility [Member] | |||||
| Debt Instrument, Term (Year) | 5 years | ||||
| Debt Instrument, Face Amount | $ 10,000 | ||||
| KeyBank [Member] | Revolving Credit Facility [Member] | |||||
| Line of Credit Facility, Maximum Borrowing Capacity | 30,000 | ||||
| Line Of Credit Facility Maximum Borrowing Capacity Contingent On Bank Approval | $ 50,000 |
Note 4 - Supplemental Balance Sheet Information (Details Textual) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
| Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Ending Balance | $ 8,413 | $ 10,653 | $ 7,405 |
| Restricted Cash and Cash Equivalents, Total | 84 | 91 | |
| Depreciation, Total | $ 2,906 | 2,340 | |
| Number of Reporting Units | 5 | ||
| Goodwill, Impairment Loss | $ 0 | ||
| Finite-Lived Intangible Asset, Expected Amortization, Year One | 1,286 | ||
| Finite-Lived Intangible Asset, Expected Amortization, Year Two | 938 | ||
| Finite-Lived Intangible Asset, Expected Amortization, Year Three | 927 | ||
| Finite-Lived Intangible Asset, Expected Amortization, Year Four | 927 | ||
| Finite-Lived Intangible Asset, Expected Amortization, Year Five | 783 | ||
| NETHERLANDS | |||
| Restricted Cash and Cash Equivalents, Total | $ 84 | $ 91 | |
Note 4 - Supplemental Balance Sheet Information - Cash and Restricted Cash (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|---|
| Cash | $ 8,329 | $ 10,562 | |
| Restricted cash | 84 | 91 | |
| Total | $ 8,413 | $ 10,653 | $ 7,405 |
Note 4 - Supplemental Balance Sheet Information - Components of Inventory (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 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 |
Note 4 - Supplemental Balance Sheet Information - Components of Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Property, plant and equipment, gross | $ 91,423 | $ 88,070 |
| Less – Accumulated depreciation | (68,218) | (65,220) |
| Property, plant and equipment, net | 23,205 | 22,850 |
| Land [Member] | ||
| Property, plant and equipment, gross | 1,273 | 1,273 |
| Building and Building Improvements [Member] | ||
| Property, plant and equipment, gross | 15,442 | 15,393 |
| Machinery and Equipment [Member] | ||
| Property, plant and equipment, gross | 63,780 | 61,048 |
| Furniture and Fixtures [Member] | ||
| Property, plant and equipment, gross | 2,588 | 2,235 |
| Computer Equipment [Member] | ||
| Property, plant and equipment, gross | 7,579 | 6,894 |
| Construction in Progress [Member] | ||
| Property, plant and equipment, gross | $ 761 | $ 1,227 |
Note 4 - Supplemental Balance Sheet Information - Summary of Goodwill (Details) $ in Thousands |
12 Months Ended |
|---|---|
|
Dec. 31, 2021
USD ($)
| |
| Goodwill balance | $ 27,018 |
| Effect of foreign currency translation | 31 |
| Goodwill balance | 38,068 |
| UEHC [Member] | |
| Acquisition of Excell | 11,019 |
| Goodwill balance | 11,019 |
| Battery & Energy Products Segment [Member] | |
| Goodwill balance | 15,525 |
| Effect of foreign currency translation | 31 |
| Goodwill balance | 26,575 |
| Battery & Energy Products Segment [Member] | UEHC [Member] | |
| Acquisition of Excell | 11,019 |
| Communications Systems Segment [Member] | |
| Goodwill balance | 11,493 |
| Effect of foreign currency translation | 0 |
| Goodwill balance | 11,493 |
| Communications Systems Segment [Member] | UEHC [Member] | |
| Acquisition of Excell | $ 0 |
Note 4 - Supplemental Balance Sheet Information - Composition of Intangible Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Cost | $ 28,454 | $ 19,662 |
| Accumulated Amortization | 11,064 | 10,453 |
| Net | 17,390 | 9,209 |
| Customer Relationships [Member] | ||
| Cost | 13,214 | 9,171 |
| Accumulated Amortization | 5,484 | 5,115 |
| Net | 7,730 | 4,056 |
