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Ultralife(ULBI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) This section presents the unaudited consolidated financial statements of Ultralife Corporation and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, income statements, cash flow statements, and statements of changes in stockholders' equity, along with detailed notes on accounting policies, acquisitions, debt, and segment information Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Consolidated Balance Sheet Highlights (In Thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------- | :------------ | :---------------- | :----- | | Cash | $10,941 | $6,854 | +$4,087 | | Trade accounts receivable, net | $32,322 | $29,370 | +$2,952 | | Inventories, net | $50,575 | $51,363 | -$788 | | Total current assets | $99,003 | $97,160 | +$1,843 | | Total assets | $220,961 | $220,451 | +$510 | | Total current liabilities | $29,898 | $29,291 | +$607 | | Long-term debt, net | $47,510 | $51,502 | -$3,992 | | Total liabilities | $82,316 | $86,264 | -$3,948 | | Total stockholders' equity | $138,645 | $134,187 | +$4,458 | Consolidated Statements of Income and Comprehensive Income This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net income Consolidated Statements of Income and Comprehensive Income (In Thousands, except per share) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (3M) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (6M) | | :----------------------------------- | :--------------------------- | :--------------------------- | :---------------- | :--------------------------- | :--------------------------- | :---------------- | | Revenues | $48,561 | $42,983 | +13.0% | $99,307 | $84,910 | +17.0% | | Cost of products sold | $36,960 | $31,420 | +17.6% | $74,961 | $61,877 | +21.1% | | Gross profit | $11,601 | $11,563 | +0.3% | $24,346 | $23,033 | +5.7% | | Operating expenses | $9,345 | $7,646 | +22.2% | $18,691 | $15,053 | +24.2% | | Operating income | $2,256 | $3,917 | -42.4% | $5,655 | $7,980 | -29.1% | | Income before income taxes | $1,113 | $3,846 | -71.0% | $3,559 | $7,453 | -52.2% | | Net income attributable to Ultralife Corporation | $879 | $2,969 | -70.4% | $2,744 | $5,860 | -53.2% | | Basic EPS | $0.05 | $0.18 | -72.2% | $0.17 | $0.36 | -52.8% | | Diluted EPS | $0.05 | $0.18 | -72.2% | $0.17 | $0.35 | -51.4% | Consolidated Statements of Cash Flows This section details the inflows and outflows of cash from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows (In Thousands) | Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :---------------- | | Net cash provided by operating activities | $9,303 | $8,844 | +5.2% | | Net cash used in investing activities | $(1,995) | $(732) | +172.5% | | Net cash used in financing activities | $(3,338) | $(11,743) | -71.6% | | Increase (decrease) in cash | $4,087 | $(3,588) | N/A | | Cash, End of period | $10,941 | $6,690 | +63.5% | Consolidated Statements of Changes in Stockholders' Equity This section presents the changes in the equity accounts of the company's stockholders over specific reporting periods Key Changes in Stockholders' Equity (In Thousands) | Item | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Balance – December 31, 2024/2023 | $134,187 | $125,427 | | Net income | $2,744 | $5,860 | | Stock option exercises | $61 | $1,936 | | Stock-based compensation | $462 | $320 | | Foreign currency translation adjustments | $1,186 | $(235) | | Balance – June 30, 2025/2024 | $138,645 | $133,345 | Notes to Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements 1. Basis of Presentation This section describes the accounting principles and standards used in preparing the interim financial statements - The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and Rule 8-03 of Regulation S-X21 - The company adopted ASU 2023-07 "Segment Reporting" in November 2023, which did not impact financial results23 - The company is evaluating ASU 2023-09 "Income Taxes" (effective Jan 1, 2025) and ASU 2024-03 "Expense Disaggregation Disclosures" (effective Jan 1, 2027) for potential impacts on disclosures2425 2. Acquisition This section details the acquisition of Electrochem Solutions, Inc., including its financial impact and strategic rationale - On October 31, 2024, Ultralife completed the acquisition of Electrochem Solutions, Inc. for $48,022 thousand in cash26 - The acquisition enhances Ultralife's strategy by providing scale, manufacturing cost efficiencies, a blue-chip customer base, and a complementary portfolio of highly engineered battery cells and packs27 - Electrochem contributed $9,299 thousand in revenue and $1,626 thousand in net income before taxes for the three-month period ended June 30, 2025, and $16,921 thousand in revenue and $2,369 thousand in net income before taxes for the six-month period ended June 30, 20253435 Electrochem Purchase Price Allocation (In Thousands) | Asset/Liability | Amount | | :-------------------------------- | :----- | | Accounts receivable | $5,270 | | Inventories | $9,172 | | Property, plant