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<SEC-DOCUMENT>0000950152-07-008802.txt : 20071109
<SEC-HEADER>0000950152-07-008802.hdr.sgml : 20071109
<ACCEPTANCE-DATETIME>20071109103756
ACCESSION NUMBER:		0000950152-07-008802
CONFORMED SUBMISSION TYPE:	424B5
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20071109
DATE AS OF CHANGE:		20071109

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ULTRALIFE BATTERIES INC
		CENTRAL INDEX KEY:			0000875657
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690]
		IRS NUMBER:				161387013
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		424B5
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-136742
		FILM NUMBER:		071228806

	BUSINESS ADDRESS:	
		STREET 1:		2000 TECHNOLOGY PARKWAY
		CITY:			NEWARK
		STATE:			NY
		ZIP:			14513
		BUSINESS PHONE:		3153327100

	MAIL ADDRESS:	
		STREET 1:		2000 TECHNOLOGY PARKWAY
		CITY:			NEWARK
		STATE:			NY
		ZIP:			14513
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B5
<SEQUENCE>1
<FILENAME>l28757ae424b5.htm
<DESCRIPTION>ULTRALIFE BATTERIES, INC.   424B5
<TEXT>
<HTML>
<HEAD>
<TITLE>ULTRALIFE BATTERIES, INC.   424B5</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Filed Pursuant to Rule 424(b)(5)
</DIV>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Registration No.&#160;333-136742
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUPPLEMENT<BR>
    (To Prospectus dated September&#160;22, 2006)
    </FONT>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 12pt">1,000,000&#160;Shares
    </FONT>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="l28757al2875700.gif" alt="(ULTRALIFE BATTERIES INC. LOGO)" ><FONT style="font-size: 12pt">
    </FONT>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 12pt">Common Stock
    </FONT>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 13%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=455 length=60 -->

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are offering 1,000,000&#160;shares of common stock. Our
    common stock is traded on the NASDAQ Global Market under the
    symbol &#147;ULBI&#148;. On November&#160;8, 2007, the last
    reported sale price of our common stock as reported on the
    NASDAQ Global Market was $13.98 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 11pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Investing in our common stock involves risks that are
    described in &#147;Risk Factors&#148; beginning on
    <FONT style="white-space: nowrap">page&#160;S-5</FONT>
    of this prospectus supplement.</B>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=455 length=84 -->

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="77%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <FONT style="font-size: 10pt">Per Share
    </FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <FONT style="font-size: 10pt">Total
    </FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13.500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,500,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Sales commissions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.675
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    675,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12.825
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,825,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 11pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Neither the Securities and Exchange Commission nor any state
    securities commission has approved or disapproved of these
    securities or passed upon the adequacy or accuracy of this
    prospectus supplement or the accompanying  prospectus. Any
    representation to the contrary is a criminal offense</B>.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to deliver the shares to investors on or about
    November&#160;15, 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=455 length=84 -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">Stephens Inc.</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The date of this prospectus supplement is November&#160;8, 2007
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END LOGICAL PAGE -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="97%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
    <B><FONT style="font-size: 10pt">PROSPECTUS SUPPLEMENT</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <FONT style="font-size: 10pt">Page
    </FONT>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#101'>ABOUT THIS PROSPECTUS SUPPLEMENT</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#102'>PROSPECTUS SUPPLEMENT SUMMARY</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#103'>RISK FACTORS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#104'>USE OF PROCEEDS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-16
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#105'>CAPITALIZATION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-16
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#106'>PRICE RANGE OF COMMON STOCK</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-17
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#107'>DIVIDEND POLICY</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-17
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#108'>PLAN OF DISTRIBUTION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-18
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#109'>DESCRIPTION OF CAPITAL STOCK AND INDEMNIFICATION
    OF DIRECTORS AND OFFICERS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-20
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#111'>LEGAL MATTERS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-22
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#112'>EXPERTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    S-22
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>PROSPECTUS</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    INFORMATION CONTAINED IN THIS PROSPECTUS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    SPECIAL NOTE&#160;REGARDING FORWARD-LOOKING STATEMENTS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    RISK FACTORS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    USE OF PROCEEDS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    11
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    SELLING STOCKHOLDERS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    12
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    PLAN OF DISTRIBUTION
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    14
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    LEGAL MATTERS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    17
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    EXPERTS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    17
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    INCORPORATION BY REFERENCE
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    18
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    WHERE YOU CAN FIND MORE INFORMATION
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    19
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-i
</DIV><!-- END LOGICAL PAGE -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->


<!-- link1 "ABOUT THIS PROSPECTUS SUPPLEMENT" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='101'></A><B><FONT style="font-family: 'Times New Roman', Times">ABOUT
    THIS PROSPECTUS SUPPLEMENT</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This document is in two parts. The first part is this prospectus
    supplement, which describes the terms of the common stock that
    we are offering and adds to and updates information contained in
    the accompanying prospectus and the documents incorporated by
    reference into this prospectus supplement and the accompanying
    prospectus. The second part is the accompanying prospectus,
    which gives more general information, some of which may not
    apply to the common stock that we are currently offering.
    Generally, the term &#147;prospectus&#148; refers to both parts
    combined.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should read and consider all of the information contained in
    this prospectus supplement and the accompanying prospectus,
    including the documents incorporated by reference in each such
    document, in making your investment decision. If the information
    varies between this prospectus supplement and the accompanying
    prospectus, the information in this prospectus supplement
    supersedes the information in the accompanying prospectus. You
    should rely only on the information contained in, or
    incorporated by reference in, this prospectus supplement and the
    accompanying prospectus. We have not, and the placement agent
    has not, authorized any other person to provide you with
    additional or different information. If anyone provides you with
    different or inconsistent information, you should not rely on
    it. You should not assume that the information provided by this
    prospectus supplement or the accompanying prospectus is accurate
    as of any date other than the date on the front of these
    documents. Our business, financial condition, results of
    operations and prospects may have changed since those dates. Our
    common stock is being offered and sold only in jurisdictions
    where offers and sales are permitted.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As used in this prospectus supplement, the terms
    &#147;Ultralife,&#148; &#147;Company,&#148; &#147;we,&#148;
    &#147;our,&#148; &#147;ours&#148; and &#147;us&#148; refer to
    Ultralife Batteries, Inc. and its subsidiaries except where the
    context otherwise requires or as otherwise indicated.
</DIV>

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    <BR>
    S-1
</DIV><!-- END LOGICAL PAGE -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 50 -->


