SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIE
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from
________________ to ________________
Commission file number 0-20852
-------
ULTRALIFE BATTERIES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 16-1387013
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2000 TECHNOLOGY PARKWAY, NEWARK, NEW YORK 14513
-----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(315) 332-7100
--------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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. Yes__X__ No______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.10 par value - 10,862,436 shares outstanding
as of October 31, 1999.
<PAGE>
ULTRALIFE BATTERIES, INC.
INDEX
- --------------------------------------------------------------------------------
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 1999 and
June 30, 1999............................................... 3
Condensed Consolidated Statements of Operations - Three months
ended September 30, 1999 and 1998........................... 4
Condensed Consolidated Statements of Cash Flows -
Three months ended September 30, 1999 and 1998.............. 5
Notes to Condensed Consolidated Financial Statements ......... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .............. 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................. 12
Item 6. Exhibits and Reports on Form 8-K.............................. 12
SIGNATURES ............................................................... 13
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
- ------------------------------------------------------------------------------------------------------------------------------------
September 30,
1999 June 30,
ASSETS (Unaudited) 1999
------------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,938 $ 776
Available-for-sale securities 17,748 22,780
Trade accounts receivable (less allowance for doubtful accounts
of $439 at September 30, 1999 and $429 at June 30, 1999) 3,435 3,554
Inventories 5,842 5,018
Prepaid expenses and other current assets 1,959 2,112
-------- --------
Total current assets 30,922 34,240
-------- --------
PROPERTY AND EQUIPMENT:
Machinery and equipment 33,825 32,662
Leasehold improvements 4,767 4,741
-------- --------
38,592 37,403
Less - Accumulated depreciation and amortization 6,123 5,626
-------- --------
32,469 31,777
-------- --------
OTHER ASSETS AND DEFERRED CHARGES:
Investment in affiliates 3,031 --
Technology license agreements and other (net of accumulated
amortization of $993 at September 30, 1999 and $968 at June 30, 1999,
respectively) 458 403
-------- --------
3,489 403
-------- --------
Total Assets $ 66,880 $ 66,420
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 107 $ 107
Accounts payable 3,803 3,847
Accrued compensation 571 653
Other current liabilities 939 1,198
-------- --------
Total current liabilities 5,420 5,805
-------- --------
LONG-TERM LIABILITIES:
Long-term debt and capital lease obligations 215 215
-------- --------
Total long - term liabilities 215 215
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
STOCKHOLDERS' EQUITY :
Preferred stock, par value $0.10 per share, authorized 1,000,000 shares- none outstanding -- --
Common stock, par value $0.10 per share, authorized - 20,000,000 shares; issued - 11,212,386
at September 30, 1999 and 10,512,386 at June 30, 1999 1,121 1,051
Capital in excess of par value 96,773 93,605
Accumulated other comprehensive income (200) 267
Accumulated deficit (36,146) (34,220)
-------- --------
61,548 60,703
-------- --------
Less --Treasury stock, at cost -- 27,250 shares (303) (303)
-------- --------
Total stockholders' equity 61,245 60,400
-------- --------
Total Liabilities and Stockholders' Equity $ 66,880 $ 66,420
======== ========
===================================================================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
3
<PAGE>
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended September 30,
1999 1998
---- ----
REVENUES $ 6,225 $ 4,222
COST OF PRODUCTS SOLD 5,806 3,934
-------- --------
GROSS PROFIT 419 288
OPERATING AND OTHER EXPENSES:
Research and development 1,092 1,828
Selling, general, and administrative 1,491 1,300
Gain on fires -- (468)
-------- --------
TOTAL OPERATING AND OTHER EXPENSES 2,583 2,660
OTHER INCOME (EXPENSE):
Interest income 305 449
Miscellaneous (67) (7)
-------- --------
LOSS BEFORE INCOME TAXES (1,926) (1,930)
-------- --------
INCOME TAXES -- --
-------- --------
NET LOSS (1,926) (1,930)
Comprehensive income (loss) (467) (490)
-------- --------
NET COMPREHENSIVE LOSS $ (2,393) $ (2,420)
