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

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

~~Registrant's~~Registrant’s telephone number, including area code: (315) 332-7100

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, smaller reporting company, or an emerging growth company. See 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 [ ] No [ X ]

The number of shares outstanding of the registrant’s common stock was ~~15,627,513,~~15,956,677, net of 4,019,711 treasury shares, as of October 31, ~~2017.~~2018.

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

	September 30,			December 31,
	2018			2017
ASSETS

Current assets:
Cash	$	25,013		$	18,241
Restricted Cash		441			89
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $277 and $292, Respectively		14,533			14,657
Inventories, Net		23,118			26,326
Prepaid Expenses and Other Current Assets		2,900			2,603
Total Current Assets		66,005			61,916
Property, Equipment and Improvements, Net		8,792			7,570
Goodwill		20,201			20,458
Other Intangible Assets, Net		6,670			7,085
Deferred Income Taxes		32			32
Other Non-Current Assets		96			125
Total Assets	$	101,796		$	97,186

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	7,260		$	8,787
Accrued Compensation and Related Benefits		1,641			2,413
Accrued Expenses and Other Current Liabilities		3,342			2,871
Income Taxes Payable		121			168
Total Current Liabilities		12,364			14,239
Deferred Income Taxes		3,904			3,867
Other Non-Current Liabilities		32			31
Total Liabilities		16,300			18,137

Commitments and Contingencies (Note 11)

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
Capital in Excess of Par Value		182,246			180,211
Accumulated Deficit		(77,709	)		(82,894	)
Accumulated Other Comprehensive Loss		(2,473	)		(1,611	)
Treasury Stock - At Cost; 4,019,711 Shares		(18,469	)		(18,469	)
Total Ultralife Corporation Equity		85,593			79,203
Non-Controlling Interest		(97	)		(154	)
Total Shareholders’ Equity		85,496			79,049

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

~~CONSO~~~~LIDATED STATEMENTS OF INCOME~~ ~~AND~~ ~~COMPREHENSIVE INCOME~~

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

2.	*~~ACQUISITION~~SUBSEQUENT EVENTS*

On ~~January 13, 2016, Ultralife UK Limited (the “Merger Subsidiary”), a U.K. corporation and a wholly-owned subsidiary of Ultralife Corporation (the “Company”), completed~~October 31, 2018, the acquisition of all of the outstanding ordinary shares of Accutronics Limited (“Accutronics”), a U.K. corporation based in Newcastle-under-Lyme, U.K., from Intrinsic Equity Limited, Catapult Growth Fund Limited Partnership, MJF Pension Trustees Limited, Robert Andrew Phillips and Michael Allen (collectively, the “Sellers”). There are no material relationships between the Company or Merger Subsidiary and any of the Sellers, other than pertaining to this acquisition. Accutronics is a leading independent designer and manufacturer of smart batteries and charger systems for high-performance, feature-laden portable and handheld electronic devices and is classified in the Battery & Energy Products segment. The acquisition of Accutronics advances our strategy of commercial revenue diversification and expands our geographic reach within European OEM’s. With industry experts predicting mid-to-high single digit growth through 2020 in the global medical batteries market, this strategic investment positions Ultralife well for further penetration of and growing revenue streams from an attractive commercial market.

The acquisition was completed pursuant to the terms of the Share Purchase Agreement dated January 13, 2016 by and among the Merger Subsidiary and the Sellers. The Merger Subsidiary paid at the time of closing an aggregate purchase price of £7,575 ($10,976) in cash, and in exchange the Merger Subsidiary received all of the outstanding shares of Accutronics ordinary stock. Monies to fund the purchase price were advanced to the Merger Subsidiary from the Company~~’s general corporate funds.~~

The purchase price was subject to adjustment based on the difference between actual and estimated amounts of working capital of Accutronics as well as the amount of net cash of Accutronics. The adjustment resulted in a final payment to the Sellers in the amount of £133 on February 24, 2016, bringing the total aggregate purchase price to £7,708 ($11,161).

The purchase price allocation was determined in accordance with the accounting treatment of a business combination in Financial Accounting Standards Board (“FASB”) ASC Topic 805, Business Combinations. Under the guidance, the fair value of the consideration was determined and the assets acquired and liabilities assumed have been recorded at their fair values at the date of the acquisition. The excess of the consideration paid over the estimated fair values has been recorded as goodwill.

The final allocation of purchase price to the assets acquired and liabilities assumed is presented in the table below. Management is responsible for determining the fair value of the tangible and intangible assets acquired and liabilities assumed as of the date of acquisition. Management considered a number of factors, including reference to an analysis performed under FASB ASC Topic 805 solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The Company’s estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain. These valuations require the use of management’s assumptions, which would not reflect unanticipated events and circumstances that may occur.

Cash
$ 1,304
Accounts Receivable
1,344
Inventory
2,167
Prepaids and Other Current Assets
584
Property, Plant & Equipment
269
Identifiable Intangible Assets
4,374
Goodwill
4,487
Accounts Payable
(1,009 )
Accrued Expenses
(1,136 )
Income Taxes Payable
(111 )
Non-Current Liabilities
(209 )
Deferred Income Taxes
(74 )
Deferred Income Taxes on Intangible Assets
(829 )

Total Consideration
$ 11,161

~~The goodwill included in the Company~~’s purchase price allocation presented above represents the value of Accutronics assembled and trained workforce, the incremental value that Accutronics engineering and technology will bring to the Company and the revenue growth expected to occur over time attributable to increased market penetration from future new products and customers. The goodwill acquired in connection with the acquisition is not deductible for income tax purposes.

~~The identifiable intangible assets included in the Company~~’s purchase price allocation represent customer contracts and relationships of $2,821, intellectual property of $1,132 and trade name of $421 that are amortized straight-line over a period ranging from 10 to 15 years.

~~During the nine-month period ended September 25, 2016, direct acquisition costs of $251 and increased cost of sales related to purchase accounting adjustments of $96 for inventory acquired were recorded in the~~ Company’s Consolidated Statement of Income and Comprehensive Income. Accutronics contributed revenue of $7,551 and an operating loss of $61 during the nine-month period ended September 25, 2016 reflecting the purchase accounting adjustments and non-recurring costs directly related to the acquisition.

~~Set forth below are the unaudited pro forma results of the Company for the~~ nine-month period ended September 25, 2016, as if the acquisition occurred as of January 1, 2015. The unaudited pro forma results for the nine months ended September 25, 2016 exclude direct acquisition costs of $251 and cost of sales of $96 related to the purchase accounting adjustments for inventory acquired. The operating results of Accutronics were not material for the period from January 1, 2016 to the acquisition date.

Nine Months Ended
September 25, 2016

Revenue
$ 60,835
Operating income
$ 2,417
Net income attributable to Ultralife
$ 2,076
Earnings per share:

Basic
$ 0.14
Diluted
$ 0.13

The unaudited pro forma results do not reflect the realization of any expected cost savings or other synergies from the acquisition of Accutronics as a result of restructuring activities, other cost savings initiatives or sales synergies following the completion of the business combination. Accordingly, these unaudited pro forma results are presented for informational purposes only and not necessarily indicative of what the actual results of operations of the combined Company would have been if the acquisition had occurred at the beginning of the 2015 period presented, nor are they indicative of future results of operations.

3.	*~~SHARE REPURCHASE PROGRAM~~*

~~On April 28, 2014, the Company~~’s Board of Directors approved a share repurchase program (the “Share Repurchase Program”) which became effective on ~~May~~November 1, ~~2014 and authorized~~2018, under which the Company is authorized to ~~repurchase~~purchase up to ~~1.8~~2.5 million shares of its outstanding common stock over a period not to exceed twelve months. ~~The~~

Under the Share Repurchase Program, ~~was extended~~shares may be purchased in open market transactions, including through ~~June 2, 2016, and the maximum number of shares authorized~~block purchases, through privately negotiated transactions, or pursuant to any trading plan that may be ~~repurchased under the program was increased to 3.4 million shares. Share repurchases under this program were made~~adopted in accordance with ~~SEC~~ Rule ~~10b-18 using a variety~~10b5-1 of ~~methods, which included open market purchases and block trades in compliance with applicable insider trading and other securities laws and regulations. With~~ the ~~exception~~Securities Exchange Act of ~~repurchases made during stock trading black-out periods under 10b5-1 Plans, the~~1934. The timing, manner, price and amount of any ~~repurchases were~~repurchase will be determined at the Company’s ~~discretion. The~~discretion and the Share Repurchase Program ~~expired on June 2, 2016~~may be suspended, terminated or modified by the Company’s Board of Directors at any time for any reason and ~~did~~does not obligate the Company to ~~repurchase~~purchase any specific number of shares. ~~From~~Under the ~~inception~~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.

3.	*REVENUES*

Effective January 1, 2018, the Company adopted Accounting Standards Update 2014-09 (Topic 606) “Revenue from Contracts with Customers”. Adoption of Topic 606 did not impact the timing of revenue recognition in our Consolidated Financial Statements 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 and revenue is recognized upon transfer of control to the customer, 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 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.