and equipment | $20,735 | | Goodwill | $7,558 | | Other intangible assets | $10,500 | | Net assets acquired | $48,022 | 3. Debt This section outlines the company's debt arrangements, including the new Term Loan Facility and repayment obligations - On October 31, 2024, Ultralife entered into a new Credit and Security Agreement with KeyBank, including a 5-year, $55 million senior secured Term Loan Facility3738 - As of June 30, 2025, $51,625 thousand principal was outstanding on the Term Loan, with $3,438 thousand classified as current portion of long-term debt40 - The company was in full compliance with its debt covenants as of June 30, 2025, and the borrowing rate was 6.79%4345 Future Minimum Principal Repayment Obligations (In Thousands) | Year | Amount | | :--- | :----- | | 2025 | $1,375 | | 2026 | $4,125 | | 2027 | $5,500 | | 2028 | $5,500 | | 2029 | $35,125 | | Total | $51,625 | 4. Earnings Per Share This section explains the calculation of basic and diluted earnings per share and factors affecting share count - Basic EPS is computed by dividing net income attributable to Ultralife by the weighted average shares outstanding, while diluted EPS includes the dilutive effect of securities49 - For the three-month period ended June 30, 2025, 21,856 potential common shares were included in diluted EPS calculation, significantly lower than 257,068 in the prior year due to fewer dilutive stock options and restricted stock awards50 5. Supplemental Balance Sheet Information This section provides detailed breakdowns of specific balance sheet accounts, including inventories, property, plant and equipment, goodwill, and other intangible assets Inventories, Net This section details the composition of the company's inventory, categorized by raw materials, work in process, and finished goods Inventories, Net (In Thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Raw materials | $35,502 | $36,035 | | Work in process | $5,639 | $4,501 | | Finished goods | $9,434 | $10,827 | | Total | $50,575 | $51,363 | Property, Plant and Equipment, Net This section provides a breakdown of the company's tangible long-term assets and associated depreciation Property, Plant and Equipment, Net (In Thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Land | $4,693 | $4,693 | | Buildings and leasehold improvements | $30,124 | $30,109 | | Machinery and equipment | $62,012 | $60,986 | | Construction in process | $3,122 | $2,077 | | Less: Accumulated depreciation | $(70,535) | $(68,437) | | Total PP&E, net | $40,614 | $40,485 | Depreciation Expense (In Thousands) | Period | June 30, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | | Three-month period ended | $1,008 | $789 | | Six-month period ended | $1,958 | $1,529 | Goodwill This section details the changes in goodwill by segment, including the impact of foreign currency translation Goodwill Activity by Segment (In Thousands) | Segment | December 31, 2024 | Effect of Foreign Currency Translation | June 30, 2025 | | :-------------------- | :---------------- | :----------------------------------- | :------------ | | Battery & Energy Products | $33,513 | $400 | $33,913 | | Communications Systems | $11,493 | - | $11,493 | | Total | $45,006 | $400 | $45,406 | Other Intangible Assets, Net This section presents the company's intangible assets, such as customer relationships and trade names, along with their amortization Other Intangible Assets, Net (In Thousands) | Category | Cost (June 30, 2025) | Accumulated Amortization (June 30, 2025) | Net (June 30, 2025) | Net (December 31, 2024) | | :-------------------- | :------------------- | :--------------------------------------- | :---------------- | :-------------------- | | Customer relationships | $18,383 | $7,913 | $10,470 | $10,858 | | Trade names | $9,976 | $1,078 | $8,898 | $9,129 | | Patents and technology | $5,783 | $5,583 | $200 | $262 | | Trademarks | $3,400 | - | $3,400 | $3,399 | | Other | $1,500 | $629 | $871 | $909 | | Total other intangible assets | $39,042 | $15,203 | $23,839 | $24,557 | Amortization Expense for Intangible Assets (In Thousands) | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Selling, general and administrative | $378 | $202 | $754 | $405 | | Research and development | $32 | $25 | $61 | $50 | | Total amortization expense | $410 | $227 | $815 | $455 | 6. Stock-Based Compensation This section details the expenses related to stock options and restricted stock awards, and unrecognized compensation costs Stock-Based Compensation Expense (In Thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Stock options | $190 | $152 | $378 | $308 | | Restricted stock | $45 | $7 | $84 | $12 | | Total | $235 | $159 | $462 | $320 | - As of June 30, 2025, total unrecognized compensation cost related to outstanding stock options was $733 thousand, expected to be recognized over a weighted average period of 1.1 years60 - Cash received from stock option exercises for the six-month period ended June 30, 2025, was $61 thousand, a significant decrease from $1,936 thousand in the prior year61 7. Income Taxes This section