======== ========
NET LOSS PER COMMON SHARE $ (0.18) $ (0.18)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 10,768 10,485
======== ========
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------
Three Months Ended September 30,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,926) $ (1,930)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 522 559
Equity in loss of joint venture 127 -
Changes in operating assets and liabilities:
Decrease in accounts receivable 119 39
Increase in inventories (824) (513)
(Increase) decrease in prepaid expenses
and other current assets 153 (936)
Decrease in accounts payable
and other current liabilities (385) (840)
-------------------- -----------------------
Net cash used in operating activities (2,214) (3,621)
-------------------- -----------------------
INVESTING ACTIVITIES
Purchase of property and equipment (1,189) (1,232)
Investment in affiliates (3,238) -
Purchase of securities (11,079) (27,871)
Sales of securities 6,915 26,298
Maturities of securities 8,722 5,481
-------------------- -----------------------
Net cash provided by investing activities 131 2,676
-------------------- -----------------------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 3,238 --
-------------------- -----------------------
Net cash provided by financing activities 3,238 --
-------------------- -----------------------
Effect of exchange rate changes on cash 7 119
-------------------- -----------------------
Increase (decrease) in cash and cash equivalents 1,162 (826)
Cash and cash equivalents at beginning of period 776 872
-------------------- -----------------------
Cash and cash equivalents at end of period $ 1,938 $ 46
==================== =======================
SUPPLEMENTAL CASH FLOW INFORMATION
Unrealized (loss) gain on securities $ (474) $ 608
==================== =======================
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ULTRALIFE BATTERIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, which are of a
normal recurring nature, necessary to present fairly the financial position
at September 30, 1999 and the results of operations and cash flows for the
three month periods ended September 30, 1999 and 1998. The results for the
three months ended September 30, 1999 are not necessarily indicative of the
results to be expected for the entire year. The financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company's financial
statements for the year ended June 30, 1999, filed on Form 10-K on
September 28, 1999.
2. NET LOSS PER SHARE
Net loss per share is calculated by dividing net loss by the weighted
average number of common shares outstanding during the period. Common stock
options have not been included since their inclusion would be antidilutive.
3. INVENTORIES
Inventories are stated at the lower of cost or market with cost
determined under the first-in, first-out (FIFO) method. The composition of
inventories was:
(Dollars in thousands)
September 30, 1999 June 30, 1999
------------------ ----------------
Raw materials $3,132 $2,984
Work in process 2,344 2,080
Finished products 703 249
---------------- ----------------
6,179 5,313
Less: Reserve for obsolescence 337 295
---------------- ----------------
$5,842 $5,018
---------------- ----------------
4. TAIWAN VENTURE
In December 1998, the Company announced the formation of a venture with
PGT Energy Corporation (PGT), together with a group of investors, to
produce Ultralife's polymer rechargeable batteries in Taiwan. In
consideration of its ownership interest in the venture, Ultralife
contributed to Ultralife Taiwan, Inc. (UTI), its proprietary technology
and, in July 1999, issued 700,000 shares of Ultralife common stock.
Ultralife holds half the seats on UTI's board of directors. PGT and the
group of investors has funded UTI with $21,250,000 in cash and hold the
remaining seats on the UTI board.
5. COMMITMENTS AND CONTINGENCIES
A company has filed a claim against the Company seeking amounts related
to commissions and breach of good faith and fair dealings. The Company's
counsel believes that an unfavorable outcome is unlikely in this matter.
6
<PAGE>
An individual has filed suit claiming the Company interfered with his
opportunity to purchase Dowty Group, PLC (now the Company's U.K.
subsidiary). The claim amounts to $25,000,000. The Company believes that
the claim is without merit and the Company intends to vigorously defend its
position. At this time, the outcome of this suit is uncertain. An
unfavorable outcome of this suit may have a material adverse impact on the
Company's financial position and results of operations.
