~~[X]~~ ~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE~~~~SECURITIES EXCHANGE ACT OF 1934~~

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~Quarter Ended~~fiscal ~~September 30~~quarter~~, 2018~~ ended March 31, 2019

~~[ ]~~~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF~~~~THE SECURITIES EXCHANGE ACT OF 1934~~

~~Registrant’s telephone number, including area code:~~ ~~(315) 332-7100~~(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data file required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ~~[ ]~~ ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~Yes [ ]~~Yes☐ No ~~[ X ]~~☒

~~The~~APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐ Not applicable

Indicate the number of shares outstanding of each of the ~~registrant’s~~issuer’s classes of common stock, ~~was 15,956,677, net of 4,019,711 treasury shares,~~ as of ~~October 31, 2018.~~the latest practicable date.

As of April 30, 2019, the registrant had 15,736,668 shares of common stock outstanding.

		September 30,			December 31,				March 31,			December 31, 2018
		2018			2017				2019			Adjusted (1)
ASSETS	ASSETS							ASSETS

Current assets:
Cash		$	25,013		$	18,241			$	21,240		$	25,934
Restricted Cash			441			89
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $277 and $292, Respectively			14,533			14,657
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $302 and $296, Respectively										13,938			16,015
Inventories, Net			23,118			26,326				27,906			22,843
Prepaid Expenses and Other Current Assets			2,900			2,603				2,397			2,368
Total Current Assets			66,005			61,916				65,481			67,160
Property, Equipment and Improvements, Net			8,792			7,570				12,398			10,744
Goodwill			20,201			20,458				20,251			20,109
Other Intangible Assets, Net			6,670			7,085				6,484			6,504
Deferred Income Taxes			32			32
Other Non-Current Assets			96			125
Deferred Income Taxes, Net										15,421			15,444
Other Noncurrent Assets										916			887
Total Assets		$	101,796		$	97,186			$	120,951		$	120,848

LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY							LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable		$	7,260		$	8,787			$	11,307		$	9,919
Accrued Compensation and Related Benefits			1,641			2,413				1,364			1,494
Accrued Expenses and Other Current Liabilities			3,342			2,871				3,325			3,973
Income Taxes Payable			121			168
Total Current Liabilities			12,364			14,239				15,996			15,386
Deferred Income Taxes			3,904			3,867				564			591
Other Non-Current Liabilities			32			31
Other Noncurrent Liabilities										468			408
Total Liabilities			16,300			18,137				17,028			16,385

Commitments and Contingencies (Note 11)
Commitments and Contingencies (Note 10)

Shareholders' Equity:
Preferred Stock – Par Value $.10 Per Share; Authorized 1,000,000 Shares; None Issued			-			-				-			-
Common Stock – Par Value $.10 Per Share; Authorized 40,000,000 Shares; Issued – 19,976,388 and 19,670,928 Shares, respectively; Outstanding – 15,956,677 and 15,651,217 Shares, respectively			1,998			1,966
Common Stock – Par Value $.10 Per Share; Authorized 40,000,000 Shares; Issued – 20,134,596
Shares at March 31, 2019 and 20,053,335 Shares at December 31, 2018; Outstanding – 15,733,414
Shares at March 31, 2019 and 15,920,585 at December 31, 2018										2,013			2,005
Capital in Excess of Par Value			182,246			180,211				183,163			182,630
Accumulated Deficit			(77,709	)		(82,894	)			(57,610	)		(58,035	)
Accumulated Other Comprehensive Loss			(2,473	)		(1,611	)			(2,351	)		(2,786	)
Treasury Stock - At Cost; 4,019,711 Shares			(18,469	)		(18,469	)
Treasury Stock - At Cost; 4,401,182 at March 31, 2019 and 4,132,750 Shares at December 31, 2018										(21,231	)		(19,266	)
Total Ultralife Corporation Equity			85,593			79,203				103,984			104,548
Non-Controlling Interest			(97	)		(154	)			(61	)		(85	)
Total Shareholders’ Equity			85,496			79,049				103,923			104,463

Total Liabilities and Shareholders' Equity		$	101,796		$	97,186			$	120,951		$	120,848

	Three Month Periods Ended
	March 31,			April 1,
	2019			2018
Revenues	$	18,882		$	23,069
Cost of Products Sold		13,798			15,787
Gross Profit		5,084			7,282

Operating Expenses:
Research and Development		1,036			1,101
Selling, General and Administrative		3,500			3,825
Total Operating Expenses		4,536			4,926

Operating Income		548			2,356

Other Expenses:
Interest and Financing Expense		(5	)		(33	)
Miscellaneous		(53	)		(100	)
Total Other Expenses		(58	)		(133	)

Income Before Income Tax Provision		490			2,223
Income Tax Provision		(41	)		(55	)

Net Income		449			2,168

Net Income Attributable to Non-Controlling Interest		(24	)		(17	)

Net Income Attributable to Ultralife Corporation		425			2,151

Other Comprehensive Income:
Foreign Currency Translation Adjustments		435			752

Comprehensive Income Attributable to Ultralife Corporation	$	860		$	2,903

Net Income Per Share Attributable to Ultralife Common Shareholders – Basic	$	.03		$	.14

Net Income Per Share Attributable to Ultralife Common Shareholders – Diluted	$	.03		$	.13

Weighted Average Shares Outstanding – Basic		15,740			15,704
Potential Common Shares		485			498
Weighted Average Shares Outstanding – Diluted		16,225			16,202

The accompanying notes are an integral part of these consolidated financial statements.

Three month periods ended

Nine month periods ended

September 30,

October 1,

September 30,

October 1,

2018

2017

2018

2017

Revenues
$ 20,330 $ 21,047 $ 66,263 $ 63,022
Cost of products sold
14,289 14,792 46,390 43,656
Gross profit
6,041 6,255 19,873 19,366

Operating expenses:

Research and development
1,099 1,355 3,417 3,678
Selling, general and administrative
3,442 3,637 10,968 11,262
Total operating expenses
4,541 4,992 14,385 14,940

Operating income
1,500 1,263 5,488 4,426

Other expense (income):

Interest and financing expense
13 38 67 147
Miscellaneous
(34 ) 20 (40 ) 53
Income before income tax provision
1,521 1,205 5,461 4,226
Income tax provision
86 104 219 370

Net income
1,435 1,101 5,242 3,856

Net income attributable to non-controlling interest
27 3 57 8

Net income attributable to Ultralife Corporation
1,408 1,098 5,185 3,848

Other comprehensive (loss) income:

Foreign currency translation adjustments
(436 ) 440 (862 ) 1,193

Comprehensive (loss) income attributable to Ultralife Corporation
$ 972 $ 1,538 $ 4,323 $ 5,041

Net income per share attributable to Ultralife common shareholders – basic
$ .09 $ .07 $ .33 $ .25

Net income per share attributable to Ultralife common shareholders – diluted
$ .09 $ .07 $ .32 $ .24

Weighted average shares outstanding – basic
15,952 15,564 15,859 15,495
Potential common shares
571 407 548 323
Weighted average shares outstanding - diluted
16,523 15,971 16,407 15,818

	Three Month Periods Ended
	March 31,			April 1,
	2019			2018
OPERATING ACTIVITIES:
Net Income	$	449		$	2,168
Adjustments to Reconcile Net Income to Net Cash (Used In) Provided By Operating Activities:
Depreciation		447			484
Amortization of Intangible Assets		92			102
Amortization of Financing Fees		9			9
Stock-Based Compensation		185			139
Deferred Income Taxes		(5	)		(1	)
Changes in Operating Assets and Liabilities:
Accounts Receivable		2,076			(939	)
Inventories		(4,963	)		(502	)
Prepaid Expenses and Other Assets		(1	)		(86	)
Accounts Payable and Other Liabilities		1,166			(2,295	)
Net Cash Used In Operating Activities		(545	)		(921	)

INVESTING ACTIVITIES:
Purchases of Property, Equipment and Improvements		(2,581	)		(172	)
Net Cash Used In Investing Activities		(2,581	)		(172	)

FINANCING ACTIVITIES:
Cash Paid to Repurchase Common Stock		(1,957	)		-
Proceeds from Exercise of Stock Option		356			939
Tax Withholdings on Stock-Based Awards		(8	)		-
Net Cash (Used In) Provided By Financing Activities		(1,609	)		939

Effect of Exchange Rate Changes on Cash		41			154

DECREASE IN CASH		(4,694	)		-

Cash, Beginning of Period		25,934			18,330
Cash, End of Period	$	21,240		$	18,330

Nine Month Periods Ended

September 30,

October 1,

2018

2017

OPERATING ACTIVITIES:

Net Income
$ 5,242 $ 3,856
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:

Depreciation
1,476 1,507
Amortization of Intangible Assets
300 315
Amortization of Financing Fees
27 42
Stock-Based Compensation
707 529
Deferred Income Taxes
54 117
Changes in Operating Assets and Liabilities:

Accounts Receivable
(8 ) (2,412 )
Inventories
2,947 (1,221 )
Prepaid Expenses and Other Assets
(338 ) (582 )
Accounts Payable and Other Liabilities
(2,876 ) 1,506
Net Cash Provided By Operating Activities
7,531 3,657

INVESTING ACTIVITIES:

Purchases of Property, Equipment and Improvements
(1,994 ) (971 )
Net Cash Used In Investing Activities
(1,994 ) (971 )

FINANCING ACTIVITIES:

Proceeds from Stock Option Exercises
1,357 1,120
Proceeds from Government Grant
397 -
Net Cash Provided By Financing Activities
1,754 1,120

Effect of Exchange Rate Changes on Cash
(167 ) 172

INCREASE IN CASH
7,124 3,978

Cash, Beginning of Period
18,330 10,629
Cash, End of Period
$ 25,454 $ 14,607

					Capital			Accumulated
	Common Stock				in Excess			Other									Non-
	Number of				of Par			Comprehensive			Accumulated			Treasury			Controlling
	Shares		Amount		Value			Income (Loss)			Deficit			Stock			Interest			Total
					��
Balance – December 31, 2017		19,670,928	$	1,966	$	180,211		$	(1,611	)	$	(82,894	)	$	(18,469	)	$	(154	)	$	79,049
Cumulative Effect Adjustment (1)												(71	)								(71	)
Net Income												2,151						17			2,168
Stock Option Exercises		221,009		23		995															1,018
Stock-Based Compensation -Stock Options						123															123
Stock-Based Compensation -Restricted Stock						16															16
Foreign Currency Translation Adjustments									752												752
Cash settlement of outstanding options						(33	)														(33	)
Balance – April 1, 2018 (1)		19,891,937	$	1,989	$	181,312		$	(859	)	$	(80,814	)	$	(18,469	)	$	(137	)	$	83,022

Balance – December 31, 2018 (1)		20,053,335	$	2,005	$	182,630		$	(2,786	)	$	(58,035	)	$	(19,266	)	$	(85	)	$	104,463
Net Income												425						24			449
Share Repurchases															(1,957	)					(1,957	)
Stock Option Exercises		75,427		8		348															356
Stock-Based Compensation -Stock Options						174															174
Stock-Based Compensation -Restricted Stock		5,834				11															11
Tax Withholdings on Restricted Stock															(8	)					(8	)
Foreign Currency Translation Adjustments									435												435
Balance – March 31, 2019		20,134,596	$	2,013	$	183,163		$	(2,351	)	$	(57,610	)	$	(21,231	)	$	(61	)	$	103,923

The accompanying notes are an integral part of these consolidated financial statements.

1.	*~~BASIS OF PRESENTATION~~*

1. BASIS OF PRESENTATION

The accompanying unaudited Consolidated Financial Statements of Ultralife Corporation (the “Company”) and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Rule 8-038-03 of Regulation S-X.S-X. Accordingly, they do not include all of the information and footnotes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the Consolidated Financial Statements have been included. Results for interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the Consolidated Financial Statements and related notes thereto contained in our Form 10-K10-K for the year ended December 31, ~~2017.~~2018.

The December 31, ~~2017~~ 2018 consolidated balance sheet data referenced herein was derived from audited financial statements, but does not include all disclosures required by GAAP.

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

Our monthly closing schedule is a 4/4/5 weekly-based cycle for each fiscal quarter, as opposed to a calendar month-based cycle for each fiscal quarter. While the actual dates for the quarter-ends will change slightly each year, we believe that there are not any material differences when making quarterly comparisons.

