10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 10-Q

______________

(Mark One)

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

For the Quarter Ended April 1, 2018

OR

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

For the transition period from                           to

Commission File Number 0-27460

ULTRALIFE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)   2000 Technology Parkway Newark, New York (Address of principal executive offices) 16-1387013 (I.R.S. Employer Identification No.)   14513 (Zip Code)

___________________

   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. Yes [ X ]  No [    ]

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). Yes [ X ]  No [    ]

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.

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

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 15,913,644, net of 4,019,711 treasury shares, as of May 1, 2018.

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ULTRALIFE CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited):
	Consolidated Balance Sheets as of April 1, 2018 and December 31, 2017	3
	Consolidated Statements of Income and Comprehensive Income for the Three Month Periods Ended April 1, 2018 and April 2, 2017	4
	Consolidated Statements of Cash Flows for the Three Month Periods Ended April 1, 2018 and April 2, 2017	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 6.	Exhibits	24
	Signatures	25
	Index to Exhibits	26

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PART I. FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

	April 1,			December 31,
	2018			2017
ASSETS
Current assets:
Cash	$	18,239		$	18,241
Restricted Cash		91			89
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $298 and $292, Respectively		15,730			14,657
Inventories, Net		26,961			26,326
Prepaid Expenses and Other Current Assets		2,730			2,603
Total Current Assets		63,751			61,916
Property, Equipment and Improvements, Net		7,359			7,570
Goodwill		20,698			20,458
Other Intangible Assets, Net		7,119			7,085
Deferred Income Taxes		32			32
Security Deposits and Other Non-Current Assets		118			125
Total Assets	$	99,077		$	97,186
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	7,545		$	8,787
Accrued Compensation and Related Benefits		1,694			2,413
Accrued Expenses and Other Current Liabilities		2,595			2,871
Income Taxes Payable		245			168
Total Current Liabilities		12,079			14,239
Deferred Income Taxes		3,874			3,867
Other Non-Current Liabilities		31			31
Total Liabilities		15,984			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 – 19,891,937 Shares at April 1, 2018 and 19,670,928 Shares at December 31, 2017; Outstanding – 15,872,226 Shares at April 1, 2018 and 15,651,217 at December 31, 2017		1,989			1,966
Capital in Excess of Par Value		181,312			180,211
Accumulated Deficit		(80,743	)		(82,894	)
Accumulated Other Comprehensive Loss		(859	)		(1,611	)
Treasury Stock - At Cost; 4,019,711 at April 1, 2018 and 4,019,711 Shares at December 31, 2017		(18,469	)		(18,469	)
Total Ultralife Corporation Equity		83,230			79,203
Non-Controlling Interest		(137	)		(154	)
Total Shareholders’ Equity		83,093			79,049
Total Liabilities and Shareholders' Equity	$	99,077		$	97,186

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

3

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In Thousands except per share amounts)

(Unaudited)

	Three Month Periods Ended
	April 1,			April 2,
	2018			2017
Revenues	$	23,069		$	22,035
Cost of Products Sold		15,787			15,145
Gross Profit		7,282			6,890
Operating Expenses:
Research and Development		1,101			1,138
Selling, General and Administrative		3,825			3,911
Total Operating Expenses		4,926			5,049
Operating Income		2,356			1,841
Other Expenses:
Interest and Financing Expense		(33	)		(68	)
Miscellaneous		(100	)		(25	)
Total Other Expenses		(133	)		(93	)
Income Before Income Tax Provision		2,223			1,748
Income Tax Provision		(55	)		(87	)
Net Income		2,168			1,661
Net Income Attributable to Non-Controlling Interest		(17	)		(6	)
Net Income Attributable to Ultralife Corporation		2,151			1,655
Other Comprehensive Income:
Foreign Currency Translation Adjustments		752			259
Comprehensive Income Attributable to Ultralife Corporation	$	2,903		$	1,914
Net Income Per Share Attributable to Ultralife Common Shareholders – Basic	$	.14		$	.11
Net Income Per Share Attributable to Ultralife Common Shareholders – Diluted	$	.13		$	.11
Weighted Average Shares Outstanding – Basic		15,704			15,412
Potential Common Shares		498			244
Weighted Average Shares Outstanding – Diluted		16,202			15,656

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

4

ULTRALIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Three Month Periods Ended
	April 1,			April 2,
	2018			2017
OPERATING ACTIVITIES:
Net Income	$	2,168		$	1,661
Adjustments to Reconcile Net Income to Net Cash (Used In) Provided By Operating Activities:
Depreciation		484			503
Amortization of Intangible Assets		102			105
Amortization of Financing Fees		9			18
Stock-Based Compensation		139			40
Deferred Income Taxes		(1	)		36
Changes in Operating Assets and Liabilities:
Accounts Receivable		(939	)		(537	)
Inventories		(502	)		771
Prepaid Expenses and Other Assets		(86	)		50
Accounts Payable and Other Liabilities		(2,295	)		92
Net Cash (Used In) Provided By Operating Activities		(921	)		2,739
INVESTING ACTIVITIES:
Purchases of Property, Equipment and Improvements		(172	)		(581	)
Net Cash Used In Investing Activities		(172	)		(581	)
FINANCING ACTIVITIES:
Proceeds from Stock Option Exercise		939			741
Net Cash Provided By Financing Activities		939			741
Effect of Exchange Rate Changes on Cash		154			74
INCREASE IN CASH		-			2,973
Cash, Beginning of Period		18,330			10,706
Cash, End of Period	$	18,330		$	13,679

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

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ULTRALIFE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands – except share and per share amounts)

(Unaudited)

1. BASIS OF PRESENTATION

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

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

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

2. 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 add 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 months ended April 1, 2018 were not material.

As of April 1, 2018, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, we have applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations.

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Deferred revenue, unbilled revenue and deferred contract costs recorded on our Consolidated Balance Sheets as of April 1, 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 generallly 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 April 1, 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 as applicable on our Consolidated Balance Sheets. The Company does not offer separate service-type warranties on its products.

See Note 12 for disaggregated revenue information.

3. CASH

The Company had cash and restricted cash totaling $18,330 and $18,330 as of April 1, 2018 and December 31, 2017, respectively.

	April 1,		December 31,
	2018		2017
Cash	$	18,239	$	18,241
Restricted Cash		91		89
Total	$	18,330	$	18,330

Restricted cash represents deposits withheld by the Dutch tax authorities and third party VAT representatives in connection with a previously utilized logistics arrangement in the Netherlands.

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4. INVENTORIES

Inventories are stated at the lower of cost or market, net of obsolescence reserves, with cost determined under the first-in, first-out (FIFO) method. The composition of inventories, net was:

	April 1,		December 31,
	2018		2017
Raw Materials	$	15,234	$	14,606
Work In Process		2,085		2,013
Finished Goods		9,642		9,707
Total	$	26,961	$	26,326

5. PROPERTY, EQUIPMENT AND IMPROVEMENTS

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

	April 1,			December 31,
	2018			2017
Land	$	123		$	123
Buildings and Leasehold Improvements		7,900			7,858
Machinery and Equipment		51,116			50,852
Furniture and Fixtures		2,024			2,005
Computer Hardware and Software		5,414			5,338
Construction In Process		487			535
		67,064			66,711
Less: Accumulated Depreciation		(59,705	)		(59,141	)
Property, Equipment and Improvements, Net	$	7,359		$	7,570

Depreciation expense for property, equipment and improvements was $484 and $503 for the three-month periods ended April 1, 2018 and April 2, 2017, respectively.

6. GOODWILL, INTANGIBLE ASSETS AND LONG TERM ASSETS

a. Goodwill

The following table summarizes the goodwill activity by segment for the three-month periods ended April 1, 2018 and April 2, 2017:

	Battery & Energy		Communi- cations
	Products		Systems		Total
Balance - December 31, 2016	$	8,472	$	11,493	$	19,965
Effect of Foreign Currency Translation		83		-		83
Balance – April 2, 2017		8,555		11,493		20,048
Effect of Foreign Currency Translation		410		-		410
Balance - December 31, 2017		8,965		11,493		20,458
Effect of Foreign Currency Translation		240		-		240
Balance – April 1, 2018	$	9,205	$	11,493	$	20,698

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b. Other Intangible Assets

The composition of other intangible assets was:

	at April 1, 2018
			Accumulated
	Cost		Amortization		Net
Trademarks	$	3,415	$	-	$	3,415
Customer Relationships		6,720		4,277		2,443
Patents and Technology		5,586		4,641		945
Distributor Relationships		377		377		-
Trade Name		408		92		316
Total Other Intangible Assets	$	16,506	$	9,387	$	7,119

	at December 31, 2017
			Accumulated
	Cost		Amortization		Net
Trademarks	$	3,411	$	-	$	3,411
Customer Relationships		6,618		4,208		2,410
Patents and Technology		5,545		4,595		950
Distributor Relationships		377		377		-
Trade Name		393		79		314
Total Other Intangible Assets	$	16,344	$	9,259	$	7,085

Amortization expense for intangible assets was $102 and $105 for the three-month periods ended April 1, 2018 and April 2, 2017, respectively. Amortization included in research and development expenses was $38 and $40 for the three-month periods ended April 1, 2018 and April 2, 2017, respectively. Amortization included in selling, general and administrative expenses was $64 and $65 for the three-month periods ended April 1, 2018 and April 2, 2017, respectively.