In August 1998, certain shareholders commenced a putative class action
lawsuit against the Company, its Directors, certain of its officers, and
certain underwriters seeking unspecified damages arising out of alleged
violations of the federal securities laws in connection with the Company's
May 1998 public offering of 2.5 million shares of common stock. The
complaint, which was amended during 1998 before defendants were required to
respond, alleged that the Company's registration statement and prospectus
issued in connection with the offering contained false statements or
omitted allegedly material information and therefore were misleading. The
plaintiffs claimed that they, and other shareholders whom they seek to
represent, purchased the Company's stock at allegedly inflated prices and
were injured thereby. In response to defendants' motions to dismiss, on
September 28, 1999 the Court dismissed, without prejudice, plaintiffs'
Amended Complaint for failure to state a claim and for failing to plead
fraud with particularity, and granted plaintiffs leave to replead their
complaint within a time specified by the Court.
On November 8, 1999, plaintiffs filed a Second Amended Class Action
Complaint, naming the same defendants and asserting similar as those set
forth in plaintiffs' prior Amended Complaint. The Company's time to respond
to the Second Amended Complaint has not yet expired.
The Company continues to believe that the litigation is without merit
and intends to continue to vigorously defend this action. To date, no
discovery has been conducted, and the amount of alleged damages, if any,
cannot be quantified, nor can the outcome of this litigation be predicted.
Accordingly, management cannot determine whether the ultimate resolution of
this litigation could have a material adverse effect on the Company's
financial position and results of operations.
In conjunction with the Company's purchase/lease agreement of its
Newark, New York facility in 1998, the Company entered into a
payment-in-lieu of tax agreement which provides the Company with certain
real estate tax concessions upon certain conditions. In connection with
this agreement, the Company received an environmental assessment which
revealed contaminated soil. The assessment indicated potential actions that
the Company may be required to undertake upon notification by the
environmental authorities. The assessment also proposed that a second
assessment be completed and provided an estimate of total potential costs
to remediate the soil of $230,000. However, there can be no assurance that
this will be the maximum cost. The Company entered into an agreement
whereby a third party has agreed to reimburse the Company for fifty percent
of the costs associated with this matter. The matter is in its preliminary
stages and the total costs of remediation cannot be estimated at this time.
The ultimate resolution of this matter may have a significant adverse
impact on the results of operations in the period in which it is resolved.
6. CAPITAL LEASE OBLIGATION
A capital lease obligation of $647,000 was incurred in fiscal 1998 when
the Company entered into a capital lease for land and buildings. An initial
payment of $400,000 was paid at the time of the lease inception, resulting
in a balance of $247,000 to be paid over 10 years. At September 30, 1999,
the outstanding principal balance on the lease was $207,000.
7. BUSINESS SEGMENT INFORMATION
The Company reports its results in four operating segments: Primary
Batteries, Rechargeable Batteries, Technology Contracts and Corporate. The
Primary Batteries segment includes
7
<PAGE>
9-volt batteries, cylindrical batteries and various specialty batteries.
The Rechargeable Batteries segment consists of the Company's efforts to
produce rechargeable batteries. The Technology Contracts segment includes
revenues and related costs associated with various government and military
development contracts. The Corporate segment consists of all other items
that do not specifically relate to the three other segments and are not
considered in the performance of the other segments.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, (DOLLARS IN THOUSANDS)
1999
PRIMARY RECHARGEABLE TECHNOLOGY
BATTERIES BATTERIES CONTRACTS CORPORATE TOTAL
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 5,632 $ 2 $591 $ - $ 6,225
Segment contribution 362 (1,092) 57 (1,491) (2,164)
Interest income (expense), net - - - 305 305
Other income (expense) - - - (67) (67)
Income taxes - - - - -
----------
Net loss (1,926)
Total assets $16,830 $ 20,361 $510 $29,179 $66,880
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, (DOLLARS IN THOUSANDS)
1998
PRIMARY RECHARGEABLE TECHNOLOGY
BATTERIES BATTERIES CONTRACTS CORPORATE TOTAL
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 3,757 $ - $ 465 $ - $ 4,222
Segment contribution 677 (1,828) 79 (1,300) (2,372)
Interest income (expense), net - - - 449 449
Other income (expense) - - - (7) (7)
Income taxes - - - - -
----------
Net loss (1,930)
Total assets $12,551 $19,978 $1,170 $38,869 $72,568
</TABLE>
8. NEW ACCOUNTING PRONOUNCEMENTS
As of July 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 133 (SFAS No. 133), "Accounting for Derivative
Instruments and Hedging Activities", which established accounting and
reporting requirements for derivative instruments and hedging activities.
