Good day, and welcome to this Ultralife Corporation Second Quarter 2014 Earnings Release Conference Call. At this time for opening remarks and introductions, I would like to turn the call over to Ms. Jody Burfening of LHA. Please go ahead, ma’am.

Thank you, Matt and good morning everyone. Thank you for joining us this morning for Ultralife Corporation’s earnings conference call for the second quarter of fiscal 2014. With us on today’s call are Mike Popielec, Ultralife’s President and CEO; and Phil Fain, Ultralife’s Chief Financial Officer. The earnings press release was issued earlier this morning and if anyone has not yet received a copy, I invite you to visit the company’s Web site at www.ultralifecorp.com, where you’ll find the release under Investor News in the Investor Relations section. Before turning the call over to management, I would like to remind everyone that some statements made during this conference call contains forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. These include potential reductions in U.S. military spending, uncertain global economic conditions and acceptance of the company’s new products on a global basis. The company cautions investors not to place undue reliance on forward-looking statements, which reflects the company’s analysis only as of today’s date. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Ultralife’s financial results is included in our authorized filings with the Securities and Exchange Commission including the latest annual report on Form 10-K. In addition, on today’s call management will refer to certain non-GAAP financial measures, that are considered to be useful metrics that differ from GAAP. These non-GAAP measures should be considered as supplemental to corresponding GAAP figures. With that, I would now like to turn the call over to Mike. Good morning Mike.

Good morning, Jody and thank you everyone for joining the call this morning. Today, I will start by making some overall comments about our second quarter 2014 operating performance. Then I'll turn the call over to Phil, who will take you through the detailed financial results. After Phil is finished, I will provide an update on the progress against our 2014 revenue initiatives and then talk about our full year expectations and financial outlook for 2014 before opening it up for questions. For the second quarter of 2014, our communication systems business revenue grew year-over-year by 16%. In our battery and energy product commercial business grew by 19% both driven by new product development sales. However, these positive revenue gains were more than offset by a 17% year-over-year revenue decline in the battery and energy products government and defense business leading to a total company revenue decrease of 12%. Both business teams performed solidly on the operational elements within their control. We also continue to tightly control costs and made some adjustments to right size our staffing through reflect weaker demand from our government and defense customers, particularly in the area of U.S. tactical communications and accessories, while we continue to fund vital new product development. As a result, operating expenses were reduced 13% year-over-year and when combined with a 150 basis points gross margin increase narrow their prior year operating loss by over 29% to a loss of $1.3 million in Q2 2014. In a few minutes I’ll talk more about our 2014 revenue initiatives and outlook. At first I’d like to ask Ultralife CFO Philip Fain a take you through additional details of the second quarter 2014 financial results. Phil?

Thank you, Mike and good morning, everyone. Earlier this morning, we released our second quarter results for the period ended June 29, 2014. Consolidated revenues for the second quarter totaled $15.2 million, representing a $2.1 million or 12% decline from the $17.3 million for the second quarter of 2013. Revenues for our battery and energy products segment were $12.2 million, a decrease of $2.5 million or 17% from last year. The decrease is fully attributable to a big drop governments and defense sales, which overshadow gains in commercial sales. Later increase 19% over the second quarter of 2013, primarily driven by shipments of our new Medical Cart power systems and new products specifically designed for medical devices. Sales to government and defense customers declined 53% from the second quarter of 2013, the mix of our battery sales for the second quarter of 2014 was 72%, 28% commercial to government and defense versus 50/50 for the second quarter of 2013. As a further point of reference, the split for the 2013 full-year was 47% commercial and 53% government and defense. The domestic to international split for battery sales was 49% to 51% for the second quarter of 2014 versus 61:39 for the second quarter of 2013. The split for the 2013 full-year was 59% domestic and 41% international. Sales classified at domestic include shipments to U.S. based primes which in some cases serve international projects. Communication system sales of $3.0 million, increased by $0.4 million or 16% from the prior year, the increase reflects the fulfillment of a large order for our recently introduced Universal Vehicle Adaptor to a large U.S. prime. Continuing the trend that started in the second quarter of 2013, we continue to see delays in the final sign-off and purchase order issuance of several large high margin…