Recently Adopted Accounting Guidance

Leases

Effective January 1, 2019, the Company adopted Accounting Standards Update 2016-02 – Leases (Topic 842). Adoption of the new standard did not materially impact the prior year consolidated statements of operations and cash flows. The prior year consolidated balance sheet has been revised for the effects of the new standard. The effects to our consolidated balance sheet as of December 31, 2018 are presented below.

The Company adopted the new standard applying the modified retrospective approach. The Company measured and recognized leases upon adoption which had commenced as of the beginning or during the prior year. The package of practical expedients permitted under the transition guidance of the new standard was elected which allowed us to carry forward the historical lease classification and determination of whether an arrangement is or contains a lease on existing leases. The use-of-hindsight transition practical expedient was applied to determine the lease term for existing leases, which resulted in the lengthening of the lease term at commencement for one of our operating facilities.

At contract inception, the Company determines whether the arrangement is or contains a lease and determines the lease classification. The lease term is determined based on the noncancellable term of the lease adjusted to the extent optional renewal terms and termination rights are reasonably certain. Lease expense is recognized evenly over the lease term. Variable lease payments are recognized as period costs. The present value of remaining lease payments are recognized as a liability on the balance sheet with a corresponding right-of-use asset adjusted for prepaid or accrued lease payments. The Company uses its incremental borrowing rate for the discount rate, unless the interest rate implicit in the lease contract is readily determinable. The Company has adopted the practical expedients to not separate non-lease components from lease components and to not present short-term leases on the balance sheet.

The impact on the consolidated balance sheet as of December 31, 2018 is shown below.

Impact to Previously Reported Results

Consolidated Balance Sheet as of December 31, 2018:

	As Previously Reported			Lease Standard Adjustment			As Adjusted
Other noncurrent assets	$	82		$	805		$	887
Prepaid expenses and other current assets		2,429			(61	)		2,368
Accrued expenses and other current liabilities		3,534			439			3,973
Other noncurrent liabilities		32			376			408
Accumulated deficit		(57,964	)		(71	)		(58,035	)

See Note 9 for further disclosure regarding lease accounting.

RecentAccounting Guidance Not Yet Adopted

There have been no developments to recently issued accounting standards, including the expected dates of adoption and anticipated effects on the Company’s consolidated financial statements, from those disclosed in the Company’s 2018 Annual Report on Form 10-K.

2.	~~SUBSEQUENT EVENTS~~

2. SUBSEQUENT EVENTS

Acquisition of Southwest Electronic Energy Corporation

On May 1, 2019, Ultralife Corporation completed the acquisition of 100% of the issued and outstanding shares of Southwest Electronic Energy Corporation (“SWE”) for an aggregate purchase price of $25.0 million in cash, net of cash acquired and subject to customary post-closing working capital adjustments.

SWE is a leading independent designer and manufacturer of high-performance smart battery systems and battery packs to customer specifications using lithium cells. SWE serves a variety of industrial markets, including oil & gas, remote monitoring, process control and marine, which demand uncompromised safety, service, reliability and quality. The Company acquired SWE as a bolt-on acquisition to further support our strategy of commercial revenue diversification by providing entry to the oil and gas exploration and production, and subsea electrification markets, which are currently unserved by Ultralife. Another key benefit includes obtaining a highly valuable technical team of battery pack and charger system engineers and technicians to add to our new product development-based revenue growth initiatives in our commercial end-markets particularly asset tracking, smart metering and other industrial applications.

The SWE acquisition was completed pursuant to a Stock Purchase Agreement dated May 1, 2019 (the “Stock Purchase Agreement”) by and among Ultralife, SWE, Southwest Electronic Energy Medical Research Institute, a Texas non-profit (the “Seller”), and Claude Leonard Benckenstein, an individual (the “Shareholder”).

The aggregate purchase price for the SWE Acquisition was funded by the Company through a combination of cash on hand and borrowings under the Credit Facilities (see Note 3).

The Stock Purchase Agreement contains customary terms and conditions including representations, warranties and indemnification provisions. A portion of the consideration paid to the Seller will be held in escrow for post-closing adjustments and indemnification purposes.

The acquisition of SWE will be accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed will be recognized at fair value as of the acquisition date. The operating results and cash flows of SWE will be included in the consolidated financial statements from the date of acquisition in the Company's Battery & Energy Products segment.

Due to the timing of the acquisition, the initial accounting is not yet complete. The Company is in the process of preparing the preliminary estimate of the fair value of assets acquired and liabilities assumed and the associated adjustments for supplemental pro forma revenue and earnings information.

First Amendment Agreement

On May 1, 2019, in connection with the SWE acquisition, the Company entered into the First Amendment Agreement with KeyBank National Association. See Note 3 for further information.

3.CREDIT FACILITY

On May 1, 2019, Ultralife, SWE, and CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), as borrowers, entered into the First Amendment Agreement (the “First Amendment Agreement”) with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent, to amend the Credit and Security Agreement by and among Ultralife and KeyBank dated May 31, 2017 (the “Credit Agreement”, and together with the First Amendment Agreement, the “Amended Credit Agreement”).

The Amended Credit Agreement, among other things, provides for a five-year, $8.0 million senior secured term loan (the “Term Loan Facility”) and extends the term of the $30.0 million senior secured revolving credit facility (the “Revolving Credit Facility”, and together with the Term Loan Facility, the “Credit Facilities”) through May 31, 2022. Up to six months prior to May 31, 2022, the Revolving Credit Facility may be increased to $50.0 million with the Bank’s concurrence.

Upon closing of the SWE Acquisition on May 1, 2019, the Company drew down the full amount of the Term Loan Facility and $6.8 million under the Revolving Credit Facility. The remaining availability under the Revolving Credit Facility is subject to certain borrowing base limits based on receivables and inventories.

The Company is required to repay the borrowings under the Term Loan Facility in sixty (60) equal consecutive monthly payments commencing on May 31, 2019, in arrears, together with applicable interest. All unpaid principal and accrued and unpaid interest with respect to the Term Loan Facility is due and payable in full on April 30, 2024. All unpaid principal and accrued and unpaid interest with respect to the Revolving Credit Facility is due and payable in full on May 31, 2022. The Company may voluntarily prepay principal amounts outstanding at any time subject to certain restrictions.

In addition to the customary affirmative and negative covenants, the Company must maintain a consolidated fixed charge coverage ratio of equal to or greater than 1.15 to 1.0, and a consolidated senior leverage ratio of equal to or less than 2.5 to 1.0, each as defined in the Amended Credit Agreement.

Borrowings under the Credit Facilities are secured by substantially all the assets of the Company.

Interest will accrue on outstanding indebtedness under the Credit Facilities at the Base Rate or the Overnight LIBOR Rate, as selected by the Company, plus the applicable margin. The Base Rate is the higher of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 50 basis points, and (c) the Overnight LIBOR Rate plus one hundred basis points. The applicable margin ranges from zero to negative 50 basis points for the Base Rate and from 185 to 215 basis points for the Overnight LIBOR Rate and are determined based on the Company’s senior leverage ratio.

The Company must pay a fee of 0.1% to 0.2% based on the average daily unused availability under the Revolving Credit Facility.

Payments must be made by the Company to the extent borrowings exceed the maximum amount then permitted to be drawn on the Credit Facilities and from the proceeds of certain transactions. Upon the occurrence of an event of default, the outstanding obligations may be accelerated and the Bank will have other customary remedies including resort to the security interest the Company provided to the Bank.

During the quarter ended March 31, 2019, we repurchased a total of 267,300 shares of our common stock for an aggregate consideration (including fees and commissions) of $1,957.

From the inception of the Share Repurchase Program on November 1, 2018, we repurchased a total of 372,974 shares of our common stock for an aggregate consideration (including fees and commissions) of $2,699.

3.	*~~REVENUES~~*

~~Effective~~ ~~January~~5. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing earnings attributable to the Company’s common shareholders by the weighted-average shares outstanding during the period. Diluted EPS includes the dilutive effect of securities, if any, and is calculated using the treasury stock method. For the three-month period ended March 31, 2019, 1,052,410 stock options and 11,666 restricted stock awards were included in the calculation of Diluted EPS as such securities are dilutive. Inclusion of these securities resulted in 484,843 additional shares in the calculation of fully diluted earnings per share. For the comparable three-month period ended April 1, 2018, 1,324,753 stock options and 17,500 restricted stock awards were included in the ~~Company adopted Accounting Standards Update~~ ~~2014~~-09 ~~(Topic~~ ~~606~~~~) “Revenue from Contracts with Customers”. Adoption~~calculation of ~~Topic~~ ~~606~~ ~~did~~ ~~not~~ ~~impact~~Diluted EPS resulting in 498,109 additional shares in the ~~timing~~calculation of ~~revenue recognition in our Consolidated Financial Statements~~fully diluted earnings per share. There were 448,250 and 214,000 outstanding stock options for the ~~current or prior interim or annual periods. Accordingly,~~ no ~~adjustments have been made to opening retained earnings or prior period amounts.~~

~~Revenue Recognition~~

~~Revenues are generated from the sale of products. Performance obligations are met~~three-month periods ended March 31, 2019 and ~~revenue is recognized upon transfer of control to the customer,~~April 1, 2018, respectively, which ~~is generally upon shipment. When contract terms require transfer of control upon delivery at a customer’s location, revenue is recognized on the date of delivery. Revenue is measured~~were not included in EPS as the amount of consideration we expect to receive in exchange for shipped product. Sales, value-added and other taxes billed and collected from customers are excluded from revenue. Customers, including distributors, do ~~not~~ have a general right of return. For products shipped under vendor managed inventory arrangements, revenue is recognized and billed when the product is consumed by the customer, at which point control has transferred and there are no ~~further obligations by the Company.~~effect would be anti-dilutive.

~~Revenues recognized from prior period performance obligations for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2018~~ ~~were~~ ~~not~~ ~~material.~~

~~As of~~ ~~September 30, 2018,~~ ~~the Company had~~ no ~~unsatisfied performance obligations for contracts with an original expected duration of greater than~~ ~~one~~ ~~year. Pursuant to Topic~~ ~~606,~~ we have applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations.

~~Deferred revenue, unbilled revenue and deferred contract costs recorded on our Consolidated Balance Sheets as of~~ ~~September 30, 2018~~ ~~and~~ ~~December 31, 2017~~ ~~were~~ ~~not~~ ~~material.~~

~~Accounts Receivable~~

~~We extend credit to our customers in the normal course of business. We perform ongoing credit evaluations and generally do~~ ~~not~~ ~~require collateral. Payment terms are generally~~ 30 days. Trade accounts receivable are recorded at their invoiced amounts, net of allowance for doubtful accounts. We evaluate the adequacy of our allowance for doubtful accounts quarterly. Accounts outstanding for longer than contractual payment terms are considered past due and are reviewed for collectability. We maintain reserves for potential credit losses based upon our historical experience and the aging of specific receivables. Receivable balances are written off when collection is deemed unlikely.

~~Sales Commissions~~

~~Sales commissions are expensed as incurred for contracts with an expected duration of~~ ~~one~~ ~~year or less. There were~~ no ~~sales commissions capitalized as of~~ ~~September 30, 2018.~~

~~Shipping and Handling Costs~~

~~Costs incurred by us related to shipping and handling are included in cost of products sold. Amounts charged to customers pertaining to these costs are reflected as revenue.~~

~~Product Warranties~~

We generally offer warranties against product defects. Costs incurred to service warranty claims are recorded as costs of products sold. We provide for potential warranty costs based on historical experience. Provision for warranty costs is recorded in other current liabilities and other long-term liabilities on our Consolidated Balance Sheets based on the duration of the warranty. The Company does ~~not~~ ~~offer separate service-type warranties on its products.~~

~~See Note~~ 12 ~~for disaggregated revenue information.~~

~~Restricted~~As of March 31, 2019 and December 31, 2018, restricted cash at ~~September 30, 2018~~ ~~consists of~~included $228 and $266, respectively, relating to a government grant awarded in the People’s Republic of China to fund specified technological research and development ~~expenditures.~~initiatives. The grant proceeds ~~will be~~are realized to income as a direct offset to expense as the related expenditures are incurred. No ~~expenditures have been incurred or~~For the quarter ended March 31, 2019, grant proceeds of approximately $38 were realized ~~with respect~~ to ~~the grant as~~income.