The change in the cost value of total intangible assets from December 31, 2017 to April 1, 2018 is a result of the effect of foreign currency translations.

7. 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 senior secured, cash flow-based, revolving credit facility that includes a $1,500 letter of credit subfacility (the “Credit Facility”). The Credit Agreement provides that the Credit Facility may be increased with the Bank’s concurrence to $50,000 prior to the last six months of the term and is scheduled to expire on May 30, 2020. The Credit Facility replaces the Company’s asset-based revolving credit facility with PNC Bank National Association which expired in accordance with its terms on May 24, 2017 (the “Prior Credit Agreement”).

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

9

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

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

In addition to the affirmative and negative covenants, the Company must maintain a fixed charge coverage ratio of 1.15 to 1.0, tested each fiscal quarter for the trailing four fiscal quarters, and a minimum tangible net worth of $40,000, tested as of the end of each calendar year. The Company was in full compliance with its covenants as of April 1, 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 April 1, 2018, we had no outstanding balance under the Credit Facility and no outstanding letters of credit related to the Credit Facility.

8. SHAREHOLDERS’ EQUITY

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

	Three-Month Periods Ended
	April 1,		April 2,
	2018		2017
Stock Options	$	123	$	36
Restricted Stock Grants		16		4
Total	$	139	$	40

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 April 1, 2018, there was $309 of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of 1.0 years.

10

The following table summarizes stock option activity for the three-month period ended April 1, 2018:

	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		14,000			7.16
Exercised		(221,009	)		4.60
Forfeited or Expired		(114,449	)		11.60
Outstanding at April 1, 2018		1,538,753		$	5.91		3.62	$	6,786
Vested and Expected to Vest at April 1, 2018		1,449,498		$	5.96		3.50	$	6,350
Exercisable at April 1, 2018		917,915		$	4.82		2.89	$	4,751

The following assumptions were used to value stock options granted during the three months ended April 1, 2018:

Risk-Free Interest Rate	1.7	%
Volatility Factor	50	%
Weighted Average Expected Life (Years)	5
Dividends	0.0	%

The weighted average grant date fair value of options granted during the three months ended April 1, 2018 was $3.19.

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

Cash received from stock option exercises under our stock-based compensation plans for the three-month periods ended April 1, 2018 and April 2, 2017 was $939 and $741, respectively.

In January 2018, 17,500 shares of restricted stock were awarded to certain of our employees. These shares vest in equal annual installments over three years. The weighted average grant date fair value of these awards was $7.16 per share. Unrecognized compensation cost related to these restricted shares was $110 at April 1, 2018.

9. 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. 

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The Tax 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 April 1, 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 GILTI provisions. At April 2018, we were not able to reasonably estimate, and therefore have not recorded, deferred taxes for the GILTI provisions. We have not yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future periods or use the period cost method.

For the three-month periods ended April 1, 2018 and April 2, 2017, we recognized $55 and $87, respectively, in income tax expense. These are detailed as follows:

	Three-Month Periods Ended
	April 1,			April 2,
	2018			2017
Current Income Tax Provision:
Foreign	$	52		$	21
Federal		-			22
State		4			5
Deferred Income Tax (Benefit) Provision		(1	)		39
Total	$	55		$	87

The deferred income tax benefit for 2018 represents the amortization of certain intangible assets of Accutronics (U.K.) largely offset by 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. The deferred income tax provision for 2017 reflects the higher previously-enacted U.S corporate tax rate. The current income tax provisions for 2018 and 2017 are primarily due to the income generated by our foreign operations during the respective periods.

Our effective consolidated tax rates for the three-month periods ended April 1, 2018 and April 2, 2017 were:

	Three-Month Periods Ended
	April 1,			April 2,
	2018			2017
Income Before Income Taxes	$	2,223		$	1,748
Income Tax Provision		55			87
Effective Income Tax Rate		2.5	%		5.0	%

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In 2018 and 2017, in the U.S. and for certain past operations in the U.K., we recognize a valuation allowance for our net operating loss carryforwards and other deferred tax assets that cannot be offset by reversing temporary differences. The recognition of the valuation allowance is based on an assessment of all available evidence, both positive and negative, weighted based on objective verifiability. The assessment of the realizability of the U.S. deferred tax assets was based on a number of factors including our history of operating losses, our historical operating volatility, our historical inability to accurately forecast earnings for future periods and the continued uncertainty of the general business climate. The use of our U.K. net operating loss carryforwards may be limited due to the change in the past U.K. operation. Based on our assessment of all available evidence and its weighting based on objective verifiability, we concluded that the realizability of these deferred tax assets is not more likely than not. In both 2018 and 2017, we have not recognized a valuation allowance against our other foreign deferred tax assets as we believe that it is more likely than not that they will be realized. We will continue to evaluate the realizability of our deferred tax assets in future periods.

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

As of April 1, 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 April 1, 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 2002 through 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 2017 remain subject to examination by the respective foreign tax jurisdiction authorities.

10. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing earnings attributable to the Company’s common shareholders by the weighted-average shares outstanding during the period. Diluted EPS includes the dilutive effect of securities, if any, and is calculated using the treasury stock method. For the three-month period ended April 1, 2018, 1,324,753 stock options and 17,500 restricted stock awards were included in the calculation of Diluted EPS as such securities are dilutive. Inclusion of these securities resulted in 498,109 additional shares in the calculation of fully diluted earnings per share. For the comparable three-month period ended April 2, 2017, 1,180,031 stock options and 15,900 restricted stock awards were included in the calculation of Diluted EPS resulting in 244,591 additional shares in the calculation of fully diluted earnings per share. There were 214,000 and 1,015,050 outstanding stock options for the three-month periods ended April 1, 2018 and April 2, 2017, respectively, which were not included in EPS as the effect would be anti-dilutive.

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11. COMMITMENTS AND CONTINGENCIES

a. Purchase Commitments

As of April 1, 2018, we have made commitments to purchase approximately $2,483 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 first three months of 2018 and 2017 were as follows:

	Three-Month Periods Ended
	April 1, 2018			April 2, 2017
Accrued Warranty Obligations – Beginning	$	149		$	172
Accruals for Warranties Issued		14			7
Settlements Made		(6	)		(24	)
Accrued Warranty Obligations – Ending	$	157		$	155

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 final 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 fire while parked at London Heathrow Airport. Following an investigation of this incident conducted by U.K. and U.S. regulatory authorities as well as by the manufacturer of the aircraft, a final report was issued by the Air Accidents Investigative Branch – UK Civil Aviation regulatory authority, with findings indicating that the fire was primarily caused by circumstances related to the plane’s emergency locator transmitter (“ELT”) manufactured and installed by another company.   A component of the ELT is a battery pack which incorporates Ultralife’s industry-standard lithium manganese dioxide non-rechargeable D-cell, which Ultralife has produced since 2001, with wide-use in global defense and commercial applications.