| Patented Technology [Member] | ||
| Cost | 5,667 | 5,557 |
| Accumulated Amortization | 5,126 | 5,014 |
| Net | 541 | 543 |
| Trade Names [Member] | ||
| Cost | 4,670 | 1,524 |
| Accumulated Amortization | 436 | 324 |
| Net | 4,234 | 1,200 |
| Trademarks [Member] | ||
| Cost | 3,413 | 3,410 |
| Accumulated Amortization | 0 | 0 |
| Net | 3,413 | $ 3,410 |
| Other Intangible Assets [Member] | ||
| Cost | 1,490 | |
| Accumulated Amortization | 18 | |
| Net | $ 1,472 |
Note 4 - Supplemental Balance Sheet Information - Amortization of Intangible Assets (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Amortization of intangible assets | $ 633 | $ 595 |
| Research and Development Expense [Member] | ||
| Amortization of intangible assets | 118 | 124 |
| Selling, General and Administrative Expenses [Member] | ||
| Amortization of intangible assets | $ 515 | $ 471 |
Note 5 - Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 14, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Gain (Loss) Related to Litigation Settlement, Total | $ (0) | $ 1,593 | |
| Capital Addition Purchase Commitments [Member] | |||
| Long-term Purchase Commitment, Amount | $ 630 | ||
| Lithium Ion Batteries Antitrust Litigation [Member] | |||
| Litigation Settlement, Amount Awarded from Other Party | $ 1,593 | ||
| Gain (Loss) Related to Litigation Settlement, Total | $ 1,593 | ||
Note 5 - Commitments and Contingencies - Changes in Produce Warranty Liability (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 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 (Details Textual) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 9 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|
Jan. 31, 2018 |
Jun. 30, 2014 |
Sep. 30, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Jul. 31, 2021 |
Dec. 31, 2019 |
Jun. 30, 2004 |
|
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares) | 1,306,824 | 1,217,163 | 1,541,792 | |||||
| Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $ 850 | |||||||
| Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year) | 1 year 4 months 24 days | |||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share) | $ 2.90 | $ 2.78 | ||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value | $ 738 | $ 427 | ||||||
| Proceeds from Stock Options Exercised | $ 398 | $ 398 | $ 238 | |||||
| Common Stock, Capital Shares Reserved for Future Issuance (in shares) | 941,986 | |||||||
| Restricted Stock [Member] | ||||||||
| Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $ 17 | |||||||
| Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year) | 1 year 2 months 12 days | |||||||
| The 2004 Long-term Incentive Plan [Member] | ||||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares) | 2,900,000 | 750,000 | ||||||
| The 2014 Long-term Incentive Plan [Member] | ||||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares) | 1,750,000 | 2,750,000 | ||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares) | 1,306,824 | |||||||
| The 2014 Long-term Incentive Plan [Member] | Awards Other than Stock Options and SARs [Member] | ||||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares) | 800,000 | |||||||
| The 2014 Long-term Incentive Plan [Member] | Restricted Stock [Member] | ||||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year) | 3 years | |||||||
| Incentive Stock Options [Member] | ||||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year) | 3 years | |||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year) | 7 years | |||||||
Note 6 - Stock-based Compensation - Non-cash Stock Compensation Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Stock-based compensation expense | $ 671 | $ 943 |