Thanks Phil. Throughout the year 2014 we’ve continued to create new products in value proposition that resulting gross margin rates capable of supporting profitability improvement while also funding continuous new product development and diversification initiatives. The expansion of our new product basket and the diversification of served market give us the best sort of controlling our own destiny in the base of decreased government depend spending. I controlling operating expense spending levels is the function of revenue. Our established 30, 55, 10 equals 10 lean business model also have enabled us to ensure business flexibility by maintaining strong liquidity and a strong balance sheet, regarding our revenue growth initiatives, the focus remains on three core elements, expanding our market sales reach, developing new products and acquiring complementary businesses. In Q2 2014, communication systems continued to expand our market customer reach. Our current direct in OEM customer base and C4 market have shown an increasing interest in expansion of our products capabilities within this Special Operations Forces. In addition, to our core ground soldier modernization products and activities, we’re also getting more engage in larger communication networks and Intelligence, Surveillance & Reconnaissance application. Over the last few years, we’ve been developing a robust pipeline of large program activities, such that when is contracted we can make a significant contribution to our revenue in our operating profit. As reaching opportunity requires a length of new product development and testing cycle, we try to allocate our limited resource to projects with our strongest customer relationships and the best opportunities for near-term large revenue captures. In light of the slow government spending we’ve learned how difficult it is to predict, which projects will ultimately make it all the way through contracting enhance make an effort to remain an opportunistically diverse get number of large…

Thank you, sir. (Operator Instructions) And we currently have no question in the queue. (Operator Instructions) And we do have a question from Gary Sebastian with Eliot•Rose Asset Management. Gary Sebastian – Eliot Rose Asset Management, LLC: Hey, guys, good morning.

Good morning, Gary.

Good morning, Gary. Gary Sebastian – Eliot Rose Asset Management, LLC: In terms of the forecast Mike. The implication I guess is that you’re going to be a better second half than the first half and I guess it works out to about maybe $17 million to $18 million per quarter or at least for the maybe $35 million for the back half versus $30 million in the first half, if I got the numbers correct and I think you did $75 million last year. So sales going to be down 10% that gets you to 65 we have 30 in the first is that about right.

Gary, we did a $78.8 million last year so that’s the base we’re working off of and some quick math you’ll see in the financials and in the 8-K filed earlier today we did $30 million in the first half so you’re correct we’re looking at approximately $40 million in the second half which would be flat with the second half of last year. Gary Sebastian – Eliot Rose Asset Management: Okay, and roughly 50% in the third and fourth quarter of that 40% or is that more of a 40% to 45% and then 55% kind of thing percentage point.

In the line of 45% to 55%. Gary Sebastian – Eliot Rose Asset Management: Okay, and then if we extrapolate that to what you’re projecting for the bottom line 2% to 3% of sales loss so that loss for the year sounds like it will be about the same or little less than the lowest for the first half so it sounds like you’re projecting break even to slight profitability in the back six months.

There is profitability in the second half of the year, you’ll see in our financials that the operating loss is $2.4 million in the first half of the year. So profitability in the second half and you’ll see in the details the impact of the China relocation as well bring that second half profitability down just a bit. Gary Sebastian – Eliot Rose Asset Management: On the second half I’m sorry the China relocation where there expenses for that in Q2.

No. Gary Sebastian – Eliot Rose Asset Management: Okay, just explain to me what you mean by that?

Yes, you’ll see full details broken out in our Q, the China relocation that we mentioned in the first quarter 10-Q it is going to occur in the second half of the year and there will be expenses associated with that we have included in our forecast. Gary Sebastian – Eliot Rose Asset Management: Okay, okay and but not with standing that you’re talking about a $40 million back half and profitability for the back six months.