The Company, on occasion, has used derivative financial instruments for
purposes other than trading and does so to reduce its exposure to
fluctuations in foreign currency exchange rates. As of September 30, 1999,
the Company did not have any outstanding derivative financial instruments.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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, FUTURE
DEMAND FOR THE COMPANY'S PRODUCTS AND SERVICES, THE SUCCESSFUL
COMMERCIALIZATION OF THE COMPANY'S ADVANCED RECHARGEABLE BATTERIES, GENERAL
ECONOMIC CONDITIONS, GOVERNMENT AND ENVIRONMENTAL REGULATION, COMPETITION
AND CUSTOMER STRATEGIES, TECHNOLOGICAL INNOVATIONS IN THE PRIMARY AND
RECHARGEABLE BATTERY INDUSTRIES, CHANGES IN THE COMPANY'S BUSINESS STRATEGY
OR DEVELOPMENT PLANS, CAPITAL DEPLOYMENT, BUSINESS DISRUPTIONS, RAW
MATERIALS SUPPLIES, AND OTHER RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE
BEYOND THE COMPANY'S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE
INCORRECT, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE DESCRIBED HEREIN
AS ANTICIPATED, BELIEVED, ESTIMATED OR EXPECTED.
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED
HEREIN AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS OF AND FOR
THE YEAR ENDED JUNE 30, 1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Consolidated revenues reached a new quarterly record of $6,225,000 for
the first three months of fiscal 2000, an increase of $2,003,000, or 47%,
over the comparable quarter in fiscal 1999. Primary battery sales increased
$1,875,000, or 50%, from $3,757,000 last year to $5,632,000 this year. The
increase in primary battery sales was primarily due to an increase in
9-volt lithium battery shipments and, to a lesser extent, greater sales of
high rate batteries. Technology contract revenues rose $126,000, or 27%,
from $465,000 to $591,000 reflecting the Company's work on the U.S.
Department of Commerce's Advanced Technology Program (ATP) with the U.S.
Department of Commerce which commenced in April 1999.
Cost of products sold amounted to $5,806,000 for the three month period
ended September 30, 1999, an increase of $1,872,000, or 48% over the same
three month period a year ago. The gross margin on total revenues for the
quarter was 7%, consistent with the gross margin of the prior year. Gross
margins on primary batteries were 6% in the first quarter of both fiscal
1999 and fiscal 2000. Last year's cost of products sold for primary
batteries, however, included $506,000 of proceeds from business
interruption insurance which offset unabsorbed overhead expenses at the
Company's U.K. facility that resulted from a fire in December 1996. This
fire suspended production of high-rate batteries in the U.K. for a period
of 15 months. Excluding the impact of these insurance proceeds, the gross
margin for primary batteries in the first quarter of fiscal 1999 was a
negative 8%. The improvement of gross margins in primary batteries
(excluding the impact from fire insurance proceeds), from a negative 8% in
the first quarter of fiscal 1999 to a positive 6% in the first quarter of
fiscal 2000, was largely a result of higher production volumes in 9-volt
and high rate batteries. While sales and production rates of high-rate
batteries produced in the U.K. are increasing, they are not yet at a level
to fully absorb all current overhead expenses. The Company anticipates that
sales orders and production volumes will increase sufficiently in fiscal
2000 to fully absorb factory overheads in
9
<PAGE>
the U.K.; however, there can be no assurance that such volumes will be
achieved. Gross profit on technology contracts decreased $22,000 in fiscal
2000 when compared to fiscal 1999, reflecting a decline in gross margins
from 17% in the first quarter 1999 to 10% in the first quarter 2000. The
slight decline in technology contract gross margins is due to lower margins
reflected in contracts in the U.K.