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 ~~Share Repurchase Program~~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 ~~May 1, 2014 through~~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 ~~expiration on June 2, 2016, the~~products.

See Note 12 for disaggregated revenue information.

Major classes of property, equipment and improvements consisted of the following:

6.7.

GOODWILL, INTANGIBLE ASSETS AND LONG TERM ASSETS

a. Goodwill

The following table summarizes the goodwill activity by segment for the ~~nine-month~~nine-month periods ended September 30, 2018 and October 1, ~~2017 and September 25, 2016:~~2017:

Battery &
Energy

Communi-
cations

Products

Systems

Total

Balance - December 31, 2015
$ 4,790 $ 11,493 $ 16,283
Acquisition of Accutronics
4,407 - 4,407
Measurement Period Adjustment
80 - 80
Effect of Foreign Currency Translation
(507 ) - (507 )
Balance – September 25, 2016
8,770 11,493 20,263
Effect of Foreign Currency Translation
(298 ) - (298 )
Balance - December 31, 2016
8,472 11,493 19,965
Effect of Foreign Currency Translation
416 - 416
Balance – October 1, 2017
$ 8,888 $ 11,493 $ 20,381

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

b. Other Intangible Assets

The composition of other intangible assets was:

	at October 1, 2017						at September 30, 2018
			Accumulated						Accumulated
	Cost		Amortization		Net		Cost		Amortization		Net

Trademarks	$	3,408	$	-	$	3,408	$	3,405	$	-	$	3,405
Customer Relationships		6,600		4,151		2,449		6,529		4,352		2,177
Patents and Technology		5,538		4,551		987		5,509		4,696		813
Distributor Relationships		377		377		-		377		377		-
Trade Name		391		68		323		379		104		275
Total Intangible Assets	$	16,314	$	9,147	$	7,167
Total Other Intangible Assets							$	16,199	$	9,529	$	6,670

	at December 31, 2016						at December 31, 2017
			Accumulated						Accumulated
	Cost		Amortization		Net		Cost		Amortization		Net

Trademarks	$	3,404	$	-	$	3,404	$	3,411	$	-	$	3,411
Customer Relationships		6,395		3,975		2,420		6,618		4,208		2,410
Patents and Technology		5,455		4,417		1,038		5,545		4,595		950
Distributor Relationships		377		368		9		377		377		-
Trade Name		359		36		323		393		79		314
Total Intangible Assets	$	15,990	$	8,796	$	7,194
Total Other Intangible Assets							$	16,344	$	9,259	$	7,085

Amortization expense for intangible assets was as follows:

Three-Month Periods Ended

Nine-Month Periods Ended

October
1,

September
25,

October
1,

September
25,

2017

2016

2017

2016

Amortization Included in:

Research and Development
$ 42 $ 49 $ 123 $ 152
Selling, General and Administrative
64 80 192 251
Total Amortization Expense
$ 106 $ 129 $ 315 $ 403

Three-month periods ended

Nine-month periods ended

September 30,

October 1,

September 30,

October 1,

2018

2017

2018

2017

Amortization included in:

Research and development

111

123

Selling, general and administrative

189

192

Total amortization expense

106

300

315

The ~~change~~decrease in the cost value of total other intangible assets from December 31, ~~201~~6 2017 to ~~October 1, 2017~~September 30, 2018 of $145 is athe result of the effect of foreign currency translations.

7.8.	.REVOLVING CREDIT AGREEMENT

Credit Facilities

On May 31, 2017, Ultralife Corporation entered into a Credit and Security Agreement (the “Credit Agreement”) and related security agreements with KeyBank National Association (“KeyBank” or the “Bank”) to establish a ~~$30,000~~$30,000 senior secured, cash flow-based, revolving credit facility that includes a ~~$1,500~~$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~~$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~~(the “Prior Credit Agreement”).

The Credit Facility provides the Company with an aggregate of up to ~~$30,000~~$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 and applicable margin for the Unused Fee is 20 basis points. Beginning April 2, 2018 and thereafter, the applicable margins will be determined based on the chart below.

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

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

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,~~$40,000, tested as of the end of each calendar year. The Company was in full compliance with its covenants as of ~~October 1, 2017.~~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.

8.9.

SHAREHOLDERS’ EQUITY

We recorded non-cash stock compensation expense in each period as follows:

	Three-Month Periods Ended				Nine-Month Periods Ended				Three-month periods ended				Nine-month periods ended
	October 1,		September 25,		October 1,		September 25,		September 30,		October 1,		September 30,		October 1,
	2017		2016		2017		2016		2018		2017		2018		2017
Stock Options	$	130	$	197	$	518	$	525	$	344	$	130	$	653	$	518
Restricted Stock Grants		3		8		11		30		19		3		54		11
Total	$	133	$	205	$	529	$	555	$	363	$	133	$	707	$	529

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 ~~October 1, 2017,~~ September 30, 2018, there was ~~$508~~$681 of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of ~~1.2~~1.1 years.

The following table summarizes stock option activity for the ~~nine-month~~nine-month period ended ~~October 1, 2017:~~September 30, 2018:

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining Contractual
Term (years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2017
2,323,581 $ 6.22
Granted
244,750 5.60
Exercised
(273,005 ) 4.10
Forfeited or Expired
(244,482 ) 8.91
Outstanding at October 1, 2017
2,050,844 $ 6.10 3.10 $ 3,149
Vested and Expected to Vest at October 1, 2017
1,937,204 $ 6.18 2.95 $ 2,928
Exercisable at October 1, 2017
1,218,744 $ 5.03 1.86 $ 2,163

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

The following assumptions were used to value stock options granted during the nine months ended ~~October 1, 2017:~~September 30, 2018:

Risk-Free Interest R~~ate~~Rate	~~1.7~~2.6	%
Volatility F~~actor~~Factor	5047	%
Weighted Average Expected Life (Y~~ears)~~(Years)	5
Dividends	0.0	%

The weighted average grant date fair value of options granted during the nine months ended ~~October 1, 2017~~ September 30, 2018 was ~~$2.47.~~$4.22.

On ~~April 19, 2017,~~ July 25, 2018, the ~~Company~~’sCompany’s Board of Directors, ~~extended the expiration date from December 30, 2017 to December 30, 2020 of options previously granted (and fully vested~~ at the ~~time~~recommendation of ~~modification)~~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 ~~300,000~~200,000 shares of the Company’s common ~~stock. Pursuant to Accounting Standards Codification Topic 718, Compensation – Stock Compensation,~~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 ~~was~~has been accounted for as an equity award ~~modification. During~~modification pursuant to Accounting Standards Codification Topic 718, Compensation – Stock Compensation. The Company has recognized for the ~~second~~third quarter ~~the Company recognized~~2018 compensation cost of ~~$193~~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~~’sFASB’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 firstnine months of ~~2017~~2018 or ~~2016.~~2017.

Cash received from stock option exercises under our stock-based compensation plans for the ~~three-month~~three-month periods ended September 30, 2018 and October 1, 2017 was $64and ~~September 25, 2016 was $131 and $106,~~$131, respectively. Cash received from stock option exercises under our stock-based compensation plans for the ~~nine-month~~nine-month periods ended September 30, 2018 and October 1, 2017 was $1,357and ~~September 25, 2016 was $1,120 and $181,~~$1,120, respectively.

In ~~September 2014, 49,200~~January 2018, 17,500 shares of restricted stock were awarded to ~~certai~~ncertain of our employees. These shares ~~have now fully vested~~vest in equal annual installments over three ~~years, and we estimated their~~ years. The weighted average grant date fair value ~~to be $3.24~~of these awards was $7.16 per share. In September 2017, 15,900 shares of the awarded restricted stock vested and the Company repurchased 3,959 shares at a total cost of $26 to satisfy the statutory tax withholding on shares vested for certain employees. There is no unrecognizedUnrecognized compensation cost related to these restricted shares was $71at ~~October~~ September 30, 2018.

10.

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.

The Act provided 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 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.

9.	*~~INCOME TAXES~~*

~~We use t~~he asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

For the ~~three-month~~three-month periods ended September 30, 2018 and October 1, 2017, ~~and September 25, 2016,~~ we recognized ~~$104~~$86 and ~~$92,~~$104, respectively, in income tax expense. For the ~~nine-month~~nine-month periods ended September 30, 2018 and October 1, 2017, we recognized $219and ~~September 25, 2016, we recorded $370 and $213,~~$370, respectively, in income tax expense. These are detailed as follows:

	Three-Month Periods Ended				Nine-Month Periods Ended					Three-month periods ended				Nine-month periods ended
	October 1,		September 25,		October 1,		September 25,			September 30,		October 1,		September 30,		October 1,
	2017		2016		2017		2016			2018		2017		2018		2017
Current Income Tax Provision:
Foreign	$	48	$	12	$	199	$	(1	)	$	64	$	48	$	153	$	199
Federal		14		21		42		38			-		14		-		42
State		4		4		12		11			4		4		12		12
Deferred Income Tax Provision		38		55		117		165			18		38		54		117
Total	$	104	$	92	$	370	$	213		$	86	$	104	$	219	$	370

The deferred income tax provision ~~is primarily due to~~for the ~~recognition of deferred tax liabilities relating~~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.~~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 ~~provision is~~provisions for 2018 and 2017 are primarily due to the income generated by our foreign operations ~~and estimated U.S. federal alternative minimum taxes.~~during the respective periods.