| Share-based Payment Arrangement, Option [Member] | ||
| Stock-based compensation expense | 618 | 838 |
| Restricted Stock [Member] | ||
| Stock-based compensation expense | $ 53 | $ 105 |
Note 6 - Stock-based Compensation - Stock Option Assumptions (Details) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Risk-free interest rate | 1.00% | 0.40% |
| Volatility factor | 50.00% | 49.00% |
| Weighted average expected life (years) (Year) | 4 years 9 months 18 days | 5 years 3 months 18 days |
| Forfeiture rate | 10.00% | 10.00% |
| Dividends | 0.00% | 0.00% |
Note 6 - Shareholders' Equity - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Shares under Option, beginning of period (in shares) | 1,217,163 | 1,541,792 |
| Options outstanding - weighted average exercise price (in dollars per share) | $ 6.50 | $ 6.88 |
| Options granted (in shares) | 340,500 | 256,000 |
| Options granted - weighted average exercise price (in dollars per share) | $ 6.78 | $ 6.51 |
| Options exercised (in shares) | (204,429) | (355,797) |
| Options exercised - weighted average exercise price (in dollars per share) | $ 4.39 | $ 6.08 |
| Options forfeited or expired (in shares) | (46,410) | (224,832) |
| Options forfeited or expired - weighted average exercise price (in dollars per share) | $ 7.44 | $ 9.76 |
| Shares under option, end of period (in shares) | 1,306,824 | 1,217,163 |
| Options outstanding - weighted average exercise price (in dollars per share) | $ 6.87 | $ 6.50 |
| Options outstanding - weighted average remaining contractual term (Year) | 4 years 2 months 19 days | |
| Options outstanding - aggregate intrinsic value | $ 504 | |
| Vested and Expected to Vest (in shares) | 1,189,175 | |
| Options vested and expected to vest - weighted average exercise price (in dollars per share) | $ 6.86 | |
| Options vested and expected to vest - weighted average remaining contractual term (Year) | 4 years 18 days | |
| Options vested and expected to vest - aggregate intrinsic value | $ 492 | |
| Options Exercisable (in shares) | 745,288 | 738,452 |
| Options exercisable, weighted-average exercise price (in dollars per share) | $ 6.85 | $ 5.82 |
| Options exercisable - weighted average remaining contractual term (Year) | 2 years 9 months 18 days | |
| Options exercisable - aggregate intrinsic value | $ 439 | |
Note 6 - Shareholders' Equity - Options Range of Exercise Prices (Details) - $ / shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Upper range limit (in dollars per share) | $ 9.96 | |
| Options outstanding, number of outstanding options (in shares) | 1,306,824 | |
| Options outstanding, weighted-average remaining contractual life (Year) | 4 years 2 months 19 days | |
| Options outstanding, weighted-average exercise price (in dollars per share) | $ 6.87 | |
| Options exercisable, number of options exercisable (in shares) | 745,288 | |
| Options exercisable, weighted-average exercise price (in dollars per share) | $ 6.85 | $ 5.82 |
| Range One [Member] | ||
| Upper range limit (in dollars per share) | $ 5.31 | |
| Options outstanding, number of outstanding options (in shares) | 325,579 | |
| Options outstanding, weighted-average remaining contractual life (Year) | 2 years 8 months 4 days | |
| Options outstanding, weighted-average exercise price (in dollars per share) | $ 4.58 | |
| Options exercisable, number of options exercisable (in shares) | 240,579 | |
| Options exercisable, weighted-average exercise price (in dollars per share) | $ 4.34 | |
| Range Two [Member] | ||
| Upper range limit (in dollars per share) | $ 6.51 | |
| Options outstanding, number of outstanding options (in shares) | 321,411 | |
| Options outstanding, weighted-average remaining contractual life (Year) | 4 years 4 months 9 days | |
