SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 - 10,485,136 shares outstanding
as of April 30, 1999.
<PAGE>
ULTRALIFE BATTERIES, INC.
INDEX
- --------------------------------------------------------------------------------
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1999 and June 30, 1998................................ 3
Condensed Consolidated Statements of Operations -
Three and nine months ended
March 31, 1999 and 1998......................................... 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended March 31, 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 .................. 8
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
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
March 31,
1999 June 30,
ASSETS (Unaudited) 1998
--------- --------
Current assets:
Cash and cash equivalents $ 1,116 $ 872
Available-for-sale securities 25,651 34,816
Trade accounts receivable (less allowance
for doubtful accounts of $252 and $158 at
March 31, 1999 and June 30, 1998, respectively) 3,410 3,046
Inventories 4,259 3,911
Prepaid expenses and other current assets 2,417 2,144
-------- --------
Total current assets 36,853 44,789
-------- --------
Property and equipment:
Machinery and equipment 35,456 33,113
Leasehold improvements 1,016 863
-------- --------
36,472 33,976
Less - Accumulated depreciation and amortization 5,145 3,828
-------- --------
31,327 30,148
-------- --------
Other assets and deferred charges:
Technology licensee agreements (net of accumulated
amortization of $906 and $561 at March 31, 1999
and June 30, 1998, respectively) 545 890
-------- --------
545 890
-------- --------
Total Assets $ 68,725 $ 75,827
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligation $ 50 $ 50
Accounts payable 3,736 4,785
Accrued compensation 219 335
Customer advances 334 334
Other current liabilities 1,238 1,540
-------- --------
Total current liabilities 5,577 7,044
-------- --------
Long - term liabilities:
Capital lease obligation 157 197
-------- --------
Total long - term liabilities 157 197
-------- --------
Commitments and contingencies (Note 6)
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; outstanding
- 10,485,136 1,051 1,051
Capital in excess of par value 93,605 93,605
Accumulated other comprehensive income 760 1,368
Accumulated deficit (32,122) (27,135)
-------- --------
63,294 68,889
Less --Treasury stock, at cost -- 27,250 shares (303) (303)
-------- --------
Total Stockholders' Equity 62,991 68,586
-------- --------
Total Liabilities and Stockholders' Equity $ 68,725 $ 75,827
======== ========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Battery sales $ 5,425 $ 3,065 $ 13,907 $ 10,638
Technology contracts 169 394 1,069 1,820
------------ ------------ ------------ ------------
Total revenues 5,594 3,459 14,976 12,458
Cost of products sold:
Battery costs 4,839 2,326 12,588 9,117
Technology contracts 129 306 817 1,566
------------ ------------ ------------ ------------
Total cost of products sold 4,968 2,632 13,405 10,683
------------ ------------ ------------ ------------
Gross profit 626 827 1,571 1,775
Operating and other expenses:
Research and development 1,360 2,180 4,788 4,943
Selling, general, and administrative 1,665 1,417 4,313 4,030
Gain on fires -- (417) (1,417) (1,612)
------------ ------------ ------------ ------------
Total operating and other expenses 3,025 3,180 7,684 7,361
Other income (expense):
Interest income 342 106 1,152 533
Miscellaneous 4 (3) (27) (25)
------------ ------------ ------------ ------------
Loss before income taxes (2,053) (2,250) (4,988) (5,078)
------------ ------------ ------------ ------------
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (2,053) $ (2,250) $ (4,988) $ (5,078)
============ ============ ============ ============
Net loss per common share $ (0.20) $ (0.28) $ (0.48) $ (0.64)
============ ============ ============ ============
Weighted average shares outstanding 10,485,136 7,985,036 10,485,136 7,995,855
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended March 31,
1999 1998
-------- --------
OPERATING ACTIVITIES
Net loss $ (4,988) $ (5,078)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 1,662 895
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (364) 737
(Increase) decrease in inventories (348) 1,727
Increase in prepaid expenses
and other current assets (273) (744)
Decrease (increase) in accounts payable
and other current liabilities (1,467) 1,898
-------- --------
Net cash used in operating activities (5,778) (565)
-------- --------
INVESTING ACTIVITIES
Purchase of property and equipment (2,496) (10,003)
Purchase of securities (85,886) (74,188)
Sales of securities 68,722 73,276
Maturities of securities 26,077 10,127
-------- --------
Net cash provided by (used in)
investing activities 6,417 (788)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 504
Principal payments under capital lease obligation (40) --
-------- --------
Net cash (used in) provided by financing activities (40) 504
-------- --------
Effect of exchange rate changes on cash (355) (223)
-------- --------
Increase (decrease) in cash and cash equivalents 244 (1,072)
Cash and cash equivalents at beginning of period 872 2,311
-------- --------
Cash and cash equivalents at end of period $ 1,116 $ 1,239
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Unrealized (loss) gain on securities $ (252) $ 387
======== ========
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 March 31, 1999 and the results of operations and cash flows for the three
and nine month periods ended March 31, 1999 and 1998. The results for the
three and nine months ended March 31, 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, 1998, filed on Form 10-K on September
29, 1998.