<!-- link1 "PROSPECTUS SUPPLEMENT SUMMARY" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='102'></A><B><FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUPPLEMENT SUMMARY</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>This summary does not contain all of the information that you
    should consider before buying our common stock. You should,
    therefore, read carefully this entire prospectus supplement and
    the accompanying prospectus, including the section entitled
    &#147;Risk Factors&#148; beginning on
    <FONT style="white-space: nowrap">page&#160;S-5</FONT>
    and the more detailed information and financial statements and
    related notes appearing elsewhere or incorporated by reference
    in this prospectus supplement and the accompanying prospectus,
    before making an investment decision.</I>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Ultralife
    Batteries, Inc.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are a global provider of high-energy power systems,
    communications accessories and engineering and technical
    services for diverse applications. We develop, manufacture and
    market a wide range of non-rechargeable and rechargeable
    batteries, charging systems and accessories for markets
    including defense, commercial and consumer portable electronics.
    Through our portfolio of standard products and engineered
    solutions, we are at the forefront of providing the next
    generation of power systems, communications accessories and
    technical services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our battery technologies allow us to offer batteries and power
    systems that are flexibly configured, light weight and generally
    capable of achieving longer operating times than many competing
    batteries currently available. Our communications accessories
    offer users a wide variety of integrated solutions that satisfy
    the most demanding applications. Our engineering and technical
    services capabilities enable us to design, integrate and field
    mobile, modular and fixed-site communication and electronic
    systems.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We compete on the basis of design flexibility, performance and
    reliability. Through our experience in battery manufacturing, we
    have developed expertise which we believe would be difficult to
    reproduce without substantial time and expense in the
    non-rechargeable battery market.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the fiscal years ended December&#160;31, 2004, 2005 and
    2006, and the nine month period ended September&#160;29, 2007,
    our sales were $98.2&#160;million, $70.5&#160;million,
    $93.5&#160;million and $100.8&#160;million, respectively. Our
    gross profit for those same periods was $20.3&#160;million,
    $12.3&#160;million, $17.4&#160;million and $23.0&#160;million,
    respectively, and our operating income (loss) was
    $5.1&#160;million, ($2.9&#160;million), ($3.0&#160;million) and
    $2.5&#160;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 6%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Growth
    Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We continually evaluate various ways to grow, including
    opportunities to expand through mergers and acquisitions. In
    2006, we acquired ABLE New Energy Co., Ltd., or ABLE, an
    established manufacturer of lithium batteries located in
    Shenzhen, China, and McDowell Research, Ltd., or McDowell, a
    manufacturer of military communications accessories located in
    Waco, Texas, and in September 2007, we acquired Innovative
    Solutions Consulting, Inc., or ISC, a company engaged in the
    business of providing engineering and technical services for
    communication electronic systems to government agencies. In
    October 2007, we entered into agreements to acquire Stationary
    Power Services, Inc., or SPS, and Reserve Power Systems, Inc.,
    or RPS, two related companies that provide battery systems for
    <FONT style="white-space: nowrap">back-up</FONT>
    power for telecom, cable television, uninterruptible power
    supply systems and critical computer applications.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For our non-rechargeable products, our strategy is to develop
    sales and marketing alliances with original equipment
    manufacturers, or OEMs and governmental agencies that utilize
    our batteries in their products, commit to cooperative research
    and development or marketing programs, and recommend our
    products for design-in or replacement use in their products.
    With respect to our rechargeable products, we have targeted
    sales through OEM customers, as well as distributors and
    resellers focused on our target markets. We continue to expand
    our marketing activities as part of our strategic plan to
    increase sales of our rechargeable batteries for military and
    communications applications, as well as hand-held devices,
    wearable devices and other electronic portable equipment.
</DIV>
</DIV><!-- End box 50 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-2
</DIV><!-- END LOGICAL PAGE -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 50 -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With respect to our communications accessories products, we have
    targeted sales of products used to support military
    communication systems, such as battery chargers, power supplies,
    power cables, connector assemblies, radio frequency (RF)
    amplifiers, amplified speakers, equipment mounts, case equipment
    and integrated communication systems, to military OEMs and
    military organizations including the U.S.&#160;Department of
    Defense.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Principal
    Executive Offices</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our principal executive offices are located at 2000 Technology
    Parkway, Newark, New York 14513. Our telephone number at that
    location is
    <FONT style="white-space: nowrap">(315)&#160;332-7000.</FONT>
    Our Internet website is www.ultralifebatteries.com. Information
    contained on our website is not incorporated by reference in
    this prospectus, and you should not consider information
    contained on our website as part of this prospectus supplement.
</DIV>
</DIV><!-- End box 50 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-3
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<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 50 -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    Offering</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    Issuer </TD>
    <TD></TD>
    <TD valign="bottom">
    Ultralife Batteries, Inc.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Common stock offered </TD>
    <TD></TD>
    <TD valign="bottom">
    1,000,000&#160;shares</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding after this offering </TD>
    <TD></TD>
    <TD valign="bottom">
    16,264,437&#160;shares</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Use of proceeds </TD>
    <TD></TD>
    <TD valign="bottom">
    To fund (i)&#160;approximately $6.0&#160;million of the
    consideration related to the acquisition of SPS, (ii)&#160;the
    prepayment of $3.5&#160;million principal amount of indebtedness
    due on the subordinated convertible notes issued as partial
    consideration for the McDowell acquisition, (iii)&#160;to repay
    $1.0&#160;million of borrowings outstanding under our credit
    facility used to fund the ISC acquisition, and (iv)&#160;for
    general working capital purposes.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    NASDAQ Global Market Symbol </TD>
    <TD></TD>
    <TD valign="bottom">
    ULBI</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Risk factors </TD>
    <TD></TD>
    <TD valign="bottom">
    See &#147;Risk Factors&#148; beginning on
    <FONT style="white-space: nowrap">page&#160;S-5</FONT>
    and other information in this prospectus for a discussion of
    factors you should consider carefully before deciding to invest
    in our common stock.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The number of shares of our common stock to be outstanding after
    this offering is based on 15,264,437&#160;shares of our common
    stock outstanding as of September&#160;29, 2007 and assumes the
    sale of all 1,000,000&#160;shares of our common stock offered
    hereby. The number of shares of common stock to be outstanding
    after this offering excludes (i)&#160;1,852,738&#160;shares
    issuable upon the exercise of stock options outstanding and
    having a weighted average exercise price of $11.34 per share,
    (ii)&#160;637,262 additional shares reserved for issuance under
    our Amended and Restated 2004 Long Term Incentive Plan, as
    amended, and (iii)&#160;700,000&#160;shares issuable upon
    conversion of the outstanding subordinated convertible notes
    issued as partial consideration for the McDowell acquisition
    after the $3.5&#160;million prepayment described above, in each
    case as of September&#160;29, 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Recent
    Operating Results</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For our recently concluded third quarter, we reported revenue of
    $33.3&#160;million, an increase of 40% compared with
    $23.7&#160;million reported for the third quarter 2006.
    Operating income for the third quarter was $0.2&#160;million
    compared to a $2.1&#160;million operating loss for the same
    period last year. As a percentage of revenue, gross margin for
    the third quarter of 2007 was 21%, up from 17% for the third
    quarter of 2006. Net loss for the third quarter of 2007 was
    $0.1&#160;million, or $0.01 per common share, compared with a
    net loss of $1.7&#160;million, or $0.11 per share for the same
    quarter in 2006.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the nine-month period ended September&#160;29, 2007, our
    revenue was $100.8&#160;million, an increase of 59% when
    compared with revenue of $63.4&#160;million for the same period
    a year ago. Operating income amounted to $2.5&#160;million for
    the first nine months of 2007, an improvement of
    $4.0&#160;million over the first nine months of 2006. Net income
    for the first nine months of 2007 was $1.1&#160;million, or
    $0.07 per share, compared to a net loss of $1.4&#160;million, or
    $0.10 per share, for the same period last year.
</DIV>
</DIV><!-- End box 50 -->

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    <BR>
    S-4
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<!-- link1 "RISK FACTORS" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='103'></A><B><FONT style="font-family: 'Times New Roman', Times">RISK
    FACTORS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>An investment in our common stock involves risks.&#160;We
    urge you to carefully consider all of the information contained
    in or incorporated by reference in this prospectus supplement
    and the accompanying prospectus as provided under
    &#147;Incorporation by Reference&#148; in the accompanying
    prospectus, including our Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K,</FONT>
    our Quarterly Reports on
    <FONT style="white-space: nowrap">Form&#160;10-Q</FONT>
    and our Current Reports on
    <FONT style="white-space: nowrap">Form&#160;8-K</FONT>
    filed with the Securities and Exchange Commission, or SEC.</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>This prospectus supplement contains forward-looking
    statements that involve risks and uncertainties. In some cases,
    you can identify forward-looking statements by terminology such
    as &#147;may,&#148; &#147;will,&#148; &#147;should,&#148;
    &#147;intend,&#148; &#147;expect,&#148; &#147;plan,&#148;
    &#147;anticipate,&#148; &#147;believe,&#148;
    &#147;estimate,&#148; &#147;predict,&#148; &#147;potential&#148;
    or &#147;continue,&#148; or the negative of such terms or other
    comparable terminology. Our actual results could differ
    materially from those anticipated in the forward-looking
    statements as a result of certain factors, including the risks
    described below and elsewhere in this prospectus supplement or
    the accompanying prospectus and in the documents incorporated by
    reference into this prospectus supplement and the accompanying
    prospectus. Our forward-looking statements are based on our
    beliefs as well as assumptions we have made and on information
    currently available to us. Our forward-looking statements
    involve risks and uncertainties, including, but not limited to,
    future demand for our products and services, addressing the
    process of U.S.&#160;military procurement, the successful
    commercialization of our products, general economic conditions,
    government and environmental regulation, finalization of non-bid
    government contracts, competition and customer strategies,
    technological innovations in the industries we service, changes
    in our business strategy or development plan, capital
    deployment, business disruptions, including those caused by
    fires, materials supplies, environmental regulations and other
    risks and uncertainties, certain of which are beyond our
    control. If any of these risks occur, our business, financial
    condition or results of operations could be adversely
    affected.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to our Business</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">A decline
    in demand for products using our batteries or communications
    accessories could reduce demand for our products.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A substantial portion of our business depends on the continued
    demand for products using our batteries and communications
    accessories sold by OEMs. Our success depends significantly upon
    the success of those OEMs&#146; products in the marketplace. We
    are subject to many risks beyond our control that influence the
    success or failure of a particular product manufactured by an
    OEM, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    competition faced by the OEM in its particular industry,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    market acceptance of the OEM&#146;s product,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the engineering, sales, marketing and management capabilities of
    the OEM,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    technical challenges unrelated to our technology or products
    faced by the OEM in developing its products,&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the financial and other resources of the OEM.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For instance, in the fiscal years ended December&#160;31, 2004,
    2005 and 2006 and the nine months ended September&#160;29, 2007,
    22%, 32%, 27% and 18% of our revenues, respectively, were
    comprised of sales of our 9-volt batteries, and of this,
    approximately 19%, 21%, 47% and 39%, respectively, pertained to
    sales to smoke alarm OEMs. If the retail demand for long-life
    smoke alarms decreases significantly, this could have a material
    adverse effect on our business, financial condition and results
    of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    customers may not meet the volume requirements in our OEM supply
    agreements.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We sell most of our products through OEM supply agreements and
    contracts. While OEM supply agreements and contracts contain
    volume-based pricing based on expected volumes, industry
    practices dictate that pricing is rarely adjusted retroactively
    when contract volumes are not achieved. Every effort is made to
    adjust future prices accordingly, but the ability to adjust
    prices is generally based on market conditions.
</DIV>