| Options outstanding, weighted-average exercise price (in dollars per share) | $ 6.28 | |
| Options exercisable, number of options exercisable (in shares) | 166,602 | |
| Options exercisable, weighted-average exercise price (in dollars per share) | $ 6.07 | |
| Range Three [Member] | ||
| Upper range limit (in dollars per share) | $ 7.16 | |
| Options outstanding, number of outstanding options (in shares) | 205,750 | |
| Options outstanding, weighted-average remaining contractual life (Year) | 6 years 5 months 12 days | |
| Options outstanding, weighted-average exercise price (in dollars per share) | $ 6.97 | |
| Options exercisable, number of options exercisable (in shares) | 11,667 | |
| Options exercisable, weighted-average exercise price (in dollars per share) | $ 7.09 | |
| Range Four [Member] | ||
| Upper range limit (in dollars per share) | $ 9.96 | |
| Options outstanding, number of outstanding options (in shares) | 454,084 | |
| Options outstanding, weighted-average remaining contractual life (Year) | 4 years 2 months 19 days | |
| Options outstanding, weighted-average exercise price (in dollars per share) | $ 8.88 | |
| Options exercisable, number of options exercisable (in shares) | 326,440 | |
| Options exercisable, weighted-average exercise price (in dollars per share) | $ 9.08 |
Note 7 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Income Tax Expense (Benefit), Total | $ 79 | $ 1,692 |
| Deferred Tax Assets, Valuation Allowance, Total | 2,697 | 1,942 |
| Unrecognized Tax Benefits, Ending Balance | 0 | $ 0 |
| General Business Tax Credit Carryforward [Member] | ||
| Tax Credit Carryforward, Amount | 2,239 | |
| Domestic Tax Authority [Member] | Internal Revenue Service (IRS) [Member] | ||
| Operating Loss Carryforwards, Total | $ 44,716 | |
| Open Tax Year | 2002 2005 2006 2007 2011 2012 2013 2014 2015 | |
| Foreign Tax Authority [Member] | ||
| Deferred Tax Assets, Valuation Allowance, Total | $ 0 | |
| Open Tax Year | 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 | |
| Foreign Tax Authority [Member] | Her Majesty's Revenue and Customs (HMRC) [Member] | ||
| Operating Loss Carryforwards, Total | $ 11,000 | |
| State and Local Jurisdiction [Member] | ||
| Open Tax Year | 2002 2005 2006 2007 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 | |
Note 7 - Income Taxes - Income Tax Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| State | $ 16 | $ 23 |
| Foreign | 210 | 283 |
| Current Income Tax Expense (Benefit), Total | 226 | 306 |
| Federal | (158) | 1,673 |
| Foreign | 11 | (287) |
| Deferred Income Tax Expense (Benefit), Total | (147) | 1,386 |
| Total income tax provision | $ 79 | $ 1,692 |
Note 7 - Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| 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 |
| 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 |
Note 7 - Income Taxes - Net Deferred Tax Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Deferred income taxes, net | $ 11,472 | $ 11,836 |
| Deferred tax liabilities | (2,254) | (515) |
| Net Deferred Tax Assets | $ 9,218 | $ 11,321 |
Note 7 - Income Taxes - United States and Foreign Income (Loss) From Continuing Operations Before Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| United States | $ (704) | $ 6,586 |
| Foreign | 553 | 437 |
| Income Before Income Taxes | $ (151) | $ 7,023 |
Note 7 - Income Taxes - Effective Rate Reconciliation (Details) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Statutory income tax rate | 21.00% | 21.00% |
| Equity compensation | 11.60% | 4.50% |
| Acquisition-related costs | (34.70%) | |
| Income tax credits | 72.70% | (2.30%) |
| Foreign tax rate change | (89.70%) | 0.00% |