discusses the effective tax rate, net operating loss carryforwards, and valuation allowances - The effective tax rate for the six-month period ended June 30, 2025, was 22.8%, up from 20.9% in the prior year, primarily due to the geographic mix of operating results64 - As of December 31, 2024, the company had domestic net operating loss (NOL) carryforwards of $15,000 thousand and domestic tax credits of $3,200 thousand, which management expects to fully utilize65 - A valuation allowance of approximately $9,600 thousand is maintained for NOL carryforwards related to past U.K. operations, which cannot be used by the current U.K. subsidiary66 8. Operating Leases This section outlines the company's operating lease costs, right-of-use assets, and lease liabilities Total Lease Cost (In Thousands) | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease cost | $291 | $268 | $591 | $530 | | Variable lease cost | $22 | $24 | $46 | $52 | | Total lease cost | $313 | $292 | $637 | $582 | Operating Lease Liabilities (In Thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Operating lease right-of-use asset | $3,746 | $4,153 | | Current operating lease liability | $1,112 | $1,138 | | Operating lease liability, net of current portion | $2,632 | $2,998 | | Total operating lease liability | $3,744 | $4,136 | | Weighted-average remaining lease term (years) | 4.1 | 4.5 | | Weighted-average discount rate | 6.7% | 6.7% | 9. Commitments and Contingencies This section details the company's purchase commitments and accrued warranty obligations - As of June 30, 2025, the company had commitments to purchase approximately $1,408 thousand in production machinery and equipment74 Accrued Warranty Obligations (In Thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Accrued warranty obligations – beginning | $887 | $547 | | Accruals for warranties issued | $251 | $389 | | Settlements made | $(173) | $(147) | | Accrued warranty obligations – ending | $965 | $789 | 10. Revenue Recognition This section explains the company's policies for recognizing revenue from product sales and extended warranty contracts - Revenue is generally recognized upon transfer of control to the customer, typically upon shipment or delivery77 - Extended warranty contracts for Communications Systems products are treated as separate performance obligations and recognized evenly over the contract term78 - As of June 30, 2025, deferred revenue on extended warranty contracts totaled $1,004 thousand, with $298 thousand expected to be recognized within one year79 11. Business Segment Information This section provides financial data for the Battery & Energy Products and Communications Systems segments, including revenues by source and geography - Ultralife operates in two reportable segments: Battery & Energy Products and Communications Systems83 - Segment performance is monitored by "segment contribution," defined as gross profit less direct SG&A and R&D expenses85 Segment Revenues (In Thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (3M) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (6M) | | :-------------------------- | :--------------------------- | :--------------------------- | :---------------- | :--------------------------- | :--------------------------- | :---------------- | | Battery & Energy Products | $45,867 | $36,683 | +25.0% | $92,188 | $71,672 | +28.6% | | Communications Systems | $2,694 | $6,300 | -57.2% | $7,119 | $13,238 | -46.2% | | Total Revenues | $48,561 | $42,983 | +13.0% | $99,307 | $84,910 | +17.0% | Revenue by Source (In Thousands) | Source | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Commercial | $31,333 (65%) | $27,664 (64%) | $60,992 (61%) | $51,804 (61%) | | Government/Defense | $17,228 (35%) | $15,319 (36%) | $38,315 (39%) | $33,106 (39%) | | Total | $48,561 | $42,983 | $99,307 | $84,910 | Revenue by Geography (In Thousands) | Geography | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | United States | $35,364 (73%) | $23,399 (54%) | $74,833 (75%) | $47,860 (56%) | | Non-United States | $13,197 (27%) | $19,584 (46%) | $24,474 (25%) | $37,050 (44%) | | Total | $48,561 | $42,983 | $99,307 | $84,910 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and operational results for the three and six-month periods ended June 30, 2025, including an overview of business segments, key financial metrics, and a discussion of liquidity and capital resources Forward-Looking Statements This section highlights the inherent uncertainties and risks associated with future-oriented statements in the report - The report contains forward-looking statements subject to various risks and uncertainties, including economic conditions, reliance on key customers, military spending, supply chain disruptions, and new product development100 - Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially from projections101102 General Business Overview This section describes Ultralife's core business, product offerings, global market reach, and segment reporting structure - Ultralife provides power solutions and communications/electronics