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. NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income and its components. The standard is applicable for
fiscal years beginning after December 15, 1997. The Company has adopted the
provision of SFAS No. 130. Other comprehensive income (loss) for the three
and nine month periods ended March 31, 1999 was $490,000 and ($608,000),
respectively. Other comprehensive income for the three and nine month
periods ended March 31, 1998 was $1,429,000 and $164,000, respectively.
Other comprehensive losses relate to unrealized gains/(losses) on investment
securities and changes in foreign currency translation.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about
operating segments in the financial statements. The standard is required to
be adopted for fiscal years beginning after December 15, 1997. The Company
will adopt this standard in its 1999 financial statements. The Company has
not yet determined the impact of this standard on its financial statements.
4. 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)
March 31, 1999 June 30, 1998
-----------------------------------
Raw materials $3,434 $2,613
Work in process 827 1,333
Finished products 285 192
-----------------------------------
4,546 4,138
Less: Reserve for obsolescence 287 227
-----------------------------------
$4,259 $3,911
-----------------------------------
6
<PAGE>
5. PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and amortization
is computed using the straight-line method over the estimated useful lives
of three to ten years. Betterments, renewals and extraordinary repairs that
extend the life of the assets are capitalized. Other repairs and maintenance
costs are expensed. When sold, the cost and accumulated depreciation
applicable to assets retired are removed from the accounts and the gain or
loss on disposition is recognized in income.
6. COMMITMENTS AND CONTINGENCIES
In August 1998, the Company, its Directors, and certain underwriters
were named as defendants in a complaint filed in the United States District
Court for the District of New Jersey by certain stockholders, purportedly on
behalf of a class of stockholders, alleging that the defendants, during the
period April 30, 1998 through June 12, 1998, violated various provisions of
the federal securities laws in connection with an offering of 2,500,000
shares of the Company's common stock. The complaint alleges that the
Company's offering documents were materially incomplete, and as a result
misleading, and that the purported class members purchased the Company's
common stock at artificially inflated prices and were damaged thereby. The
Company believes that the litigation is without merit and intends to defend
it vigorously. All defendants have filed Motions to Dismiss the Complaint.
As of May 6, 1999, the motions have been fully briefed and submitted to the
Court. 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.
On December 8, 1998, the Company announced that it had entered into a
venture with the PGT Energy Corp. (PGT), together with a group of investors,
to produce Ultralife's advanced solid polymer rechargeable batteries in
Taiwan. Ultralife will provide the joint venture, named Ultralife Taiwan,
Inc. (UTI), with its proprietary solid polymer battery technology and $8.75
million in cash, which will be generated by selling 700,000 shares of
Ultralife common stock to UTI at $12.50 per share. Ultralife will be UTI's
largest shareholder, with 47% ownership, and hold half of the seats on UTI's
board of directors. Ultralife will also receive the first $2.5 million of
profit distributions. PGT and the group of investors will fund UTI with
$21.25 million in cash and hold the remaining seats on the board. The first
meeting of the UTI board of directors was held in Taiwan on April 9, 1999,
at which time UTI was formally incorporated and initial funding contributed.
