Hold -- Price 11.31 on Aug. 26
by Collins Stewart

A $7 million order to ULBI's RedBlack Communications [to produce, manage and support the Communication Switch Subsystem for the U.S. Air Force Battle Control System-Mobile program] ... demonstrates the strides ULBI has made ... in creat[ing] cross-selling opportunities; to date, RedBlack has delivered $10 million of systems/services. Since March, ULBI is off about 2% and lags our proprietary index of defense-related stocks' 13% gain, in line with the S&P... . Valuation looks fair at 7.7 times ...[enterprise value]Ebitda. Market cap: $197 million.

Hugenic contracts now and for the foreseeable future with the military.

About to purchase chinese company Able New Energy Co., Ltd. which is a producer of lithiu, batteries. Which are used in hybrid cars

Ultralife batteries (UBLI ) posted record sales in the fourth quarter, but it's still in the red, partly because of a recent acquisition. Its stock has tumbled from 13 on Oct. 17 to 9.44 on Mar. 21. But that makes the stock more undervalued in the eyes of investment firm Grace Brothers, which has steadily been buying shares since last year, accumulating a 30% stake. Ultralife makes a line of lithium batteries that are used by various industries and military organizations worldwide. Ultralife's lightweight and long-lasting BA-5390 supplies power for about 60 different devices used by the U.S. military and its allies in Afghanistan, Iraq, and elsewhere. About 50% of the company's revenues in 2007 are expected to come from the Defense Dept. Grace's strategy is to buy companies it figures are undervalued. Many of them end up being acquired. Grace declined comment. One fund manager close to Grace figures the stock is worth twice its price. Ultralife could be acquired, too, like other outfits Grace invested in, he says. Mark Grzymski of Needham says Ultralife's business remains solid and sees it earning 40 cents a share in 2007 on sales of $120 million vs. last year's $70.5 million. He rates it a buy, with

Under-developed potential of civilian application

Potential

Short interest ratio: 15
Insider Buying: $6.5M

Ultralife Batteries, Inc. announced Dec. 12 that it has received an order valued at approximately $1.2 million from the U.S. Defense Department for its BA-5347/U military batteries. Deliveries are expected to begin immediately and be completed this month.