systems to government, defense, and commercial sectors globally, focusing on engineering and collaborative problem-solving105 - The company sells products worldwide through OEMs, distributors, and directly to defense departments, operating under various brand names106 - Financial results are reported in two segments: Battery & Energy Products and Communications Systems, with segment contribution as the key performance indicator107 Overview of Financial Performance This section summarizes the company's consolidated financial results for the quarter, highlighting key revenue, profit, and income trends - Consolidated revenues for Q2 2025 increased 13.0% to $48,561 thousand, driven by the Electrochem acquisition and government/defense sales, despite a 20.4% decrease in commercial sales109 - Gross profit margin declined by 300 basis points to 23.9% in Q2 2025 due to sales product mix, higher tariffs/freight, and lower factory throughput110 - Operating income for Q2 2025 decreased 42.4% to $2,256 thousand, impacted by lower Communications Systems sales, reduced gross margin in Battery & Energy Products, and increased operating expenses112 - Net income attributable to Ultralife Corporation for Q2 2025 was $879 thousand ($0.05 EPS), down from $2,969 thousand ($0.18 EPS) in Q2 2024114 - Management expects improved results in the second half of 2025 and into 2026, driven by a rebound in Communications Systems, new product programs, and sustained defense spending116 Results of Operations (Three-Month Periods) This section provides a detailed analysis of the company's financial performance for the three-month periods, covering revenues, gross profit, operating expenses, and net income - Revenues: Consolidated revenues increased 13.0% to $48,561 thousand. Battery & Energy Products revenues increased 25.0% to $45,867 thousand (attributable to Electrochem and strong government/defense demand), while Communications Systems sales decreased 57.2% to $2,694 thousand due to shipment delays117118119 - Gross Profit: Consolidated gross margin decreased from 26.9% to 23.9%. Battery & Energy Products gross margin declined 350 basis points to 23.6% due to sales mix (declines in medical and oil & gas) and higher costs. Communications Systems gross margin increased 280 basis points to 28.4% due to favorable sales mix despite lower volume120121122 - Operating Expenses: Total operating expenses increased 22.2% to $9,345 thousand, primarily due to Electrochem inclusion ($654 thousand), a 25.3% increase in new product development, and strengthening of sales/marketing teams123124 - Other Expense: Increased significantly to $1,143 thousand from $71 thousand, mainly due to higher interest expense from Electrochem acquisition financing and the absence of a prior-year insurance payment for a cyberattack125 - Net Income & EPS: Net income attributable to Ultralife was $879 thousand ($0.05 basic/diluted EPS), a 70.4% decrease from $2,969 thousand ($0.18 basic/diluted EPS) in the prior year127 Results of Operations (Six-Month Periods) This section provides a detailed analysis of the company's financial performance for the six-month periods, covering revenues, operating expenses, other income/expense, and net income - Revenues: Consolidated revenues increased 17.0% to $99,307 thousand. Battery & Energy Products revenues increased 28.6% to $92,188 thousand (including $16,921 thousand from Electrochem and 5.0% organic growth from government/defense, offset by commercial declines). Communications Systems revenues decreased 46.2% to $7,119 thousand due to prior-year shipments and timing delays129130131 - Operating Expenses: Total operating expenses increased 24.2% to $18,691 thousand, driven by Electrochem inclusion and increased investment in R&D and sales/marketing132133 - Other Expense: Increased to $2,096 thousand from $527 thousand, primarily due to a 115.8% increase in interest expense from the Electrochem acquisition financing and a shift from miscellaneous income to expense134 - Income Taxes: The effective tax rate increased to 22.8% from 20.9%. The provision was $810 thousand, including a $609 thousand deferred tax provision expected to be offset by NOLs135 - Net Income & EPS: Net income attributable to Ultralife was $2,744 thousand ($0.17 basic/diluted EPS), a 53.2% decrease from $5,860 thousand ($0.36 basic, $0.35 diluted EPS) in the prior year136 Non-GAAP Financial Measures This section presents non-GAAP financial measures, including Adjusted EBITDA and Adjusted Earnings Per Share, with their reconciliations to GAAP measures Adjusted EBITDA This section defines and reconciles Adjusted EBITDA, a non-GAAP measure, to net income attributable to Ultralife Corporation - Adjusted EBITDA is a non-GAAP measure defined as net income attributable to Ultralife Corporation before net interest expense, income taxes, depreciation, amortization, stock-based compensation, and certain non-recurring items138 Adjusted EBITDA Reconciliation (In Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to Ultralife Corp. | $879 | $2,969 | $2,744 | $5,860 | | Add: Interest expense | $992 | $418 | $2,024 | $938 | | Add: Income tax provision | $243 | $853 | $810 | $1,556 | | Add: Depreciation expense | $1,008 | $789 | $1,958 | $1,529 | | Add: Amortization expense | $410 | $227 | $815 | $455 | | Add: Stock-based compensation expense | $235 | $159 | $462 | $320 | | Add: Severance cost for plant closure | - | - | $150 | - | | Add: Acquisition and other non-recurring costs | $326 | - | $518 | - | | Add: Non-cash purchase accounting adjustments | $20 | - | $80 | - | | Adjusted EBITDA | $4,113 | $5,415 | $9,561 | $10,658 | - Adjusted EBITDA for Q2 2025 was $4,113 thousand (8.4% of revenues), down from $5,415 thousand (12.6% of revenues) in Q2 2024. For H1 2025, it was $9,561 thousand, down from $10,658 thousand in H1 2024115142 Adjusted Earnings Per Share This section defines and reconciles Adjusted EPS, a non-GAAP measure, to diluted EPS attributable to Ultralife Corporation - Adjusted EPS is a non-GAAP measure that excludes the provision for deferred income taxes from net income attributable to Ultralife Corporation144 Adjusted EPS Reconciliation | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to Ultralife Corp. (Diluted EPS) | $0.05 | $0.18 | $0.16 | $0.35 | | Deferred tax provision (per diluted share) | $0.02 | $0.04 | $0.04 | $0.09 | | Adjusted net income (Diluted EPS) | $0.07 | $0.22 | $0.20 | $0.44 | Liquidity and Capital Resources This section discusses the company's cash position, operating cash flow, investing and financing activities, and future funding plans - Cash increased to $10,941 thousand as of June 30, 2025, from $6,854 thousand at December 31, 2024, primarily due to cash generated from operations146 - Net cash provided by operating activities was $9,303 thousand for H1 2025, compared to $8,844 thousand for H1 2024147 - Cash used in investing activities for H1 2025 was $1,995 thousand for capital expenditures, while cash used in financing activities was $3,338 thousand, mainly for debt reduction148 - The company expects positive operating cash flow and available Revolving Credit Facility borrowings to meet future funding requirements149 - A new shelf registration statement (Form S-3) was filed in March 2024 for $100 million in securities, intended for general corporate purposes including acquisitions and strategic investments150 Critical Accounting Policies This section confirms that no significant changes were made to critical accounting policies during the reporting period - No significant changes were made to critical accounting policies or related assumptions and estimates during the first six months of 2025154 Item 4. Controls and Procedures This section addresses the effectiveness of the company's disclosure controls and internal control over financial reporting, identifying a material weakness related to accounting personnel but affirming the fair presentation of financial statements, and outlining ongoing remediation efforts Evaluation of Disclosure Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures, noting a material weakness - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to an existing material weakness in internal control over financial reporting156 - Despite the material weakness, management believes the Consolidated Financial Statements are fairly stated in all material respects157 Remediation Efforts to Address Material Weaknesses This section outlines the company's ongoing actions to address identified material weaknesses in internal control over financial reporting - A material weakness was identified due to the need for additional accounting personnel with expertise commensurate with the company's growth158 - Remediation efforts are ongoing, including hiring additional personnel (e.g., VP of Financial Growth, Controller for Electrochem) to augment the accounting team and strengthen controls160 - Remediation will be complete once corrective actions are fully implemented and internal control over financial reporting is deemed effective through further evaluation and testing161 Changes in Internal Control Over Financial Reporting This section describes recent organizational changes and personnel additions aimed at strengthening the company's internal control environment - During and after Q2 2025, the company reorganized its Corporate Accounting organization and hired additional experienced personnel, including a Director, Internal Audit & SOX Compliance162 - These changes are expected to significantly strengthen internal control over financial reporting as the company continues its global growth162 PART II. OTHER INFORMATION Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - The report includes CEO and CFO certifications (Exhibits 31.1, 31.2) and Section 1350 Certifications (Exhibit 32)163 - Financial statements are attached in iXBRL format as Exhibit 101163 Signatures This section contains the official signatures for the Form 10-Q filing - The report was signed on August 7, 2025, by Michael E. Manna, President and Chief Executive Officer, and Philip A. Fain, Chief Financial Officer and Treasurer167