7. 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 March 31, 1999, the
outstanding principal balance on the lease was $207,000.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussion and analysis below, and throughout this report, contains
forward-looking statements within the meaning of Section 27A of the Securities
and Exchange Act of 1933 and Section 21E of the Securities and Exchange Act of
1934. Actual results could differ materially from those projected or suggested
in the forward-looking statements.
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, 1998.
Results of Operations
Three months ended March 31, 1999 and 1998
Total revenues increased $2,135,000, or 62%, from $3,459,000 for the three
months ended March 31, 1998 to a record of $5,594,000 for the three months ended
March 31, 1999. Battery sales increased $2,360,000, or 77%, from $3,065,000 to
$5,425,000. The increase in battery sales was primarily due to an increase in
9-volt lithium battery shipments. Greater sales of high rate batteries also
contributed to the increased revenue for the quarter. Technology contract
revenues decreased $225,000, or 57%, from $394,000 to $169,000 reflecting the
completion of certain programs. The Company commenced work on the Company's
$15,300,000 Advanced Technology Program (ATP) with the U.S. Department of
Commerce in April 1999 following the completion of final agreements with
Eagle-Picher Technologies, LLC and Lockheed Martin Missiles and Space, its
partners on this contract.
Cost of products sold increased from $2,632,000 in the third quarter 1998 to
$4,968,000 in the third quarter 1999. Cost of products sold as a percentage of
sales increased from approximately 76% of sales in the third quarter 1998 to 89%
in the third quarter 1999. Cost of batteries sold increased from $2,326,000, or
76% of battery sales, for the third quarter 1998 to $4,839,000, or 89% of
battery sales, for the third quarter 1999. The increase in cost of sales is
primarily due to higher cost in the UK where sales and production volumes of
high-rate batteries have not yet fully recovered to the levels achieved prior to
the December 1996 fire. This fire suspended production of high-rate batteries
for a period of 15 months. In the prior year's quarter, $703,000 of insurance
proceeds were applied to fully offset factory overhead expenses resulting from
the lack of production. During the current quarter, the final insurance proceeds
amounting to $280,000 were applied to offset current overhead expenses. While
sales and production rates of high-rate batteries 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; however, there can be no
assurance that such volumes will be achieved. Technology contract cost of sales
decreased from $306,000 in the third quarter 1998 to $129,000 in the third
quarter 1999, in a proportion comparable to that of the related sales. As a
percentage of sales, technology contract cost of sales decreased from 78% to 76%
in the current quarter.
Operating and other expenses decreased $155,000, or approximately 5%, from
$3,180,000 in the third quarter 1998 to $3,025,000 for the third quarter 1999.
Of the Company's operating and other expenses, research and development expenses
decreased $820,000, or 38%, from $2,180,000 to $1,360,000, which resulted from
the Company's determination to focus its efforts on a limited
8
<PAGE>
number of key rechargeable battery programs. That decrease was partially offset
by an increase of $248,000 in selling, general, and administrative expenses,
from $1,417,000 to $1,665,000, or 18%, which was primarily due to increased
legal expenses and consulting fees and increased internal support staff
associated with the implementation of new management information systems. The
systems expenditures are intended to support the Company's planned growth and
meet Year 2000 compliance requirements. Gains from insurance proceeds relating
to the December 1996 fire at the Company's United Kingdom facility were $417,000
in the third quarter 1998. The claim has been settled and no gains were
recognized in the third quarter 1999.
Interest income increased $236,000 from $106,000 in the third quarter 1998
to $342,000 for the third quarter 1999. The increased interest income is
principally the result of higher average balances invested following the public
securities offering completed April 30, 1998.
Net losses were $2,250,000, or $0.28 per share, for the third quarter 1998
compared to $2,053,000, or $0.20 per share, for the third quarter 1999,
primarily as a result of the reasons described above.