Operating and other expenses were $2,583,000 for the three months ended
September 30, 1999, a decrease of $77,000, or 3%, from $2,660,000 in the
prior year. Included in the operating expenses last year was a gain on
fires of $468,000 which related to fire insurance proceeds for the
Company's fire in the U.K. The claim was settled during fiscal 1999 and no
gains were recognized in fiscal 2000. Excluding the impact of this
non-recurring item, operating expenses decreased $545,000, or 17%. Of the
Company's operating and other expenses, research and development expenses
decreased $736,000, or 40%, to $1,092,000 for the first quarter of fiscal
2000. The decline in research and development expenses was primarily due to
a shift in resources to the U.S. Department of Commerce Advanced Technology
Program and a narrower focus on key rechargeable development programs. That
decrease was partially offset by an increase of $191,000, or 15%, in
selling, general, and administrative expenses, to $1,491,000 in the first
three months of fiscal 2000. This increase in SG&A expenses was mainly due
to higher information technology expenses and higher insurance costs, as
well as an increased allocation of support departments in the U.K.
operating facility.
Interest income decreased $144,000, or 32%, from $449,000 in the first
quarter of fiscal 1999 to $305,000 in the first quarter of fiscal 2000. The
reduction in interest income is principally the result of lower average
cash balances.
Net losses were $1,926,000, or $0.18 per share, for the first three
months of fiscal 2000 compared to $1,930,000, or $0.18 per share, for the
same quarter last year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, cash and cash equivalents and available for sale
securities totaled $19,686,000. The Company used $2,214,000 of cash in
operating activities during the first three months of fiscal 2000. This
usage of cash related primarily to the net loss reported for the period and
an increase in inventories, offset in part by depreciation and amortization
expense. The Company spent $1,189,000 for capital additions for production
equipment and facilities improvements during the first quarter 2000. In
addition, in conjunction with the Taiwan venture agreement, the Company
issued 700,000 shares of its common stock related to the Company's Taiwan
venture.
At September 30, 1999, the Company had long-term debt outstanding of
$215,000 primarily relating to the capital lease obligation for the
Company's Newark, New York offices and manufacturing facilities. Ultralife
UK maintains a line of credit in the amount of $330,000 for short-term
working capital requirements. In November 1999, the Company entered into a
capital lease for $423,000 related to computer hardware and software,
whereby payments will be made monthly over a 3-year term. With planned
sales growth, the Company is continuing to pursue a working capital line of
credit of approximately $15,000,000. Presently, no commitments for this
financing have been obtained.
The Company's capital resource commitments as of September 30, 1999
consisted principally of capital equipment commitments of approximately
$536,000. The Company believes its current financial position and cash
flows from operations will be adequate to support its financial
requirements throughout the next 12 months.
10
<PAGE>
YEAR 2000 DISCLOSURE
The "Year 2000" issue is the result of computer programs being
written using only two digits as opposed to four to represent the
applicable year. Computer programs that have time sensitive software may
recognize "00" as the year 1900 rather than the year 2000. This could
potentially result in a system failure or an error in calculation. This
Year 2000 issue is believed to affect all companies and organizations,
including the Company.
The Company has taken and continues to take a number of steps in
an effort to assess its readiness for Year 2000 issues, including reviewing
all business systems, testing equipment, surveying key material suppliers,
and completing the remediation plan.
During the early part of fiscal 1999, the Company's review and
assessment determined that its U.S. accounting system was not Year 2000
compliant. As part of its ongoing project to improve the flow of management
information and control of operations, the Company implemented and began
using an enterprise-wide software system as of July 1, 1999. The Company
now believes that its systems are fully Year 2000 compliant. The total
costs of this project, including hardware, software, consulting and
implementation costs, amounted to approximately $450,000. Most of these
costs were capitalized.