Our effective co~~nsolidated~~consolidated tax rates for the ~~nine-month~~nine-month periods ended September 30, 2018 and October 1, 2017 ~~and September 25, 2016~~ were:

Nine-Month Periods Ended

October

September

25,

September 30,

October 1,

2017

2016

2018

2017

Income Before Income Taxes

4,226

1,952

Income Before Income Taxes

$5,461

$4,226

Income Tax Provision

370

213

Income Tax Provision

219

370

Effective Income Tax Rate

8.8

10.9

4.0%

8.8%

~~The overall effective tax rate is~~In 2018 and 2017, in the ~~result of~~U.S. and for certain past operations in the ~~combination of income~~U.K., we recognize a valuation allowance for our net operating loss carryforwards and ~~losses in each of our tax jurisdictions, which is particularly influenced by the fact that we have recorded a full reserve against our~~other deferred tax assets ~~pertaining~~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 ~~cumulative historical losses~~accurately forecast earnings for future periods and the continued uncertainty of the general business climate. The use of our ~~U.S. operations~~U.K. net operating loss carryforwards may be limited due to the change in the past U.K. operation. Based on our assessment of all available evidence and ~~certain~~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, we have not recognized a valuation allowance against our other foreign ~~subsidiaries,~~deferred tax assets as ~~management does not~~we believe ~~at this time,~~ that it is more likely than not that wethey will ~~realize~~be realized. We will continue to evaluate the ~~benefit~~realizability of ~~these losses.~~our deferred tax assets in future periods.

As of December 31, ~~201~~6, 2017, we have domestic and foreign net operating losses (“NOL”) totaling approximately ~~$70,976~~$69,594 and ~~$12,760,~~$12,760, respectively, and domestic tax credits of approximately ~~$1,704,~~$1,837, available to reduce future taxable income. Included in our NOL carryforwards are foreign loss carryforwards of approximately ~~$12,760,~~$12,760, nearly all of which can be carried forward indefinitely. The domestic NOL carryforward of ~~$70,976~~$69,594 expires ~~from 2019~~beginning in 2020 through 2034.

As of September 30, 2018, 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 and December 31, 2017.

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 ~~200~~22002 through ~~2016~~2017 remain subject to examination by the Internal Revenue Service (“IRS”) and various state and local tax jurisdictions due to our NOL carryforwards. Our tax matters for the years 2009 through ~~2016~~2017 remain subject to examination by the respective foreign tax jurisdiction authorities.

~~11.~~

12.

COMMITMENTS AND CONTINGENCIES

a. Purchase Commitments

As of ~~October 1, 2017,~~ September 30, 2018, we have made commitments to purchase approximately ~~$640~~$3,230 of production machinery and equipment.

b. Product Warranties

We estimate future costs associated with expected product failure rates, material usage and service costs in the development of our warranty obligations. Warranty reserves are based on historical experience of warranty claims and 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 firstnine months of ~~2017~~2018 and ~~2016~~2017 were as follows:

	Nine-Month Periods Ended						Nine-Month Periods Ended
	October 1, 2017			September 25, 2016			September 30, 2018			October 1, 2017
Accrued Warranty Obligations – Beginning	$	172		$	192		$	149		$	172
Accruals for Warranties Issued		66			30			(9	)		66
Settlements Made		(58	)		(43	)		(54	)		(58	)
Accrued Warranty Obligations – Ending	$	180		$	179		$	86		$	180

c. Contingencies and Legal Matters

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

Dreamliner Litigation

In July 2013, an unoccupied Boeing 787 Dreamliner aircraft operated by Ethiopian Airlines was damaged by a fire while parked at London Heathrow Airport. ~~We participated in and provided technical assistance in support of~~Following an investigation of this incident conducted by U.K. and U.S. regulatory authorities as well as by the manufacturer of the aircraft, ~~as we are one of many downstream suppliers to that manufacturer.~~ Aa 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~~’sUltralife’s industry-standard lithium manganese dioxide non-rechargeable ~~D-cell.~~D-cell, which Ultralife has ~~had this cell~~produced since 2001, with wide-use in ~~production since 2001, with millions of units produced and this cell is widely-used for~~ global defense and commercial applications. This battery product has gone through rigorous safety and qualification testing, including United Nations Transport of Dangerous Goods, Manual of Tests and Criteria, and is authorized for use in aerospace applications under Technical Standard Order C142.

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. The suit~~ fire, which was filed by Ethiopian Airlines Enterprise in the Commercial Court, ~~Queen~~’sQueen’s Bench Division of the High Court of Justice, London. ~~The suit seeks as damages $42,000 plus other unspecified amounts, including those for loss of use and diminution in value of the aircraft.~~ We ~~maintain liability and products liability insurance through reputable providers, and in accordance with our corporate practices,~~ immediately ~~advised and~~ referred this matter to our insurers. ~~We are working with those insurers and their counsel to respond to and actively defend against this action, which is ongoing.~~

AtThis 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 ~~time, we believe that there is not a reasonable possibility that this incident will result in a material~~termination. The matter was terminated without financial ~~exposure~~consequences to the Company.

~~12.~~

13.

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 ~~October 1~~September 30, ~~2017~~2018:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total			Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	18,616	$	2,431	$	-		$	21,047		$	17,289	$	3,041	$	-		$	20,330
Segment Contribution		5,186		1,069		(4,992	)		1,263
Interest, Financing and Miscellaneous Expense, Net						(58	)		(58	)
Tax Provision						(104	)		(104	)
Non-Controlling Interest						(3	)		(3	)
Segment Contribution												4,702		1,339		(4,541	)		1,500
Interest, Financing and Miscellaneous Income, Net																21			21
Tax Provision																(86	)		(86	)
Non-Controlling Interest																(27	)		(27	)
Net Income Attributable to Ultralife								$	1,098									$	1,408
Total Assets	$	45,221	$	31,465	$	16,655		$	93,341

Three-Month Period Ended ~~September 25~~~~, 2016~~October 1, 2017:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total			Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	14,943	$	4,688	$	-		$	19,631		$	18,616	$	2,431	$	-		$	21,047
Segment Contribution		4,522		1,475		(4,859	)		1,138			5,186		1,069		(4,992	)		1,263
Interest, Financing and Miscellaneous Expense, Net						(30	)		(30	)						(58	)		(58	)
Tax Provision						(92	)		(92	)						(104	)		(104	)
Non-Controlling Interest						3			3							(3	)		(3	)
Net Income Attributable to Ultralife								$	1,019									$	1,098
Total Assets	$	42,394	$	32,129	$	9,034		$	83,557

Nine-Month Period Ended ~~October 1~~September 30, ~~2017~~2018:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total			Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	52,977	$	10,045	$	-		$	63,022		$	52,344	$	13,919	$	-		$	66,263
Segment Contribution		14,858		4,508		(14,940	)		4,426
Interest, Financing and Miscellaneous Expense, Net						(200	)		(200	)
Segment Contribution												14,664		5,209		(14,385	)		5,488
Interest, Financing and Miscellaneous Expense, Net																(27	)		(27	)
Tax Provision						(370	)		(370	)						(219	)		(219	)
Non-Controlling Interest						(8	)		(8	)						(57	)		(57	)
Net Income Attributable to Ultralife								$	3,848									$	5,185

Nine-Month Period Ended ~~September 25~~~~, 2016~~October 1, 2017:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total			Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	47,142	$	13,693	$	-		$	60,835		$	52,977	$	10,045	$	-		$	63,022
Segment Contribution		14,404		3,898		(16,183	)		2,119			14,858		4,508		(14,940	)		4,426
Interest, Financing and Miscellaneous Expense, Net						(167	)		(167	)						(200	)		(200	)
Tax Provision						(213	)		(213	)						(370	)		(370	)
Non-Controlling Interest						25			25							(8	)		(8	)
Net Income Attributable to Ultralife								$	1,764									$	3,848

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

Commercial and Government/Defense Revenue Information:

Three-Month Period Ended September 30, 2018:	Total Revenue		Commercial			Government/ Defense
Battery & Energy Products	$	17,289	$	10,127		$	7,162
Communications Systems		3,041		-			3,041
Total	$	20,330	$	10,127		$	10,203
				50	%		50	%

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
Battery & Energy Products	$	52,977	$	30,988		$	21,989
Communications Systems		10,045		-			10,045
Total	$	63,022	$	30,988		$	32,034
				49	%		51	%

U.S. and Non-U.S. Revenue Information¹:

Three-Month Period Ended September 30, 2018:

Total

Revenue

United States

Non-United States

Battery & Energy Products

17,289

9,389

7,900

Communications Systems

3,041

2,140

901

Total

20,330

11,529

8,801

Three-Month Period Ended October 1, 2017:

Total

Revenue

United States

Non-United States

Battery & Energy Products

18,616

9,161

9,455

Communications Systems

2,431

2,144

287

Total

21,047

11,305

9,742

Nine-Month Period Ended September 30, 2018:

Total

Revenue

United States

Non-United States

Battery & Energy Products

52,344

29,451

22,893

Communications Systems

13,919

12,747

1,172

Total

66,263

42,198

24,065

Nine-Month Period Ended October 1, 2017:

Total

Revenue

United States

Non-United States

Battery & Energy Products

52,977

25,832

27,145

Communications Systems

10,045

9,399

646

Total

63,022

35,231

27,791

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

~~13.~~

14.

RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS

In ~~November 2015,~~ May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ~~(“ASU”~~2014-09 (Topic 606) ~~2015-17, “Income Taxes: Balance Sheet Classification~~“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 ~~Deferred Taxes”, which requires that deferred tax liabilities and assets be netted against each other and classified as non-current in a classified statement of financial position. ASU 2015-17~~either the retrospective or cumulative effect transition method. Topic 606 is effective for ~~public companies for~~ annual ~~and interim~~reporting periods beginning after December 15, ~~2016. During the first quarter of~~ 2017, we adopted ASU 2015-17 on a retrospective basis. As such, we reclassified $94 of foreign current deferred tax assets to non-current on the consolidated balance sheets as of April 2, 2017 and December 31, 2016. The deferred tax liabilities relate to U.S. tax obligations which cannot be netted against foreign deferred taxes. The adoption of ASU 2015-17 did not affect our consolidated statements of income.

~~In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718)”, which identifies areas for simplification involving several aspects of accounting for share-based payment transactions,~~ including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. ASU 2016-09 is effective for public companies for annual and interim periods ~~beginning after December 15, 2016. We~~within that reporting period. The Company has adopted the new accounting standard in the first quarter of 2017 and will maintain our policy to estimate forfeitures expected to occur to determine stock-based compensation expense. Adoption of this new accounting standard resulted in the recognition of an increase in the Company’s gross deferred tax asset of approximately $1,200 and an offsetting increase in the valuation allowance. There was no impact to the Company’s retained earnings as a result of adopting this new accounting standard.Topic 606 effective January 1, 2018. See Note 2 for further discussion.

In ~~July 2015,~~ November 2016, the FASB issued ~~ASU 2015-11, "Simplifying the Measurement~~Accounting Standards Update 2016-18, “Statement of ~~Inventory," which simplifies the subsequent measurement of inventory by using only the lower of cost and net realizable value. This~~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, ~~2016,~~ 2017, and ~~must~~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 ~~retrospective basis. We~~prospective basis to an award modified on or after the adoption date. The Company has adopted ~~the new accounting~~this standard ~~in the first quarter~~effective January 1, 2018. Adoption of ~~2017. There was no material~~this standard did not impact ~~to the Company's financial statements as a result of adopting this new accounting standard.~~our Consolidated Financial Statements.

There have been no developments to recently issued accounting standards, including the expected dates of adoption and ~~estimated~~anticipated effects on the ~~Company’s consolidated financial statements and disclosures,~~Company’s Consolidated Financial Statements, from those disclosed in the Company’s ~~2016~~2017 Annual Report on Form ~~10-K,~~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.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment”, which eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. The annual assessment of goodwill impairment will be determined by using the difference between the carrying amount and the fair value of the reporting unit. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

●

In May 2017, the FASB issued ASU 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. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and early adoption is permitted, including in an interim period. ASU 2017-09 is to be applied on a prospective basis to an award modified on or after the adoption date. We do not intend to early adopt ASU 2017-09 and do not expect the adoption of this new accounting standard will have a material impact on our consolidated financial statements.

~~Item~~ITEM 2. ~~MANAGEMENT~~’SMANAGEMENT’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; ~~our efforts to develop new commercial applications for our products;~~ possible future declines in demand for the products that use our batteries or communications systems; the unique risks associated with our China operations; 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 in our ~~ability to comply with changes to the regulations for the shipment~~supply of ~~our products;~~raw materials and components; variability in our quarterly and annual results and the price of our common stock; 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; ~~possible breaches in security and other disruptions; safety risks, including the risk of fire;~~ negative publicity of ~~lithium-ion~~Lithium-ion batteries; our resources being overwhelmed by our growth prospects; our ability to retain top management and key personnel; ~~potential disruptions in our supply of raw materials and components;~~ our exposure to foreign currency fluctuations; our ~~customers~~’customers’ demand falling short of volume expectations in our supply agreements; 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; 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, ~~2016.~~2017.

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, ~~2016~~2017 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, ~~2016.~~2017.

The financial information in this ~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations is presented in thousands of dollars, except for share and per share amounts. ~~All figures presented below represent results from continuing operations, unless otherwise specified.~~

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 ~~manufacture, install~~ and ~~maintain~~manufacture power and communications systems ~~including~~including: rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems and accessories, and custom engineered systems. We continually strive to increase the size and profitability of our business through 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.~~departments and government agencies. We enjoy strong name recognition in our markets under our Ultralife® Batteries, Lithium Power®, McDowell Research®, AMTI™, ABLE™, ACCUTRONICS™, ACCUPRO™, 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~~includes: Lithium 9-volt, cylindrical, thin cell and ~~various~~ other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and ~~accessories, such as cables.~~accessories. The Communications Systems segment ~~includes~~includes: RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication ~~system kits~~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.

Consolidated revenues of $20,330 for the three-month period ended September 30, 2018, decreased by $717 or 3.4%, from $21,047 ~~for~~during the three-month period ended October 1, 2017, ~~increased by $1,416 or 7.2%, from $19,631 during the three-month period ended September 25, 2016, despite $2,270 of~~ ~~revenues attributable~~due to shipments under the Vehicle Installed Power Enhanced Rifleman Appliqué (“VIPER”) Program in the year-earlier period. Excluding the VIPER shipments, the Company’s revenues increased 21% driven by a 25% increase for Battery & Energy Productslower non-U.S. government/defense and 9-Volt battery sales. ~~Communications Systems core product sales such as our 20-watt amplifiers, universal vehicle adaptors and power supplies, were flat with the year-earlier period.~~

Gross profit for the three-month period ended ~~October 1, 2017~~September 30, 2018 was ~~$6,255,~~$6,041 or 29.7% of revenues, ~~compared~~compared to ~~$5,997,~~$6,255 or ~~30.5%~~29.7% of revenues, for the same quarter a year ago. The ~~80 basis point~~ decline ~~primarily reflects the mix of products sold and supply chain variances.~~ in gross profit resulted from lower sales.

Operating expenses in~~creased~~decreased to $4,541 during the three-month period ended September 30, 2018, compared to $4,992 during the three-month period ended October 1, ~~2017, compared to $4,859 during the three-month period ended September 25, 2016.~~2017. The ~~increase of $133~~$451 or ~~2.7% was primarily attributable to an accrual related to executive variable compensation reflecting year-to-date operating results. Management continues to maintain their strict~~9.0% decrease reflects continued tight control over ~~all~~ discretionary spending.

Operating income for the three-month pe~~riod~~period ended ~~October 1, 2017~~September 30, 2018 was ~~$1,263~~$1,500 or ~~6.0%~~7.4% of revenues, compared to ~~$1,138~~$1,263 or ~~5.8%~~6.0% for the year-earlier period. The ~~year-over-year~~18.7% increase in operating income ~~reflects the impact of the higher sales and~~resulted from lower operating ~~expense leverage.~~expenses.

Net income attributable to Ultralife was $~~1,098~~$1,408 or $0.09 per share – basic and diluted, for the three-month period ended September 30, 2018, compared to $1,098, or $0.07 per share – basic and diluted, for the three-month period ended October 1, ~~2017, compared to $1,019 or $0.07 per share for the three-month period ended September 25, 2016.~~2017.

Adjusted ~~EBITD~~A,EBITDA, defined as net income attributable to Ultralife before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, ~~plus/minus expense/income that we do not consider reflective of our ongoing operations,~~ amounted to ~~$1,985~~$2,472 in the third quarter of ~~2017~~2018 compared to ~~$2,046 in~~$1,985 for the third quarter of ~~2016.~~2017. See the section “Adjusted ~~EBITDA from Continuing Operations”~~EBITDA” beginning on ~~Page~~page 25 for a reconciliation of Adjusted EBITDA to ~~Net Income Attributable~~net income attributable to Ultralife.