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

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

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12. 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, 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 April 1, 2018:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	17,224	$	5,845	$	-		$	23,069
Segment Contribution		5,036		2,246		(4,926	)		2,356
Interest, Financing and Miscellaneous Expense, Net						(133	)		(133	)
Tax Provision						(55	)		(55	)
Non-Controlling Interest						(17	)		(17	)
Net Income Attributable to Ultralife								$	2,151

Three-Month Period Ended April 2, 2017:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	17,479	$	4,556	$	-		$	22,035
Segment Contribution		4,930		1,960		(5,049	)		1,841
Interest, Financing and Miscellaneous Expense, Net						(93	)		(93	)
Tax Provision						(87	)		(87	)
Non-Controlling Interest						(6	)		(6	)
Net Income Attributable to Ultralife								$	1,655

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

Commercial and Government/Defense Revenue Information: 

Three-Month Period Ended April 1, 2018:	Total Revenue		Commercial		Government/ Defense
Battery & Energy Products	$	17,224	$	9,626	$	7,598
Communications Systems		5,845		-		5,845
Total	$	23,069	$	9,626	$	13,443
				42%		58%

Three-Month Period Ended April 2, 2017:	Total Revenue		Commercial		Government/ Defense
Battery & Energy Products	$	17,479	$	9,351	$	8,128
Communications Systems		4,556		-		4,556
Total	$	22,035	$	9,351	$	12,684
				42%		58%

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

Three-Month Period Ended April 1, 2018:	Total Revenue		United States		Non-United States
Battery & Energy Products	$	17,224	$	9,415	$	7,809
Communications Systems		5,845		5,573		272
Total	$	23,069	$	14,988	$	8,081
				65%		35%

Three-Month Period Ended April 2, 2017:	Total Revenue		United States		Non-United States
Battery & Energy Products	$	17,479	$	9,422	$	8,057
Communications Systems		4,556		4,468		88
Total	$	22,035	$	13,890	$	8,145
				63%		37%

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

13. RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS

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

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

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

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

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

In March 2018, the FASB issued Accounting Standards Update 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”. The standard adds various Securities and Exchange Commission (“SEC”) paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), which was effective immediately. The SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Tax Cuts and Jobs Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Tax Cuts and Jobs Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. We have accounted for the tax effects of the Tax Cuts and Jobs Act under the guidance of SAB 118. We have determined reasonable estimates for those effects and have recorded provisional amounts in our Consolidated Financial Statements as of April 1, 2018 and December 31, 2017.

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

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This report contains certain forward-looking statements and information that are based on the beliefs of management as well as assumptions made by and information currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, our reliance on certain key customers; potential costs because of the warranties we supply with our products and services; possible future declines in demand for the products that use our batteries or communications systems; the unique risks associated with our China operations; 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 supply of 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; negative publicity of Lithium-ion batteries; our resources being overwhelmed by our growth prospects; our ability to retain top management and key personnel; our exposure to foreign currency fluctuations; our 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, 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, 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 Form 10-K for the year ended December 31, 2017.

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

General

We offer products and services ranging from power solutions to communications and electronics systems to customers across the globe in the government, defense and commercial sectors. With an emphasis on strong engineering and a collaborative approach to problem solving, we design and manufacture power and communications systems including: rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems and accessories, and custom engineered systems. We continually evaluate ways to grow, including 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.

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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. We enjoy strong name recognition in our markets under our Ultralife® Batteries, Lithium Power®, McDowell Research®, AMTITM, ABLETM, ACCUTRONICS™, ACCUPRO™,  and ENTELLION™ brands. We have sales, operations and product development facilities in North America, Europe and Asia.

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

Overview

Consolidated revenues of $23,069 for the three-month period ended April 1, 2018, increased by $1,034 or 4.7%, from $22,035 during the three-month period ended April 2, 2017, due to higher medical and government/defense shipments.

Gross profit for the three-month period ended April 1, 2018 was $7,282 or 31.6% of revenues, compared to $6,890 or 31.3% of revenues, for the same quarter a year ago. The 30 basis point improvement in gross margin resulted from the favorable product mix of our 2018 shipments.

Operating expenses decreased to $4,926 during the three-month period ended April 1, 2018, compared to $5,049 during the three-month period ended April 2, 2017. The decrease of $123 or 2.4% was attributable to continued tight control over discretionary spending.

Operating income for the three-month period ended April 1, 2018 was $2,356 or 10.2% of revenues, compared to $1,841 or 8.4% for the year-earlier period. The increase in operating income resulted from revenue growth, improvement in gross margin and reduction in operating expenses.

Net income attributable to Ultralife was $2,151, or $0.14 per share – basic and $0.13 per share – diluted, for the three-month period ended April 1, 2018, compared to $1,655, or $0.11 per share – basic and diluted, for the three-month period ended April 2, 2017.  Adjusted EBITDA, defined as net income (loss) attributable to Ultralife before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expenses/income that we do not consider reflective of our ongoing operations, amounted to $2,973 or 12.9% of revenues in the first quarter of 2018 compared to $2,477 or 11.2% of revenues for the first quarter of 2017. See the section “Adjusted EBITDA” beginning on page 21 for a reconciliation of Adjusted EBITDA to net income attributable to Ultralife.

A strong start to the year, backlog, and strict adherence to our business model parameters gives us confidence that we will deliver another year of profitable growth.

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Results of Operations

Three-Month Periods Ended April 1, 2018 and April 2, 2017

Revenues. Consolidated revenues for the three-month period ended April 1, 2018 amounted to $23,069, an increase of $1,035, or 4.7%, from the $22,035 reported for the three-month period ended April 2, 2017.

Battery & Energy Products revenues decreased $254, or 1.5%, from $17,479 for the three-month period ended April 2, 2017 to $17,224 for the three month period ended April 1, 2018. Commercial revenues for the first quarter of 2018 comprised 56% of total revenues for the segment and increased 2.9% over the prior year period. This increase primarily resulted from 18.9% revenue growth attributable to our medical customers, partially offset by a reduction in the sales of our 9-Volt batteries.   Government and defense sales decreased 6.5% primarily due to the timing of shipments to a large non-U.S. global defense prime contractor and the U.S. Department of Defense.

Communications Systems revenues increased $1,289, or 28.3%, from $4,556 during the three-month period ended April 2, 2017 to $5,845 for the three-month period ended April 1, 2018. This increase is attributable to shipments of our Vehicle Amplifier-Adapters for the U.S. Army’s Special Force Assistance Brigades under a contract awarded in December 2017 and an increased shipment of our core products, such as 20-watt amplifiers and universal vehicle adapters. 

Cost of Products Sold. Cost of products sold totaled $15,787 for the quarter ended April 1, 2018, an increase of $642, or 4.2%, from the $15,145 reported for the same three-month period a year ago. Consolidated cost of products sold as a percentage of total revenue decreased from 68.7% for the three-month period ended April 2, 2017 to 68.4% for the three-month period ended April 1, 2018. Correspondingly, consolidated gross margin was 31.6% for the three-month period ended April 1, 2018, compared with 31.3% for the three-month period ended April 2, 2017, primarily reflecting sales mix.

For our Battery & Energy Products segment, gross profit for the first quarter of 2018 was $5,036 or 29.2% of revenues, an increase of $106 or 2.2% from gross profit of $4,930, or 28.2% of revenues, for the first quarter of 2017. Battery & Energy Products’ gross margin as a percentage of revenues increased for the three-month period ended April 1, 2018 by 100 basis points, reflecting product mix.

For our Communications Systems segment, gross profit for the first quarter of 2018 was $2,246 or 38.4% of revenues, an increase of $286 or 14.6%, from gross profit of $1,960, or 43.0% of revenues, for the first quarter of 2017. The 460 basis point decrease in gross margin as a percentage of revenue during 2018 is driven by product mix.

Operating Expenses. Total operating expenses for the three-month period ended April 1, 2018 totaled $4,926, a decrease of $123 or 2.4% from the $5,049 reported during the three-month period ended April 2, 2017. The decrease resulted from continued tight control over discretionary spending in 2018.

Overall, operating expenses as a percentage of revenues were 21.4% for the quarter ended April 1, 2018 compared to 22.9% for the quarter ended April 2, 2017. Amortization expense associated with intangible assets related to our acquisitions was $102 for the first quarter of 2018 ($64 in selling, general and administrative expenses and $38 in research and development costs), compared with $105 for the first quarter of 2017 ($65 in selling, general, and administrative expenses and $40 in research and development costs). Research and development costs were $1,101 for the three-month period ended April 1, 2018, a decrease of $37 or 3.3%, from $1,138 for the three-months ended April 2, 2017. The decrease primarily reflects the timing of development and testing costs associated with new products. Selling, general, and administrative expenses decreased $86 or 2.2%, to $3,825 during the first quarter of 2018 from $3,911 during the first quarter of 2017. The decrease is attributable to continued tight control over discretionary administrative spending.

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Other Expense. Other expense totaled $133 for the three-month period ended April 1, 2018 compared to $93 for the three-month period ended April 2, 2017. Interest and financing expense decreased $35, from $68 for the first quarter of 2017 to $33 for the comparable period in 2018. The decrease is due to the more favorable terms of our Revolving Credit Agreement which was executed on May 31, 2017. Miscellaneous expense amounted to $100 for the first quarter of 2018 compared with $25 for the first quarter of 2017, primarily due to transactions impacted by foreign currency fluctuations between the U.S. dollar relative to Pounds Sterling and the Euro.