Nine Months Ended March 31, 1999 and 1998
Total revenues of the Company increased $2,518,000, or 20%, from $12,458,000
in the nine months ended March 31, 1998 to $14,976,000 in the nine months ended
March 31, 1999. Battery sales increased $3,269,000, or 31%, from $10,638,000 to
$13,907,000. The increase in battery sales was primarily due to increased 9-volt
lithium battery sales and the resumption of high-rate lithium battery sales at
the Company's United Kingdom subsidiary. Technology contract revenues decreased
$751,000, or 41%, from $1,820,000 in the nine months ended March 31, 1998 to
$1,069,000 for the nine months ended March 31, 1999. This decrease primarily
reflects the completion of certain contracts during fiscal 1998.
Cost of products sold increased $2,722,000 from $10,683,000 for the nine
months ended March 31, 1998 to $13,405,000 for the nine months ended March 31,
1999. Cost of batteries sold increased $3,471,000 from $9,117,000 to
$12,588,000. As a percentage of sales, cost of batteries sold increased from 86%
to 91% for the nine months ended March 31, 1999 compared to the same period in
1998. The increased cost of batteries sold as a percentage of sales reflects
unabsorbed factory overhead expense in the UK and a shift in product mix. The
cost of military batteries (BA-5372) sold in the prior year, as a percentage of
sales, was relatively lower than that incurred for the Company's other
batteries. This contract was completed on December 31, 1997. Cost of products
sold includes insurance proceeds received by Ultralife UK for business
interruption amounting to $1,628,000 in the nine months ended March 31, 1998 and
$1,491,000 in the current year. These receipts offset manufacturing variances in
the UK resulting from low production volumes and the startup of high-rate
lithium battery production following the December 1996 fire. Technology contract
cost of sales decreased $749,000 from $1,566,000, or 86% of sales, for the nine
months ended March 31, 1998 to $817,000, or 76% of sales, for the nine months
ended March 31, 1999. The decrease in technology contract cost of sales as a
percentage of sales reflects improved performance in contracts principally at
the Company's UK subsidiary.
Operating and other expenses increased $323,000, or 4%, from $7,361,000 for
the nine months ended March 31, 1998 to $7,684,000 for the nine months ended
March 31, 1999. Of the Company's operating and other expenses, the research and
development expenses decreased $155,000 from $4,943,000 to $4,788,000. In the
current year, the Company has focused its efforts on a limited number of key
rechargeable battery programs. Selling, general, and administrative expenses
increased $283,000, or 7%, from $4,030,000 to $4,313,000. This increase is
principally due to higher
9
<PAGE>
legal expenses and consulting and internal support staff associated with the
implementation of new management information systems. Operating and other
expenses include gains on fires of $1,612,000 for the nine months ended March
31, 1998 and $1,417,000 for the nine months ended March 31, 1999. These gains
reflect the receipt of insurance proceeds to reinstate the Company's UK
subsidiary following the December 31, 1996 fire. The facility has now commenced
operations, and the insurance claim has been settled.
Interest income increased $619,000 from $533,000 in the nine months ended
March 31, 1998 to $1,152,000 for the nine months ended March 31, 1999. The
higher interest income in the current year is principally the result of higher
average balances invested following the public securities offering completed on
April 30, 1998.
Net losses were $5,078,000, or $0.64 per share, in the nine months ended
March 31, 1998 compared to $4,988,000, or $0.48 per share, in the nine months
ended March 31, 1999, primarily as a result of the reasons described above.
Liquidity and Capital Resources
The Company used $5,778,000 of cash in operating activities during the first
nine months of fiscal 1999. This usage of cash related primarily to the net loss
reported for the period and lower accounts payable and accrued liabilities,
offset in part by depreciation and amortization expense. In addition, the
Company spent $2,496,000 of cash for capital additions for production equipment
and facilities improvements.
The Company had long-term debt of $157,000 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. With planned sales growth, the
Company is continuing to explore obtaining working capital lines of credit of
approximately $15,000,000. At present, no commitments for this financing have
been obtained.
The Company's capital resource commitments as of March 31, 1999 consisted
principally of capital equipment commitments of approximately $1,750,000. 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.
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 is taking 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.