As of ~~September 30, 2018.~~ ~~Restricted~~March 31, 2019 and December 31, 2018, restricted cash ~~also~~ includes euro-denominated deposits of $83 and $85, respectively, withheld by the Dutch tax authorities and third party VAT representatives in connection with a previously utilized logistics arrangement in the Netherlands.

Restricted cash is included as a component of the cash balance for purposes of the ~~statement~~consolidated statements of cash flows.

Depreciation expense for property, equipment and improvements was ~~as follows:~~$447 and $484 for the three-month periods ended March 31, 2019 and April 1, 2018, respectively.

7.	*~~GOODWILL, INTANGIBLE ASSETS AND LONG TERM ASSETS~~*

a. Goodwill

The following table summarizes the goodwill activity by segment for the ~~nine~~~~-month~~three-month periods ended ~~September 30, 2018~~ March 31, 2019 and ~~October~~April 1, ~~2017:~~2018:

~~Battery &~~

~~Energy~~

~~Communi-~~

~~cations~~

~~Products~~

~~Systems~~

~~Total~~

~~Balance - December 31, 2016~~

~~8,472~~

~~11,493~~

~~19,965~~

~~Effect of Foreign Currency Translation~~

~~416~~

~~Balance – October 1, 2017~~

~~8,888~~

~~11,493~~

~~20,381~~

~~Effect of Foreign Currency Translation~~

~~Balance - December 31, 2017~~

~~8,965~~

~~11,493~~

~~20,458~~

~~Effect of Foreign Currency Translation~~

~~(257~~

)

~~(257~~

)

~~Balance – September 30, 2018~~

~~8,708~~

~~11,493~~

~~20,201~~

	Battery & Energy			Communi- cations
	Products			Systems		Total
Balance - December 31, 2017	$	8,965		$	11,493	$	20,458
Effect of Foreign Currency Translation		240			-		240
Balance – April 1, 2018		9,205			11,493		20,698
Effect of Foreign Currency Translation		(589	)		-		(589	)
Balance - December 31, 2018		8,616			11,493		20,109
Effect of Foreign Currency Translation		142			-		142
Balance – March 31, 2019	$	8,758		$	11,493	$	20,251

b. Other Intangible Assets,

Net

The composition of other intangible assets was:

	at September 30, 2018
			Accumulated				at March 31, 2019
	Cost		Amortization		Net				Accumulated
							Cost		Amortization		Net
Trademarks	$	3,405	$	-	$	3,405	$	3,407	$	-	$	3,407
Customer Relationships		6,529		4,352		2,177		6,530		4,453		2,077
Patents and Technology		5,509		4,696		813		5,510		4,766		744
Distributor Relationships		377		377		-		377		377		-
Trade Name		379		104		275		379		123		256
Total Other Intangible Assets	$	16,199	$	9,529	$	6,670	$	16,203	$	9,719	$	6,484

The ~~decrease~~change in the cost value of total ~~other~~ intangible assets from December 31, ~~2017~~ 2018 to ~~September 30, 2018~~ of ~~$145~~March 31, 2019 is ~~the~~a result of the effect of foreign currency translations.

8.	.~~REVOLVING CREDIT AGREEMENT~~

~~Credit Facilities~~

On ~~May~~Amortization expense for intangible assets was $92 and $102 for the three-month periods ended March 31, ~~2017,~~ ~~Ultralife Corporation entered into a Credit~~2019 and ~~Security Agreement (the “Credit Agreement”) and related security agreements with KeyBank National Association (“KeyBank” or the “Bank”) to establish a~~ ~~$30,000~~ ~~senior secured, cash flow-based, revolving credit facility that includes a~~ ~~$1,500~~ ~~letter of credit subfacility (the “Credit Facility”). The Credit Agreement provides that the Credit Facility~~ ~~may~~ ~~be increased with the Bank’s concurrence to~~ ~~$50,000~~ ~~prior to the last~~ ~~six~~ ~~months of the term and is scheduled to expire on~~ ~~May 30, 2020.~~ ~~The Credit Facility replaces the Company’s asset-based revolving credit facility with PNC Bank National Association which expired in accordance with its terms on~~ ~~May 24, 2017 (~~~~the “Prior Credit Agreement”).~~

~~The Credit Facility provides the Company with an aggregate of up to~~ ~~$30,000~~ ~~of loan and letter of credit availability determined based on a borrowing base formula. The Company~~ ~~may~~ use advances under the Credit Facility for general working capital purposes, to reimburse drawings under letters of credit and to fund capital expenditures and acquisitions, all subject to the terms of the Credit Agreement. The Company had no ~~amounts drawn under the Prior Credit Agreement at the time of its expiration and has~~ ~~not~~ ~~borrowed under the Credit Facility.~~

Interest will accrue on outstanding indebtedness under the Credit Agreement at the Overnight LIBOR Rate plus the applicable margin, or at the Base Rate plus the applicable margin, as selected by the Company. During the period beginning ~~May 31, 2017~~ ~~and ending~~ April 1, 2018, ~~the applicable margin for Overnight LIBOR Loans is~~ ~~185~~ ~~basis points, the applicable margin for Base Rate Loans is negative~~ 50 ~~basis points~~respectively. Amortization included in research and ~~applicable margin~~development expenses was $33 and $38 for the ~~Unused Fee is~~ 20 ~~basis points. Beginning~~ three-month periods ended March 31, 2019 and April 2,1, 2018, respectively. Amortization included in selling, general and ~~thereafter,~~administrative expenses was $59 and $64 for the ~~applicable margins will be determined based on the chart below.~~three-month periods ended March 31, 2019 and April 1, 2018, respectively.

~~The Company must pay a fee on its unused availability equal to the applicable margin for the Unused Fee and customary letter of credit fees.~~

~~In addition to the affirmative and negative covenants, the Company must maintain a fixed charge coverage ratio of~~ ~~1.15~~ to ~~1.0,~~ ~~tested each fiscal quarter for the trailing~~ ~~four~~ ~~fiscal quarters, and a minimum tangible net worth of~~ ~~$40,000,~~ ~~tested as of the end of each calendar year. The Company was in full compliance with its covenants as of~~ ~~September 30, 2018.~~

Any outstanding borrowings must be repaid upon expiration of the term of the Credit Facility. Payments must be made during the term to the extent outstanding borrowings exceed the maximum amount then permitted to be drawn as borrowings under the Credit Facility and from the proceeds of certain transactions. Upon the occurrence of an event of default, the outstanding obligations of the Company under the Credit Facility ~~may~~ ~~be accelerated in addition to the other remedies available to the Bank under the terms of the Credit Agreement. The Credit Facility is secured by substantially all the assets of the Company.~~

~~As of~~ ~~September 30, 2018,~~ ~~we had~~ no ~~outstanding balance under the Credit Facility and~~ no ~~outstanding letters of credit related to the Credit Facility.~~

We have stock options outstanding from various stock-based employee compensation plans for which we record compensation cost relating to share-based payment transactions in our financial statements. As of ~~September 30, 2018,~~ March 31, 2019, there was ~~$681~~$372 of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of ~~1.1~~0.8 years.

The following table summarizes stock option activity for the ~~nine~~~~-month~~three-month period ended ~~September 30, 2018:~~March 31, 2019:

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining Contractual
Term (years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2018
1,860,211 $ 6.10
Granted
217,500 9.68
Exercised
(305,460 ) 4.54
Forfeited or Expired
(17,499 ) 5.61
Outstanding at September 30, 2018
1,754,752 $ 6.68 3.50 $ 3,986
Vested and Expected to Vest at September 30, 2018
1,650,364 $ 6.66 3.36 $ 3,791
Exercisable at September 30, 2018
1,174,378 $ 5.75 2.68 $ 3,193

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2019		1,576,087		$	6.58
Granted		-			-
Exercised		(75,427	)		4.71
Forfeited or Expired		-			-
Outstanding at March 31, 2019		1,500,660		$	6.68		3.25	$	5,574
Vested and Expected to Vest at March 31, 2019		1,409,243		$	6.65		3.12	$	5,280
Exercisable at March 31, 2019		1,031,701		$	5.98		2.47	$	4,377

~~The following assumptions were used to value stock options granted during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2018:~~

~~The weighted average grant date fair value of options granted during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2018~~ ~~was~~ ~~$4.22.~~

On ~~July 25, 2018,~~ ~~the Company’s Board of Directors, at the recommendation of the Compensation and Management Committee and pursuant to the Company’s Amended and Restated~~ ~~2004~~ ~~Long-Term Incentive Plan, modified the option previously granted to the Company’s President and Chief Executive Officer to purchase an aggregate~~ ~~200,000~~ ~~shares of the Company’s common stock at~~ ~~$10.00,~~ ~~such that the option will fully vest immediately upon the Company’s common stock~~ ~~first~~ ~~reaching a closing price~~ ~~$10.00~~ ~~for~~ 15 ~~trading days in a~~ 30 ~~trading-day period. The option as previously granted provided for vesting in annual increments of~~ ~~50,000~~ ~~shares on each of the~~ ~~four~~ ~~anniversaries of the date the Company’s common stock~~ ~~first~~ ~~reached a closing price~~ ~~$10.00~~ ~~for~~ 15 ~~trading days in a~~ 30 ~~trading-day period. The option became fully vested during the~~ ~~third~~ ~~quarter~~ ~~2018~~ ~~and expires~~ ~~December 30, 2020.~~ ~~The transaction has been accounted for as an equity award modification pursuant to Accounting Standards Codification Topic~~ ~~718,~~ ~~Compensation – Stock Compensation. The Company has recognized for the~~ ~~third~~ ~~quarter~~ ~~2018~~ ~~compensation cost of approximately~~ ~~$182,~~ representing the incremental fair value of the modified award computed as of the modification date as the difference between the fair value of the modified award and the fair value of the original award immediately before it was modified. The incremental fair value was determined using a Monte Carlo simulation option-pricing model consistent with the valuation methodology used to value and recognize the original award.

FASB’s guidance for share-based payments requires cash flows from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised stock options in excess of the deferred tax asset attributable to stock compensation costs for such stock options. We did ~~not~~ ~~record any excess tax benefits in the~~ ~~first~~~~nine~~ ~~months of~~ ~~2018~~ or ~~2017.~~

Cash received from stock option exercises under our stock-based compensation plans for the ~~three~~~~-month~~three-month periods ended ~~September 30,~~March 31, 2019 and April 1, 2018 was $356 and ~~October 1, 2017~~ ~~was~~ ~~$64~~ ~~and~~ ~~$131,~~ ~~respectively. Cash received from stock option exercises under our stock-based compensation plans for the~~ ~~nine~~~~-month periods ended~~ ~~September 30, 2018~~ ~~and~~ ~~October 1, 2017~~ ~~was~~ ~~$1,357~~ ~~and~~ ~~$1,120,~~$939, respectively.

In January 2018, 17,500 shares of restricted stock were awarded to certain of our employees. These shares vest in equal annual installments over three years. The weighted average grant date fair value of these awards was ~~$7.16~~$7.16 per share. Unrecognized compensation cost related to these restricted shares was ~~$71~~$42 at ~~September 30, 2018.~~March 31, 2019.

~~10.~~

8. INCOME TAXES

On ~~December 22, 2017,~~ the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but ~~not~~ ~~limited to, (~~1~~) reducing the U.S. federal corporate tax rate from~~ 35 ~~percent to~~ 21 ~~percent; (~~2~~) elimination of the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (~~3~~) changing rules related to usage and limitation of net operating loss carryforwards created in tax years beginning after~~ ~~December 31, 2017; (~~4~~) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries for tax years beginning after~~ ~~December 31, 2017;~~ ~~and (~~5~~) implementing a territorial tax system and imposing a transition toll tax on deemed repatriated earnings of foreign subsidiaries.~~

Our effective tax rate for the three months ended March 31, 2019 and April 1, 2018 was 8% and 3%, respectively. The ~~Act provided~~increase in our effective tax rate for a ~~one~~~~-time deemed mandatory repatriation for post-~~~~1986~~ ~~undistributed foreign subsidiary earnings and profits (“E&P”) through~~ the ~~year ended~~ ~~December 31, 2017.~~ ~~The Company had a deficit in foreign E&P and is~~ ~~not~~ ~~expected to be subject~~current quarter compared to the ~~deemed mandatory repatriation.~~

On ~~December 22, 2017,~~ ~~the SEC staff issued Staff Accounting Bulletin~~ ~~No.~~~~118~~ ~~to address the application of U.S. GAAP in situations when a registrant does~~ ~~not~~ ~~have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. At~~ ~~September 30, 2018,~~ the amounts recorded for the Tax Act remain provisional for the transition tax, the remeasurement of deferred taxes, and our reassessment of permanently reinvested earnings, uncertain tax positions and valuation allowances. These estimates ~~may~~ be impacted by further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations, state tax conformity to federal tax changes and the impact of the Global Intangible Low-Taxed Income (“GILTI”) provisions. At ~~September 30, 2018,~~ ~~we were~~ ~~not~~ ~~able to reasonably estimate, and therefore have~~ ~~not~~ ~~recorded, deferred taxes for the GILTI provisions. We have~~ ~~not~~ yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future periods or use the period cost method.