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    <BR>
    S-5
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    growth and expansion strategy could strain or overwhelm our
    resources.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rapid growth of our business could significantly strain
    management, operations and technical resources. If we are
    successful in obtaining rapid market growth of our products, we
    will be required to deliver large volumes of quality products to
    customers on a timely basis at a reasonable cost to those
    customers. For example, the large contracts received from the
    U.S.&#160;military for our batteries using cylindrical cells
    could strain the current capacity capabilities of our U.K.
    facility and require additional equipment and time to build a
    sufficient support infrastructure at that location. This demand
    could also create working capital issues for us, as we may need
    increased liquidity to fund purchases of raw materials and
    supplies. We cannot assure, however, that business will grow
    rapidly or that our efforts to expand manufacturing and quality
    control activities will be successful or that we will be able to
    satisfy commercial scale production requirements on a timely and
    cost-effective basis.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have recently adopted a strategy to grow our business through
    the acquisition of complementary businesses, in addition to
    organic growth. Our inability to acquire such businesses, or
    increased competition for such businesses which could increase
    our acquisition costs, could impede our ability to close
    identified acquisitions, which could adversely affect our growth
    strategy and results of operations. In addition, our inability
    to improve the operating margins of businesses we acquire or
    operate such acquired businesses profitably or to effectively
    integrate the operations of those acquired businesses could
    adversely affect our business, financial condition and results
    of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2006, we acquired the businesses of McDowell and ABLE, and in
    2007 we acquired ISC and entered into agreements to acquire SPS
    and RPS, which added new facilities and operations to our
    overall business. We have faced some initial operational
    challenges at McDowell that are requiring a greater amount of
    management&#146;s time to resolve than we had expected. Our
    management team remains essentially the same, however, which
    places an increased burden and responsibility on a team which
    had little capacity to absorb such added responsibility. In
    addition, these acquisitions have strained our production
    capacity, which could have an adverse impact on our ability to
    meet customer demands for product delivery.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will also be required to continue to improve our operations,
    management and financial systems and controls in order to remain
    competitive. The failure to manage growth and expansion
    effectively could have an adverse effect on our business,
    financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    recent acquisitions may not result in the revenue growth that we
    expect. In addition, we may not be able to successfully
    integrate our recent acquisitions.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the second quarter of 2006, we acquired ABLE, a
    manufacturer of lithium batteries located in Shenzhen, China,
    and during the third quarter of 2006, we acquired substantially
    all of the assets of McDowell, a manufacturer of military
    communications accessories located in Waco, Texas. In addition,
    in September 2007, we acquired ISC, a provider of engineering
    and technical services for communication electronic systems to
    government agencies. In October of 2007, we entered into
    agreements to acquire SPS and RPS, two related companies that
    provide battery systems for
    <FONT style="white-space: nowrap">back-up</FONT>
    power for telecom, cable television, uninterruptible power
    supply systems and critical computer applications. We have begun
    the process of integrating these acquisitions into our business
    and assimilating their operations, services, products and
    personnel with our management policies, procedures and
    strategies. We cannot be sure that we will achieve the benefits
    of revenue growth that we expect from these acquisitions or that
    we will not incur unforeseen additional costs or expenses in
    connection with these acquisitions. To effectively manage our
    expected future growth, we must continue to successfully manage
    our integration of these companies and continue to improve our
    operational systems, internal procedures, accounts receivable
    and management, financial and operational controls. If we fail
    in any of these areas, our business could be adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">The U.S.
    government can audit our contracts with the U.S. military and,
    under certain circumstances, can adjust the economic terms of
    those contracts.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A significant portion of our business comes from sales of
    product to the U.S.&#160;military through various government
    contracts. These contracts are subject to procurement laws and
    regulations that lay out uniform
</DIV>

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    <BR>
    S-6
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    policies and procedures for acquiring goods and services by the
    U.S.&#160;government. The regulations also contain guidelines
    for managing contracts after they are awarded, including
    conditions under which contracts may be terminated, in whole or
    in part, at the government&#146;s convenience or for default.
    Failure to comply with the procurement laws or regulations can
    result in civil, criminal or administrative proceedings
    involving fines, penalties, suspension of payments, or
    suspension or disbarment from government contracting or
    subcontracting for a period of time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have had certain &#147;exigent&#148; non-bid contracts with
    the U.S.&#160;government that have been subject to an audit and
    final price adjustment and have resulted in decreased margins
    compared with the original terms of the contracts. As of
    September&#160;29, 2007, there were no outstanding exigent
    contracts with the government. As part of its due diligence, the
    U.S.&#160;government has conducted post-audits of the completed
    exigent contracts to ensure that information used in supporting
    the pricing of exigent contracts did not differ materially from
    actual results. In September 2005, the Defense Contracting Audit
    Agency, or DCAA, presented its findings related to the audits of
    three of the exigent contracts, suggesting a potential pricing
    adjustment of approximately $1,400,000 related to reductions in
    the cost of materials that occurred prior to the final
    negotiation of these contracts. We have reviewed these audit
    reports, have submitted our response to these audits and
    believe, taken as a whole, the proposed audit adjustments can be
    offset with the consideration of other compensating cost
    increases that occurred prior to the final negotiation of the
    contracts. While we believe that potential exposure exists
    relating to any final negotiation of these proposed adjustments,
    we cannot reasonably estimate what, if any, adjustment may
    result when finalized. In addition, we have received a request
    from the Office of Inspector General of the Department of
    Defense, or DoD IG, seeking certain information and documents
    relating to our business with the Department of Defense. We are
    cooperating with the DoD IG inquiry and are furnishing the
    requested information and documents. At this time we have no
    basis for assessing whether we might face any penalties or
    liabilities on account of the DoD IG inquiry. The aforementioned
    DCAA-related adjustments could reduce margins and, along with
    the aforementioned DoD IG inquiry, could have an adverse effect
    on our business, financial condition and results of operations.
    Such adjustments could reduce margins and have an adverse effect
    on our business, financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We are
    subject to the contract rules and procedures of the U.S.
    government because we do business with the U.S. military. These
    rules and procedures create significant risks and uncertainties
    for us that are not usually present in contracts with private
    parties.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will continue to develop both non-rechargeable and
    rechargeable battery products, related products and
    communications accessories to meet the needs of the
    U.S.&#160;military. We compete in solicitations for awards of
    contracts for these products, as well as meeting delivery
    schedules for orders released under contract. The receipt of an
    award, however, does not usually result in the immediate release
    of an order and does not guarantee in any way any given volume
    of orders. Any delay of solicitations or anticipated purchase
    orders by, or future failure of, the U.S.&#160;government to
    purchase products manufactured by us could have a material
    adverse effect on our business, financial condition and results
    of operations. Additionally, we are typically required to
    successfully meet contractual specifications and to pass various
    qualification-testing for the products under contract by the
    military. Our inability to pass these tests in a timely fashion
    could have a material adverse effect on our business, financial
    condition and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    When a government contract is awarded, there is a government
    procedure that permits unsuccessful companies to formally
    protest such award if they believe they were unjustly treated in
    the evaluation process. As a result of these protests, the
    government is precluded from proceeding under these contracts
    until the protests are resolved. A prolonged delay in the
    resolution of a protest, or a reversal of an award resulting
    from such a protest, could have a material adverse effect on our
    business, financial condition and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Many of our products are sold for ultimate use overseas in
    countries where the U.S.&#160;military is deployed.
    U.S.&#160;government decisions regarding military deployment and
    budget allocations to fund overseas military operations have an
    impact on the demand for our products.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-7
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">A
    significant portion of our revenues is derived from contracts
    with the U.S. military or OEMs that supply the U.S.
    military.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the years ended December&#160;31, 2004, 2005 and 2006, and
    the nine months ended September&#160;29, 2007, approximately
    65%, 45%, 47% and 46%, respectively, of our revenues were
    comprised of sales made directly or indirectly to the
    U.S.&#160;military. We have two major customers, the
    U.S.&#160;Department of Defense, that comprised 56%, 25%, 20%,
    and 17% of our revenue in the years ended December&#160;31,
    2004, 2005, and 2006, and the nine months ended
    September&#160;29, 2007, respectively and the U.K. Ministry of
    Defense, that comprised 2%, 6%, 7% and 16% of our revenue in the
    years ended December&#160;31, 2004, 2005, and 2006, and the nine
    months ended September&#160;29, 2007, respectively. There were
    no other customers that comprised greater than 10% of our total
    revenues in those periods. If the demand for products from the
    U.S.&#160;military were to decrease significantly, this could
    have a material adverse effect on our business, financial
    condition and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We generally do not distribute our products to a concentrated
    geographical area nor is there a significant concentration of
    credit risks arising from individuals or groups of customers
    engaged in similar activities, or who have similar economic
    characteristics. One customer, the U.S.&#160;military, comprised
    18% of our trade accounts receivable as of September&#160;29,
    2007. There were no other customers that comprised greater than
    10% of our total trade accounts receivable as of
    September&#160;29, 2007. This customer comprised 22% of our
    total trade accounts receivable as of December&#160;31, 2006.
    While sales to the U.S.&#160;military have been substantial
    during 2006 and 2007, we do not consider this customer to be a
    significant credit risk. We do not normally obtain collateral on
    trade accounts receivable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    efforts to develop new commercial applications for our products
    could fail.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although we are involved with developing certain products for
    new commercial applications, such as
    <FONT style="white-space: nowrap">back-up</FONT>
    batteries for the automotive telematics market, batteries for
    emergency locator transmitters and RF amplifiers for portable
    radio communications, we cannot assure that volume acceptance of
    our products will occur due to the highly competitive nature of
    the business. There are many new product and technology entrants
    into the marketplace, and we must continually reassess the
    market segments in which our products can be successful and seek
    to engage customers in these segments that will adopt our
    products for use in their products. In addition, these companies
    must be successful with their products in their markets for us
    to gain increased business. Increased competition, failure to
    gain customer acceptance of products, introduction of
    competitive technologies or failure of our customers in their
    markets could have a further adverse effect on our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We may
    incur significant costs because of the warranties we supply with
    our products.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With respect to our battery products, we typically offer
    warranties against any defects due to product malfunction or
    workmanship for a period up to one year from the date of
    purchase. With respect to our communications accessory products,
    we typically offer a four-year warranty. We also offer a
    <FONT style="white-space: nowrap">10-year</FONT>
    warranty on our 9-volt batteries that are used in
    ionization-type smoke alarms. We provide for a reserve for these
    potential warranty expenses, which is based on an analysis of
    historical warranty issues. There is no assurance that future
    warranty claims will be consistent with past history, and in the
    event we experience a significant increase in warranty claims,
    there is no assurance that our reserves will be sufficient. This
    could have a material adverse effect on our business, financial
    condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We are
    subject to certain safety risks, including the risk of fire,
    inherent in the manufacture of lithium batteries.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Due to the high energy density inherent in lithium batteries,
    our batteries can pose certain safety risks, including the risk
    of fire. We incorporate safety procedures in research,
    development, manufacturing processes and the transportation of
    batteries that are designed to minimize safety risks, but we
    cannot assure that accidents will not occur. Although we
    currently carry insurance policies which cover loss of the plant
    and machinery, leasehold improvements, inventory and business
    interruption, any accident, whether at the
</DIV>