Income Taxes. The tax provision for the 2017 first quarter was $55 compared to $87 for the first quarter of 2017. 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 was $2,151, or $0.14 per share – basic and $0.13 per share – diluted, for the three-month period ended April 1, 2018, compared to $1,655, or $0.11 per share – basic and diluted, for the three-month period ended April 2, 2017.  Average weighted common shares outstanding used to compute diluted earnings per share increased from 15,656,288 in the first quarter of 2017 to 16,202,314 in the first quarter of 2018.  The increase in 2018 is attributable to stock option exercises since the first quarter of 2017 and an increase in the weighted average stock price to compute diluted shares from $5.47 for the first quarter of 2017 to $8.17 for the first quarter of 2018.

Adjusted EBITDA

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. 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 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 (affecting relative amortization expense), the age and book value of facilities and equipment (affecting relative depreciation expense) and other significant non-operating expenses or income. We also present Adjusted EBITDA from operations because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. We reconcile Adjusted EBITDA to Net income (loss) attributable to Ultralife; the most comparable financial measure under U.S. generally accepted accounting principles (“U.S. GAAP”).

We use Adjusted EBITDA in our decision-making processes relating to the operation of our business together with U.S. GAAP financial measures such as income (loss) from operations. 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 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.

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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:

● Adjusted EBITDA does not reflect (1) our cash expenditures or future requirements for capital expenditures or contractual commitments; (2) changes in, or cash requirements for, our working capital needs; (3) the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; (4) income taxes or the cash requirements for any tax payments; and (5) all of the costs associated with operating our business;

● although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA from continuing operations does not reflect any cash requirements for such replacements;

● while stock-based compensation is a component of cost of products sold and operating expenses, the impact on our consolidated financial statements compared to other companies can vary significantly due to such factors as assumed life of the stock-based awards and assumed volatility of our common stock; and

● other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally. Adjusted EBITDA is calculated as follows for the periods presented:

	Three-Month Periods Ended
	April 1,		April 2,
	2018		2017
Net Income Attributable to Ultralife	$	2,151	$	1,655
Add:
Interest and Financing Expense, Net		33		69
Income Tax Provision		55		87
Depreciation Expense		484		503
Amortization of Intangible Assets and Financing Fees		111		123
Stock-Based Compensation Expense		139		40
Adjusted EBITDA	$	2,973	$	2,477

Liquidity and Capital Resources

As of April 1, 2018, cash totaled $18,330, consistent with the cash balance at the beginning of the year.  During the three-month period ended April 1, 2018, we used cash in our operations of $921, as compared to $2,739 of cash generated from operations during the three-month period ended April 2, 2017, a decrease of $3,660.  Cash used in operations in 2018 consisted of net income of $2,168 and non-cash expenses (depreciation, amortization and stock-based compensation) totaling $734.  This was more than offset by an increase in accounts receivable of $939 primarily due to the timing of payments from a large customer, an increase in inventory of $502 to service 2018 backlog, and a net decrease in accounts payable and other working capital of $2,382 largely attributable to timing of inventory receipts and payments. 

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Cash provided by operations for the three-month period ended April 2, 2017 included net income of $1,661 plus non-cash expenses (depreciation, amortization and stock-based compensation) totaling $666, and a decrease in inventory of $771 resulting from the usage of inventory to service the 2017 backlog, partially offset by a $537 increase in accounts receivables due primarily to the timing of sales during the first quarter of 2017, and a net increase in accounts payable and other working capital items of $178 due in large part to procuring inventory associated with servicing backlog.    

Cash used in investing activities for the three-month periods ended April 1, 2018 and April 2, 2017 consisted of capital expenditures of $172 and $581, respectively.

Cash provided by financing activities for the three months ended April 1, 2018 consisted of stock option exercise proceeds of $939.  Cash provided by financing activities for the three months ended April 2, 2017 consisted of stock option exercise proceeds of $741. 

As of April 1, 2018, we had made commitments to purchase approximately $2,483 of production machinery and equipment, which we expect to fund through operating cash flows or debt borrowings.

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

Debt Commitments

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.

Critical Accounting Policies

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

During the three months of 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.

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Item 4.  Controls and Procedures

Evaluation Of Disclosure Controls And Procedures

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.

Changes In Internal Control Over Financial Reporting

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.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Dreamliner Litigation 

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

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

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

Item 6. EXHIBITS

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

24

SIGNATURES

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.

	ULTRALIFE CORPORATION
	(Registrant)
Date: May 3, 2018	By:   /s/   Michael D. Popielec
	Michael D. Popielec
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: May 3, 2018	By:   /s/   Philip A. Fain
	Philip A. Fain
	Chief Financial Officer and Treasurer
	(Principal Financial Officer and
	Principal Accounting Officer)

25

Index to Exhibits

31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

26

EX-31.1

Exhibit 31.1

I, Michael D. Popielec, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ultralife Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 3, 2018	By:   /s/   Michael D. Popielec
	Michael D. Popielec
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Philip A. Fain, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ultralife Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 3, 2018	By:   /s/   Philip A. Fain
	Philip A. Fain
	Chief Financial Officer and Treasurer

EX-32

Exhibit 32

Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), Michael D. Popielec and Philip A. Fain, the President and Chief Executive Officer and Chief Financial Officer and Treasurer, respectively, of Ultralife Corporation, certify that (i) the Quarterly Report on Form 10-Q for the quarter ended April 1, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Ultralife Corporation.

A signed original of this written statement required by Section 906 has been provided to Ultralife Corporation and will be retained by Ultralife Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

Date: May 3, 2018	By:   /s/   Michael D. Popielec
	Michael D. Popielec
	President and Chief Executive Officer
Date: May 3, 2018	By:   /s/   Philip A. Fain
	Philip A. Fain
	Chief Financial Officer and Treasurer

XML

Document And Entity Information - shares	3 Months Ended
	Apr. 01, 2018	May 01, 2018
Document Information [Line Items]
Entity Registrant Name	Ultralife Corp
Entity Central Index Key	0000875657
Trading Symbol	ulbi
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		15,913,644
Document Type	10-Q
Document Period End Date	Apr. 01, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Current assets:
Cash	$ 18,239	$ 18,241
Restricted Cash	91	89
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $298 and $292, Respectively	15,730	14,657
Inventories, Net	26,961	26,326
Prepaid Expenses and Other Current Assets	2,730	2,603
Total Current Assets	63,751	61,916
Property, Equipment and Improvements, Net	7,359	7,570
Goodwill	20,698	20,458
Other Intangible Assets, Net	7,119	7,085
Deferred Income Taxes	32	32
Security Deposits and Other Non-Current Assets	118	125
Total Assets	99,077	97,186
Current Liabilities:
Accounts Payable	7,545	8,787
Accrued Compensation and Related Benefits	1,694	2,413
Accrued Expenses and Other Current Liabilities	2,595	2,871
Income Taxes Payable	245	168
Total Current Liabilities	12,079	14,239
Deferred Income Taxes	3,874	3,867
Other Non-Current Liabilities	31	31
Total Liabilities	15,984	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 – 19,891,937 Shares at April 1, 2018 and 19,670,928 Shares at December 31, 2017; Outstanding – 15,872,226 Shares at April 1, 2018 and 15,651,217 at December 31, 2017	1,989	1,966
Capital in Excess of Par Value	181,312	180,211
Accumulated Deficit	(80,743)	(82,894)
Accumulated Other Comprehensive Loss	(859)	(1,611)
Treasury Stock - At Cost; 4,019,711 at April 1, 2018 and 4,019,711 Shares at December 31, 2017	(18,469)	(18,469)
Total Ultralife Corporation Equity	83,230	79,203
Non-Controlling Interest	(137)	(154)
Total Shareholders’ Equity	83,093	79,049
Total Liabilities and Shareholders' Equity	$ 99,077	$ 97,186

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Trade accounts receivable, allowance for doubtful accounts	$ 298	$ 292
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized (in shares)	40,000,000	40,000,000
Common stock, shares issued (in shares)	19,891,937	19,670,928
Common stock, shares outstanding (in shares)	15,872,226	15,651,217
Treasury stock, shares (in shares)	4,019,711	4,019,711

XML

Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Revenues	$ 23,069	$ 22,035
Cost of Products Sold	15,787	15,145
Gross Profit	7,282	6,890
Operating Expenses:
Research and Development	1,101	1,138
Selling, General and Administrative	3,825	3,911
Total Operating Expenses	4,926	5,049
Operating Income	2,356	1,841
Other Expenses:
Interest and Financing Expense	(33)	(68)
Miscellaneous	(100)	(25)
Total Other Expenses	(133)	(93)
Income Before Income Tax Provision	2,223	1,748
Tax Provision	(55)	(87)
Net Income	2,168	1,661
Non-Controlling Interest	(17)	(6)
Net Income Attributable to Ultralife Corporation	2,151	1,655
Other Comprehensive Income:
Foreign Currency Translation Adjustments	752	259
Comprehensive Income Attributable to Ultralife Corporation	$ 2,903	$ 1,914
Net Income Per Share Attributable to Ultralife Common Shareholders – Basic (in dollars per share)	$ 0.14	$ 0.11
Net Income Per Share Attributable to Ultralife Common Shareholders – Diluted (in dollars per share)	$ 0.13	$ 0.11
Weighted Average Shares Outstanding – Basic (in shares)	15,704	15,412
Potential Common Shares (in shares)	498	244
Weighted Average Shares Outstanding – Diluted (in shares)	16,202	15,656