~~For the~~ ~~three~~~~-month periods ended~~ ~~September 30, 2018~~ ~~and~~ ~~October 1, 2017,~~ ~~we recognized~~ ~~$86~~ ~~and~~ ~~$104,~~ ~~respectively, in income tax expense. For the~~ ~~nine~~~~-month periods ended~~ ~~September 30, 2018~~ ~~and~~ ~~October 1, 2017,~~ ~~we recognized~~ ~~$219~~ ~~and~~ ~~$370,~~ ~~respectively, in income tax expense. These are detailed as follows:~~

Three-month periods ended

Nine-month periods ended

September 30,

October 1,

September 30,

October 1,

2018

2017

2018

2017

Current Income Tax Provision:

Foreign
$ 64 $ 48 $ 153 $ 199
Federal
- 14 - 42
State
4 4 12 12
Deferred Income Tax Provision
18 38 54 117
Total
$ 86 $ 104 $ 219 $ 370

~~The deferred income tax provision for the~~ ~~three~~~~-month and~~ ~~nine~~~~-month periods ended~~ ~~September 30, 2018~~ represents the increase in the taxable temporary difference related to goodwill and certain other indefinite-lived intangible assets of the U.S. operations that cannot be predicted to reverse for book purposes during our loss carryforward periods, partially offset by the amortization of certain intangible assets of Accutronics (U.K.). The deferred income tax provision for the ~~three~~~~-month and~~ ~~nine~~~~-month periods ended~~ ~~October 1, 2017~~ ~~reflects the higher previously-enacted U.S corporate tax rate. The current income tax provisions for~~ ~~2018~~ ~~and~~ ~~2017~~ ~~are~~prior quarter was primarily due to the ~~income generated by~~reversal of the valuation allowance on our ~~foreign operations during the respective periods.~~U.S. deferred tax assets as of December 31, 2018.

Our effective ~~consolidated~~ tax ~~rates~~rate for the ~~nine~~~~-month periods~~three months ended ~~September 30, 2018~~ ~~and~~ ~~October 1, 2017~~ ~~were:~~

Nine-Month Periods Ended

September 30,

October 1,

2018

2017

Income Before Income Taxes
$5,461 $4,226

Income Tax Provision
219 370

Effective Income Tax Rate
4.0% 8.8%

March 31, 2019 was lower than the U.S. federal statutory rate primarily due to tax benefits relating to the exercise of stock options during the period.

In ~~2018~~As of March 31, 2019, we have domestic net operating losses (“NOL”) carryforwards of $63,388, which expire 2019 thru 2035, and ~~2017,~~ ~~in the U.S.~~domestic tax credits of $1,817, which expire 2028 thru 2037, available to reduce future taxable income. Management has concluded it is more likely than not that these domestic NOL and credit carryforwards will be fully utilized.

As of March 31, 2019, for certain past operations in the U.K., we ~~recognize~~continue to report a valuation allowance for ~~our~~NOL carryforwards of approximately $10,000, nearly all of which can be carried forward indefinitely. Utilization of the net operating loss carryforwards and other deferred tax assets that cannot be offset by reversing temporary differences. The recognition of the valuation allowance is based on an assessment of all available evidence, both positive and negative, weighted based on objective verifiability. The assessment of the realizability of the U.S. deferred tax assets was based on a number of factors including our history of operating losses our historical operating volatility, our historical inability to accurately forecast earnings for future periods and the continued uncertainty of the general business climate. The use of our U.K. net operating loss carryforwards may be limited due to the change in the past U.K. ~~operation. Based on~~operation and cannot currently be used to reduce taxable income at our ~~assessment~~other U.K. subsidiary, Accutronics Ltd.

As of ~~all available evidence and its weighting based on objective verifiability, we concluded that the realizability of these deferred tax assets is~~ ~~not~~ ~~more likely than~~ ~~not~~ at ~~September 30, 2018.~~ ~~In both~~ ~~2018~~ ~~and~~ ~~2017,~~March 31, 2019, we have not recognized a valuation allowance against our other foreign deferred tax assets, as ~~we believe that it~~realization is considered to be more likely than ~~not~~ ~~that they will be realized. We will continue to evaluate the realizability of our deferred tax assets in future periods.~~

~~As of~~ ~~December 31, 2017,~~ ~~we have domestic and foreign net operating losses (“NOL”) totaling approximately~~ ~~$69,594~~ ~~and~~ ~~$12,760,~~ ~~respectively, and domestic tax credits of approximately~~ ~~$1,837,~~ ~~available to reduce future taxable income. Included in our NOL carryforwards are foreign loss carryforwards of approximately~~ ~~$12,760,~~ ~~nearly all of which can be carried forward indefinitely. The domestic NOL carryforward of~~ ~~$69,594~~ ~~expires beginning in~~ ~~2020~~ ~~through~~ ~~2034.~~not.

As of ~~September 30, 2018,~~ March 31, 2019, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations.

There were no unrecognized tax benefits related to uncertain tax positions at ~~September 30, 2018~~ March 31, 2019 and December 31, ~~2017.~~2018.

As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. Our U.S. tax matters for the years ~~2002~~2000 through ~~2017~~2018 remain subject to examination by the Internal Revenue Service (“IRS”) ~~and~~due to our net operating loss carryforwards. Our U.S. tax matters for the years 2000 through 2018 remain subject to examination by various state and local tax jurisdictions due to our ~~NOL~~net operating loss carryforwards. Our tax matters for the years ~~2009~~2010 through ~~2017~~2018 remain subject to examination by the respective foreign tax jurisdiction authorities.

~~11.~~

~~EARNINGS PER SHARE~~

9. OPERATING LEASES

~~Basic earnings per share (“EPS”) is computed by dividing net income attributable~~The Company has operating leases predominantly for operating facilities. As of March 31, 2019, the remaining lease terms on our operating leases range from less than one year to ~~Ultralife Corporation~~approximately 3 years. Renewal options to extend our leases have been exercised. Termination options are not reasonably certain of exercise by the ~~weighted-average shares outstanding during~~Company. There is no transfer of title or option to purchase the ~~period. Diluted EPS includes the dilutive effect of securities, if any, and is calculated using the treasury stock method. For the~~ ~~three~~~~-month period ended~~ ~~September 30, 2018,~~ ~~1,252,502~~ ~~stock options and~~ ~~17,500~~ ~~restricted stock awards were included in the calculation of Diluted EPS as such securities~~leased assets upon expiration. There are ~~dilutive. Inclusion of these securities resulted in~~ ~~571,829~~ ~~additional shares in the calculation of fully diluted earnings per share. For the comparable~~ ~~three~~~~-month period ended~~ ~~October 1, 2017,~~ ~~1,481,844~~ ~~stock options and~~ no ~~restricted stock awards were included in the calculation of Diluted EPS resulting in~~ ~~407,668~~ ~~additional shares in the calculation of fully diluted earnings per share. For the~~ ~~nine~~~~-month periods ended~~ ~~September 30, 2018~~ ~~and~~ ~~October 1, 2017,~~ ~~1,252,502~~ ~~and~~ ~~1,066,844~~ ~~stock options and~~ ~~17,500~~ ~~and~~ ~~zero~~ ~~restricted stock awards, respectively, were included in the calculation of Diluted EPS as such securities are dilutive. Inclusion of these securities resulted in~~ ~~548,004~~ ~~and~~ ~~323,217~~ ~~additional shares, respectively, in the calculation of fully diluted earnings per share.~~ residual value guarantees or material restrictive covenants.

~~There were 5~~~~02,250~~ ~~and~~ ~~569,000~~ ~~outstanding stock options~~The components of lease expense for the ~~three~~~~-month periods ended~~ ~~September 30, 2018~~ current and ~~October 1, 2017,~~ ~~respectively, which~~prior comparative period were ~~not~~ ~~included in EPS~~ as ~~the effect would be anti-dilutive. There were 5~~~~02,250~~ ~~and~~ ~~984,000~~ ~~outstanding stock options for the~~ ~~nine~~~~-month periods ended~~ ~~September 30, 2018~~ ~~and~~ ~~October 1, 2017,~~ ~~respectively, which were~~ ~~not~~ ~~included in EPS~~follows:

	Three Months Ended
	March 31,		April 1,
	2019		2018
Operating Lease Cost	$	145	$	151
Variable Lease Cost		21		18
Total Lease Cost	$	166	$	169

Supplemental cash flow information related to leases was as ~~the effect would be anti-dilutive.~~follows:

	Three Months Ended
	March 31,		April 1,
	2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	150	$	153
Right-of-use assets obtained in exchange for lease liabilities:	$	131	$	-

Supplemental balance sheet information related to leases was as follows:

	Balance Sheet Classification	March 31, 2019			December 31, 2018
Assets:
Operating lease right-of-use asset	Other noncurrent assets	$	844		$	805

Liabilities:
Current operating lease liability	Accrued expenses and other current liabilities	$	412		$	439
Operating lease liability, net of current portion	Other noncurrent liabilities		436			376
Total operating lease liability		$	848		$	815

Weighted-average remaining lease term (years)			2.3			2.1

Weighted-average discount rate			4.5	%		4.5	%

Future minimum lease payments as of March 31, 2019 are as follows:

Maturity of Operating Lease Liabilities
2019	$	307
2020		389
2021		160
2022		36
2023		-
Thereafter		-
Total lease payments		892
Less: Imputed interest		(44	)
Present value of remaining lease payments	$	848

~~12.~~

~~COMMITMENTS~~ ~~AND~~ ~~CONTINGENCIES~~

10. COMMITMENTS AND CONTINGENCIES

a. Purchase Commitments

As of ~~September 30, 2018,~~ March 31, 2019, we have made commitments to purchase approximately ~~$3,230~~$2,363 of production machinery and equipment.

b. Product Warranties

We estimate future warranty costs ~~associated with expected~~to be incurred for product failure rates, material usage and service costs in the development of our warranty obligations. ~~Warranty reserves~~Estimated future costs are based on ~~historical~~actual past experience ~~of warranty claims~~ and are generally ~~will be~~ estimated as a percentage of sales over the warranty period. ~~In the event the actual results of these items differ from the estimates, an adjustment to the warranty obligation would be recorded.~~ Changes in our product warranty liability during the first~~nine~~ three months of ~~2018~~2019 and ~~2017~~2018 were as follows:

	Nine-Month Periods Ended						Three-Month Periods Ended
	September 30, 2018			October 1, 2017			March 31, 2019			April 1, 2018
Accrued Warranty Obligations – Beginning	$	149		$	172		$	95		$	149
Accruals for Warranties Issued		(9	)		66			5			14
Settlements Made		(54	)		(58	)		(5	)		(6	)
Accrued Warranty Obligations – Ending	$	86		$	180		$	95		$	157

We are subject to legal proceedings and claims that arise from time to time in the normal course of business. We believe that the final disposition of any such matters will not have a material adverse effect on ~~our~~the Company’s financial position, results of operations or cash flows.