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    <BR>
    S-8
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    manufacturing facilities or from the use of the products, may
    result in significant production delays or claims for damages
    resulting from injuries. While we maintain what we believe to be
    sufficient casualty and liability insurance coverage to protect
    against such occurrences, these types of losses could have a
    material adverse effect on our business, financial condition and
    results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We may
    incur significant costs because of known and unknown
    environmental matters.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    National, state and local laws impose various environmental
    controls on the manufacture, storage, use and disposal of
    lithium batteries and of certain chemicals used in the
    manufacture of lithium batteries. Although we believe that our
    operations are in substantial compliance with current
    environmental regulations and that, except as noted below, there
    are no environmental conditions that will require material
    expenditures for
    <FONT style="white-space: nowrap">clean-up</FONT> at
    our present or former facilities or at facilities to which we
    have sent waste for disposal, there can be no assurance that
    changes in such laws and regulations will not impose costly
    compliance requirements on us or otherwise subject us to future
    liabilities. Moreover, state and local governments may enact
    additional restrictions relating to the disposal of lithium
    batteries by our customers that could have a material adverse
    effect on our business, financial condition and results of
    operations. In addition, the U.S.&#160;Department of
    Transportation, or DOT, and certain international regulatory
    agencies that consider lithium to be a hazardous material
    regulate the transportation of lithium-ion batteries and
    batteries that contain lithium metal. We currently ship lithium
    batteries in accordance with regulations established by the DOT
    and other international regulatory agencies. There can be no
    assurance that additional or modified regulations relating to
    the manufacture, transportation, storage, use and disposal of
    materials used to manufacture our batteries or restricting
    disposal of batteries will not be imposed or how these
    regulations will affect us or our customers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In conjunction with our purchase/lease of our Newark, New York
    facility in 1998, we entered into a
    <FONT style="white-space: nowrap">payment-in-lieu</FONT>
    of tax agreement, which provides us with real estate tax
    concessions upon meeting certain conditions. In connection with
    this agreement, a consulting firm performed a Phase I
    and&#160;II Environmental Site Assessment, which revealed the
    existence of contaminated soil and ground water around one of
    the buildings. We have submitted various work plans to the New
    York State Department of Environmental Conservation, or NYSDEC,
    regarding further environmental testing and sampling in order to
    determine the scope of any additional remediation. We
    subsequently met with the NYSDEC in March 2006 to present the
    test results. In November 2006, the NYSDEC completed its review
    of the final investigation report and requested additional
    groundwater, soil and sediment sampling. A work plan to address
    the additional investigation was submitted to the NYSDEC in
    January 2007 and was approved in April 2007. Additional
    investigative work was performed in May 2007. A preliminary
    report of results was prepared by our outside environmental
    consulting firm in August 2007, and a meeting with the NYSDEC
    and the New York State Department of Health, or the NYSDOH, took
    place in September 2007. As a result of this meeting, NYSDEC and
    NYSDOH have requested additional investigation work. A work plan
    to address this additional investigation is being developed. The
    results of the additional investigation requested by the NYSDEC
    may increase the estimated remediation costs modestly. At
    September&#160;29, 2007, we have reserved $45,000 for this
    matter. The ultimate resolution of this matter may result in us
    incurring costs in excess of what we have reserved.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The future regulatory direction of the European Union&#146;s
    Restriction of Hazardous Substances, or RoHS, and Waste
    Electrical and Electronic Equipment, or WEEE, Directives, as
    they pertain to our products, is uncertain. Their potential
    impact to our business would become material if battery packs
    were to be included in new guidelines and we were unable to
    procure materials in a timely manner. Other associated risks
    related to these directives include excess inventory risk due to
    a write off of non-compliant inventory. We continue to monitor
    the regulatory activity of the European Union to ascertain such
    risks.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    China&#146;s &#147;Management Methods for Controlling Pollution
    Caused by Electronic Information Products Regulation,&#148; or
    China RoHS, provides a two-step, broad regulatory framework,
    including similar hazardous substance restrictions as are
    imposed by the European Union&#146;s RoHS Directive, and apply
    to methods for the control and reduction of pollution and other
    public hazards to the environment caused during the production,
    sale and import of electronic information products, or EIP, in
    China affecting a broad range of electronic products and parts,
    with an implementation date of March&#160;1, 2007. Currently,
    only the first step of the regulatory framework of China RoHS,
    which details marking and labeling requirements under Standard
</DIV>

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    <BR>
    S-9
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    SJT11364-2006 (&#147;Marking Standard&#148;), is in effect.
    However, the methods under China RoHS only apply to EIP placed
    in the marketplace in China. Additionally, the Marking Standard
    does not apply to components sold to OEMs for use in other EIP.
    Our sales in China are limited to sales to OEMs and to
    distributors who supply to OEMs. Should our sales strategy
    change to include direct sales to end-users, our compliance
    system is sufficient to meet our requirements under China RoHS.
    Our current estimated costs associated with our compliance with
    this regulation based on our current market share and strategy
    are not significant. However, we continue to evaluate the impact
    of China RoHS, and actual costs could differ from our current
    estimates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Any
    inability to comply with changes to the regulations for the
    shipment of our products could limit our ability to transport
    our products to customers in a cost-effective manner</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The transportation of non-rechargeable and rechargeable lithium
    batteries is regulated by the International Civil Aviation
    Organization, or ICAO, and corresponding International Air
    Transport Association, or IATA, Dangerous Goods Regulations and
    the International Maritime Dangerous Goods Code, or IMDG, and in
    the U.S.&#160;by the Department of Transportation&#146;s
    Pipeline and Hazardous Materials Safety Administration, or
    PHMSA. These regulations are based on the United Nations
    Recommendations on the Transport of Dangerous Goods Model
    Regulations and the United Nations Manual of Tests and Criteria.
    We currently ship our products pursuant to ICAO, IATA and PHMSA
    hazardous goods regulations. New regulations that pertain to all
    lithium battery manufacturers went into effect in 2003 and 2004,
    and additional regulations will go into effect in 2008 and 2009.
    The regulations require companies to meet certain testing,
    packaging, labeling and shipping specifications for safety
    reasons. We comply with all current U.S.&#160;and international
    regulations for the shipment of our products, and we intend and
    expect to comply with any new regulations that are imposed. We
    have established our own testing facilities to ensure that we
    comply with these regulations. If we are unable to comply with
    the new regulations, however, or if regulations are introduced
    that limit our ability to transport our products to customers in
    a cost-effective manner, this could have a material adverse
    effect on our business, financial condition and results of
    operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    supply of materials could be disrupted.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain materials used in our products are available only from a
    single or a limited number of suppliers. As such, some materials
    could become in short supply, resulting in limited availability
    <FONT style="white-space: nowrap">and/or</FONT>
    increased costs. Additionally, we may elect to develop
    relationships with a single or limited number of suppliers for
    materials that are otherwise generally available. Due to our
    involvement with supplying military batteries to the government,
    we could receive a government preference to continue to obtain
    critical supplies to meet military production needs. However, if
    the government did not provide us with a government preference
    in such circumstances, the resulting difficulty in obtaining
    supplies could have a material adverse effect on our business,
    financial condition and results of operations. Although we
    believe that alternative suppliers are available to supply
    materials that could replace materials currently used and that,
    if necessary, we would be able to redesign our products to make
    use of such alternatives, any interruption in the supply from
    any supplier that serves as a sole source could delay product
    shipments and have a material adverse effect on our business,
    financial condition and results of operations. Although we have
    experienced interruptions of product deliveries by sole source
    suppliers, these interruptions have not typically had a material
    adverse effect on our business, financial condition and results
    of operations. However, as we increased production at our Waco,
    Texas facility in the fourth quarter of 2006, our operations
    were hindered by certain suppliers&#146; inability to provide
    timely deliveries of materials. We cannot guarantee that we will
    not experience a material interruption of product deliveries
    from sole source suppliers. Additionally, we could face
    increasing pricing pressure from our suppliers dependent upon
    volume, due to rising costs by these suppliers that could be
    passed on to us in higher prices for our raw materials, which
    could have a material effect on our business, financial
    condition and results of operations.
</DIV>