~~Primarily as a result of~~We are delighted about the two recently announced Communications Systems delivery contracts totaling $19.2 million to supply our ~~operating performance, we generated cash of $3,978~~Vehicle Amplifier-Adaptors and Mounted Power Amplifiers for the ~~nine month period ended October 1, 2017. Accordingly, cash increased from $10,629 at December 31, 2016~~U.S. Army, as well as the $9.5 million IDIQ contract to ~~$14,607 at October 1, 2017.~~supply our communication kits for an undisclosed branch of the U.S. Department of Defense.

~~Having more than doubled both operating profit~~We remain focused on our revenue diversification strategy, pursuing commercial opportunities and ~~EPS for the first nine months of the year, we~~government/defense opportunities as U.S. spending continues to recover, and are ~~well~~ positioned ~~towards delivering~~to deliver another year of profitable ~~growth.~~ ~~In addition, the BA-5390 $21.4 million indefinite-delivery / indefinite-quantity (“IDIQ”) award received~~growth in March 2017, the VIPER $4.7 million contract received in August 2017, and the recent BA-5790/5795 CFx $49.8 million IDIQ award received in September 2017 serve as positive indicators of future growth potential as we finish out 2017 and head into 2018.”

T~~hree-Month~~Three-Month Periods E~~nded~~Ended September 30, 2018 and October 1, ~~201~~20177 ~~and September~~ 25~~, 201~~6

Revenues.Consolidated revenues for the three-month period ended ~~October 1, 2017~~September 30, 2018 amounted to ~~$21,047, an increase~~$20,330, a decrease of ~~$1,416~~$717, or ~~7.2%~~3.4%, from the ~~$19,631~~$21,047 reported for the three-month period ended ~~September 25, 2016.~~October 1, 2017.

Battery & Energy Products revenues ~~increased $3,673~~decreased $1,327, or ~~24.6%~~7.1%, tofrom $18,616 for the three-month period ended October 1, 2017 ~~from $14,943~~to $17,289 for the three-month period ended September ~~25, 2016.~~ ~~Government~~30, 2018, reflecting lower 9-Volt battery sales to our Europe-based customers, timing of orders to non-U.S. government/defense customers and large shipments to an industrial commercial customer in 2017 which did not re-occur in 2018. Our U.S. government/defense sales increased ~~57.5% from~~9.6% for the ~~2016 period~~quarter due primarily to higher ~~battery demand from both~~sales of our primary 5390 batteries to the U.S. ~~and international customers which were up 58.0% and 56.1%, respectively. Commercial revenues for~~Department of Defense, consistent with the ~~third quarter of 2017 increased 8.3% over the prior year period, reflecting a 14.2% increase~~recovery in ~~the shipment of medical batteries and chargers and 1.3% increase for other commercial applications.~~ domestic defense spending.

Communications Systems revenues ~~decreased $2,257~~increased $610, or ~~48.2%~~25.1%, from ~~$4,688~~$2,431 during ~~the three-month~~ ~~period ended September 25, 2016 to $2,431 for~~ the three-month period ended October 1, ~~2017.~~2017 to $3,041 for the three-month period ended September 30, 2018. This ~~decrease~~increase is ~~due to revenues~~ attributable to higher shipments ~~of VIPER systems of $2,270 in the 2016 period. Excluding VIPER, sales~~ of core products such as our 20-watt amplifiers, universal vehicle adaptors and ~~power supplies were essentially flat with the prior-year period.~~other radio accessories.

Cost of Products ~~Sold.~~ Sold / Gross Profit.Cost of products sold totaled ~~$14,792~~$14,289 for the quarter ended ~~October 1, 2017, an increase~~September 30, 2018, a decrease of ~~$1,158,~~$503, or ~~8.5%~~3.4%, from the ~~$13,634~~$14,792 reported for the same ~~quarter~~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 ~~increased to~~remained constant at 70.3% for the 2018 and 2017 three-month ~~period ended October 1, 2017 from 69.5% for the three-month period ended September 25, 2016.~~periods. Correspondingly, consolidated gross margin was 29.7% for the three-month period ended October 1, 2017, compared with 30.5% for the three-month period ended September 25, 2016, primarily reflecting the mix of products sold and incremental supply chain variances for the Battery & Energy Product business in the 2017 period. both periods.

InFor our Battery & Energy Products segment, ~~the cost of products sold increased $3,010 or 28.9%, to $13,430 for the three-month period ended October 1, 2017 from $10,420 during the three-month period ended September 25, 2016. Battery & Energy Products’~~ gross profit for the third quarter of ~~2017~~2018 was ~~$5,186~~$4,702 or ~~27.9%~~27.2% of revenues, ~~an increase~~a decrease of ~~$663~~$484 or ~~14.7%,~~9.3% from gross profit of ~~$4,523~~$5,186, or ~~30.3%~~27.9% of revenues, for the third quarter of ~~2016.~~2017. Battery & Energy Products’ gross margin ~~as a percentage of revenues~~ decreased for the three-month period ended ~~October 1, 2017~~September 30, 2018 by ~~240~~70 basis points, ~~primarily~~ reflecting ~~the mix of products sold, incremental supply chain variances and manufacturing variances incurred on the start-up of certain new products in the 2017 period.~~ product mix.

InFor our Communications Systems segment, gross profit for the ~~cost~~third quarter of 2018 was $1,339 or 44.0% of revenues, an increase of $270 or 25.2%, from gross profit of $1,069, or 44.0% of revenues, for the third quarter of 2017. Both three-month periods reflect the product mix of our high-value proposition core products ~~sold decreased by $1,852 or 57.6% from $3,214 during~~such as our 20-watt amplifiers, universal vehicle adaptors and other radio accessories.

Operating Expenses. Total operating expenses for the three-month period ended September ~~25, 2016 to $1,362~~30, 2018 totaled $4,541, a decrease of $451 or 9.0% from the $4,992 reported during the three-month period ended October 1, ~~2017 due to the VIPER shipments in 2016 as well as core product mix. Communications Systems’ gross profit~~2017. The reduction for the 2018 third quarter ~~of 2017 was $1,069 or 44.0% of revenues, a decrease of $405 or 27.5%, from gross profit of $1,474 or 31.4% of revenues, for~~reflects the third quarter of 2016. The gross margin of 44.0%, an increase of 1,260 basis points over the 2016 period, was driven by the sales growth of high-value proposition core amplifier and integrated solutions products.

~~Operating Expenses.~~ Operating expenses for the three-month period ended October 1, 2017 totaled $4,992, an increase of $133 or 2.7% from the $4,859 incurred during the three-month period ended September 25, 2016. The increase was due primarily to an accrual related to executive variable compensation based on the year-over-year improvement in operating results. Management continues to maintain their strictcontinued tight control over ~~all~~ discretionary spending.

Overall, ~~operatin~~goperating expenses as a percentage of revenues were 22.3% for the quarter ended September 30, 2018 compared to 23.7% for the quarter ended October 1, ~~2017 compared to 24.8% for the quarter ended September 25, 2016.~~2017. Amortization expense associated with intangible assets related to our acquisitions was $97 for the third quarter of 2018 ($61 in selling, general and administrative expenses and $36 in research and development costs), compared with $106 for the third quarter of 2017 ($64 in selling, general, and administrative expenses and $42 in research and development costs)~~, compared with $129 for the third quarter of 2016 ($80 in selling, general, and administrative expenses and $49 in research and development costs)~~. Research and development costs were ~~$1,355~~$1,099 for the three-month period ended September 30, 2018, a decrease of $256 or 18.9%, from $1,355 for the three-months ended October 1, ~~2017, essentially flat~~2017. The decrease primarily reflects the timing of development and testing costs associated with ~~$1,357 for the three months ended September 25, 2016.~~new products. Selling, general, and administrative expenses ~~increased $135~~decreased $195 or ~~3.9%~~5.4%, to ~~$3,637 during~~$3,442 for the third quarter of ~~2017~~2018 from ~~$3,502 during~~$3,637 for the third quarter of ~~2016.~~2017. The ~~increase~~decrease is ~~primarily~~ attributable to ~~an accrual related~~continued tight control over discretionary administrative spending and lower sales commissions due to ~~executive variable compensation reflecting year-to-date operating results.~~lower sales in the third quarter of 2018.

Other Expense (Income).Other income totaled $21 for the three-month period ended September 30, 2018 compared to other expense ~~totaled~~of $58 for the three-month period ended October 1, ~~2017 compared to $30 for the three-month period ended September 25, 2016.~~2017. Interest and financing expense, ~~was~~net of interest income, decreased $25 from $38 for the third quarter of 2017 ~~compared~~ to ~~$50~~$13 for the ~~2016 period.~~comparable period in 2018. The decrease is ~~primarily~~ due to ~~the more favorable terms of~~higher interest income resulting from our ~~Revolving Credit Agreement which was executed on May 31,~~increased cash balance in 2018 as compared to 2017. Miscellaneous income ~~(expense)~~ amounted to ~~($20)~~$34 for the third quarter of ~~2017~~2018 compared with miscellaneous expense of $20 for the third quarter of ~~2016,~~2017, primarily due to transactions impacted by foreign currency fluctuations ~~between~~in the U.S. dollar relative to ~~Pounds~~the Pound Sterling, and the ~~Euro.~~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.