In ~~July 2013,~~ ~~an unoccupied Boeing~~ ~~787~~ ~~Dreamliner aircraft operated by Ethiopian Airlines was damaged by fire while parked at London Heathrow Airport. Following an investigation~~ However, recognizing that legal matters are subject to inherent uncertainties, and there exists the possibility that ultimate resolution of ~~this incident conducted by U.K.~~these matters could have a material adverse impact on the Company’s financial position and ~~U.S. regulatory authorities as well as by~~results of operations in the manufacturer of the aircraft, a final report was issued by the Air Accidents Investigative Branch – UK Civil Aviation regulatory authority, with findings indicating that the fire was primarily caused by circumstances related to the plane’s emergency locator transmitter (“ELT”) manufactured and installed by another company. A component of the ELT is a battery pack which incorporates Ultralife’s industry-standard lithium manganese dioxide non-rechargeable D-cell, which Ultralife has produced since ~~2001,~~ ~~with wide-use in global defense and commercial applications.~~

On ~~May 4, 2015,~~ ~~we were notified of a lawsuit~~period in which ~~we were named, along with other suppliers to the aircraft manufacturer, concerning that~~ ~~2013~~ ~~fire, which was filed by Ethiopian Airlines Enterprise in the Commercial Court, Queen’s Bench Division~~any such effects are recorded. We are not aware of ~~the High Court of Justice, London. We immediately referred~~any such situations at this ~~matter to our insurers.~~

~~This lawsuit has now been resolved (~~ ~~February 2018),~~ ~~the claimant has terminated the action against the Company, and the Court has acknowledged and consented to this termination. The matter was terminated without financial consequences to the Company.~~time.

11. BUSINESS SEGMENT INFORMATION

We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes: lithium 9~~-volt,~~9-volt, cylindrical and other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes: RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design. We believe that reporting performance at the gross profit level is the best indicator of segment performance. As such, we report segment performance at the gross profit level and operating expenses as corporate charges.

The components of segment performance were as follows:

Three-Month Period Ended ~~September 30~~, ~~2018~~March 31, 2019:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total			Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	17,289	$	3,041	$	-		$	20,330		$	15,998	$	2,884	$	-		$	18,882
Segment Contribution		4,702		1,339		(4,541	)		1,500			4,410		674		(4,536	)		548
Interest, Financing and Miscellaneous Income, Net						21			21
Other Expense																(58	)		(58	)
Tax Provision						(86	)		(86	)						(41	)		(41	)
Non-Controlling Interest						(27	)		(27	)						(24	)		(24	)
Net Income Attributable to Ultralife								$	1,408									$	425

The following tables disaggregate our business segment revenues by major source and geography.

¹Sales classified to U.S. include shipments to U.S.-based prime contractors which in some cases may serve non-U.S. projects

~~14.~~

~~RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS~~

In ~~May 2014,~~ ~~the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update~~ ~~2014~~-09 ~~(Topic~~ ~~606~~) “Revenue from Contracts with Customers” related to revenue from contracts with customers. Under this standard, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard will replace most existing revenue recognition guidance under GAAP and permits the use of either the retrospective or cumulative effect transition method. Topic ~~606~~ ~~is effective for annual reporting periods beginning after~~ ~~December 15, 2017,~~ ~~including interim periods within that reporting period. The Company has adopted Topic~~ ~~606~~ ~~effective~~ ~~January 1, 2018.~~ ~~See Note~~ 2 ~~for further discussion.~~

In ~~November 2016,~~ ~~the FASB issued Accounting Standards Update~~ ~~2016~~-~~18,~~ ~~“Statement of Cash Flows (Topic~~ ~~230~~~~): Restricted Cash”. The standard is effective for fiscal years beginning after~~ ~~December 31, 2017,~~ and interim periods within those fiscal years, and should be applied using a retrospective transition method for each period presented. The standard requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total cash amounts shown on the statements of cash flows. The Company has adopted this standard effective ~~January 1, 2018.~~ As a result, restricted cash has been included in the total cash amounts on the Company’s Consolidated Statement of Cash Flows for all periods presented and the required disclosures have been included in the Notes to Consolidated Financial Statements.

In ~~August 2016,~~ ~~the FASB issued Accounting Standards Update~~ ~~2016~~-~~15,~~ ~~“Statement of Cash Flows (Topic~~ ~~230~~~~), Classification of Certain Cash Receipts and Cash Payments”. The standard makes~~ ~~eight~~ ~~targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after~~ ~~December 15, 2017,~~ and interim periods within those fiscal years. The standard requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company has adopted this standard effective ~~January 1, 2018.~~ ~~Adoption of this standard did~~ ~~not~~ ~~impact our Consolidated Financial Statements for the current or prior periods presented.~~

In ~~May 2017,~~ ~~the FASB issued Accounting Standards Update~~ ~~2017~~-~~09,~~ ~~“Compensation – Stock Compensation (Topic~~ ~~718~~) – Scope of Modification Accounting”, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic ~~718.~~ ~~The standard is effective for fiscal years beginning after~~ ~~December 15, 2017~~ ~~and interim periods within those fiscal years. The standard is to be applied on a prospective basis to an award modified on or after the adoption date. The Company has adopted this standard effective~~ ~~January 1, 2018.~~ ~~Adoption of this standard did~~ ~~not~~ ~~impact our Consolidated Financial Statements.~~

~~There have been~~ no developments to recently issued accounting standards, including the expected dates of adoption and anticipated effects on the Company’s Consolidated Financial Statements, from those disclosed in the Company’s ~~2017~~ ~~Annual Report on Form~~ 10~~-K, except for the following:~~

In ~~March 2018,~~ ~~the FASB issued Accounting Standards Update~~ ~~2018~~-~~05,~~ ~~“Income Taxes (Topic~~ ~~740~~~~): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin~~ ~~No.~~~~118”.~~ ~~The standard adds various Securities and Exchange Commission (“SEC”) paragraphs pursuant to the issuance of the~~ ~~December 2017~~ ~~SEC Staff Accounting Bulletin~~ ~~No.~~~~118,~~ ~~“Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB~~ ~~118”~~~~), which was effective immediately. The SEC issued SAB~~ ~~118~~ ~~to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Tax Cuts and Jobs Act in the period of enactment. SAB~~ ~~118~~ allows disclosure that timely determination of some or all of the income tax effects from the Tax Cuts and Jobs Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. We have accounted for the tax effects of the Tax Cuts and Jobs Act under the guidance of SAB ~~118.~~ ~~We have determined reasonable estimates for those effects and have recorded provisional amounts in our Consolidated Financial Statements as of~~ ~~September 30, 2018~~ ~~and~~ ~~December 31, 2017.~~

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This report contains certain forward-looking statements and information that are based on the beliefs of management as well as assumptions made by and information currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, our reliance on certain key customers; ~~potential costs because of the warranties we supply with our products and services;~~ possible future declines in demand for the products that use our batteries or communications systems; the unique risks associated with our China operations; potential costs because of the warranties we supply with our products and services; potential disruptions in our supply of raw materials and components; our efforts to develop new commercial applications for our products; ~~possible breaches in security and other disruptions;~~ reduced U.S. and foreign military spending including the uncertainty associated with government budget approvals; ~~potential disruptions~~possible breaches in ~~our supply of raw materials~~security and ~~components;~~other disruptions; variability in our quarterly and annual results and the price of our common stock; safety risks, including the risk of fire; our inability to comply with changes to the regulations for the shipment of our products; ~~safety risks, including the risk of fire; possible impairments of our goodwill and other intangible assets; negative publicity of Lithium-ion batteries;~~ our resources being overwhelmed by our growth prospects; our ability to retain top management and key personnel; possible impairments of our ~~exposure to foreign currency fluctuations;~~goodwill and other intangible assets; our customers’ demand falling short of volume expectations in our supply agreements; negative publicity of Lithium-ion batteries; our exposure to foreign currency fluctuations; the risk that we are unable to protect our proprietary and intellectual property; rules and procedures regarding contracting with the U.S. and foreign governments; our ability to utilize our net operating loss carryforwards; exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; ~~our ability to utilize our net operating loss carryforwards;~~ our ability to comply with government regulations regarding the use of “conflict minerals”; possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; known and unknown environmental matters; technological innovations in the non-rechargeable and rechargeable battery industries; and other risks and uncertainties, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those forward-looking statements described herein. When used in this report, the words “anticipate”, “believe”, “estimate” or “expect” or words of similar import are intended to identify forward-looking statements. For further discussion of certain of the matters described above and other risks and uncertainties, see Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim any obligation to update any risk factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 to reflect new information or risks, future events or other developments.

The following discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q and the Risk Factors and our Consolidated Financial Statements and Notes thereto contained in our ~~Annual Report on~~ Form 10-K for the year ended December 31, ~~2017.~~2018.

The financial information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in thousands of dollars, except for share and per share amounts.

We offer products and services ranging from power solutions to communications and electronics systems to customers across the globe in the government, defense and commercial sectors. With an emphasis on strong engineering and a collaborative approach to problem solving, we design and manufacture power and communications systems including: rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems and accessories, and custom engineered systems. We continually ~~strive~~evaluate ways to ~~increase the size and profitability of our business through~~grow, including the design, development and sale of new products, expansion of our sales force to penetrate new markets and geographies, as well as seeking opportunities to expand through acquisitions.

We sell our products worldwide through a variety of trade channels, including original equipment manufacturers (“OEMs”), industrial and defense supply distributors, and directly to U.S. and international defense ~~departments and government agencies.~~departments. We enjoy strong name recognition in our markets under our Ultralife® Batteries, Lithium Power®, McDowell Research®, ~~AMTI™, ABLE™,~~AMTITM, ABLETM, ACCUTRONICS™, ACCUPRO™, and ENTELLION™ brands. We have sales, operations and product development facilities in North America, Europe and Asia.

We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes: Lithium 9-volt, cylindrical, thin cell and other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes: RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design. We believe that reporting performance at the gross profit level is the best indicator of segment performance. As such, we report segment performance at the gross profit level and operating expenses as Corporate charges. See Note 11 in the Notes to Consolidated Financial Statements.

Our website address is www.ultralifecorporation.com. We make available free of charge via a hyperlink on our website (see Investor Relations link on the website) our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports and statements as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). We will provide copies of these reports upon written request to the attention of Philip A. Fain, CFO, Treasurer and Secretary, Ultralife Corporation, 2000 Technology Parkway, Newark, New York, 14513. Our filings with the SEC are also available through the SEC website at www.sec.gov or at the SEC Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by calling 1-800-SEC-0330.

Consolidated revenues of ~~$20,330~~$18,882 for the three-month period ended ~~September 30, 2018,~~March 31, 2019, decreased by ~~$717~~$4,187 or ~~3.4%~~18.1%, from ~~$21,047~~$23,069 during the three-month period ended ~~October~~April 1, ~~2017,~~2018, due to ~~lower non-U.S.~~the timing differences in government/defense battery shipments and ~~9-Volt battery sales.~~the start-up of production and shipment of Communications Systems products to support the U.S. Army’s Network Modernization initiatives under the delivery orders announced in October 2018, which were less than Q1 2018 shipments of Vehicle Amplifier Adapters for the U.S. Army’s Special Force Assistance Brigades under a contract awarded in December 2017 and power supplies shipments to a large global defense prime contractor.

Gross profit for the three-month period ended ~~September 30, 2018~~March 31, 2019 was ~~$6,041~~$5,084 or ~~29.7%~~26.9% of revenues, compared to ~~$6,255~~$7,282 or ~~29.7%~~31.6% of revenues, for the same quarter a year ago. The ~~decline~~470 basis point decrease in gross ~~profit~~margin resulted from ~~lower sales.~~costs incurred to commence production of Communications Systems large program awards announced in October 2018 for shipment in 2019 and the product mix of our shipments.

Operating expenses decreased to ~~$4,541~~$4,536 during the three-month period ended ~~September 30, 2018,~~March 31, 2019, compared to ~~$4,992~~$4,926 during the three-month period ended ~~October~~April 1, ~~2017.~~2018. The ~~$451~~decrease of $390 or ~~9.0% decrease reflects~~7.9% was attributable to continued tight control over discretionary spending.

Operating income for the three-month period ended ~~September 30, 2018~~March 31, 2019 was ~~$1,500~~$548 or ~~7.4%~~2.9% of revenues, compared to ~~$1,263~~$2,356 or ~~6.0%~~10.2% for the year-earlier period. The ~~18.7% increase~~decrease in operating income primarily resulted from lower ~~operating expenses.~~sales in our Communications Systems business and the costs to transition to production to fulfill the large program awards announced in October 2018.