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
OPERATING ACTIVITIES:
Net Income	$ 2,168	$ 1,661
Adjustments to Reconcile Net Income to Net Cash (Used In) Provided By Operating Activities:
Depreciation	484	503
Amortization of Intangible Assets	102	105
Amortization of Financing Fees	9	18
Stock-Based Compensation	139	40
Deferred Income Taxes	(1)	36
Changes in Operating Assets and Liabilities:
Accounts Receivable	(939)	(537)
Inventories	(502)	771
Prepaid Expenses and Other Assets	(86)	50
Accounts Payable and Other Liabilities	(2,295)	92
Net Cash (Used In) Provided By Operating Activities	(921)	2,739
INVESTING ACTIVITIES:
Purchases of Property, Equipment and Improvements	(172)	(581)
Net Cash Used In Investing Activities	(172)	(581)
FINANCING ACTIVITIES:
Proceeds from Stock Option Exercise	939	741
Net Cash Provided By Financing Activities	939	741
Effect of Exchange Rate Changes on Cash	154	74
INCREASE IN CASH		2,973
Cash, Beginning of Period	18,241	10,706
Cash, End of Period	$ 18,239	$ 13,679

XML

Note 1 - Basis of Presentation

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

1. BASIS OF PRESENTATION

The accompanying unaudited Consolidated Financial Statements of Ultralife Corporation (the “Company”) and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Rule

8

-

03

of Regulation S-

X.

Accordingly, they do

not

include all of the information and footnotes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the Consolidated Financial Statements have been included. Results for interim periods should

not

be considered indicative of results to be expected for a full year. Reference should be made to the Consolidated Financial Statements and related notes thereto contained in our Form

10

-K for the year ended

December 31, 2017.

The

December 31, 2017

consolidated balance sheet data referenced herein was derived from audited financial statements, but does

not

include all disclosures required by GAAP.

Our monthly closing schedule is a

4/4/5

weekly-based cycle for each fiscal quarter, as opposed to a calendar month-based cycle for each fiscal quarter. While the actual dates for the quarter-ends will change slightly each year, we believe that there are

not

any material differences when making quarterly comparisons.

XML

Note 2 - Revenues

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

2. 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 add 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

months ended

April 1, 2018

were

not

material.

As of

April 1, 2018,

the Company had

no

unsatisfied performance obligations for contracts with an original expected duration of greater than

one

year. Pursuant to Topic

606,

we have applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations.

Deferred revenue, unbilled revenue and deferred contract costs recorded on our Consolidated Balance Sheets as of

April 1, 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 generallly

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

April 1, 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 as applicable on our Consolidated Balance Sheets. The Company does

not

offer separate service-type warranties on its products.

See Note

12

for disaggregated revenue information.

XML

Note 3 - Cash

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

3. CASH

The Company had cash and restricted cash totaling

$18,330

and

$18,330

as of

April 1, 2018

and

December 31, 2017,

respectively.

	April 1,		December 31,
	2018		2017
Cash	$	18,239	$	18,241
Restricted Cash		91		89
Total	$	18,330	$	18,330

Restricted cash represents deposits withheld by the Dutch tax authorities and

third

party VAT representatives in connection with a previously utilized logistics arrangement in the Netherlands.

XML

Note 4 - Inventories

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

4. INVENTORIES

Inventories are stated at the lower of cost or market, net of obsolescence reserves, with cost determined under the

first

-in,

first

-out (FIFO) method. The composition of inventories, net was:

	April 1 ,		December 31,
	2018		2017
Raw Materials	$	15,234	$	14,606
Work In Process		2,085		2,013
Finished Goods		9,642		9,707
Total	$	26,961	$	26,326

XML

Note 5 - Property, Equipment and Improvements

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

5. PROPERTY, EQUIPMENT AND IMPROVEMENTS

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

	April 1 ,			December 31,
	2018			2017
Land	$	123		$	123
Buildings and Leasehold Improvements		7,900			7,858
Machinery and Equipment		51,116			50,852
Furniture and Fixtures		2,024			2,005
Computer Hardware and Software		5,414			5,338
Construction In Process		487			535
		67,064			66,711
Less: Accumulated Depreciation		(59,705	)		(59,141	)
Property, Equipment and Improvements, Net	$	7,359		$	7,570

Depreciation expense for property, equipment and improvements was

$484

and

$503

for the

three

-month periods ended

April 1, 2018

and

April 2, 2017,

respectively.

XML

Note 6 - Goodwill, Intangible Assets and Long Term Assets

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

6. GOODWILL, INTANGIBLE ASSETS AND LONG TERM ASSETS

a. Goodwill

The following table summarizes the goodwill activity by segment for the

three

-month periods ended

April 1, 2018

and

April 2, 2017:

	Battery & Energy		Communi- cations
	Products		Systems		Total
Balance - December 31, 2016	$	8,472	$	11,493	$	19,965
Effect of Foreign Currency Translation		83		-		83
Balance – April 2, 2017		8,555		11,493		20,048
Effect of Foreign Currency Translation		410		-		410
Balance - December 31, 2017		8,965		11,493		20,458
Effect of Foreign Currency Translation		240		-		240
Balance – April 1, 2018	$	9,205	$	11,493	$	20,698

b. Other Intangible Assets

The composition of other intangible assets was:

	at April 1, 2018
			Accumulated
	Cost		A mortization		Net
Trademarks	$	3,415	$	-	$	3,415
Customer Relationships		6,720		4,277		2,443
Patents and Technology		5,586		4,641		945
Distributor Relationships		377		377		-
Trade Name		408		92		316
Total Other Intangible Assets	$	16,506	$	9,387	$	7,119

	at December 31, 2017
			Accumulated
	Cost		A mortization		Net
Trademarks	$	3,411	$	-	$	3,411
Customer Relationships		6,618		4,208		2,410
Patents and Technology		5,545		4,595		950
Distributor Relationships		377		377		-
Trade Name		393		79		314
Total Other Intangible Assets	$	16,344	$	9,259	$	7,085

Amortization expense for intangible assets was

$102

and

$105

for the

three

-month periods ended

April 1, 2018

and

April 2, 2017,

respectively. Amortization included in research and development expenses was

$38

and

$40

for the

three

-month periods ended

April 1, 2018

and

April 2, 2017,

respectively. Amortization included in selling, general and administrative expenses was

$64

and

$65

for the

three

-month periods ended

April 1, 2018

and

April 2, 2017,

respectively.

The change in the cost value of total intangible assets from

December 31, 2017

to

April 1, 2018

is a result of the effect of foreign currency translations.

XML

Note 7 - Revolving Credit Agreement

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

7. 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

senior secured, cash flow-based, revolving credit facility that includes a

$1,500

letter of credit subfacility (the “Credit Facility”). The Credit Agreement provides that the Credit Facility

may

be increased with the Bank’s concurrence to

$50,000

prior to the last

six

months of the term and is scheduled to expire on

May 30, 2020.

The Credit Facility replaces the Company’s asset-based revolving credit facility with PNC Bank National Association which expired in accordance with its terms on

May 24, 2017 (

the “Prior Credit Agreement”).

The Credit Facility provides the Company with an aggregate of up to

$30,000

of loan and letter of credit availability determined based on a borrowing base formula. The Company

may

use advances under the Credit Facility for general working capital purposes, to reimburse drawings under letters of credit and to fund capital expenditures and acquisitions, all subject to the terms of the Credit Agreement. The Company had

no

amounts drawn under the Prior Credit Agreement at the time of its expiration and has

not

borrowed under the Credit Facility.

Interest will accrue on outstanding indebtedness under the Credit Agreement at the Overnight LIBOR Rate plus the applicable margin, or at the Base Rate plus the applicable margin, as selected by the Company. During the period beginning

May 31, 2017

and ending

April 1, 2018,

the applicable margin for Overnight LIBOR Loans is

185

basis points, the applicable margin for Base Rate Loans is negative

50

basis points 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

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

In addition to the affirmative and negative covenants, the Company must maintain a fixed charge coverage ratio of

1.15

to

1.0,

tested each fiscal quarter for the trailing

four

fiscal quarters, and a minimum tangible net worth of

$40,000,

tested as of the end of each calendar year. The Company was in full compliance with its covenants as of

April 1, 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

April 1, 2018,

we had

no

outstanding balance under the Credit Facility and

no

outstanding letters of credit related to the Credit Facility.