The Company's review and assessment to date has determined that the present
U.S. accounting systems are not Year 2000 compliant. The Company has an ongoing
project to select and install an enterprise-wide software system to improve the
flow of management information and control of
10
<PAGE>
operations. The Company anticipates substantially completing this project during
1999. In March 1999, the Company finalized its decision to purchase a Year 2000
compliant system, and it is now in the implementation phase of the project. The
total costs of this project, including hardware, software, consulting and
implementation costs, are estimated to be between $400,000 and $600,000. Most of
these costs will be 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 the Year 2000 problems at our
vendors and suppliers at this time.
While 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, the Company cannot, at this time,
fully assess the potential impact. Management is continuing to examine the Year
2000 issues as they potentially impact the Company and is finalizing contingency
plans as necessary.
Taiwan Joint Venture
On December 8, 1998, the Company announced that it had entered into a
venture with the PGT Energy Corp. (PGT), together with a group of investors, to
produce Ultralife's advanced solid polymer rechargeable batteries in Taiwan.
Ultralife will provide the joint venture, named Ultralife Taiwan, Inc. (UTI),
with its proprietary solid polymer battery technology and $8.75 million in cash,
which will be generated by selling 700,000 shares of Ultralife common stock to
UTI at $12.50 per share. Ultralife will be UTI's largest shareholder, with 47%
ownership, and hold half of the seats on UTI's board of directors. Ultralife
will also receive the first $2.5 million of profit distributions. PGT and the
group of investors will fund UTI with $21.25 million in cash and hold the
remaining seats on the board. The first meeting of the UTI board of directors
was held in Taiwan on April 9, 1999, at which time UTI was formally incorporated
and initial funding contributed.
U.S. Army Contract
On April 23, 1999, the Company announced that it had been awarded a $1.7
million sole-source contract to provide primary (disposable) batteries to the
U.S. Army. The contract was awarded by the U.S. Army Communications and
Electronics Command (CECOM) in Ft. Monmouth, New Jersey. The battery ordered by
CECOM is designated BA-X372/U, a 6-volt cylindrical battery consisting of two
lithium-manganese dioxide cells connected in series. The batteries are primarily
used to provide the necessary memory back-up power for the most widely used
military "Singars" radio. Ultralife had previously produced this battery from
1994 through 1997 under a separate contract with CECOM. The new contract calls
for production to begin within four months, and it is expected that shipments of
the batteries will run through mid-2000.
11
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In August 1998, the Company, its Directors, and certain underwriters
were named as defendants in a complaint filed in the United States District
Court for the District of New Jersey by certain stockholders, purportedly on
behalf of a class of stockholders, alleging that the defendants, during the
period April 30, 1998 through June 12, 1998, violated various provisions of
the federal securities laws in connection with an offering of 2,500,000
shares of the Company's common stock. The complaint alleges that the
Company's offering documents were materially incomplete, and as a result
misleading, and that the purported class members purchased the Company's
common stock at artificially inflated prices and were damaged thereby. The
Company believes that the litigation is without merit and intends to defend
it vigorously. All defendants have filed Motions to Dismiss the Complaint.
As of May 6, 1999, the motions have been fully briefed and submitted to the
Court. 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
None filed during the quarter ended March 31, 1999.
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: May 13, 1999 By: /s/ Joseph C. Abeles
-------------------------
Joseph C. Abeles
Chief Executive Officer
Date: May 13, 1999 By: /s/ Frederick F. Drulard
-------------------------
Frederick F. Drulard
Vice President, Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,116
<SECURITIES> 25,651
<RECEIVABLES> 3,662
<ALLOWANCES> 252
<INVENTORY> 4,259
<CURRENT-ASSETS> 36,853
<PP&E> 36,472
<DEPRECIATION> 5,145
<TOTAL-ASSETS> 68,725
<CURRENT-LIABILITIES> 5,577
<BONDS> 0
0
0
<COMMON> 1,051
<OTHER-SE> 61,940
<TOTAL-LIABILITY-AND-EQUITY> 68,725
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<TOTAL-REVENUES> 14,976
<CGS> 13,405
<TOTAL-COSTS> 13,405
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<INCOME-PRETAX> (4,988)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,988)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,988)
<EPS-PRIMARY> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