Net income attributable to Ultralife was ~~$1,408~~$425, or ~~$0.09~~$.03 per share – basic and diluted, for the three-month period ended ~~September 30, 2018,~~March 31, 2019 compared to ~~$1,098,~~$2,151, or ~~$0.07~~$0.14 per share – basic and $0.13 per share – diluted, for the three-month period ended ~~October~~April 1, ~~2017.~~

2018. Adjusted EBITDA, defined as net income (loss) attributable to Ultralife before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expenses/income that we do not consider reflective of our ongoing operations, amounted to ~~$2,472~~$1,204 or 6.4% of revenues in the ~~third~~first quarter of ~~2018~~2019 compared to ~~$1,985~~$2,973 or 12.9% of revenues for the ~~third~~first quarter of ~~2017.~~2018. See the section “Adjusted EBITDA” beginning on page 2521 for a reconciliation of Adjusted EBITDA to net income attributable to Ultralife.

~~We are delighted about the two recently announced Communications Systems delivery contracts totaling $19.2 million to supply~~With key amplifier product shipments now increasing and robust opportunities for growth from our ~~Vehicle Amplifier-Adaptors and Mounted Power Amplifiers for the U.S. Army, as well as the $9.5 million IDIQ contract to supply our communication kits for an undisclosed branch~~diversified set of ~~the U.S. Department of Defense.~~

~~We remain focused on our revenue diversification strategy, pursuing~~ commercial ~~opportunities~~ and government/defense ~~opportunities as U.S. spending continues to recover, and are~~customers ahead of us, we remain well positioned ~~to deliver~~for another year of profitable growth in ~~2018.~~2019.

~~Three-Month~~Three-Month Periods ~~Ended September 30, 2018~~Ended March 31, 2019 and ~~October~~ April1, ~~2017~~2018

Revenues. Consolidated revenues for the three-month period ended ~~September 30, 2018~~March 31, 2019 amounted to ~~$20,330,~~$18,882, a decrease of ~~$717,~~$4,187, or ~~3.4%~~18.1%, from the ~~$21,047~~$23,069 reported for the three-month period ended ~~October~~April 1, ~~2017.~~2018.

Battery & Energy Products revenues decreased ~~$1,327,~~$1,226, or 7.1%, to $15,998 from ~~$18,616~~$17,224 for the three-month period ended ~~October~~April 1, ~~2017~~2018. Commercial revenues for the first quarter of 2019 comprised 63% of total revenues for the segment and increased 4.0% over the prior year period. This increase primarily resulted from 10.4% revenue growth attributable to ~~$17,289~~our medical customers, partially offset by a reduction in the sales of our 9-Volt batteries. Government and defense sales decreased 21.2% primarily due to the lumpiness of orders from some of our U.S. and international defense customers.

Communications Systems revenues decreased $2,961, or 50.7%, to $2,884 from $5,845 for the three-month period ended ~~September 30,~~April 1, 2018. This decrease is primarily due to the initial start-up production and shipment of products to support the U.S. Army’s Network Modernization initiatives under the delivery orders announced in October 2018 ~~reflecting lower 9-Volt battery sales to our Europe-based customers, timing~~which were less than Q1 2018 shipments of ~~orders to non-U.S. government/defense customers~~Vehicle Amplifier Adapters for the U.S. Army’s Special Force Assistance Brigades under a contract awarded in December 2017 and ~~large~~power supplies shipments to ~~an industrial commercial customer in 2017 which did not re-occur in 2018. Our U.S. government/~~a large global defense ~~sales increased 9.6% for the quarter due primarily to higher sales of our primary 5390 batteries to the U.S. Department of Defense, consistent with the recovery in domestic defense spending.~~

Communications Systems revenues increased $610, or 25.1%, from $2,431 during the three-month period ended October 1, 2017 to $3,041 for the three-month period ended September 30, 2018. This increase is attributable to higher shipments of core products such as our 20-watt amplifiers, universal vehicle adaptors and other radio accessories.prime contractor.

Cost of Products ~~Sold~~ ~~/ Gross Profit~~.Sold. Cost of products sold totaled ~~$14,289~~$13,798 for the quarter ended ~~September 30, 2018,~~March 31, 2019, a decrease of ~~$503,~~$1,989, or ~~3.4%~~12.6%, from the ~~$14,792~~$15,787 reported for the same three-month period a year ago. ~~The decrease was primarily due to lower year-over-year sales of our Battery & Energy Products business.~~ Consolidated cost of products sold as a percentage of total revenue ~~remained constant at 70.3%~~increased to 73.1% for the ~~2018 and 2017~~ three-month ~~periods.~~period ended March 31, 2019 from 68.4% for the three-month period ended April 1, 2018. Correspondingly, consolidated gross margin was ~~29.7%~~26.9% for ~~both periods.~~the three-month period ended March 31, 2019, compared with 31.6% for the three-month period ended April 1, 2018, primarily reflecting sales mix and costs incurred to commence the initial production of Communications Systems products to begin shipments under large program awards announced in October 2018.

For our Battery & Energy Products segment, gross profit for the ~~third~~first quarter of ~~2018~~2019 was ~~$4,702~~$4,410 or ~~27.2%~~27.6% of revenues, a decrease of ~~$484~~$626 or ~~9.3%~~12.4% from gross profit of ~~$5,186,~~$5,036 or ~~27.9%~~29.2% of revenues, for the ~~third~~first quarter of ~~2017.~~2018. The decrease in Battery & Energy Products’ gross margin ~~decreased~~ for ~~the three-month period ended September 30, 2018 by 70 basis points, reflecting~~2019 was due to product mix.

For our Communications Systems segment, gross profit for the ~~third~~first quarter of ~~2018~~2019 was ~~$1,339~~$674 or ~~44.0%~~23.4% of revenues, ~~an increase~~a decrease of ~~$270~~$1,572 or ~~25.2%~~70.0%, from gross profit of ~~$1,069,~~$2,246, or ~~44.0%~~38.4% of revenues, for the ~~third~~first quarter of ~~2017. Both three-month periods reflect the product mix~~2018. The decrease in gross margin during 2019 was primarily due to costs incurred to commence production of ~~our high-value proposition core products such as our 20-watt amplifiers, universal vehicle adaptors and other radio accessories.~~large program awards announced in October 2018.

Operating Expenses. Total operating expenses for the three-month period ended ~~September 30, 2018~~March 31, 2019 totaled ~~$4,541,~~$4,536, a decrease of ~~$451~~$390 or ~~9.0%~~7.9% from the ~~$4,992~~$4,926 reported during the three-month period ended ~~October~~April 1, ~~2017.~~2018. The ~~reduction for the 2018 third quarter reflects the~~decrease resulted from continued tight control over discretionary ~~spending.~~spending in 2019.

Overall, operating expenses as a percentage of revenues were ~~22.3%~~24.0% for the quarter ended ~~September 30, 2018~~March 31, 2019 compared to ~~23.7%~~21.4% for the quarter ended ~~October~~April 1, ~~2017.~~2018. Amortization expense associated with intangible assets related to our acquisitions was ~~$97~~$92 for the ~~third~~first quarter of ~~2018~~2019 ($6159 in selling, general and administrative expenses and ~~$36~~$33 in research and development costs), compared with ~~$106~~$102 for the ~~third~~first quarter of ~~2017~~2018 ($64 in selling, general, and administrative expenses and ~~$42~~$38 in research and development costs). Research and development costs were ~~$1,099~~$1,036 for the three-month period ended ~~September 30, 2018,~~March 31, 2019, a decrease of ~~$256~~$65 or ~~18.9%~~5.9%, from ~~$1,355~~$1,101 for the three-months ended ~~October~~April 1, ~~2017.~~2018. The decrease primarily reflects the timing of development and testing costs associated with new products. Selling, general, and administrative expenses decreased ~~$195~~$325 or ~~5.4%~~8.5%, to ~~$3,442 for~~$3,500 during the ~~third~~first quarter of ~~2018~~2019 from ~~$3,637 for~~$3,825 during the ~~third~~first quarter of ~~2017.~~2018. The decrease is attributable to continued tight control over discretionary administrative ~~spending and lower sales commissions due to lower sales in the third quarter of 2018.~~spending.

Other ~~Expense~~ ~~(Income)~~.Expense. Other ~~income~~expense totaled ~~$21 for the three-month period ended September 30, 2018 compared to other expense of~~ $58 for the three-month period ended ~~October~~March 31, 2019 compared to $133 for the three-month period ended April 1, ~~2017.~~2018. Interest and financing expense ~~net of interest income,~~ decreased ~~$25~~$28, from ~~$38~~$33 for the ~~third~~first quarter of ~~2017~~2018 to ~~$13~~$5 for the comparable period in ~~2018.~~2019. The decrease is due to the offsetting interest earned on our higher ~~interest income resulting~~cash balances from ~~our increased cash balance in 2018 as compared to 2017.~~the year-earlier period. Miscellaneous ~~income~~expense amounted to ~~$34~~$53 for the ~~third~~first quarter of 2019 compared with $100 for the first quarter of 2018, ~~compared with miscellaneous expense of $20 for the third quarter of 2017,~~ primarily due to ~~transactions impacted by foreign currency fluctuations in~~the strengthening of the U.S. dollar relative to ~~the Pound~~Pounds Sterling and the ~~strengthening of the U.S dollar to the Pound Sterling from the end of the second quarter to the end of the third quarter in 2018.~~Euro.

Income Taxes. The tax provision for the ~~2018 third~~2019 first quarter was ~~$86~~$41 compared to ~~$104~~$55 for the ~~third~~first quarter of ~~2017.~~2018. See Note 98 in the Notes to Consolidated Financial Statements for additional information regarding our income taxes.

Net Income Attributable to Ultralife. Net income attributable to Ultralife was ~~$1,408,~~$425, or ~~$0.09~~$.03 per share – basic and diluted for the three-month period ended ~~September 30, 2018,~~March 31, 2019 compared to ~~$1,098,~~$2,151, or ~~$0.07~~$0.14 per share – basic and $0.13 per share – diluted, for the three-month period ended ~~October~~April 1, ~~2017.~~2018. Average weighted common shares outstanding used to compute diluted earnings per share increased from ~~15,971,243~~16,202,314 in the ~~third~~first quarter of ~~2017~~2018 to ~~16,523,433~~16,224,790 in the ~~third~~first quarter of ~~2018.~~2019. The increase in ~~2018~~2019 is attributable to stock option exercises since the ~~third~~first quarter of ~~2017~~2018 and an increase in the weighted average stock price to compute diluted shares from ~~$6.86 for the third quarter of 2017 to $9.29 for the third quarter of 2018.~~

~~Revenues.~~ ~~Consolidated revenues for the nine-month period ended September 30, 2018 amounted to $66,263, an increase of $3,241 or 5.1%, from the $63,022 reported for the nine-month period ended October 1, 2017.~~

Battery & Energy Products revenues decreased $633, or 1.2%, from $52,977 for the nine-month period ended October 1, 2017 to $52,344 for the nine-month period ended September 30, 2018. Government and defense sales of this segment increased 1.6% from the 2017 nine-month period, reflecting a 21.5% increase in U.S. government and defense sales, and now comprise 42.7% of total segment sales versus 41.5% last year. The increase primarily reflects sales of our primary 5390 batteries to the U.S. Department of Defense. While shipments of batteries and chargers for medical applications increased 6.9%, overall commercial revenues of this segment decreased 3.2% from the 2017 nine-month period and now comprise 57.3% of total segment sales versus 58.5% last year. The year-over-year decrease resulted from lower shipments of 9-Volt batteries and non-recurring industrial commercial product sales in 2017.

Communications Systems revenues increased $3,874, or 38.6%, from $10,045 during the nine-month period ended October 1, 2017 to $13,919 for the nine-month period ended September 30, 2018. This increase is primarily attributable to the fulfillment of a Vehicle Amplifier Adaptors award received in December 2017 from a large global defense prime contractor for the U.S. Army’s Security Force Assistance Brigades and shipments of our Vehicle Installed Power Enhanced Riflemen Appliqué (“VIPER”).

~~Cost of Products Sold~~ ~~/ Gross Profit~~. Cost of products sold totaled $46,390 for the nine-month period ended September 30, 2018, an increase of $2,734 or 6.3%, from the $43,656 reported for the same nine-month period a year ago. Consolidated cost of products sold as a percentage of total revenue increased from 69.3% for the nine-month period ended October 1, 2017 to 70.0% for the nine-month period ended September 30, 2018. Correspondingly, consolidated gross margin was 30.0% for the nine-month period ended September 30, 2018, compared with 30.7% for the nine-month period ended October 1, 2017, due to product mix.