XML

Note 8 - Shareholders' Equity

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Shareholders' Equity and Share-based Payments [Text Block]

8. SHAREHOLDERS’ EQUITY

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

	Three-Month Periods E nded
	April 1,		April 2 ,
	2018		2017
Stock Options	$	123	$	36
Restricted Stock Grants		16		4
Total	$	139	$	40

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

April 1, 2018,

there was

$309

of total unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted average period of

1.0

years.

The following table summarizes stock option activity for the

three

-month period ended

April 1, 2018:

	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		14,000			7.16
Exercised		(221,009	)		4.60
Forfeited or Expired		(114,449	)		11.60
Outstanding at April 1, 2018		1,538,753		$	5.91		3.62	$	6,786
Vested and Expected to Vest at April 1, 2018		1,449,498		$	5.96		3.50	$	6,350
Exercisable at April 1, 2018		917,915		$	4.82		2.89	$	4,751

The following assumptions were used to value stock options granted during the

three

months ended

April 1, 2018:

Risk-Free Interest Rate	1.7	%
Volatility Factor	50	%
Weighted Average Expected Life (Years)	5
Dividends	0.0	%

The weighted average grant date fair value of options granted during the

three

months ended

April 1, 2018

was

$3.19.

FASB’s guidance for share-based payments requires cash flows from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised stock options in excess of the deferred tax asset attributable to stock compensation costs for such stock options. We did

not

record any excess tax benefits in the

first

three

months of

2018

or

2017.

Cash received from stock option exercises under our stock-based compensation plans for the

three

-month periods ended

April 1, 2018

and

April 2, 2017

was

$939

and

$741,

respectively.

In

January 2018,

17,500

shares of restricted stock were awarded to certain of our employees. These shares vest in equal annual installments over

three

years. The weighted average grant date fair value of these awards was

$7.16

per share. Unrecognized compensation cost related to these restricted shares was

$110

at

April 1, 2018.

XML

Note 9 - Income Taxes

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9. 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 Tax 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

April 1, 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 GILTI provisions. At

April 2018,

we were

not

able to reasonably estimate, and therefore have

not

recorded, deferred taxes for the GILTI provisions. We have

not

yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future periods or use the period cost method.

For the

three

-month periods ended

April 1, 2018

and

April 2, 2017,

we recognized

$55

and

$87,

respectively, in income tax expense. These are detailed as follows:

	Three-Month Periods E nded
	April 1 ,			April 2 ,
	2018			2017
Current Income Tax Provision:
Foreign	$	52		$	21
Federal		-			22
State		4			5
Deferred Income Tax (Benefit) Provision		(1	)		39
Total	$	55		$	87

The deferred income tax benefit for

2018

represents the amortization of certain intangible assets of Accutronics (U.K.) largely offset by 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. The deferred income tax provision for

2017

reflects the higher previously-enacted U.S corporate tax rate. The current income tax provisions for

2018

and

2017

are primarily due to the income generated by our foreign operations during the respective periods.

Our effective consolidated tax rates for the

three

-month periods ended

April 1, 2018

and

April 2, 2017

were:

	Three-Month P erio ds E nded
	April 1,			April 2 ,
	2018			2017
Income Before Income Taxes	$	2,223		$	1,748
Income Tax Provision		55			87
Effective Income Tax Rate		2.5	%		5.0	%

In

2018

and

2017,

in the U.S. and for certain past operations in the U.K., we recognize a valuation allowance for our net operating loss carryforwards and other deferred tax assets that cannot be offset by reversing temporary differences. The recognition of the valuation allowance is based on an assessment of all available evidence, both positive and negative, weighted based on objective verifiability. The assessment of the realizability of the U.S. deferred tax assets was based on a number of factors including our history of operating losses, our historical operating volatility, our historical inability to accurately forecast earnings for future periods and the continued uncertainty of the general business climate. The use of our U.K. net operating loss carryforwards

may

be limited due to the change in the past U.K. operation. Based on our assessment of all available evidence and its weighting based on objective verifiability, we concluded that the realizability of these deferred tax assets is

not

more likely than

not.

In both

2018

and

2017,

we have

not

recognized a valuation allowance against our other foreign deferred tax assets as we believe that it is more likely than

not

that they will be realized. We will continue to evaluate the realizability of our deferred tax assets in future periods.

As of

December 31, 2017,

we have domestic and foreign net operating losses (“NOL”) totaling approximately

$69,594

and

$12,760,

respectively, and domestic tax credits of approximately

$1,837,

available to reduce future taxable income. Included in our NOL carryforwards are foreign loss carryforwards of approximately

$12,760,

nearly all of which can be carried forward indefinitely. The domestic NOL carryforward of

$69,594

expires beginning in

2019

through

2034.

As of

April 1, 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

April 1, 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

2002

through

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

2017

remain subject to examination by the respective foreign tax jurisdiction authorities.

XML

Note 10 - Earnings Per Share

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

10. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing earnings attributable to the Company’s common shareholders by the weighted-average shares outstanding during the period. Diluted EPS includes the dilutive effect of securities, if any, and is calculated using the treasury stock method. For the

three

-month period ended

April 1, 2018,

1,324,753

stock options and

17,500

restricted stock awards were included in the calculation of Diluted EPS as such securities are dilutive. Inclusion of these securities resulted in

498,109

additional shares in the calculation of fully diluted earnings per share. For the comparable

three

-month period ended

April 2, 2017,

1,180,031

stock options and

15,900

restricted stock awards were included in the calculation of Diluted EPS resulting in

244,591

additional shares in the calculation of fully diluted earnings per share. There were

214,000

and

1,015,050

outstanding stock options for the

three

-month periods ended

April 1, 2018

and

April 2, 2017,

respectively, which were

not

included in EPS as the effect would be anti-dilutive.

XML

Note 11 - Commitments and Contingencies

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

11. COMMITMENTS AND CONTINGENCIES

a. Purchase Commitments

As of

April 1, 2018,

we have made commitments to purchase approximately

$2,483

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

first

three

months of

2018

and

2017

were as follows:

	Three -Month P eriod s E nded
	April 1 , 2018			April 2 , 2017
Accrued Warranty Obligations – Beginning	$	149		$	172
Accruals for Warranties Issued		14			7
Settlements Made		(6	)		(24	)
Accrued Warranty Obligations – Ending	$	157		$	155

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 final 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 fire while parked at London Heathrow Airport. Following an investigation of this incident conducted by U.K. and U.S. regulatory authorities as well as by the manufacturer of the aircraft, a final report was issued by the Air Accidents Investigative Branch – UK Civil Aviation regulatory authority, with findings indicating that the fire was primarily caused by circumstances related to the plane’s emergency locator transmitter (“ELT”) manufactured and installed by another company.   A component of the ELT is a battery pack which incorporates Ultralife’s industry-standard lithium manganese dioxide non-rechargeable D-cell, which Ultralife has produced since

2001,

with wide-use in global defense and commercial applications.

On

May 4, 2015,

we were notified of a lawsuit in which we were named, along with other suppliers to the aircraft manufacturer, concerning that

2013

fire, which was filed by Ethiopian Airlines Enterprise in the Commercial Court, Queen’s Bench Division of the High Court of Justice, London. We immediately referred this matter to our insurers.

This lawsuit has now been resolved (

February 2018),

the claimant has terminated the action against the Company, and the Court has acknowledged and consented to this termination. The matter was terminated without financial consequences to the Company.