Income Taxes.~~We recognized a~~ The tax provision offor the 2018 third quarter was $86 compared to $104 for the third quarter of ~~2017 compared to $92 for the third quarter of 2016, an increase of $12 or 13.0%. The increase is primarily due to the increased amounts and geographic mix of earnings for the quarter.~~2017. See Note 9 in the Notes to Consolidated Financial Statements ~~in this Form 10-Q~~ for additional information regarding our income taxes.

Net Income Attributable to Ultralife.Net income attributable to Ultralife was $1,408, or $0.09 per share – basic and ~~Net income attributable to Ultralife common shareholders per~~ diluted, ~~share was $1,098 and $0.07, respectively,~~ for the ~~three months~~three-month period ended September 30, 2018, compared to $1,098, or $0.07 per share – basic and diluted, for the three-month period ended October 1, ~~2017, compared to $1,019 and $0.07, respectively, for the three months ended September 25, 2016.~~2017. Average weighted common shares outstanding used to compute diluted earnings per share increased from ~~15,297,718 in the third quarter of 2016 to~~ 15,971,243 in the third quarter of 2017 ~~due~~ to 16,523,433 in the ~~exercise~~third quarter of 2018. The increase in 2018 is attributable to stock ~~options~~option exercises since the third quarter of 2017 and an increase in the ~~vesting~~weighted average stock price to compute diluted shares from $6.86 for the third quarter of ~~restricted stock under our Long-Term Incentive Plans, and~~2017 to $9.29 for the ~~increased stock price.~~third quarter of 2018.

~~Nine~~~~-Month~~Nine-Month Periods Ended September 30, 2018 and October 1, ~~201~~2017~~7 and September~~ 25~~, 201~~6

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 ~~amounted~~ to ~~$63,022, an increase of $2,187 or 3.6%, from the $60,835 generated during the nine-month period ended September 25, 2016.~~

~~Battery &~~ ~~Energy Products revenues increased $5,835, or 12.4%, from $47,142~~$52,344 for the nine-month period ended September ~~25, 2016 to $52,977 for~~30, 2018. Government and defense sales of this segment increased 1.6% from the 2017 nine-month period, ~~ended October 1, 2017. Commercial~~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 ~~business~~ segment ~~increased 7.3% over~~decreased 3.2% from the ~~2016~~2017 nine-month period and now comprise ~~58.5%~~57.3% of total segment sales versus ~~60.7%~~58.5% last year. The ~~increase in commercial revenues~~year-over-year decrease resulted from ~~12.1% year-over-year growth in the shipment~~lower shipments of ~~medical~~9-Volt batteries and ~~chargers, supplemented by a 2.5% increase across our expanding non-medical~~non-recurring industrial commercial ~~customer base. Government and defense~~product sales of the Battery & Energy Products business segment increased 20.3% from the 2016 nine-month period and now comprise 41.5% of total segment sales versus 39.3% last year. The increase reflects the higher overall demand across our U.S. and international customer base.in 2017.

Communications Systems revenues ~~decreased $3,648,~~increased $3,874, or ~~26.6%~~38.6%, from ~~$13,693~~$10,045 during ~~the nine-month period ended September 25, 2016 to $10,045 for the nine-month period ended October 1, 2017.~~ Revenues attributable to VIPER shipments were $8,219 in the nine-month period in 2016. In the comparable period in 2017, there was $133 of revenues attributable to VIPER shipments. Excluding the VIPER shipments, sales of core amplifiers and integrated solutions products increased $4,438 or 81.1% over the first nine months of 2016 driven by an increased demand for our core products such as our 20-watt amplifiers, universal vehicle adaptors and power supplies.

~~Cost of Products Sold.~~ ~~Cost of products sold totaled $43,656 for~~ 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 ~~$1,123~~$2,734 or ~~2.6%~~6.3%, from the ~~$42,533~~$43,656 reported for the same nine-month period a year ago. Consolidated cost of products sold as a percentage of total revenue ~~decreased~~increased from ~~69.9% for the nine-month period ended September 25, 2016 to~~ 69.3% for the nine-month period ended October 1, ~~2017.~~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, ~~compared with 30.1% for the nine-month period ended September 25, 2016,~~ due ~~primarily~~ to ~~favorable~~ product ~~mix for our Communications Systems segment for the 2017 period.~~ mix.

For our Battery & Energy Products segment, the cost of products sold ~~increased $5,381~~decreased $439 or ~~16.4%~~1.2%, from ~~$32,738 during the nine-month period ended September 25, 2016 to~~ $38,119 during the nine-month period ended October 1, ~~2017.~~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 ~~2017~~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, ~~an increase of $454 or 3.2% from gross profit of $14,404, or 30.6% of revenues,~~ for the ~~2016~~2017 nine-month period. Battery & Energy Products’ gross margin as a percentage of revenues decreased for the nine-month period ended October 1, 2017 by 260 basis points, primarily reflecting the mix of products sold and incremental supply chain variances.

For our Communications Systems segment, the cost of products sold ~~decreased~~increased by ~~$4,258~~$3,173 or ~~43.5%~~57.3% from ~~$9,795 during the nine-month period ended September 25, 2016 to~~ $5,537 during the nine-month period ended October 1, ~~2017.~~ 2017 to $8,710 during the nine-month period ended September 30, 2018. Communications Systems’ gross profit for the first nine months of ~~2017~~2018 was ~~$4,508~~$5,209 or ~~44.9%~~37.4% of revenues, an increase of ~~$610~~$701 or 15.6% from gross profit of ~~$3,898~~$4,508 or ~~28.5%~~44.9% of revenues, for the third quarter of ~~2016.~~2017. The ~~1,640 basis point increase~~decrease in gross margin during ~~2017~~2018 is due to ~~growth~~product mix reflecting the higher sales for competitively bid U.S. Department of Defense contracts in ~~core product sales and favorable product mix.~~the current nine-month period.

Operating Expenses. Total operating expenses for the nine-month period ended ~~October 1, 2017~~September 30, 2018 totaled ~~$14,940,~~$14,385, a decrease of ~~$1,243~~$555 or ~~7.7%~~3.7% from the ~~$16,183 incurred~~$14,940 recorded during the nine-month period ended ~~September 25, 2016. This decrease was attributable to reductions in~~October 1, 2017. Both periods reflected continued tight control over discretionary costs completed during and subsequent to the 2016 second quarter, cost synergies associated with our acquisition of Accutronics, and one-time costs incurred in January 2016 to complete the acquisition. spending.

Overall, operating expenses as a percentage of revenues were ~~23.7%~~21.7% for the nine-month period ended ~~October 1, 2017~~September 30, 2018 compared to ~~26.6%~~23.7% for the comparable ~~2016~~2017 period. Amortization expense associated with intangible assets related to our acquisitions was $300 for the first nine months of 2018 ($189 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)~~, compared with $403 for the first nine months of 2016 ($251 in selling, general, and administrative expenses and $152 in research and development costs)~~. Research and development costs were ~~$3,678~~$3,417 for the nine-month period ended ~~October 1, 2017,~~September 30, 2018, a decrease of ~~$760,~~$261 or ~~17.1%,~~7.1% from ~~$4,438~~the $3,678 for the ~~nine months~~nine-months ended ~~September 25, 2016.~~October 1, 2017. The decrease primarily reflects the timing of development and testing costs associated with ~~the shipment of VIPER units in 2016 and discretionary cost reduction actions completed during and subsequent to the second quarter of 2016, including synergies with Accutronics.~~new products. Selling, general, and administrative expenses decreased ~~$483~~$294 or ~~4.1%~~2.6%, from ~~$11,745 during the first nine months of 2016 to~~ $11,262 during the first nine months of ~~2017. The decrease is attributable~~2017 to ~~one-time costs incurred to complete~~$10,968 during the ~~acquisition~~first nine months of ~~Accutronics~~2018 in ~~January 2016 and~~line with our tight control over discretionary ~~cost reductions.~~spending.