In addition to internal Year 2000 activities, the Company is in
contact with its key suppliers and vendors to assess their state of
readiness and compliance. The Company has issued documentation to key
vendors and suppliers and is receiving assurances from these companies that
all new equipment purchased is Year 2000 compliant, and that the supply of
materials necessary to the continued smooth operation of the Company will
not be materially affected by any Year 2000 issues. However, it is
difficult to predict with certainty what the impact on the Company may be
as a result of any Year 2000 problems at its vendors and suppliers.
The Company believes that the cost of completing the assessment
and remediation plan will not be material and that the risks to the Company
with respect to Year 2000 issues are manageable. Management is continuing
to examine the Year 2000 issues as they potentially impact the Company and
is finalizing contingency plans as necessary.
11
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In August 1998, certain shareholders commenced a putative class action
lawsuit against the Company, its Directors, certain of its officers, and
certain underwriters seeking unspecified damages arising out of alleged
violations of the federal securities laws in connection with the Company's
May 1998 public offering of 2.5 million shares of common stock. The
complaint, which was amended during 1998 before defendants were required to
respond, alleged that the Company's registration statement and prospectus
issued in connection with the offering contained false statements or
omitted allegedly material information and therefore were misleading. The
plaintiffs claimed that they, and other shareholders whom they seek to
represent, purchased the Company's stock at allegedly inflated prices and
were injured thereby. In response to defendants' motions to dismiss, on
September 28, 1999 the Court dismissed, without prejudice, plaintiffs'
Amended Complaint for failure to state a claim and for failing to plead
fraud with particularity, and granted plaintiffs leave to replead their
complaint within a time specified by the Court.
On November 8, 1999, plaintiffs filed a Second Amended Class Action
Complaint, naming the same defendants and asserting similar as those set
forth in plaintiffs' prior Amended Complaint. The Company's time to respond
to the Second Amended Complaint has not yet expired.
The Company continues to believe that the litigation is without merit
and intends to continue to vigorously defend this action. To date, no
discovery has been conducted, and the amount of alleged damages, if any,
cannot be quantified, nor can the outcome of this litigation be predicted.
Accordingly, management cannot determine whether the ultimate resolution of
this litigation could have a material adverse effect on the Company's
financial position and results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On October 18, 1999, the Company filed a Form 8-K with the
Securities and Exchange Commission indicating that on
September 28, 1999, the United States District Court for the
District of New Jersey dismissed a putative class action filed
in August 1998 against the Company, certain of its officers
and directors, and the underwriters of the Company's June 1998
public offering of securities. In its Order dated September
28, 1999, the Court granted the Company's motion to dismiss
and dismissed plaintiffs' Amended Complaint without prejudice,
and granted plaintiffs leave to amend their Amended Complaint
within thirty days of the date of the Order.
12
<PAGE>
SIGNATURES
Pursuant to the requirements 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 BATTERIES, INC.
-------------------------
(Registrant)
Date: NOVEMBER 12, 1999 By: /S/ JOHN D. KAVAZANJIAN
----------------- ------------------------
John D. Kavazanjian
President and Chief Executive Officer
Date: NOVEMBER 12, 1999 By: /S/ ROBERT W. FISHBACK
----------------- -----------------------
Robert W. Fishback
Vice President - Finance and Chief
Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Jun-30-2000
<PERIOD-START> Jul-01-1999
<PERIOD-END> Sep-30-1999
<CASH> 1,938
<SECURITIES> 17,748
<RECEIVABLES> 3,874
<ALLOWANCES> 439
<INVENTORY> 5,842
<CURRENT-ASSETS> 30,922
<PP&E> 38,592
<DEPRECIATION> 6,123
<TOTAL-ASSETS> 66,880
<CURRENT-LIABILITIES> 5,420
<BONDS> 0
0
0
<COMMON> 1,121
<OTHER-SE> 60,124
<TOTAL-LIABILITY-AND-EQUITY> 66,880
<SALES> 6,225
<TOTAL-REVENUES> 6,225
<CGS> 5,806
<TOTAL-COSTS> 5,806
<OTHER-EXPENSES> 2,583
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> (1,926)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,926)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,926)
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