XML

Note 12 - Business Segment Information

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

12. 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, 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

April 1, 2018

:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	17,224	$	5,845	$	-		$	23,069
Segment Contribution		5,036		2,246		(4,926	)		2,356
Interest, Financing and Miscellaneous Expense, Net						(133	)		(133	)
Tax Provision						(55	)		(55	)
Non-Controlling Interest						(17	)		(17	)
Net Income Attributable to Ultralife								$	2,151

Three-Month Period Ended

April 2,

201

7

:

	Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	17,479	$	4,556	$	-		$	22,035
Segment Contribution		4,930		1,960		(5,049	)		1,841
Interest, Financing and Miscellaneous Expense, Net						(93	)		(93	)
Tax Provision						(87	)		(87	)
Non-Controlling Interest						(6	)		(6	)
Net Income Attributable to Ultralife								$	1,655

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

Commercial and Government/Defense Revenue Information:

 

Three-Month Period Ended April 1, 2018:	Total Revenue		Commercial		Government/ Defense
Battery & Energy Products	$	17,224	$	9,626	$	7,598
Communications Systems		5,845		-		5,845
Total	$	23,069	$	9,626	$	13,443
				42%		58%

Three-Month Period Ended April 2, 2017:	Total Revenue		Commercial		Government/ Defense
Battery & Energy Products	$	17,479	$	9,351	$	8,128
Communications Systems		4,556		-		4,556
Total	$	22,035	$	9,351	$	12,684
				42%		58%

U.S. and Non-U.S. Revenue Information

1

:

Three-Month Period Ended April 1, 2018:	Total Revenue		United States		Non-United States
Battery & Energy Products	$	17,224	$	9,415	$	7,809
Communications Systems		5,845		5,573		272
Total	$	23,069	$	14,988	$	8,081
				65%		35%

Three-Month Period Ended April 2, 2017:	Total Revenue		United States		Non-United States
Battery & Energy Products	$	17,479	$	9,422	$	8,057
Communications Systems		4,556		4,468		88
Total	$	22,035	$	13,890	$	8,145
				63%		37%

1

Sales classified to U.S. include shipments to U.S.-based prime contractors which in some cases

may

serve non-U.S. projects

XML

Note 13 - Recent Accounting Pronouncements and Developments

3 Months Ended

Apr. 01, 2018

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

13. RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS

In

May 2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update

2014

-

09

(Topic

606

) “Revenue from Contracts with Customers” related to revenue from contracts with customers. Under this standard, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard will replace most existing revenue recognition guidance under GAAP and permits the use of either the retrospective or cumulative effect transition method. Topic

606

is effective for annual reporting periods beginning after

December 15, 2017,

including interim periods within that reporting period. The Company has adopted Topic

606

effective

January 1, 2018.

See Note

2

for further discussion.

In

November 2016,

the FASB issued Accounting Standards Update

2016

-

18,

 “Statement of Cash Flows (Topic

230

): Restricted Cash”.  The standard is effective for fiscal years beginning after

December 31, 2017,

and interim periods within those fiscal years, and should be applied using a retrospective transition method for each period presented. The standard requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total cash amounts shown on the statements of cash flows. The Company has adopted this standard effective

January 1, 2018.

As a result, restricted cash has been included in the total cash amounts on the Company’s Consolidated Statement of Cash Flows for all periods presented and the required disclosures have been included in the Notes to Consolidated Financial Statements.

In

August 2016,

the FASB issued Accounting Standards Update

2016

-

15,

“Statement of Cash Flows (Topic

230

), Classification of Certain Cash Receipts and Cash Payments”. The standard makes

eight

targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. The new standard requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company has adopted this standard effective

January 1, 2018.

Adoption of this standard did

not

impact our Consolidated Financial Statements for the current or prior periods presented.

In

May 2017,

the FASB issued Accounting Standards Update

2017

-

09,

“Compensation – Stock Compensation (Topic

718

) – Scope of Modification Accounting”, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic

718.

  The standard is effective for fiscal years beginning after

December 15, 2017

and interim periods within those fiscal years. The standard is to be applied on a prospective basis to an award modified on or after the adoption date. The Company has adopted this standard effective

January 1, 2018.

Adoption of this standard did

not

impact our Consolidated Financial Statements.

There have been

no

developments to recently issued accounting standards, including the expected dates of adoption and anticipated effects on the Company’s Consolidated Financial Statements, from those disclosed in the Company’s

2017

Annual Report on Form

10

-K, except for the following:

In

March 2018,

the FASB issued Accounting Standards Update

2018

-

05,

“Income Taxes (Topic

740

): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin

No.

118”.

The standard adds various Securities and Exchange Commission (“SEC”) paragraphs pursuant to the issuance of the

December 2017

SEC Staff Accounting Bulletin

No.

118,

 “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB

118”

), which was effective immediately. The SEC issued SAB

118

to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Tax Cuts and Jobs Act in the period of enactment. SAB

118

allows disclosure that timely determination of some or all of the income tax effects from the Tax Cuts and Jobs Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. We have accounted for the tax effects of the Tax Cuts and Jobs Act under the guidance of SAB

118.

We have determined reasonable estimates for those effects and have recorded provisional amounts in our Consolidated Financial Statements as of

April 1, 2018

and

December 31, 2017.

XML

Note 3 - Cash (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

	April 1,		December 31,
	2018		2017
Cash	$	18,239	$	18,241
Restricted Cash		91		89
Total	$	18,330	$	18,330

XML

Note 4 - Inventories (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	April 1 ,		December 31,
	2018		2017
Raw Materials	$	15,234	$	14,606
Work In Process		2,085		2,013
Finished Goods		9,642		9,707
Total	$	26,961	$	26,326

XML

Note 5 - Property, Equipment and Improvements (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	April 1 ,			December 31,
	2018			2017
Land	$	123		$	123
Buildings and Leasehold Improvements		7,900			7,858
Machinery and Equipment		51,116			50,852
Furniture and Fixtures		2,024			2,005
Computer Hardware and Software		5,414			5,338
Construction In Process		487			535
		67,064			66,711
Less: Accumulated Depreciation		(59,705	)		(59,141	)
Property, Equipment and Improvements, Net	$	7,359		$	7,570

XML

Note 6 - Goodwill, Intangible Assets and Long Term Assets (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Schedule of Goodwill [Table Text Block]

	Battery & Energy		Communi- cations
	Products		Systems		Total
Balance - December 31, 2016	$	8,472	$	11,493	$	19,965
Effect of Foreign Currency Translation		83		-		83
Balance – April 2, 2017		8,555		11,493		20,048
Effect of Foreign Currency Translation		410		-		410
Balance - December 31, 2017		8,965		11,493		20,458
Effect of Foreign Currency Translation		240		-		240
Balance – April 1, 2018	$	9,205	$	11,493	$	20,698

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	at April 1, 2018
			Accumulated
	Cost		A mortization		Net
Trademarks	$	3,415	$	-	$	3,415
Customer Relationships		6,720		4,277		2,443
Patents and Technology		5,586		4,641		945
Distributor Relationships		377		377		-
Trade Name		408		92		316
Total Other Intangible Assets	$	16,506	$	9,387	$	7,119

	at December 31, 2017
			Accumulated
	Cost		A mortization		Net
Trademarks	$	3,411	$	-	$	3,411
Customer Relationships		6,618		4,208		2,410
Patents and Technology		5,545		4,595		950
Distributor Relationships		377		377		-
Trade Name		393		79		314
Total Other Intangible Assets	$	16,344	$	9,259	$	7,085

XML

Note 7 - Revolving Credit Agreement (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Interest Rate Margins on Outstanding Debt [Table Text Block]

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

XML

Note 8 - Shareholders' Equity (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

	Three-Month Periods E nded
	April 1,		April 2 ,
	2018		2017
Stock Options	$	123	$	36
Restricted Stock Grants		16		4
Total	$	139	$	40

Share-based Compensation, Stock Options, Activity [Table Text Block]

	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		14,000			7.16
Exercised		(221,009	)		4.60
Forfeited or Expired		(114,449	)		11.60
Outstanding at April 1, 2018		1,538,753		$	5.91		3.62	$	6,786
Vested and Expected to Vest at April 1, 2018		1,449,498		$	5.96		3.50	$	6,350
Exercisable at April 1, 2018		917,915		$	4.82		2.89	$	4,751

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Risk-Free Interest Rate	1.7	%
Volatility Factor	50	%
Weighted Average Expected Life (Years)	5
Dividends	0.0	%

XML

Note 9 - Income Taxes (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Three-Month Periods E nded
	April 1 ,			April 2 ,
	2018			2017
Current Income Tax Provision:
Foreign	$	52		$	21
Federal		-			22
State		4			5
Deferred Income Tax (Benefit) Provision		(1	)		39
Total	$	55		$	87

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Three-Month P erio ds E nded
	April 1,			April 2 ,
	2018			2017
Income Before Income Taxes	$	2,223		$	1,748
Income Tax Provision		55			87
Effective Income Tax Rate		2.5	%		5.0	%

XML

Note 11 - Commitments and Contingencies (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	Three -Month P eriod s E nded
	April 1 , 2018			April 2 , 2017
Accrued Warranty Obligations – Beginning	$	149		$	172
Accruals for Warranties Issued		14			7
Settlements Made		(6	)		(24	)
Accrued Warranty Obligations – Ending	$	157		$	155

XML

Note 12 - Business Segment Information (Tables)

3 Months Ended

Apr. 01, 2018

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	17,224	$	5,845	$	-		$	23,069
Segment Contribution		5,036		2,246		(4,926	)		2,356
Interest, Financing and Miscellaneous Expense, Net						(133	)		(133	)
Tax Provision						(55	)		(55	)
Non-Controlling Interest						(17	)		(17	)
Net Income Attributable to Ultralife								$	2,151