For our Battery & Energy Products segment, the cost of products sold decreased $439 or 1.2%, from $38,119 during the nine-month period ended October 1, 2017 to $37,680 during the nine-month period ended September 30, 2018 due to lower sales in the 2018 period. Battery & Energy Products’ gross profit for the 2018 nine-month period was $14,664 or 28.0% of revenues, a decrease of $194 or 1.3% from gross profit of $14,858, or 28.0% of revenues, for the 2017 nine-month period.

For our Communications Systems segment, the cost of products sold increased by $3,173 or 57.3% from $5,537 during the nine-month period ended October 1, 2017 to $8,710 during the nine-month period ended September 30, 2018. Communications Systems’ gross profit$8.17 for the first ~~nine months~~quarter of 2018 ~~was $5,209 or 37.4% of revenues, an increase of $701 or 15.6% from gross profit of $4,508 or 44.9% of revenues, for the third quarter of 2017. The decrease in gross margin during 2018 is due~~ to ~~product mix reflecting the higher sales for competitively bid U.S. Department of Defense contracts in the current nine-month period.~~

~~Operating Expenses.~~ Total operating expenses for the nine-month period ended September 30, 2018 totaled $14,385, a decrease of $555 or 3.7% from the $14,940 recorded during the nine-month period ended October 1, 2017. Both periods reflected continued tight control over discretionary spending.

Overall, operating expenses as a percentage of revenues were 21.7% for the nine-month period ended September 30, 2018 compared to 23.7% for the comparable 2017 period. Amortization expense associated with intangible assets related to our acquisitions was $300$9.40 for the first ~~nine months~~quarter of ~~2018 ($189~~2019, partially offset by the repurchase of shares in ~~selling, general and administrative expenses and $111 in research and development costs), compared with $315 for~~ the first nine months of 2017 ($192 in selling, general, and administrative expenses and $123 in research and development costs). Research and development costs were $3,417 for the nine-month period ended September 30, 2018, a decrease of $261 or 7.1% from the $3,678 for the nine-months ended October 1, 2017. The decrease primarily reflects the timing of development and testing costs associated with new products. Selling, general, and administrative expenses decreased $294 or 2.6%, from $11,262 during the first nine months of 2017 to $10,968 during the first nine months of 2018 in line with our tight control over discretionary spending.2019 period.

~~Other Expense.~~ Other expense totaled $27 for the nine-month period ended September 30, 2018 compared to $200 for the nine-month period ended October 1, 2017. Interest and financing expense, net of interest income, decreased $80 to $67 for the 2018 period from $147 for the comparable period in 2017, as a result of the more favorable terms of our Revolving Credit Agreement which was executed on May 31, 2017, as well as higher interest income due to our increased cash balance. Miscellaneous income amounted to $40 for the first nine months of 2018 compared with expense of $53 for the first nine months of 2017, primarily due to fluctuations in the U.S. dollar relative to the Pound Sterling.

~~Income Taxes.~~ We recognized a tax provision of $219 for the first three quarters of 2018 compared with a tax provision of $370 for the first three quarters of 2017. The decrease of $151 or 40.8% was due to the geographic mix of earnings for the periods and the favorable impact resulting from the lower U.S. Federal tax rates and elimination of the alternative minimum taxes in conjunction with the Tax Cuts & Jobs Act. The effective consolidated tax rates for the nine-month periods ended September 30, 2018 and October 1, 2017 were 4.0% and 8.8%, respectively. See Note 9 in the Notes to Consolidated Financial Statements for additional information regarding our income taxes.

~~Net Income Attributable to Ultralife.~~ Net income attributable to Ultralife and Net income attributable to Ultralife common shareholders per diluted share was $5,185 and $0.32, respectively, for the nine months ended September 30, 2018, compared to $3,848 and $0.24, respectively, for the nine months ended October 1, 2017. Average common shares outstanding used to compute diluted earnings per share increased from 15,817,961 in the 2017 period to 16,407,121 in the 2018 period, mainly due to the exercise of stock options under our Long-Term Incentive Plans and the increased stock price.

In evaluating our business, we consider and use Adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure of our operating performance. We define Adjusted EBITDA as net income attributable to Ultralife before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense. We also use Adjusted EBITDA as a supplemental measure to review and assess our operating performance and to enhance comparability between periods. We also believe the use of Adjusted EBITDA facilitates investors’ understanding of operating performance from period to period by backing out potential differences caused by variations in such items as capital structures (affecting relative interest expense and stock-based compensation expense), the amortization of intangible assets acquired through our business acquisitions (affecting relative amortization expense and provision (benefit) for income taxes), the age and book value of facilities and equipment (affecting relative depreciation expense) and one-time charges/benefits relating to income taxes. We also present Adjusted EBITDA from operations because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. We reconcile Adjusted EBITDA to Net income ~~(loss)~~ attributable to Ultralife, the most comparable financial measure under U.S. generally accepted accounting principles (“U.S. GAAP”).

We use Adjusted EBITDA in our decision-making processes relating to the operation of our business together with U.S. GAAP financial measures such as operating income. We believe that Adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our U.S. GAAP results, while isolating the effects of depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance, and of stock-based compensation, which is a non-cash expense that varies widely among companies. We believe that by presenting Adjusted EBITDA, we assist investors in gaining a better understanding of our business on a going forward basis. We provide information relating to our Adjusted EBITDA so that securities analysts, investors and other interested parties have the same data that we employ in assessing our overall operations. We believe that trends in our Adjusted EBITDA are a valuable indicator of our operating performance on a consolidated basis and of our ability to produce operating cash flows to fund working capital needs, to service debt obligations and to fund capital expenditures.

The term Adjusted EBITDA is not defined under U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Our Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, Adjusted EBITDA should not be considered in isolation or as a substitute for net income ~~(loss)~~ attributable to Ultralife or other consolidated statement of operations data prepared in accordance with U.S. GAAP. Some of these limitations include, but are not limited to, the following:

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only ~~supplementally.~~on a supplemental basis. Neither current nor potential investors in our securities should rely on Adjusted EBITDA as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of Adjusted EBITDA to Net income attributable to Ultralife.

As of ~~September 30, 2018,~~March 31, 2019, cash totaled ~~$25,454, an increase~~$21,240, a decrease of ~~$7,124 from~~$4,694 as compared to $25,934 of cash held at December 31, 2018, primarily driven by the ~~beginning~~procurement of ~~the year.~~ inventory for large program awards for our Communications Systems business, strategic capital investment for our Battery & Energy Products business, and repurchases of our common stock under our Share Repurchase Program.

During the ~~nine-month~~three-month period ended ~~September 30,~~March 31, 2019, net cash of $545 was used in operations, driven by a $4,963 increase in inventory primarily relating to large program awards announced in October 2018 ~~we generated $7,531 of cash from~~for our ~~operating activities.~~Communications Systems business. Cash ~~generated from~~used in operations ~~in 2018 consisted of~~was largely offset by net income of ~~$5,242,~~$449 plus non-cash expenses (depreciation, amortization, stock-based compensation and ~~stock-based compensation)~~deferred taxes) totaling ~~$2,510, a decrease of $2,947 in inventory primarily due to the fulfillment of orders, partially offset by~~$728 and a net decrease ~~in working capital~~ of ~~$3,168 primarily due to the timing of inventory procurements and compensation and benefit-related expenditures.~~

During the nine-month period ended October 1, 2017, cash increased by $3,978. Cash of $3,657 generated from operations for the nine-month period ended October 1, 2017 consisted of net income of $3,856, non-cash expenses (depreciation, amortization and stock-based compensation) totaling $2,393, and a net increase$3,241 in ~~accounts payable and~~ other working capital items ~~of $1,041 largely~~primarily attributable to the timing of ~~payroll. This was partially offset by an increase in accounts receivable of $2,412 primarily due to the timing of shipments~~customer collections and ~~an increase in inventory of $1,221 largely due to service 2017 backlog.~~supplier payments.

Cash used in investing activities for the ~~nine-month periods~~three-month period ended ~~September 30, 2018 and October 1, 2017 amounted to $1,994 and $971, respectively, representing~~March 31, 2019 consisted of capital expenditures of $2,581 primarily due to investment in automation equipment pertaining to our Battery & Energy Products business, including 3-Volt cell production.

Net cash used in financing activities for the three months ended March 31, 2019 was attributable to share repurchases under our Share Repurchase Program totaling $1,957, partially offset by stock option exercise proceeds of $356.

As of March 31, 2019, the Company has significant U.S. net operating loss carryforwards available to utilize as an offset to future taxable income. See Note 8 in the ~~respective periods.~~notes to consolidated financial statements for additional information.

As of March 31, 2019, we had made commitments to purchase approximately $2,363 of production machinery and equipment, which we expect to fund through operating cash flows or debt borrowings.

Cash provided by financing activities for the nine-month periods ended September 30, 2018 totaled $1,754, consisting of cash proceeds of $1,357 from stock option exercises and $397 for a government grant awarded in the People’s Republic of China to fund specified future technological research and development expenditures. Cash provided by financing activities for the nine-month period ended October 1, 2017 consisted of $1,120 in stock option exercise proceeds.

In July 2017, the Company made a strategic decision to invest up to $4,300 in our Newark, New York facility to modernize our manufacturing capability for production of premium 3-volt primary batteries for various applications in the rapidly growing, wireless Internet of Things (“IoT”) market. This investment, in line with our strategy to diversify revenues outside of the core U.S. government/defense markets and focus on transformational commercial opportunities, will enable us to produce a premium product with performance differentiation and incorporate the manufacturing technology expertise required to deliver a clear competitive advantage in terms of product performance, volume, safety, value proposition and strategic supply chain access to the end market and OEM’s. In addition to the IoT market, the product will also expand customer options in the legacy smoke detector market by providing our customers the choice between our industry leading next generation 9-volt battery, or a new premium 3-volt product. Low volume equipment production to support product qualification builds in partnership with customers is expected to start in late 2018 and continue into 2019, with customer-driven, higher volume US production expected to ramp up over the course of 2019.

On October 31, 2018, the Company’s Board of Directors approved a share repurchase program (the “Share Repurchase Program”) which became effective on November 1, 2018, under which the Company is authorized to purchase up to 2.5 million shares of its outstanding common stock over a period not to exceed twelve months.

Under the Share Repurchase Program, shares may be purchased in open market transactions, including through block purchases, through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. The timing, manner, price and amount of any repurchase will be determined at the Company’s discretion and the Share Repurchase Program may be suspended, terminated or modified by the Company’s Board of Directors at any time for any reason and does not obligate the Company to purchase any specific number of shares. Under the Program, all purchases will be made in accordance with Securities Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of open market stock repurchases.

~~We have~~On May 1, 2019, in connection with financing ~~through our Credit~~the SWE acquisition (see Note 2 to the notes to consolidated financial statements), the Company drew down $8.0 million on its Term Loan Facility ~~with KeyBank, which provides a $30,000 secured, cash flow-based, revolving credit facility that includes a $1,500 letter of credit subfacility. There have been no borrowings~~and $6.8 million under ~~the~~its Revolving Credit Facility. ~~See Note 7 in the Notes to the Consolidated Financial Statements for additional information regarding our Credit Facility.~~

The Company ~~currently~~ believes that the cash flow generated from future operations and ~~when necessary, available borrowing from~~availability under our Revolving Credit Facility will be sufficient to meet ~~its current and long-term~~our general funding requirements for the foreseeable future.

See Note 3 to the notes to consolidated financial statements for further information regarding our credit facilities.

Management exercises judgment in making important decisions pertaining to choosing and applying accounting policies and methodologies in many areas. Not only are these decisions necessary to comply with U.S. GAAP, but they also reflect management’s view of the most appropriate manner in which to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 (“Summary of Operations and Significant Accounting Policies”) to our Consolidated Financial Statements in our 2018 Annual Report on Form 10-K ~~for the year ended December 31, 2017~~ should be reviewed for a greater understanding of how our financial performance is recorded and reported.

During the ~~nine~~first three months of ~~2018,~~2019, there were no significant changes in the manner in which our significant accounting policies were applied or in which related assumptions and estimates were developed. Refer to Note 21 in the notes to consolidated financial statements for updated accounting policies to reflect the Company’s adoption of Topic ~~606 “Revenue from Contracts with Customers”~~842 - Leases as of January 1, ~~2018.~~2019.