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 compared to $167 for the nine-month period ended September 25, 2016.~~2017. Interest and financing expense, net of interest income, decreased ~~$66~~$80 to ~~$147~~$67 for the ~~2017~~2018 period from ~~$213~~$147 for the comparable period in ~~2016. The decrease is attributable to one-time costs~~2017, as a result of ~~$48 associated with~~ the ~~acquisition of Accutronics and~~ more favorable terms of our Revolving Credit Agreement which was executed on May 31, ~~2017.~~2017, as well as higher interest income due to our increased cash balance. Miscellaneous income ~~(expense)~~ amounted to ~~($53)~~$40 for the first nine months of 2018 compared with expense of $53 for the first nine months of 2017, ~~compared with $46 for the first nine months of 2016,~~ primarily due to ~~transactions impacted by foreign currency~~ fluctuations ~~between~~in the U.S. dollar relative to ~~Pounds Sterling and~~ the ~~Euro.~~

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 compared with a tax provision~~2017. The decrease of ~~$213 for the first three quarters of 2016. The increase of $157~~$151 or ~~73.7% is primarily~~40.8% was due to the ~~increased amounts and~~ geographic mix of earnings for the ~~2017 period.~~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 ~~September 25, 2016 were~~ 8.8% ~~and 10.9%~~, 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, compared to $1,764 and $0.11, respectively, for the nine months ended September 25, 2016.~~2017. Average common shares outstanding used to compute diluted earnings per share increased from ~~15,446,290 in the 2016 period to~~ 15,817,961 in the 2017 period to 16,407,121 in the 2018 period, mainly due to the exercise of stock options ~~and the vesting of restricted stock~~ under our Long-Term Incentive Plans and the increased ~~price of our common stock.~~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 ~~(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 continuing operations.~~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’ ~~use~~understanding of operating performance ~~comparisons~~ 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 ~~book~~ amortization of intangible assets acquired through our business acquisitions (affecting relative amortization ~~expense)~~expense and provision (benefit) for income taxes), the age and book value of facilities and equipment (affecting relative depreciation expense) and ~~other significant non-operating expenses or income.~~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;~~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 ~~income (loss) from operations.~~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 ~~limiting~~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. GAAPGAAP results and using Adjusted EBITDA only supplementally. Neither current nor potential investors in our securities should rely on Adjusted EBITDA ~~is calculated~~ as ~~follows~~a substitute for any GAAP measures and we encourage investors to review the ~~periods presented:~~following reconciliation of Adjusted EBITDA to Net income attributable to Ultralife.

As of ~~October 1, 2017,~~September 30, 2018, cash totaled ~~$14,607,~~$25,454, an increase of ~~$3,978~~$7,124 from the beginning of the year. During the nine-month period ended September 30, 2018, we generated $7,531 of cash from our operating activities. Cash generated from operations in 2018 consisted of net income of $5,242, non-cash expenses (depreciation, amortization and stock-based compensation) totaling $2,510, a decrease of $2,947 in inventory primarily due to the fulfillment of orders, partially offset by 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, wecash increased by $3,978. Cash of $3,657 generated ~~$3,657 of cash~~ from ~~our operating activities as compared to $3,568 of cash generated during~~operations for the nine-month period ended ~~September 25, 2016, an increase of $89. Cash generated from operations in~~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 in accounts payable and other working capital items of $1,041 largely 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 and an increase in inventory of $1,221 largely due to service 2017 backlog.

~~Cash~~ provided by operations for the nine-month period ended September 25, 2016 included net income of $1,739 plus non-cash expenses (depreciation, amortization and stock-based compensation) totaling $2,711, and a decrease in inventory of $755, partially offset by a net decrease in accounts payable and other working capital items of $1,637 largely attributable to the payment for inventory procured.

Cash used in investing activities for the nine-month ~~period~~periods ended September 30, 2018 and October 1, 2017 ~~consisted of~~amounted to $1,994 and $971, for capital expenditures. For the nine months ended September 25, 2016, we used $10,787 of cash in investing activities primarily for the acquisition of Accutronics of $9,857 (final purchase price of $11,161, net cash acquired from Accutronics of $1,304) plusrespectively, representing capital expenditures ~~totaling $990.~~in the respective periods.

Cash provided by financing activities for the ~~nine months~~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 ~~of proceeds from stock option exercises. For the nine months ended September 25, 2016, net cash used~~ in ~~financing activities totaled $426, consisting of $607 used to repurchase shares under the Share Repurchase Program and partially offset by $181 of~~ stock option exercise proceeds. ~~See Note 3 in the Notes to Consolidated Financial Statements in this Form 10-Q for additional information on the Share Repurchase Program.~~

~~As of~~ ~~October 1, 2017, we had made commitments to purchase approximately $640 of production machinery and equipment, which we expect to fund through operating cash flows or debt borrowings.~~

In July 2017, the Company made a ~~strategi~~cstrategic 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. ~~We anticipate~~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 ~~capital investment project implementation~~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 ~~applicable new product certification~~amount of any repurchase will be ~~completed~~determined at the Company’s discretion and the Share Repurchase Program may be suspended, terminated or modified by the ~~end~~Company’s Board of ~~2018.~~

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 financing through our Credit 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 under the 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 operations and, when necessary, available borrowing from our Credit Facility, will be sufficient to meet its current and long-term funding requirements for the foreseeable future.

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~~’smanagement’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 ~~2016~~ 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 months of ~~2017,~~2018, 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 2 for updated accounting policies to reflect the Company’s adoption of Topic 606 “Revenue from Contracts with Customers” as of January 1, 2018.

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.

In July 2013, an unoccupied Boeing 787 Dreamliner aircraft operated by Ethiopian Airlines was damaged by a fire while parked at London Heathrow Airport. ~~We participated in and provided technical assistance in support of~~Following an investigation of this incident conducted by U.K. and U.S. regulatory authorities as well as by the manufacturer of the aircraft, ~~as we are one of many downstream suppliers to that manufacturer.~~ Aa 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~~’sUltralife’s industry-standard lithium manganese dioxide non-rechargeable ~~D-cell.~~D-cell, which Ultralife has ~~had this cell in production~~produced since 2001, with ~~millions of units produced and this cell is widely-used for~~wide-use in global defense and commercial applications. This battery product has gone through rigorous safety and qualification testing, including United Nations Transport of Dangerous Goods, Manual of Tests and Criteria, and is authorized for use in aerospace applications under Technical Standard Order C142.

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. The suit~~fire, which was filed by Ethiopian Airlines Enterprise in the Commercial Court, ~~Queen~~’sQueen’s Bench Division of the High Court of Justice, London. ~~The suit seeks as damages $42,000 plus other unspecified amounts, including those for loss of use and diminution in value of the aircraft.~~ We ~~maintain liability and products liability insurance through reputable providers, and in accordance with our corporate practices,~~ immediately ~~advised and~~ referred this matter to our insurers. ~~We are working with those insurers and their counsel to respond to and actively defend against this action, which is ongoing.~~

AtThis 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 ~~time, we believe that there is not a reasonable possibility that this incident will result in a material~~termination. The matter was terminated without financial ~~exposure~~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.

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

Pursuant to the requirements of ~~Equity~~the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the ~~Issuer and Affiliated Purchasers~~

~~On April 28, 2014, the Company~~’s Board of Directors approved a share repurchase program (the “Share Repurchase Program”) which became effective on May 1, 2014 and under which the Company was authorized to repurchase up to 1.8 million shares of its outstanding common stock over a period not to exceed twelve months. The Share Repurchase Program was extended through June 2, 2016, and the maximum number of shares authorized to be repurchased under the program was increased to 3.4 million shares. 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 exception of repurchases made during stock trading black-out periods under 10b5-1 Plans, the timing, manner, price and amount of any repurchases were determined at the Company’s discretion. The Share Repurchase Program expired on June 2, 2016 and did not obligate the Company to repurchase any specific number of shares. From the inception of the Share Repurchase Program on May 1, 2014 through its expiration on June 2, 2016, the Company repurchased 2,592,095 shares for an aggregate cost (excluding fees and commissions) of $10,480. During the three and nine month periods ended September 25, 2016, the Company repurchased 149,904 shares under this program for a total cost (excluding fees and commissions) of $603.

~~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.~~

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

		Page
PART I.	FINANCIAL INFORMATION

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

	Consolidated Balance Sheets as of ~~October 1, 2017~~September 30, 2018 (Unaudited) and December 31, ~~2016~~ 2017	3

	Consolidated Statements of Income and Comprehensive Income (Unaudited) for the Three and Nine Month Periods Ended September 30, 2018 and October 1, 2017 ~~and September 25, 2016~~	4

	Consolidated Statements of Cash Flows (Unaudited) for the Nine Month Periods Ended September 30, 2018 and October 1, 2017 ~~and September 25, 2016~~	5

	Notes to Consolidated Financial Statements	6

~~Item~~ITEM 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920

~~Item~~ITEM 4.	Controls and Procedures	27 28

PART II.	OTHER INFORMATION

~~Item~~ITEM 1.	Legal Proceedings	27 28

~~Item 2.~~ITEM 1A.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~Risk Factors	28

~~Item~~ITEM 6.	Exhibits	28 29

	Signatures	29 30

	Index to Exhibits	3031

	Nine Month Periods Ended
	October 1,			September 25,
	2017			2016
OPERATING ACTIVITIES:
Net Income	$	3,856		$	1,739
Adjustments to Reconcile Net Income to Net Cash Provided By (Used In) Operating Activities:
Depreciation		1,507			1,698
Amortization of Intangible Assets		315			403
Amortization of Financing Fees		42			55
Stock-Based Compensation		529			555
Deferred Income Taxes		117			165
Changes in Operating Assets and Liabilities:
Accounts Receivable		(2,412	)		(283	)
Inventories		(1,221	)		755
Prepaid Expenses and Other Assets		(582	)		176
Accounts Payable and Other Liabilities		1,506			(1,695	)
Net Cash Provided By Operating Activities		3,657			3,568