| Foreign tax rates | (15.50%) | 0.10% |
| States taxes | (10.80%) | 0.30% |
| Other | (7.00%) | 0.50% |
| Effective income tax rate | (52.40%) | 24.10% |
Note 8 - Operating Leases (Details Textual) |
Dec. 31, 2021 |
|---|---|
| Minimum [Member] | |
| Lessee, Operating Lease, Remaining Lease Term (Year) | 1 year |
| Maximum [Member] | |
| Lessee, Operating Lease, Remaining Lease Term (Year) | 10 years |
Note 8 - Operating Leases - Lease Cost (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Operating lease cost | $ 762 | $ 703 |
| Variable lease cost | 79 | 75 |
| Total lease cost | $ 841 | $ 778 |
Note 8 - Operating Leases - Supplement Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Operating cash flows from operating leases | $ 744 | $ 688 |
| Right-of-use assets obtained in exchange for lease liabilities: | $ 1,020 | $ 875 |
Note 8 - Operating Leases - Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Weighted-average remaining lease term (years) (Year) | 4 years 6 months | 3 years 3 months 18 days |
| Weighted-average discount rate | 4.50% | 4.50% |
| Other Noncurrent Assets [Member] | ||
| Operating lease right-of-use asset | $ 2,581 | $ 2,189 |
| Accrued Expenses and Other Current Liabilities [Member] | ||
| Current operating lease liability | 867 | 680 |
| Other Noncurrent Liabilities [Member] | ||
| Operating lease liability, net of current portion | 1,743 | 1,524 |
| Accrued Expenses and Other Current Liabilites and Other Noncurrent Liabilities [Member] | ||
| Total operating lease liability | $ 2,610 | $ 2,204 |
Note 8 - Operating Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| 2022 | $ 889 | |
| 2023 | 894 | |
| 2024 | 434 | |
| 2025 | 139 | |
| 2026 | 140 | |
| Thereafter | 424 | |
| Total lease payments | 2,920 | |
| Less: Imputed interest | (310) | |
| Accrued Expenses and Other Current Liabilites and Other Noncurrent Liabilities [Member] | ||
| Operating Lease, Liability, Total | $ 2,610 | $ 2,204 |
Note 9 - 401(k) Retirement Benefit Plan (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Defined Contribution Plan, Employer Matching Contribution, First 3%, Percent of Match | 100.00% | |
| Defined Contribution Plan, Maximum Employee Contribution Percentage, Subject to Employer Matching Contribution | 3.00% | 6.00% |
| Defined Contribution Plan, Employer Matching Contribution, Next 2%, Percent of Match | 50.00% | |
| Defined Contribution Plan, Maximum Employee Contribution Percentage, Subject to Employer 50% Matching Contribution | 2.00% | |
| Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay | 4.00% | 3.00% |
| Defined Contribution Plan, Employer Matching Contribution, Percent of Match | 50.00% | |
| Defined Contribution Plan, Employer Discretionary Contribution Amount | $ 586 | $ 466 |
Note 10 - Business Segment Information (Details Textual) $ in Thousands |
12 Months Ended | |
|---|---|---|
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
| Number of Operating Segments | 2 | |
| Non-US [Member] | ||
| Long-Lived Assets | $ 26,762 | $ 12,456 |
Note 10 - Business Segment Information - Segment Activity (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Revenue | $ 98,267 | $ 107,712 |
| Segment contribution | 35 | 5,701 |
| Other income (expense) | 186 | (1,322) |
| Income tax provision (benefit) | 79 | 1,692 |
| Non-controlling interest | 4 | 99 |
| Net loss attributable to Ultralife | (234) | 5,232 |
| Total assets | 159,538 | 137,701 |
| Capital expenditures | 2,814 | 3,101 |
| Goodwill | 38,068 | 27,018 |
| Depreciation and amortization of intangible assets | 3,539 | 2,935 |
| Stock-based compensation | 671 | 943 |
| Battery & Energy Products Segment [Member] | ||
| Revenue | 87,083 | 91,907 |