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    <BR>
    S-10
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Any
    inability to protect our proprietary and intellectual property
    could allow our competitors and others to produce competing
    products based on our proprietary and intellectual
    property.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our success depends more on the knowledge, ability, experience
    and technological expertise of our employees than on the legal
    protection of patents and other proprietary rights. We claim
    proprietary rights in various unpatented technologies, know-how,
    trade secrets and trademarks relating to products and
    manufacturing processes. We cannot guarantee the degree of
    protection these various claims may or will afford, or that
    competitors will not independently develop or patent
    technologies that are substantially equivalent or superior to
    our technology. We protect our proprietary rights in our
    products and operations through contractual obligations,
    including nondisclosure agreements with certain employees,
    customers, consultants and strategic partners. There can be no
    assurance as to the degree of protection these contractual
    measures may or will afford. We have had patents issued and have
    patent applications pending in the U.S.&#160;and elsewhere. We
    cannot assure (1)&#160;that patents will be issued from any
    pending applications, or that the claims allowed under any
    patents will be sufficiently broad to protect our technology,
    (2)&#160;that any patents issued to us will not be challenged,
    invalidated or circumvented, or (3)&#160;as to the degree or
    adequacy of protection any patents or patent applications may or
    will afford. If we are found to be infringing third party
    patents, there can be no assurance that we will be able to
    obtain licenses with respect to such patents on acceptable
    terms, if at all. The failure to obtain necessary licenses could
    delay product shipment or the introduction of new products, and
    costly attempts to design around such patents could foreclose
    the development, manufacture or sale of products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">The loss
    of key personnel could significantly harm our business, and the
    ability and technical competence of persons we hire will be
    critical to the success of our business.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because of the specialized, technical nature of our business, we
    are highly dependent on certain members of our management,
    marketing, engineering and technical staff. The loss of these
    employees could have a material adverse effect on our business,
    financial condition and results of operations. In addition to
    developing manufacturing capacity to produce high volumes of
    batteries, we must attract, recruit and retain a sizeable
    workforce of technically competent employees. Our ability to
    pursue effectively our business strategy will depend upon, among
    other factors, the successful recruitment and retention of
    additional highly skilled and experienced managerial, marketing,
    engineering and technical personnel, and the integration of such
    personnel obtained through business acquisitions. We cannot
    assure that we will be able to recruit or retain this type of
    personnel. An inability to hire sufficient numbers of people or
    to find people with the desired skills could result in greater
    demands being placed on limited management resources which could
    have a material adverse effect on our business, financial
    condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We are
    subject to competition from large and small manufacturers of
    high rate batteries and communications accessories.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We compete with large and small manufacturers of alkaline,
    carbon-zinc, seawater, and high-rate batteries as well as other
    manufacturers of lithium batteries, both rechargeable and
    non-rechargeable, and communications accessories. We cannot
    assure that we will successfully compete with these
    manufacturers, many of which have substantially greater
    financial, technical, manufacturing, distribution, marketing,
    sales and other resources.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    products could become obsolete.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The market for our products is characterized by changing
    technology and evolving industry standards, often resulting in
    product obsolescence or short product lifecycles. Although we
    believe that our products are comprised of state-of-the-art
    technology, there can be no assurance that competitors will not
    develop technologies or products that would render our
    technology and products obsolete or less marketable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Many of the companies with which we compete have substantially
    greater resources than us, and some have the capacity and volume
    of business to be able to produce their products more
    efficiently than we can at the present time. In addition, these
    companies are developing or have developed products using a
    variety of technologies that are expected to compete with our
    technologies. If these companies successfully market their
</DIV>

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    <BR>
    S-11
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    products in a manner that renders our technologies obsolete,
    there may be a material adverse effect on our business,
    financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We are
    subject to foreign currency fluctuations.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We maintain manufacturing operations in the U.S., the U.K. and
    China, and we export products to various countries. We purchase
    materials and sell our products in foreign currencies, and
    therefore currency fluctuations may impact our pricing of
    products sold and materials purchased. In addition, our foreign
    subsidiaries maintain their books in local currency, and the
    translation of those subsidiary financial statements into
    U.S.&#160;dollars for our consolidated financial statements
    could have an adverse effect on our consolidated financial
    results, due to changes in local currency relative to the
    U.S.&#160;dollar. Accordingly, currency fluctuations could have
    a material adverse effect on our business, financial condition
    and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    ability to use our net operating loss carryforwards in the
    future may be limited, which could have an adverse impact on our
    tax liabilities.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2006, we had approximately
    $84.7&#160;million of net operating loss carryforwards, or NOLs,
    available to offset future taxable income. At the end of 2004,
    based on our assessment, we recorded a deferred tax asset
    related to the future tax benefit expected to be received
    relating to our U.S.&#160;operations. This was due to our
    profitable track record and expected continued profitability.
    The asset was recorded since it was determined to be more likely
    then not to be realized. We continually assess the carrying
    value of this asset based on the relevant accounting standards.
    As a result of our assessment in the fourth quarter of 2006, we
    concluded that a full valuation allowance against the net
    deferred tax asset was appropriate. The establishment of the
    valuation allowance was based upon the most recent operating
    losses in the U.S.&#160;as well as other factors. Therefore, as
    of December&#160;31, 2006, we reflected a net deferred tax asset
    of $0 in the United States and in the United Kingdom. As we
    continue to assess the realizability of our deferred tax assets,
    the amount of the valuation allowance could be reduced.
    Achieving our business plan targets, particularly those relating
    to revenue and profitability, is integral to our assessment
    regarding the recoverability of our net deferred tax asset.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have determined that a change in ownership, as defined under
    Internal Revenue Code Section&#160;382, occurred during 2003 and
    again during 2005. As such, the domestic net operating loss
    carryforward will be subject to an annual limitation estimated
    to be in the range of approximately $12&#160;million. This
    limitation did not have an impact on income taxes determined for
    2006. Such a limitation could result in the possibility of a
    cash outlay for income taxes in a future year when earnings
    exceed the amount of net operating loss carryforwards that can
    be used by us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    quarterly results and the price of our common stock could
    fluctuate significantly.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our future operating results may vary significantly from quarter
    to quarter depending on factors such as the timing and shipment
    of significant orders, new product introductions, delays in
    customer releases of purchase orders, the mix of distribution
    channels through which we sell our products and general economic
    conditions. Frequently, a substantial portion of our revenue in
    each quarter is generated from orders booked and shipped during
    that quarter. As a result, revenue levels are difficult to
    predict for each quarter. If revenue results are below
    expectations, operating results will be adversely affected as we
    have a sizeable base of fixed overhead costs that do not
    fluctuate much with the changes in revenue. Due to such
    variances in operating results, we have sometimes failed to
    meet, and in the future may not meet, market expectations or
    even our own guidance regarding our future operating results.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to the uncertainties of quarterly operating results,
    future announcements concerning us or our competitors, including
    technological innovations or commercial products, litigation or
    public concerns as to the safety or commercial value of one or
    more of our products may cause the market price of our common
    stock to fluctuate substantially for reasons which may be
    unrelated to our operating results. These fluctuations, as well
    as general economic, political and market conditions, may have a
    material adverse effect on the market price of our common stock.
</DIV>