Yes, that’s correct. Gary Sebastian – Eliot Rose Asset Management: Okay, super and are you going to – will you be able to pull out the China relow expenses as one time, expense so they don’t hit the operating line.

Unfortunately, not that’s the generally accepted accounting principles won’t allow us to do that, but it is a disclosure item that we will just make the investors certainly will be aware of. Gary Sebastian – Eliot Rose Asset Management: Okay, and does the relocation make the plant more efficient as a reduced cost going forward, what’s the rational behind it?

Yeah, all those things I mean our lease was up in facility government has jurisdiction over area that our hand is doing some overall development. We’re using this opportunity to go to new facility more modern facility better laid out facilities. So we’re looking at actually improving operations with the move and I think we have a world class its done product line and facility moves before. And we’ve got our eyes all over it from a standpoint of planning and execution and relate not really would necessarily want to move if then have to move. But to the extent that’s really something it’s all out of hands. We’re using it improve our proper operations in China. Gary Sebastian – Eliot Rose Asset Management: Super, okay. And what gives us the sense, what gives you Mike the sense that you can hit this $40 million in the back half. I know we’re seasonally stronger in the back half of the year. I know that government’s fiscal year-ends in the back half so that could be budget flush. Can you give us some reasons why you’re think you can get to that $40 million run rate in the back half?

Yes, I think in the case of B&E just as we look at the overall revenue streams we articulated in the prepared remarks. As those continue to progress. And in the case of comm. systems we’ve really derisk some of the larger projects and from that standpoint looking at where are those individual transactions are and their lifecycle to be coming into orders and (indiscernible) orders. We feel comfortable that we’ve got a pretty conservative view of that we take changing our guidance very seriously, we wanted to be as transparents we could be to the investor communities like it make judgments and what we are doing and now we are performing, but at this point we feel, we fairly derisk the back half of the year. Given the current realities of government defense budgets. Gary Sebastian – Eliot Rose Asset Management: Okay, super. So that’s the conservative projection in light of what we’ve seen so far this year and despite the conservative projection is still expect to be profitable in cash flow positive. Could that possibly indicate we’ve seen a bottom I mean we’ve certainly you call out a quarter or two ago that maybe we saw the bottom on the battery side and we’ve had and if we’re only a commercial business having 19% growth would be spectacular in this environment compared to whose public companies but it’s the government that’s been hold us back. So is that sort of sense that maybe things have already bottomed for us, with these two losses in the first half?

I think that, the reason we are more comfort and the ultimate bottoming of their revenue is just a larger percentage of a commercial business versus the government defense business. Gary Sebastian – Eliot Rose Asset Management: Yeah.

So, much deliberately around and it seems like so much of that is out of your direct control and some depending in the commercial area. First of all there is a broader amount of customers you can talk to – you can really sell your valueable proposition, I think a better indication, when contracts will be later or not. And to the extent that’s a larger percentage of our overall revenue stream, we feel encouraged by that and we are not as, I don’t think we have as much risk as we may have had a couple of years ago, where the overlong maturity of our business with government defense. Gary Sebastian – Eliot Rose Asset Management: Gotcha, super. And, in terms of M&A so you have been looking I guess for about a year now, since you get the line of credit and cashes doubled or tripled over the past couple of years and we’re seeing a ton of M&A out there in the real world, not a pushed it to do something, because you would do something if it make sense. But, a lot of transactions are going down. Are you not seeing enough or the price is too high, what can you give us a little more color on your M&A efforts?