INVESTING ACTIVITIES:
Cash Paid for Property, Equipment and Improvements		(971	)		(990	)
Acquisition of Accutronics, Net of Cash Acquired		-			(9,857	)
Change in Restricted Cash		-			60
Net Cash Used In Investing Activities		(971	)		(10,787	)

FINANCING ACTIVITIES:
Proceeds from Stock Option Exercise		1,120			181
Cash Paid to Repurchase Treasury Stock		-			(607	)
Proceeds from Debt Borrowing		-			3,030
Payments of Debt Borrowings		-			(3,030	)
Net Cash Provided By (Used In) Financing Activities		1,120			(426	)

Effect of Exchange Rate Changes on Cash		172			(98	)

INCREASE (DECREASE) IN CASH		3,978			(7,743	)

Cash, Beginning of Period		10,629			14,393
Cash, End of Period	$	14,607		$	6,650

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

(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

	October 1,			December 31,
	2017			2016
ASSETS
Current assets:
Cash	$	14,607		$	10,629
Restricted Cash		81			77
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $277 and $277, Respectively		15,741			13,179
Inventories, Net		24,922			23,456
Prepaid Expenses and Other Current Assets		2,602			2,079
Total Current Assets		57,953			49,420
Property, Equipment and Improvements, Net		7,612			7,999
Goodwill		20,381			19,965
Intangible Assets, Net		7,167			7,194
Security Deposits and Other Non-Current Assets		134			72
Deferred Income Taxes		94			94
Total Assets	$	93,341		$	84,744

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	7,108		$	7,292
Accrued Compensation and Related Benefits		2,286			1,258
Accrued Expenses and Other Current Liabilities		3,388			2,606
Income Taxes Payable		285			172
Total Current Liabilities		13,067			11,328
Deferred Income Taxes		5,704			5,538
Other Non-Current Liabilities		28			18
Total Liabilities		18,799			16,884

Commitments and Contingencies (Note 11)

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 – 19,610,628
Shares at October 1, 2017 and 19,324,723 Shares at December 31, 2016; Outstanding – 15,590,917		1,961			1,932
Shares at October 1, 2017 and 15,308,971 at December 31, 2016
Capital in Excess of Par Value		179,794			178,163
Accumulated Deficit		(86,694	)		(90,542	)
Accumulated Other Comprehensive Loss		(1,887	)		(3,080	)
Treasury Stock - At Cost; 4,019,711 at October 1, 2017 and 4,015,752 Shares at December 31, 2016		(18,470	)		(18,443	)
Total Ultralife Corporation Equity		74,704			68,030
Non-Controlling Interest		(162	)		(170	)
Total Shareholders’ Equity		74,542			67,860

Total Liabilities and Shareholders' Equity	$	93,341		$	84,744

	Three Month Periods Ended						Nine Month Periods Ended
	October 1,			September 25,			October 1,			September 25,
	2017			2016			2017			2016

Revenues	$	21,047		$	19,631		$	63,022		$	60,835
Cost of Products Sold		14,792			13,634			43,656			42,533
Gross Profit		6,255			5,997			19,366			18,302

Operating Expenses:
Research and Development		1,355			1,357			3,678			4,438
Selling, General and Administrative		3,637			3,502			11,262			11,745
Total Operating Expenses		4,992			4,859			14,940			16,183

Operating Income		1,263			1,138			4,426			2,119

Other (Expense) Income:
Interest and Financing Expense		(38	)		(50	)		(147	)		(213	)
Miscellaneous		(20	)		20			(53	)		46
Income Before Income Taxes		1,205			1,108			4,226			1,952
Income Tax Provision		104			92			370			213

Net Income		1,101			1,016			3,856			1,739

Net (Income) Loss Attributable to Non-Controlling Interest		(3	)		3			(8	)		25

Net Income Attributable to Ultralife Corporation		1,098			1,019			3,848			1,764

Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments		440			(613	)		1,193			(1,314	)

Comprehensive Income Attributable to Ultralife Corporation	$	1,538		$	406		$	5,041		$	450

Net Income Per Share Attributable to Ultralife Common Shareholders – Basic	$	.07		$	.07		$	.25		$	.12

Net Income Per Share Attributable to Ultralife Common Shareholders – Diluted	$	.07		$	.07		$	.24		$	.11

Weighted Average Shares Outstanding – Basic		15,564			15,207			15,495			15,262
Potential Common Shares		407			91			323			184
Weighted Average Shares Outstanding - Diluted		15,971			15,298			15,818			15,446

Cash	$	1,304
Accounts Receivable		1,344
Inventory		2,167
Prepaids and Other Current Assets		584
Property, Plant & Equipment		269
Identifiable Intangible Assets		4,374
Goodwill		4,487
Accounts Payable		(1,009	)
Accrued Expenses		(1,136	)
Income Taxes Payable		(111	)
Non-Current Liabilities		(209	)
Deferred Income Taxes		(74	)
Deferred Income Taxes on Intangible Assets		(829	)

Total Consideration	$	11,161

	Nine Months Ended
	September 25, 2016

Revenue	$	60,835
Operating income	$	2,417
Net income attributable to Ultralife	$	2,076
Earnings per share:
Basic	$	0.14
Diluted	$	0.13

	Battery & Energy			Communi- cations
	Products			Systems		Total

Balance - December 31, 2015	$	4,790		$	11,493	$	16,283
Acquisition of Accutronics		4,407			-		4,407
Measurement Period Adjustment		80			-		80
Effect of Foreign Currency Translation		(507	)		-		(507	)
Balance – September 25, 2016		8,770			11,493		20,263
Effect of Foreign Currency Translation		(298	)		-		(298	)
Balance - December 31, 2016		8,472			11,493		19,965
Effect of Foreign Currency Translation		416			-		416
Balance – October 1, 2017	$	8,888		$	11,493	$	20,381

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		2,323,581		$	6.22
Granted		244,750			5.60
Exercised		(273,005	)		4.10
Forfeited or Expired		(244,482	)		8.91
Outstanding at October 1, 2017		2,050,844		$	6.10		3.10	$	3,149
Vested and Expected to Vest at October 1, 2017		1,937,204		$	6.18		2.95	$	2,928
Exercisable at October 1, 2017		1,218,744		$	5.03		1.86	$	2,163

	Three-Month Periods Ended				Nine-Month Periods Ended
	October 1,		September 25,		October 1,		September 25,
	2017		2016		2017		2016

Net Income Attributable to Ultralife	$	1,098	$	1,019	$	3,848	$	1,764
Add:
Interest and Financing Expense, Net		38		50		147		213
Income Tax Provision		104		92		370		213
Depreciation Expense		497		533		1,507		1,698
Amortization of Intangible Assets and Financing Fees		115		147		357		457
Stock-Based Compensation Expense		133		205		529		555
Non-Cash Purchase Accounting Adjustments		-		-		-		96
Other		-		-		-		12

Adjusted EBITDA	$	1,985	$	2,046	$	6,758	$	5,008

Exhibit Index	Description of Document	Incorporated By Reference 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

		~~ITEM 6.~~ULTRALIFE CORPORATION
		~~EXHIBITS~~(Registrant)

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


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

	October 1,		December 31,		September 30,		December 31,
	2017		2016		2018		2017
Raw Materials	$	12,939	$	14,482	$	13,448	$	14,606
Work In Process		1,871		986		1,857		2,013
Finished Goods		10,112		7,988		7,813		9,707
Total	$	24,922	$	23,456	$	23,118	$	26,326

	October 1,			December 31,			September 30,			December 31,
	2017			2016			2018			2017
Land	$	123		$	123		$	123		$	123
Buildings and Leasehold Improvements		7,801			7,757			7,924			7,858
Machinery and Equipment		50,788			49,722			51,054			50,852
Furniture and Fixtures		1,989			1,947			1,983			2,005
Computer Hardware and Software		5,303			5,223			5,549			5,338
Construction In Process		384			421			2,601			535
		66,388			65,193			69,234			66,711
Less: Accumulated Depreciation		(58,776	)		(57,194	)		(60,442	)		(59,141	)
Property, Equipment and Improvements, Net	$	7,612		$	7,999
Property, Equipment and Improvements, Net							$	8,792		$	7,570

		~~ULTRALIFE CORPORATION~~
		~~(Registrant)~~


~~Date:~~ ~~November 2, 201~~7	~~By:~~	~~/s/~~ ~~Michael D. Popielec~~
		~~Michael D. Popielec~~
		~~President and Chief Executive Officer~~
		~~(Principal Executive Officer)~~


~~Date:~~ ~~November 2, 201~~7	~~By:~~	~~/s/ Philip A. Fain~~
		~~Philip A. Fain~~
		~~Chief Financial Officer and Treasurer~~
		~~(Principal Financial Officer and~~
		~~Principal Accounting Officer)~~

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

(Unaudited)