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    <BR>
    S-12
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We may be
    unable to obtain financing to fund ongoing operations and future
    growth.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    While we believe that our revenue growth projections and our
    ongoing cost controls will allow us to generate cash and achieve
    profitability in the foreseeable future, there is no assurance
    as to when or if we will be able to achieve our projections. Our
    future cash flows from operations, combined with our
    accessibility to cash and credit, may not be sufficient to allow
    us to finance ongoing operations or to make required investments
    for future growth. We may need to seek additional credit or
    access capital markets for additional funds. There is no
    assurance that we would be successful in this regard.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have certain debt covenants that must be maintained in
    accordance with the provisions of our credit facility. There is
    no assurance that we will be able to continue to meet these debt
    covenants in the future. If we default on any of our debt
    covenants and we are unable to renegotiate credit terms in order
    to comply with such covenants, this could have a material
    adverse effect on our business, financial condition and results
    of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There have been several amendments to our credit facility during
    the past few years, including amendments to authorize
    acquisitions and modify financial covenants. Recently, effective
    February&#160;14, 2007, we entered into Forbearance and
    Amendment Number Six to the Credit Agreement, or the Forbearance
    and Amendment, with JPMorgan Chase and M&#038;T Bank which
    reduced the amount of the revolving credit component from
    $20&#160;million to $15&#160;million. The Company and the
    Lenders entered into Extension of Forbearance and Amendment
    Number Seven to the Credit Agreement, or the Forbearance
    Extension, and Extension of Forbearance and Amendment Number
    Eight to Credit Agreement, or the Second Forbearance Extension,
    which provide that JPMorgan Chase and M&#038;T Bank will forbear
    from exercising their rights under the credit facility arising
    from our failure to comply with certain financial covenants in
    the credit facility with respect to the fiscal quarter ended
    December&#160;31, 2006. Specifically, we were not in compliance
    with the terms of the credit facility because we failed to
    maintain the required debt-to-earnings and EBIT-to-interest
    ratios provided for in the credit facility. JPMorgan Chase and
    M&#038;T Bank agreed to forbear from exercising their respective
    rights and remedies under the credit facility until
    March&#160;23, 2007, or the Forbearance Period, unless we
    breached the Forbearance and Amendment or unless another event
    or condition occurs that constitutes a default under the credit
    facility. The Forbearance Extension extended the Forbearance
    Period until May&#160;18, 2007, and the Second Forbearance
    Extension further extended the Forbearance Period until
    August&#160;15, 2007. During the Forbearance Period, JPMorgan
    Chase and M&#038;T Bank each agreed to continue to make
    revolving loans available to us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On August&#160;15, 2007, the Company and the Lenders entered
    into Amendment Number Nine to Credit Agreement, or Amendment
    Nine, which effectively ended the Forbearance Period and
    extended the term of the revolving credit facility to
    January&#160;31, 2009 and the term of the term loans to
    July&#160;1, 2009. During the Forbearance Period, the applicable
    revolving interest rate and the applicable term interest rate,
    in each case as set forth in the credit agreement, was increased
    by 25&#160;basis points. In addition to a number of technical
    and conforming amendments, the Forbearance and Amendment revised
    the definition of &#147;Change in Control&#148; in the credit
    facility to provide that the acquisition of equity interests
    representing more than 30% of the aggregate ordinary voting
    power represented by the issued and outstanding equity interests
    of us shall constitute a &#147;Change in Control&#148; for
    purposes of the credit facility. Previously, the equity interest
    threshold had been set at 20%. As a result of the uncertainty of
    our ability to comply with the financial covenants within the
    next year, we are continuing to classify all of the debt
    associated with this credit facility as a current liability on
    our balance sheet. Now that the Forbearance Period has ended,
    JPMorgan Chase and M&#038;T Bank may exercise their rights and
    remedies under the credit facility without further notice or
    action.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    While we believe relations with our lenders are good, and we
    have received waivers as necessary in the past, there can be no
    assurance that such waivers will always be obtained when needed.
    In such case, we believe we have, in the aggregate, sufficient
    cash, cash generation capabilities from operations, working
    capital and financing alternatives at our disposal, including
    but not limited to alternative borrowing arrangements and other
    available lenders, to fund operations in the normal course for
    the foreseeable future. If we are unable to achieve our plans or
    unforeseen events occur, we may need to implement alternative
    plans to provide us with sufficient levels of liquidity and
    working capital. While we believe we could complete our original
    plans or
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-13
</DIV><!-- END LOGICAL PAGE -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    alternative plans, if necessary, there can be no assurance that
    such alternatives would be available on acceptable terms and
    conditions or that we would be successful in our implementation
    of such plans.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">The
    re-payment of the debt outstanding under our credit facility and
    the vesting of options under certain of our equity compensation
    plans may both be accelerated if any single stockholder owns
    more than 30% of our stock. Currently, our largest stockholder
    owns almost 30% of our stock.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our largest single stockholder is Grace Brothers, Ltd., which,
    as of its most recent Schedule&#160;13D/A filing, beneficially
    owned 29.4% of our issued and outstanding shares of common
    stock. On June&#160;6, 2007, Mr.&#160;Bradford T. Whitmore,
    general partner of Grace Brothers, Ltd., became a member of our
    Board of Directors. If Grace Brothers, Ltd. were to increase its
    ownership to more than 30%, it would be deemed a &#147;change in
    control&#148; for purposes of our credit facility administered
    by JP Morgan Chase and for purposes of options granted under our
    2004 Amended and Restated Long Term Incentive Plan, or LTIP. If
    a &#147;change in control&#148; were to occur, our commercial
    lenders would be able to demand payment of all amounts
    outstanding under our existing credit facility and the vesting
    of all outstanding options granted under our LTIP would be
    accelerated resulting in a significant expense being charged
    against our income statement for the period during which the
    &#147;change in control&#148; occurred, all of which would have
    a material adverse effect on our business, financial condition
    and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    operations in China are subject to unique risks and
    uncertainties.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our operating facility in China presents risks including, but
    not limited to, political changes, civil unrest, labor disputes,
    currency restrictions and changes in currency exchange rates,
    taxes, and boycotts and other civil disturbances that are
    outside of our control. Any such disruptions could have a
    material adverse effect on our business, financial condition and
    results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We may be
    unable to adequately maintain and monitor our internal controls
    over financial reporting.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We maintain and monitor various internal control processes over
    our financial reporting. Whenever we acquire a new business or
    operations, we need to integrate those operations with our
    existing control processes, which can prove to be a challenge if
    the acquired business had not been required to have such
    controls in effect. We are in the process of integrating
    McDowell and ISC into our business and assimilating
    McDowell&#146;s operations, services, products and personnel
    with our management policies, procedures and strategies. We are
    in the process of remediating several internal control
    deficiencies that have been identified at McDowell. While we
    work to ensure a stringent control environment, it is possible
    that we may fail to adequately maintain and monitor our various
    internal control processes over our financial reporting. Any
    such failure could result in internal control deficiencies that
    might be considered to be material weaknesses. Such material
    weaknesses in internal controls would be indicative of potential
    factors that could affect the reliability of our financial
    statements and other reported financial information and impact
    the financial results we report.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to this Offering</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We may
    sell more shares of common stock in the future.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon consummation of this offering, we will have
    16,278,612&#160;shares of common stock outstanding. Future sales
    of our common stock by existing stockholders pursuant to
    Rule&#160;144 under the Securities Act of 1933, as amended, or
    through the exercise of outstanding registration rights or
    otherwise could have an adverse effect on the prevailing market
    price of our common stock and our ability to raise additional
    capital. Except for permitted sales of an aggregate of
    18,000&#160;shares by three of our directors, our executive
    officers and directors and their affiliates have agreed not to
    sell any shares for 75&#160;days following the date of this
    prospectus supplement without the consent of Stephens Inc.
    Thereafter, all shares held by our executive officers and
    directors and their affiliates will be eligible for sale in the
    public market, subject, in most cases, to applicable volume
    limitations and other resale conditions imposed by
    Rule&#160;144. The sale, or the availability for sale, of
    substantial amounts of our common stock or securities
    convertible into common stock in the public
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-14
</DIV><!-- END LOGICAL PAGE -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    market at any time subsequent to the date of this prospectus
    supplement could adversely affect the prevailing market price of
    our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">We may
    sell shares of our authorized preferred stock in the
    future.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Board of Directors is authorized to issue preferred stock
    and determine its rights and preferences, privileges and
    restrictions, including voting rights, dividend rights,
    conversion rights, redemption privileges and liquidation
    preferences. Although there is no preferred stock currently
    outstanding, there are no limitations on the ability of our
    Board of Directors to issue any series of preferred stock. Any
    such issuance could result in dilution from a voting and equity
    perspective to our existing holders of our common stock and
    would likely establish dividend and liquidation preferences for
    the holders of preferred stock. In addition, the issuance of a
    series of preferred stock in connection with possible
    acquisitions, future financings and other corporate purposes
    could have the effect of making it more difficult for a third
    party to acquire, or could discourage a third party from seeking
    to acquire, a majority of our outstanding voting stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">The price
    of our common shares may fluctuate substantially, which could
    negatively affect the holders of our common shares.</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The price of our common stock could be subject to significant
    fluctuations in response to a variety of factors, including
    variations in our anticipated or actual results of operations,
    fluctuations in the price of the shares of our competitors,
    announcements of acquisitions as part of our growth strategy,
    additions or departures of key personnel, announcements of legal
    proceedings or regulatory matters, and general volatility in the
    stock market. The stock market has experienced volatility that
    has affected the market prices of equity securities of many
    companies, which has often been unrelated to the operating
    performance of these companies. A number of other factors, many
    of which are beyond our control, also could cause the market
    price of our common shares to fluctuate substantially.
    Volatility in the market price of our common shares may prevent
    the holders of our common shares from being able to sell their
    shares at or above the price that was paid for them.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-15
</DIV><!-- END LOGICAL PAGE -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->


<!-- link1 "USE OF PROCEEDS" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='104'></A><B><FONT style="font-family: 'Times New Roman', Times">USE
    OF PROCEEDS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will receive net proceeds from this offering of approximately
    $12,575,000 after payment of sales commissions and other
    offering expenses, estimated to total $925,000.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to use the net proceeds from the offering to fund:
    (i)&#160;approximately $6.0&#160;million of the consideration
    related to the acquisition of SPS, (ii)&#160;the prepayment of
    $3.5&#160;million principal amount of indebtedness due on the
    subordinated convertible notes that have an interest rate of
    5.0%, mature on November&#160;18, 2007 and were issued as
    partial consideration for the McDowell acquisition,
    (iii)&#160;to repay $1.0&#160;million of borrowings outstanding
    under our credit facility used to fund the ISC acquisition, and
    (iv)&#160;for general working capital purposes.
</DIV>