| Segment contribution | 21,063 | 23,400 |
| Other income (expense) | ||
| Total assets | 110,633 | 85,112 |
| Capital expenditures | 2,104 | 3,031 |
| Goodwill | 26,575 | 15,525 |
| Depreciation and amortization of intangible assets | 2,847 | 2,269 |
| Stock-based compensation | 298 | 446 |
| Communications Systems Segment [Member] | ||
| Revenue | 11,184 | 15,805 |
| Segment contribution | 3,579 | 5,759 |
| Other income (expense) | ||
| Total assets | 25,359 | 26,425 |
| Capital expenditures | 255 | 0 |
| Goodwill | 11,493 | 11,493 |
| Depreciation and amortization of intangible assets | 326 | 342 |
| Stock-based compensation | 125 | 155 |
| Corporate Segment [Member] | ||
| Revenue | 0 | 0 |
| Segment contribution | (24,607) | (23,458) |
| Other income (expense) | 186 | (1,322) |
| Income tax provision (benefit) | 79 | 1,692 |
| Non-controlling interest | 4 | 99 |
| Total assets | 23,546 | 26,164 |
| Capital expenditures | 455 | 70 |
| Goodwill | 0 | 0 |
| Depreciation and amortization of intangible assets | 366 | 324 |
| Stock-based compensation | $ 248 | $ 342 |
Note 10 - Business Segment Information - Revenue by Business Segment Sector (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|||
| Revenues | [1] | $ 98,267 | $ 107,712 | |
| Commercial [Member] | ||||
| Revenues | $ 64,079 | $ 62,330 | ||
| Revenue, percentage | 65.00% | 58.00% | ||
| Government & Defense [Member] | ||||
| Revenues | $ 34,188 | $ 45,382 | ||
| Revenue, percentage | 35.00% | 42.00% | ||
| Battery & Energy Products Segment [Member] | ||||
| Revenues | [1] | $ 87,083 | $ 91,907 | |
| Battery & Energy Products Segment [Member] | Commercial [Member] | ||||
| Revenues | 64,079 | 62,330 | ||
| Battery & Energy Products Segment [Member] | Government & Defense [Member] | ||||
| Revenues | 23,004 | 29,577 | ||
| Communications Systems Segment [Member] | ||||
| Revenues | [1] | 11,184 | 15,805 | |
| Communications Systems Segment [Member] | Commercial [Member] | ||||
| Revenues | 0 | 0 | ||
| Communications Systems Segment [Member] | Government & Defense [Member] | ||||
| Revenues | $ 11,184 | $ 15,805 | ||
| ||||
Note 10 - Business Segment Information - Domestic and International Revenue by Segment (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|||
| Revenues | [1] | $ 98,267 | $ 107,712 | |
| UNITED STATES | ||||
| Revenues | [1] | $ 48,819 | $ 62,255 | |
| Revenue, percentage | [1] | 50.00% | 58.00% | |
| Non-US [Member] | ||||
| Revenues | [1] | $ 49,448 | $ 45,457 | |
| Revenue, percentage | [1] | 50.00% | 42.00% | |
| Battery & Energy Products Segment [Member] | ||||
| Revenues | [1] | $ 87,083 | $ 91,907 | |
| Battery & Energy Products Segment [Member] | UNITED STATES | ||||
| Revenues | [1] | 43,298 | 49,930 | |
| Battery & Energy Products Segment [Member] | Non-US [Member] | ||||
| Revenues | [1] | 43,785 | 41,977 | |
| Communications Systems Segment [Member] | ||||
| Revenues | [1] | 11,184 | 15,805 | |
| Communications Systems Segment [Member] | UNITED STATES | ||||
| Revenues | [1] | 5,521 | 12,325 | |
| Communications Systems Segment [Member] | Non-US [Member] | ||||
| Revenues | [1] | $ 5,663 | $ 3,480 | |
| ||||
Note 11 - Impact of COVID-19 (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Finite-Lived Intangible Assets, Net, Ending Balance | $ 17,390 | $ 9,209 |
| Covid-19 [Member] | ||
| Decrease in Sales | 11,000 | |
| Decrease in Operating Profit | 4,500 | |
| Covid-19 [Member] | Backlog, Excluding Excell [Member] | ||
| Finite-Lived Intangible Assets, Net, Ending Balance | 53,166 | |
| Finite-Lived Intangible Assets, Period Increase (Decrease), Total | $ 13,874 | |
| Finite-Lived Intangible Assets, Period Increase (Decrease), Percentage | 35.30% |