The accompanying unaudited consolidated financial statements of Ultralife Corporation and its subsidiaries (the “Company” or “Ultralife”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and notes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the consolidated financial statements have been included. Results for interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the consolidated financial statements and related notes thereto contained in our Form 10-K for the year ended December 31, 2021.

The December 31, 2021 consolidated balance sheet information referenced herein was derived from audited financial statements but does not include all disclosures required by GAAP.

Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.

Significant Accounting Policies

We regularly review of our accounting policies and make modifications as necessary to align with new accounting standards and changing business conditions.  Accordingly, the accounting policies below have been updated during the current year.  Reference should be made to Note 1 to the consolidated financial statements in our 2021 Annual Report on Form 10-K for all other of the Company’s significant accounting policies.

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. 

Separately priced extended warranty contracts are offered on certain products.  Extended warranties are treated as separate performance obligations and recognized to revenue evenly over the term of the respective contract.  Revenue not yet recognized on extended warranty contracts is recorded as deferred revenue on the consolidated balance sheet.

For customer contracts with an original expected duration of less than one year, we apply 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.

Warranties:

We generally offer standard warranties against product defects.  We also offer separately priced extended warranty contracts on certain products.  Warranty costs expected to be incurred are estimated based on the Company’s experience and recorded as costs of products sold.  Standard warranty costs are recognized upon product sale.  Extended warranty costs are recognized over the term of the contract.  Provision for warranty costs is recorded in accrued expenses and other current liabilities and other noncurrent liabilities on our consolidated balance sheet based on the duration of the warranty.

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.