We’re still extremely active in M&A activity both from forming perspective as well as hunting for new opportunities – it’s a high priority of us. We want to use the best – our cash to best extent possible, we want to make sure that the transactions we do make sense, we worked really hard to get our operational efficiencies where at this point, we work hard to generate that the cash and to have the cash balance to be able to deploy it either in (indiscernible) M&A and so when we look at acquisition opportunities we look very, very closely. And we plan for then becoming a very successful part of our enterprise long term. And so, we are not looking for the necessarily the perfect company. We all understand that every company has its ups and downs. We are trying to be very selective because we know how important it is that we do a good one. Gary Sebastian – Eliot Rose Asset Management: Okay, but you are seeing companies and are there any negotiations is going on and you just haven’t met on price is there anything not that it’s eminent, but or anythings in possible process?

I can comment on that Gary, but the second we get to the point where it’s something we’ve been disclosed, we’d disclose really. Gary Sebastian – Eliot Rose Asset Management: Okay, and then balance sheet question inventories were about flat sequentially. And on a $15 million quarterly run rate granted you are going to improve that in the back half of the year, but $27 million in inventory seems kind of high out of 2015, 2016 again run rate can more be done that?

No, it’s certainly can’t be Gary. The situation that we are currently in is the – the timing between receiving an order and shifting an order based on some of the items that are backlogged in contracting for comms systems has caused our inventory to creep up a just a little bit over the end of last year, but our target is going forward is not to carry $27 million of inventory – is to bring that down rather significantly. Gary Sebastian – Eliot Rose Asset Management: Super, okay so if the back half improvement and revenues and profitability comes true, we should see the inventory over the next six months decline a bit?

Yes, in the 10% range. Gary Sebastian – Eliot Rose Asset Management: Beautiful okay. And then Phil on the buyback program I know liquidity is been challenging on the stock but aren’t there I don’t if they call 10B1s or they are 10B5s. I am not sure but there is certain programs which not only allow you to buy stock during quite periods where its on going but maybe allow you to buy some stock in the market and not just respond to block, so another words that no blocks are ever offered you guys even though the volumes miniscule on daily basis but you could do something.

But we are very familiar with those programs and all that’s a minute details that go into that with trading volume over that the quarter and the 8 to 10,000 range daily going into a program only result in just a couple of thousand shares at this time. Gary Sebastian – Eliot Rose Asset Management: But it is not better than nothing, I mean you did nothing in a whole three month period, so you mean if you only getting a couple thousand shares a day, it will add up. And with the $4.15 cent book where the stock is now at 360 bid, it seems like it would be smart move.

That certainly is debatable we can certainly discuss that further. Gary Sebastian – Eliot Rose Asset Management: Okay, okay, so its something that could be looked at.

Yes, we consider re-consider our positions overtime depending and the overall capital allocation needs of the company but it’s certainly something that isn’t decision made in and now we looked at were – believe me we look at it several times a day, but give problems Gary Sebastian – Eliot Rose Asset Management: Yeah, I just want to go over just to make sure I’m right on the value proposition here. So a book over $4 which is a pretty solid book you have almost $18 million in cash just about a buck of share the NOL, so is the NOL $20 or $30 million?

Yes, it is that the NOL Gary is $60 plus million, we disclosed in the 10-K it’s around $65 million to $75 million overall. Gary Sebastian – Eliot Rose Asset Management: Okay, and even if you had a 20% of that 20% or 30% of that its another buck of share. So there is buck in cash, a buck possibly in NOL value to an acquirer and/or shield future earnings and certainly working capital beyond cash you’re building your land et cetera. So there is at least $4 to $5 of solid value in good business at zero. So all that being said I would just encourage you to be a little more aggressive on the buyback here.

Gary, I think we look at things very similarly I appreciate the comment. Gary Sebastian – Eliot Rose Asset Management: Okay, thanks guys and good luck on the back half.

Thank you.

(Operator Instructions) And with no further questions. I would like to turn the call back to Mr. Popielec for any additional or closing comments.

Well, thank you once again for joining us for our second quarter 2014 earnings call, look forward to meeting up with several of you or talking via phone over the next few weeks or so and sharing with you in the future our quarterly progress during our future earnings calls. Thanks very much for your time today.

Thank you, sir. And again that does conclude today’s call. Thank you for your participation.