Note 5 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 5 - Commitments and Contingencies

a. Legal Matters

We are subject to legal proceedings and claims that arise from time to time in the ordinary course of business.  We believe that the final disposition of any such matters of which we are currently aware will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.  However, recognizing that legal matters are subject to inherent uncertainties, there exists the possibility that ultimate resolution of current or future legal matters could have a material adverse impact on the Company’s financial position, results of operations or cash flows.  We are not aware of any such situations at this time.

On December 14, 2020, Ultralife was awarded a final settlement of $1,593 (net of fees) upon court approval and order authorizing distribution of settlement funds in a class action lawsuit (In Re: Lithium-ion Batteries Antitrust Litigation, 13-MD-02420-YGR, United States District Court, Northern District of California).  At the time of the court order, the settlement funds were held in an escrow account controlled by the court for administrative purposes, and there remained no potential for appeal or reversal of the court order.  Based on all conditions present upon the court order, it was concluded that the net settlement amount was fully realizable.  Accordingly, a gain of $1,593 was recognized and was separately reported as gain on litigation settlement on the consolidated statement of income and comprehensive income for the year ended December 31, 2020. The corresponding amount due was collected in full in January 2021.

b. Indemnity

Our organizational documents provide that our directors or officers will be reimbursed for all expenses, to the fullest extent permitted by law arising out of their performance.

c. Purchase Commitments

As of December 31, 2021, we have made commitments to purchase approximately $630 of production machinery and equipment.

d. China

Our operating facility in China presents risks including, but not limited to, changes in local regulatory requirements, changes in labor laws, local wage laws, environmental regulations, taxes and operating licenses, compliance with U.S. regulatory requirements, including the Foreign Corrupt Practices Act, uncertainties as to application and interpretation of local laws and enforcement of contract and intellectual property rights, currency restrictions, currency exchange controls, fluctuations of currency, and currency revaluations, eminent domain claims, civil unrest, power outages, water shortages, labor shortages, labor disputes, increase in labor costs, rapid changes in government, economic and political policies, political or civil unrest, acts of terrorism, or the threat of boycotts, other civil disturbances and the possible impact of the imposition of tariffs by the U.S. Government on 9 Volt batteries that we manufacture in China as well as any retaliating trade policies or restrictions. Any such disruptions could depress our earnings and have other material adverse effects on our business, financial condition and results of operations.

e. Employment Contracts

We have an employment contract with Michael D. Popielec, our President and Chief Executive Officer, which remains in effect until terminated by either party.  This agreement provides for a base salary, as adjusted for increases at the discretion of our Board of Directors, and includes incentive bonuses based upon attainment of specified quantitative and qualitative performance goals.  This agreement also provides for severance payments in the event of specified events of termination of employment.  In addition, this agreement provides for a lump sum payment in the event of termination of employment in connection with a change in control.

As part of our employment commencement process, employees are required to enter into agreements providing for confidentiality of certain information and the assignment of rights to inventions made by them while employed by us. These agreements also contain certain non-competition and non-solicitation provisions effective during the employment term and for varying periods thereafter depending on position and location. There can be no assurance that we will be able to enforce these agreements. All of our employees agree to abide by the terms of a Code of Ethics policy that provides for the confidentiality of certain information received during the course of their employment.

f. Product Warranties

We estimate future warranty costs to be incurred for product failure rates, material usage and service costs in the development of our warranty obligations. Estimated future costs are based on actual past experience and are generally estimated as a percentage of sales over the warranty period. Changes in our product warranty liability during the years ended December 31, 2021 and 2020 were as follows:

	2021			2020
Balance, January 1	$	149		$	195
Provision for warranties issued		142			200
Settlements made		(158	)		(246	)
Balance, December 31	$	133		$	149