<!-- link1 "CAPITALIZATION" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='105'></A><B><FONT style="font-family: 'Times New Roman', Times">CAPITALIZATION</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our capitalization as of
    September&#160;29, 2007. Our capitalization is presented
    (i)&#160;on an actual basis, including the September 2007
    acquisition of ISC, and (ii)&#160;on an as adjusted basis to
    give effect to the sale of 1,000,000&#160;shares of common stock
    offered in this offering and the application of the estimated
    net proceeds of the offering as described in &#147;Use of
    Proceeds.&#148; This table should be read in conjunction with
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; incorporated in this
    prospectus supplement by reference to our Quarterly Report on
    <FONT style="white-space: nowrap">Form&#160;10-Q</FONT>
    for the quarter ended September&#160;29, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="12%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    September&#160;29, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    Actual
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    As Adjusted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom">
    (Dollars in thousands)
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 6pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Cash, cash equivalents and short term investments:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9,002
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Debt:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Current portion of debt and capital lease obligations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,789
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,789
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Debt and capital lease obligations &#151; long-term
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20,324
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,824
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Total debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33,113
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,613
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Shareholders&#146; equity:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Common stock, $0.01&#160;par value; 40,000,000&#160;shares
    authorized; <BR>
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;15,991,687&#160;shares
    issued as of September&#160;29, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,591
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,691
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    136,725
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    149,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Accumulated other comprehensive income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    154
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    154
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Accumulated deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (92,892
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (92,892
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    &#160;&#160;&#160;&#160;&#160;Less-Treasury stock;
    727,250&#160;shares issued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,378
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,378
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Total shareholders&#146; equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    43,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,775
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Total capitalization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    76,313
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    84,388
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 31%; align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=455 length=144 -->



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Note: The payment of $3,500 of debt principal on the McDowell
    subordinated convertible notes, as required by the McDowell
    settlement agreement, will trigger a $6,000 reduction in the
    outstanding principal balance of those notes and a $1,889
    reduction of accrued liabilities, all of which will be reflected
    in our Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for the year ending December&#160;31, 2007, as previously
    disclosed in our Quarterly Report on
    <FONT style="white-space: nowrap">Form&#160;10-Q</FONT>
    for the period ended September&#160;29, 2007.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-16
</DIV><!-- END LOGICAL PAGE -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->


<!-- link1 "PRICE RANGE OF COMMON STOCK" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='106'></A><B><FONT style="font-family: 'Times New Roman', Times">PRICE
    RANGE OF COMMON STOCK</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our common stock is traded on the NASDAQ Global Market under the
    symbol &#147;ULBI&#148;. The last reported sales price per share
    of our common stock on the NASDAQ Global Market was $13.98 on
    November&#160;8, 2007. As of November&#160;8, 2007, there were
    15,278,612&#160;shares of our common stock outstanding. The
    following table shows the high and low per share closing sales
    price for our common stock as reported on the NASDAQ Global
    Market for the periods indicated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="80%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="9%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    Closing Sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    Prices
</DIV>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    High
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    Low
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Fiscal Year Ending December&#160;31, 2007:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    First Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    11.74
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8.04
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Second Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10.57
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Third Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12.86
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10.46
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Fourth Quarter (through November&#160;8, 2007)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14.99
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12.56
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Fiscal Year Ended December&#160;31, 2006:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    First Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13.67
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10.41
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Second Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12.49
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8.31
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Third Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10.41
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8.79
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Fourth Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13.72
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Fiscal Year Ended December&#160;31, 2005:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    First Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    19.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    16.46
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Second Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17.88
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Third Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10.06
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Fourth Quarter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13.28
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    11.60
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>


<!-- link1 "DIVIDEND POLICY" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='107'></A><B><FONT style="font-family: 'Times New Roman', Times">DIVIDEND
    POLICY</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate that we will retain all future earnings to finance
    the continuing development of our business. In addition, our
    bank credit facility prohibits us from declaring or paying any
    dividends or other distributions on our capital stock.
    Accordingly, we do not anticipate paying cash dividends on our
    common stock in the foreseeable future. The payment of any
    future dividends will be at the discretion of our Board of
    Directors and will depend upon, among other things, future
    earnings, the success of our business activities, regulatory and
    capital requirements, our lenders, our general financial
    condition and general business conditions.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-17
</DIV><!-- END LOGICAL PAGE -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->


<!-- link1 "PLAN OF DISTRIBUTION" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='108'></A><B><FONT style="font-family: 'Times New Roman', Times">PLAN
    OF DISTRIBUTION</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stephens Inc. has entered into a placement agency agreement with
    us. Pursuant to the placement agency agreement, Stephens Inc.
    has agreed to act as placement agent for the sale of up to
    1,000,000&#160;shares of our common stock in connection with
    this offering. The placement agent is using its reasonable
    efforts to introduce us to investors who will purchase the
    shares. The placement agent does not have any obligation to buy
    any of the shares from us or to arrange for the purchase or sale
    of any specific number or dollar amount of the shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed to pay the placement agent a commission equal to
    5.0% of the gross proceeds of the sale of shares in this
    offering; provided that the minimum commission payable to the
    placement agent will be $500,000. The following table shows the
    per share and total commissions we will pay to the placement
    agent in connection with the sale of the common stock offered
    pursuant to this prospectus supplement and the accompanying
    prospectus, assuming the purchase of all of the common stock
    offered hereby.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="18%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Per share of common stock:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $.675
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total commissions:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $675,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because there is no minimum offering amount required as a
    condition to closing in this offering, the actual total
    commissions, if any, are not presently determinable and may be
    substantially less than the maximum amount set forth above. In
    compliance with the guidelines of the Financial Industry
    Regulatory Authority, or FINRA, the maximum commission to be
    received by the placement agent (or any other FINRA member or
    independent broker or dealer in this offering) will in no event
    exceed 8.0% of the gross proceeds received by the Company from
    the sale of shares in the offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have also agreed to reimburse the placement agent for the
    reasonable and documented out of pocket expenses, including the
    reasonable fees and expenses of its counsel and other experts,
    incurred by the placement agent in connection with this offering
    which are estimated not to exceed $100,000. We estimate the
    total expenses of this offering which will be payable by us,
    excluding the commissions of the placement agent (and any other
    FINRA member or independent broker or dealer in this offering),
    will be approximately $250,000.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted the placement agent a right of first refusal to
    act as our exclusive agent in connection with any private
    placement of securities, merger or acquisition and as lead
    manager in connection with any public offering of securities or
    other financing that the Company may undertake during the six
    month period immediately following the completion of this
    offering. To the extent that such right of refusal would cause
    us to breach an existing agreement between us and another
    investment banking firm, the placement agent&#146;s right of
    first refusal shall be limited to a non-exclusive or co-lead
    role to the extent allowed by such other agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed to indemnify the placement agent against certain
    liabilities, including liabilities under the Securities Act of
    1933, as amended, or to contribute to payments the placement
    agent may be require to make in respect thereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The price per share of the common stock was determined based on
    discussions between us and the placement agent. Investors will
    be informed of the date and manner in which they must transmit
    the purchase price for their shares. It is expected that the
    sale of the common stock will be completed on November&#160;15,
    2007. On the scheduled closing date, the following will occur:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    We will receive funds in the amount of the aggregate purchase
    price;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    We will deposit the shares being sold with the Depository Trust
    Company, which will credit the shares to the respective accounts
    of the investors;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The placement agent will receive its commission in accordance
    with the terms of the placement agency agreement.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The placement agency agreement provides that the completion of
    the sale of the common stock is subject to certain conditions
    precedent, including the absence of any material adverse change
    in our business
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-18
</DIV><!-- END LOGICAL PAGE -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and the receipt of certain certificates, opinions and letters
    from us and our counsel. If the conditions of this offering are
    not satisfied or waived, all investor funds will be returned
    promptly to the investors and this offering will terminate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except for sales of an aggregate 18,000&#160;shares by three of
    our directors, our executive officers and directors and their
    affiliates have agreed to a
    <FONT style="white-space: nowrap">75-day</FONT>
    &#147;lock up&#148; with respect to future sales of shares of
    our common stock and other of our securities that they
    beneficially own. This means that, subject to certain
    exceptions, for a period of 75&#160;days following the date of
    this prospectus supplement, such persons may not, without the
    prior written consent of the placement agent, directly or
    indirectly sell, offer, contract or grant any option to sell,
    pledge, transfer, establish an open &#147;put equivalent
    position&#148; or liquidate or decrease a &#147;call equivalent
    position&#148; or otherwise dispose of or transfer any shares of
    common stock, options to acquire shares of common stock or
    securities exchangeable or exercisable for or convertible into
    shares of common stock currently or hereafter owned by them, or
    publicly announce an intention to do any of the foregoing. The
    <FONT style="white-space: nowrap">75-day</FONT>
    restricted period described above is subject to automatic
    extension such that, in the event that either (1)&#160;during
    the last 17&#160;days of the
    <FONT style="white-space: nowrap">75-day</FONT>
    period, we issue an earnings release or material news or a
    material event relating to us occurs or (2)&#160;prior to the
    expiration of the
    <FONT style="white-space: nowrap">75-day</FONT>
    restricted period, the &#147;lock up&#148; restrictions
    described above will, subject to limited exceptions, continue to
    apply until the date that is 18&#160;days after the date of
    issuance of the earnings release or the occurrence of the
    material news or material event. We have agreed in the placement
    agency agreement to a similar lock up for the same periods
    described above.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The placement agency agreement, including the form of
    <FONT style="white-space: nowrap">lock-up</FONT>
    letter as an exhibit thereto, will be included as an exhibit to
    a Current Report on
    <FONT style="white-space: nowrap">Form&#160;8-K</FONT>
    that we will file with the SEC in connection with the
    consummation of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The placement agent or its affiliates may from time to time
    engage in investment banking and advisory services for us in the
    ordinary course of their business.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-19
</DIV><!-- END LOGICAL PAGE -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->