Our President and Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer and Treasurer (Principal Financial Officer) have evaluated our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e)) as of the end of the period covered by this quarterly report. Based on this evaluation, our President and Chief Executive Officer and Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures were effective as of such date.

There has been no change in our internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)) that occurred during the fiscal quarter covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~Dreamliner Litigation~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~In July 2013, an unoccupied Boeing 787 Dreamliner aircraft operated~~Purchases of Equity Securities by ~~Ethiopian Airlines was damaged by fire while parked at London Heathrow Airport. Following an investigation~~the Issuer

Refer to Note 4 of the Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~incident conducted by U.K.~~Form 10-Q) for further discussion regarding share repurchases.

On October 31, 2018, the Company’s Board of Directors approved a share repurchase program (the “Share Repurchase Program”) which became effective on November 1, 2018 and ~~U.S. regulatory authorities as well as by~~under which the ~~manufacturer~~Company was authorized to repurchase up to 2.5 million shares of its outstanding common stock over a period not to exceed twelve months.

Share repurchases under this program were made in accordance with SEC Rule 10b-18 using a variety of methods, which included open market purchases and block trades in compliance with applicable insider trading and other securities laws and regulations. With the ~~aircraft, a final report was issued by~~exception of repurchases made during stock trading black-out periods under 10b5-1 Plans, the ~~Air Accidents Investigative Branch – UK Civil Aviation regulatory authority, with findings indicating that~~timing, manner, price and amount of any repurchases were determined at the ~~fire was primarily caused by circumstances~~Company’s discretion.

The following table sets forth information regarding our repurchases of common stock for the first quarter of 2019 under this program:

All repurchases were made using cash resources. The above table excludes shares repurchased to settle employee tax withholding related to the ~~plane’s emergency locator transmitter (“ELT”) manufactured and installed by another company. A component~~vesting of the ELT is a battery pack which incorporates Ultralife’s industry-standard lithium manganese dioxide non-rechargeable D-cell, which Ultralife has produced since 2001, with wide-use in global defense and commercial applications.

On May 4, 2015, we were notified of a lawsuit in which we were named, along with other suppliers to the aircraft manufacturer, concerning that 2013 fire, which was filed by Ethiopian Airlines Enterprise in the Commercial Court, Queen’s Bench Division of the High Court of Justice, London. We immediately referred this matter to our insurers.

This lawsuit has now been resolved (February 2018), the claimant has terminated the action against the Company, and the Court has acknowledged and consented to this termination. The matter was terminated without financial consequences to the Company.

There have been no material changes to the Company’s risk factors from those included in our Annual Report on Form 10-K for the year ended December 31, 2017. We encourage current and potential investors of our securities to review the risk factors as set forth therein.stock awards.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Common Stock, $0.10 par value per share	ULBI	NASDAQ
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

Large accelerated filer		~~[ ]~~ ☐	Accelerated filer☒	~~[ ]~~
Non-accelerated filer		~~[ ] (Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	~~[ X ]~~☒

	Emerging ~~growth company~~		~~[ ]~~Growth Company ☐

		Page
PART I.	FINANCIAL INFORMATION

~~ITEM~~Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets as of ~~September 30, 2018 (Unaudited)~~March 31, 2019 and December 31, ~~2017~~2018	3

	Consolidated Statements of Income and Comprehensive Income ~~(Unaudited)~~ for the Three ~~and Nine~~ Month Periods Ended ~~September 30,~~March 31, 2019 and April 1, 2018 ~~and October 1, 2017~~	4

	Consolidated Statements of Cash Flows ~~(Unaudited)~~ for the ~~Nine~~Three Month Periods Ended ~~September 30,~~March 31, 2019 and April 1, 2018 ~~and October 1, 2017~~	5

	Consolidated Statements of Changes in Shareholders’ Equity for the Three Month Periods Ended March 31, 2019 and April 1, 2018	6

	Notes to Consolidated Financial Statements	67

~~ITEM~~Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	2018

~~ITEM~~Item 4.	Controls and Procedures	2824

PART II.	OTHER INFORMATION

~~ITEM 1.~~Item 2.	~~Legal Proceedings~~Unregistered Sales of Equity Securities and Use of Proceeds	2825

~~ITEM 1A.~~	~~Risk Factors~~	28

~~ITEM~~Item 6.	Exhibits	2926

	Signatures	30

	~~Index to Exhibits~~	3127

ULTRALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ~~INCOME AND~~ ~~COMPREHENSIVE INCOME~~CASH FLOWS
(In ~~Thousands except per share amounts)~~Thousands)

(Unaudited)

	September 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
Raw Materials	$	13,448	$	14,606	$	17,201	$	13,274
Work In Process		1,857		2,013		2,067		2,016
Finished Goods		7,813		9,707		8,638		7,553
Total	$	23,118	$	26,326	$	27,906	$	22,843

ULTRALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN SHAREHOLDERS’ EQUITY ~~(In Thousands)~~

(U(Dollars in ~~naudited)~~Thousands) (Unaudited)

	Nine Month Periods Ended
	September 30,			October 1,
	2018			2017
OPERATING ACTIVITIES:
Net Income	$	5,242		$	3,856
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Depreciation		1,476			1,507
Amortization of Intangible Assets		300			315
Amortization of Financing Fees		27			42
Stock-Based Compensation		707			529
Deferred Income Taxes		54			117
Changes in Operating Assets and Liabilities:
Accounts Receivable		(8	)		(2,412	)
Inventories		2,947			(1,221	)
Prepaid Expenses and Other Assets		(338	)		(582	)
Accounts Payable and Other Liabilities		(2,876	)		1,506
Net Cash Provided By Operating Activities		7,531			3,657

INVESTING ACTIVITIES:
Purchases of Property, Equipment and Improvements		(1,994	)		(971	)
Net Cash Used In Investing Activities		(1,994	)		(971	)

FINANCING ACTIVITIES:
Proceeds from Stock Option Exercises		1,357			1,120
Proceeds from Government Grant		397			-
Net Cash Provided By Financing Activities		1,754			1,120

Effect of Exchange Rate Changes on Cash		(167	)		172

INCREASE IN CASH		7,124			3,978

Cash, Beginning of Period		18,330			10,629
Cash, End of Period	$	25,454		$	14,607

	September 30,			December 31,			March 31,			December 31,
	2018			2017			2019			2018
Land	$	123		$	123		$	123		$	123
Buildings and Leasehold Improvements		7,924			7,858			8,284			8,267
Machinery and Equipment		51,054			50,852			51,772			51,261
Furniture and Fixtures		1,983			2,005			2,073			2,058
Computer Hardware and Software		5,549			5,338			5,889			5,590
Construction In Process		2,601			535			5,478			4,302
		69,234			66,711			73,619			71,601
Less: Accumulated Depreciation		(60,442	)		(59,141	)		(61,221	)		(60,857	)
Property, Equipment and Improvements, Net	$	8,792		$	7,570		$	12,398		$	10,744

	at December 31, 2018
			Accumulated
	Cost		Amortization		Net
Trademarks	$	3,405	$	-	$	3,405
Customer Relationships		6,471		4,392		2,079
Patents and Technology		5,486		4,725		761
Distributor Relationships		377		377		-
Trade Name		370		111		259
Total Other Intangible Assets	$	16,109	$	9,605	$	6,504

~~Consolidated Senior Leverage Ratio~~	~~Applicable Basis~~ ~~Points for Overnight~~ ~~LIBOR Loans~~	~~Applicable Basis~~ ~~Points for~~ ~~Base Rate Loans~~	~~Applicable Basis~~ ~~Points for Unused~~ ~~Fee~~
~~Less than 1.50 to 1.00~~	~~185~~	~~(50)~~	20
~~Greater than or equal to 1.50 to 1.00 but less than 2.50 to 1.00~~	~~200~~	~~(25)~~	15
~~Greater than or equal to 2.50 to 1.00~~	~~215~~	0	10

	Three-month periods ended				Nine-month periods ended				Three-Month Periods Ended
	September 30,		October 1,		September 30,		October 1,		March 31,		April 1,
	2018		2017		2018		2017		2019		2018
Stock Options	$	344	$	130	$	653	$	518	$	174	$	123
Restricted Stock Grants		19		3		54		11		11		16
Total	$	363	$	133	$	707	$	529	$	185	$	139

~~Risk-Free Interest Rate~~	~~2.6~~	%
~~Volatility Factor~~	47	%
~~Weighted Average Expected Life (Years)~~	5
~~Dividends~~	~~0.0~~	%

Three-Month Period Ended September 30, 2018:	Total Revenue		Commercial			Government/ Defense
Three-Month Period Ended March 31, 2019:									Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	17,289	$	10,127		$	7,162		$	15,998	$	10,010		$	5,988
Communications Systems		3,041		-			3,041			2,884		-			2,884
Total	$	20,330	$	10,127		$	10,203		$	18,882	$	10,010		$	8,872
				50	%		50	%				53	%		47	%

Three-Month Period Ended October 1, 2017:	Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	18,616	$	10,817		$	7,799
Communications Systems		2,431		-			2,431
Total	$	21,047	$	10,817		$	10,230
				51	%		49	%

Nine-Month Period Ended September 30, 2018:	Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	52,344	$	30,007		$	22,337
Communications Systems		13,919		-			13,919
Total	$	66,263	$	30,007		$	36,256
				45	%		55	%

Nine-Month Period Ended October 1, 2017:	Total Revenue		Commercial			Government/ Defense
Three-Month Period Ended April 1, 2018:									Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	52,977	$	30,988		$	21,989		$	17,224	$	9,626		$	7,598
Communications Systems		10,045		-			10,045			5,845		-			5,845
Total	$	63,022	$	30,988		$	32,034		$	23,069	$	9,626		$	13,443
				49	%		51	%				42	%		58	%

Three-Month Period Ended March 31, 2019:	Total Revenue		United States			Non-United States
Battery & Energy Products	$	15,998	$	7,567		$	8,431
Communications Systems		2,884		2,454			430
Total	$	18,882	$	10,021		$	8,861
				53	%		47	%

Three-Month Period Ended September 30, 2018:	Total Revenue		United States			Non-United States
Three-Month Period Ended April 1, 2018:									Total Revenue		United States			Non-United States
Battery & Energy Products	$	17,289	$	9,389		$	7,900		$	17,224	$	9,415		$	7,809
Communications Systems		3,041		2,140			901			5,845		5,573			272
Total	$	20,330	$	11,529		$	8,801		$	23,069	$	14,988		$	8,081
				57	%		43	%				65	%		35	%

	Three-Month Periods Ended
	March 31,		April 1,
	2019		2018

Net Income Attributable to Ultralife	$	425	$	2,151
Add:
Interest and Financing Expense, Net		5		33
Income Tax Provision		41		55
Depreciation Expense		447		484
Amortization of Intangible Assets and Financing Fees		101		111
Stock-Based Compensation Expense		185		139
Adjusted EBITDA	$	1,204	$	2,973

	Total Number of Shares Purchased		Weighted Average Price Paid Per Share		Total Number of Shares Purchased As Part of Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program
January 2019		267,100		$7.29		372,774		2,127,226
February 2019		200		7.49		372,974		2,127,026
March 2019		-		-		372,974		2,127,026
Total		267,300				372,974

Exhibit Index	Exhibit Description ~~of Document~~	Incorporated By Reference ~~from:~~from

31.1	Rule 13a-14(a) / 15d-14(a) CEO Certifications	Filed herewith
31.2	Rule 13a-14(a) / 15d-14(a) CFO Certifications	Filed herewith
32	Section 1350 Certifications	Filed herewith
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.LAB	XBRL Taxonomy Label Linkbase Document
101.PRE	XBRL Taxonomy Presentation Linkbase Document
101.DEF	XBRL Taxonomy Definition Document

		ULTRALIFE CORPORATION
		(Registrant)

	Date: ~~November 1~~May , ~~2018~~2, 2019	By: /s/ Michael D. Popielec
		Michael D. Popielec
		President and Chief Executive Officer
		(Principal Executive Officer)


	Date: ~~November 1~~, ~~2018~~May 2, 2019	By: /s/ Philip A. Fain
		Philip A. Fain
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and
		Principal Accounting Officer)