<!-- link1 "DESCRIPTION OF CAPITAL STOCK AND INDEMNIFICATION OF DIRECTORS AND OFFICERS" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='109'></A><B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF CAPITAL STOCK AND<BR>
    INDEMNIFICATION OF DIRECTORS AND OFFICERS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Set forth below is a description of certain provisions of our
    common stock and preferred stock. The following description is
    only a summary. You should refer to all of the provisions of our
    Certificate of Incorporation and By-laws, which have been filed
    as exhibits to the registration statement of which this
    prospectus is a part. As of the date of this prospectus
    supplement, under our Certificate of Incorporation, our
    authorized capital stock consists of 40,000,000 common shares,
    $.10&#160;par value per share, and 1,000,000 preferred shares,
    $.10&#160;par value per share. As of November&#160;8, 2007,
    15,278,612&#160;shares of common stock and no shares of
    preferred stock were issued and outstanding.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Voting.</I>&#160;&#160;For all matters submitted to a vote of
    stockholders, including the election of directors, each holder
    of common stock is entitled to one vote for each share
    registered in his or her name on the books of Ultralife. For
    most stockholder votes, an action is approved if the votes cast
    in favor of the action exceed the votes cast opposing the
    action, subject to quorum requirements (which are stockholders
    holding a majority of the stock entitled to vote at such
    meeting) and any voting rights granted to holders of preferred
    stock. Our common stock does not have cumulative voting rights
    and our directors are elected by plurality vote.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Dividends.</I>&#160;&#160;If our Board of Directors declares
    a dividend, holders of common stock will receive payments from
    the funds of Ultralife that are legally available to pay
    dividends. However, this dividend right is subject to any
    preferential dividend rights we may grant to the persons who
    hold preferred stock, if any is outstanding, and may further be
    subject to negative covenants imposed on the payment of
    dividends by our senior lenders pursuant to our credit
    facilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Liquidation.</I>&#160;&#160;If Ultralife is dissolved, the
    holders of common stock will be entitled to share ratably in all
    the assets that remain after we pay our liabilities and any
    amounts we may owe to the persons who hold preferred stock, if
    any is outstanding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Rights and Restrictions.</I>&#160;&#160;Holders of
    common stock do not have preemptive rights, and they have no
    right to convert their common stock into any other securities.
    Our common stock is not redeemable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Transfer Agent and Registrar.</I>&#160;&#160;Our transfer
    agent and registrar for our common stock is American Stock
    Transfer and Trust&#160;Company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Preferred
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have no shares of preferred stock issued and outstanding. Our
    Certificate of Incorporation, as amended, allows our Board of
    Directors to authorize the issuance of shares of preferred stock
    in one or more series without stockholder approval. Our Board of
    Directors has the discretion to determine the rights,
    preferences, privileges and restrictions, including voting
    rights, dividend rights, conversion rights, redemption
    privileges and liquidation preferences, of each series of
    preferred stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The purpose of authorizing our Board of Directors to issue
    preferred stock and determine its rights and preferences without
    the approval of our stockholders is to eliminate delays
    associated with a stockholder vote on specific issuances. The
    issuance of preferred stock, while providing flexibility in
    connection with possible acquisitions, future financings and
    other corporate purposes, could have the effect of making it
    more difficult for a third party to acquire, or could discourage
    a third party from seeking to acquire, a majority of our
    outstanding voting stock. Upon the closing of this offering,
    there will be not shares of preferred stock outstanding, and we
    have no present plans to issue any shares of preferred stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    of Officers and Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With respect to indemnification of directors and officers,
    Section&#160;145 of the Delaware General Corporation Law, or
    DGCL, provides that a corporation shall have the power to
    indemnify any person who was or is a party or is threatened to
    be made a party to any threatened, pending or completed action,
    suit or
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-20
</DIV><!-- END LOGICAL PAGE -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    proceeding, whether civil, criminal, administrative or
    investigative (other than an action by or in the right of the
    corporation), by reason of the fact that the person is or was a
    director, officer, employee or agent of the corporation, or is
    or was serving at the request of the corporation as a director,
    officer, employee or agent of another corporation, partnership,
    joint venture, trust or other enterprise, against expenses
    (including attorneys&#146; fees), judgments, fines and amounts
    paid in settlement actually and reasonably incurred by the
    person in connection with such action, suit or proceeding, if
    the person acted in good faith and in a manner the person
    reasonably believed to be in or not opposed to the best
    interests of the corporation, and, with respect to any criminal
    action or proceeding, had no reasonable cause to believe the
    person&#146;s conduct was unlawful. Under this provision of the
    DGCL, the termination of any action, suit or proceeding by
    judgment, order, settlement, conviction, or upon a plea of nolo
    contendere or its equivalent, shall not, of itself, create a
    presumption that the person did not act in good faith and in a
    manner which the person reasonably believed to be in or not
    opposed to the best interests of the corporation, and with
    respect to any criminal action or proceeding, had reasonable
    cause to believe that the person&#146;s conduct was unlawful.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, the DGCL provides that a corporation shall have the
    power to indemnify any person who was or is a party or is
    threatened to be made a party to any threatened, pending or
    completed action or suit by or in the right of the corporation
    to procure a judgment in its favor by reason of the fact that
    the person is or was a director, officer, employee or agent of
    the corporation, or is or was serving at the request of the
    corporation as a director, officer, employee or agent of another
    corporation, partnership, joint venture, trust or other
    enterprise, against expenses (including attorneys&#146; fees)
    actually and reasonably incurred by the person in connection
    with the defense or settlement of such action or suit if the
    person acted in good faith and in a manner the person reasonably
    believed to be in or not opposed to the best interests of the
    corporation and except that no indemnification shall be made in
    respect of any claim, issue or matter as to which such person
    shall have been adjudged to be liable to the corporation unless
    and only to the extent that the Delaware Court of Chancery or
    other court in which such action or suit was brought shall
    determine upon application that, despite the adjudication of
    liability but in view of all the circumstances of the case, such
    person is fairly and reasonably entitled to indemnity for such
    expenses which the Court of Chancery or such other court shall
    deem proper.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Certificate of Incorporation provides for limitation of the
    liability of directors to the Company and its stockholders and
    for indemnification of directors, officers, employees and agents
    of the Company, respectively, to the maximum extent permitted by
    the DGCL.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Certificate of Incorporation provides that directors are not
    liable to the Company or its stockholders for monetary damages
    for breaches of fiduciary duty as a director, except for
    liability (a)&#160;for any breach of the director&#146;s duty of
    loyalty to the Company or its stockholders, (b)&#160;for acts or
    omissions not in good faith or that involve intentional
    misconduct or a knowing violation of law, (c)&#160;for dividend
    payments or stock repurchases in violation of Delaware law, or
    (d)&#160;for any transaction from which the director derived any
    improper personal benefit.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Insofar as indemnification for liabilities arising under the
    Securities Act of 1933&#160;may be permitted to our directors,
    officers or persons in control pursuant to the foregoing
    provisions or otherwise, we have been advised that in the
    opinion of the SEC, such indemnification is against public
    policy as expressed in the Securities Act and is, therefore,
    unenforceable.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-21
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->


<!-- link1 "LEGAL MATTERS" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='110'></A><B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The validity of the shares of common stock offered by us will be
    passed upon for us by Harter Secrest&#160;&#038; Emery LLP.
    Alston&#160;&#038; Bird LLP will pass on certain legal matters
    for the placement agent in connection with this offering.
</DIV>


<!-- link1 "EXPERTS" -->


<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='111'></A><B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements incorporated in this Prospectus
    Supplement by reference to our Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    as of and for the year ended December&#160;31, 2006 have been so
    incorporated in reliance on the report of BDO Seidman LLP, an
    independent registered public accounting firm, and the financial
    statements incorporated in this Prospectus Supplement by
    reference to our Annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    as of and for the years ended December&#160;31, 2005 and 2004
    have been so incorporated in reliance on the report of
    PricewaterhouseCoopers LLP, an independent registered public
    accounting firm, with each report given on the authority of said
    firm as experts in accounting and auditing.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements of Innovative Solutions Consulting Inc.
    for the year ended December&#160;31, 2006, incorporated in this
    Prospectus Supplement by reference to our Current Report on
    <FONT style="white-space: nowrap">Form&#160;8-K/A</FONT>
    filed with the SEC on October&#160;31, 2007, have been so
    incorporated in reliance on the report of Bonadio&#160;&#038;
    Co., LLP, an independent registered public accounting firm,
    given on the authority of said firm as experts in accounting and
    auditing.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    S-22
</DIV><!-- END LOGICAL PAGE -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN LOGICAL PAGE -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 16pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">1,000,000&#160;Shares</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="l28757al2875700.gif" alt="ULTRALIFE BATTERIES, INC. LOGO" ><FONT style="font-size: 16pt">
    </FONT>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 16pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 14pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUPPLEMENT<BR>
    November&#160;8, 2007</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 18pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stephens
    Inc.</FONT></B>
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

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