	Battery & Energy Products		Communi- cations Systems		Corporate			Total
Revenues	$	17,479	$	4,556	$	-		$	22,035
Segment Contribution		4,930		1,960		(5,049	)		1,841
Interest, Financing and Miscellaneous Expense, Net						(93	)		(93	)
Tax Provision						(87	)		(87	)
Non-Controlling Interest						(6	)		(6	)
Net Income Attributable to Ultralife								$	1,655

Revenue from External Customers by Geographic Areas [Table Text Block]

Three-Month Period Ended April 1, 2018:	Total Revenue		Commercial		Government/ Defense
Battery & Energy Products	$	17,224	$	9,626	$	7,598
Communications Systems		5,845		-		5,845
Total	$	23,069	$	9,626	$	13,443
				42%		58%

Three-Month Period Ended April 2, 2017:	Total Revenue		Commercial		Government/ Defense
Battery & Energy Products	$	17,479	$	9,351	$	8,128
Communications Systems		4,556		-		4,556
Total	$	22,035	$	9,351	$	12,684
				42%		58%

Schedule of Revenues from External Customers by Business Segment Sector [Table Text Block]

Three-Month Period Ended April 1, 2018:	Total Revenue		United States		Non-United States
Battery & Energy Products	$	17,224	$	9,415	$	7,809
Communications Systems		5,845		5,573		272
Total	$	23,069	$	14,988	$	8,081
				65%		35%

Three-Month Period Ended April 2, 2017:	Total Revenue		United States		Non-United States
Battery & Energy Products	$	17,479	$	9,422	$	8,057
Communications Systems		4,556		4,468		88
Total	$	22,035	$	13,890	$	8,145
				63%		37%

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Note 3 - Cash (Details Textual) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Ending Balance	$ 18,330	$ 18,330

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Note 3 - Cash - Summary of Cash (Details) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Cash	$ 18,239	$ 18,241
Restricted Cash	91	89
Total	$ 18,330	$ 18,330

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Note 4 - Inventories - Composition of Inventories (Details) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Raw Materials	$ 15,234	$ 14,606
Work In Process	2,085	2,013
Finished Goods	9,642	9,707
Total	$ 26,961	$ 26,326

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Note 5 - Property, Equipment and Improvements (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Depreciation, Total	$ 484	$ 503

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Note 5 - Property, Equipment and Improvements - Major Classes of Property, Equipment and Improvements (Details) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Property, equipment and improvements	$ 67,064	$ 66,711
Less: Accumulated Depreciation	(59,705)	(59,141)
Property, Equipment and Improvements, Net	7,359	7,570
Land [Member]
Property, equipment and improvements	123	123
Building and Building Improvements [Member]
Property, equipment and improvements	7,900	7,858
Machinery and Equipment [Member]
Property, equipment and improvements	51,116	50,852
Furniture and Fixtures [Member]
Property, equipment and improvements	2,024	2,005
Computer Equipment [Member]
Property, equipment and improvements	5,414	5,338
Construction in Progress [Member]
Property, equipment and improvements	$ 487	$ 535

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Note 6 - Goodwill, Intangible Assets and Long Term Assets (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Amortization of Intangible Assets, Total	$ 102	$ 105
Research and Development Expense [Member]
Amortization of Intangible Assets, Total	38	40
Selling, General and Administrative Expenses [Member]
Amortization of Intangible Assets, Total	$ 64	$ 65

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Note 6 - Goodwill, Intangible Assets and Long Term Assets - Goodwill Activity by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2018	Apr. 02, 2017	Dec. 31, 2017
Balance	$ 20,458	$ 19,965	$ 20,048
Effect of Foreign Currency Translation	240	83	410
Balance	20,698	20,048	20,458
Battery & Energy Products Segment [Member]
Balance	8,965	8,472	8,555
Effect of Foreign Currency Translation	240	83	410
Balance	9,205	8,555	8,965
Communications Systems Segment [Member]
Balance	11,493	11,493	11,493
Effect of Foreign Currency Translation
Balance	$ 11,493	$ 11,493	$ 11,493

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Note 6 - Goodwill, Intangible Assets and Long Term Assets - Composition of Intangible Assets (Details) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Cost	$ 16,506	$ 16,344
Accumulated Amortization	9,387	9,259
Net	7,119	7,085
Trademarks [Member]
Cost	3,415	3,411
Accumulated Amortization
Net	3,415	3,411
Customer Relationships [Member]
Cost	6,720	6,618
Accumulated Amortization	4,277	4,208
Net	2,443	2,410
Patents and Technology [Member]
Cost	5,586	5,545
Accumulated Amortization	4,641	4,595
Net	945	950
Distributor Relationships [Member]
Cost	377	377
Accumulated Amortization	377	377
Net
Trade Names [Member]
Cost	408	393
Accumulated Amortization	92	79
Net	$ 316	$ 314

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Note 7 - Revolving Credit Agreement (Details Textual) $ in Thousands		3 Months Ended	10 Months Ended
	May 31, 2017 USD ($)	Apr. 01, 2018 USD ($)	Apr. 01, 2018 USD ($)
KeyBank [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 30,000
Line of Credit Facility Maximum Borrowing Capacity May Be Increased to	50,000
Long-term Line of Credit, Total		$ 0	$ 0
Minimum Fixed Charge Coverage Ratio		1.15
Minimum Tangible Net Worth		$ 40,000	40,000
Letters of Credit Outstanding, Amount		0	$ 0
KeyBank [Member] | Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate			1.85%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage			0.20%
KeyBank [Member] | Revolving Credit Facility [Member] | Base Rate [Member]
Debt Instrument, Basis Spread on Variable Rate			(0.50%)
KeyBank [Member] | Letter of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,500
PNC Bank [Member] | Revolving Credit Facility [Member]
Long-term Line of Credit, Total		$ 0	$ 0

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Note 7 - Revolving Credit Agreement - Interest Rate Margins (Details) - KeyBank [Member] - Revolving Credit Facility [Member]	10 Months Ended	26 Months Ended
	Apr. 01, 2018	May 30, 2020
Scenario, Forecast [Member] | Leverage Ratio Less Than 1.5 [Member]
Applicable basis points for unused fee		0.20%
Scenario, Forecast [Member] | Leverage Ratio Between 1.5 and 2.5 [Member]
Applicable basis points for unused fee		0.15%
Scenario, Forecast [Member] | Leverage Ratio Greater than 2.5 [Member]
Applicable basis points for unused fee		0.10%
London Interbank Offered Rate (LIBOR) [Member]
Interest rate margin on outstanding borrowings	1.85%
Applicable basis points for unused fee	0.20%
London Interbank Offered Rate (LIBOR) [Member] | Scenario, Forecast [Member] | Leverage Ratio Less Than 1.5 [Member]
Interest rate margin on outstanding borrowings		1.85%
London Interbank Offered Rate (LIBOR) [Member] | Scenario, Forecast [Member] | Leverage Ratio Between 1.5 and 2.5 [Member]
Interest rate margin on outstanding borrowings		2.00%
London Interbank Offered Rate (LIBOR) [Member] | Scenario, Forecast [Member] | Leverage Ratio Greater than 2.5 [Member]
Interest rate margin on outstanding borrowings		2.15%
Base Rate [Member]
Interest rate margin on outstanding borrowings	(0.50%)
Base Rate [Member] | Scenario, Forecast [Member] | Leverage Ratio Less Than 1.5 [Member]
Interest rate margin on outstanding borrowings		(0.50%)
Base Rate [Member] | Scenario, Forecast [Member] | Leverage Ratio Between 1.5 and 2.5 [Member]
Interest rate margin on outstanding borrowings		(0.25%)
Base Rate [Member] | Scenario, Forecast [Member] | Leverage Ratio Greater than 2.5 [Member]
Interest rate margin on outstanding borrowings		0.00%

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Note 8 - Shareholders' Equity (Details Textual) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended
	Jan. 31, 2018	Apr. 01, 2018	Apr. 02, 2017
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options		$ 309
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		1 year
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value		$ 3.19
Excess Tax Benefit from Share-based Compensation, Financing Activities		$ 0	$ 0
Proceeds from Stock Options Exercised		$ 939	$ 741
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value		$ 7.16
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options		$ 110
Restricted Stock [Member] | The 2014 Long-term Incentive Plan [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross	17,500
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years

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Note 8 - Shareholders' Equity - Non-cash Stock Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Stock-based comepensation expense	$ 139	$ 40
Employee Stock Option [Member]
Stock-based comepensation expense	123	36
Restricted Stock [Member]
Stock-based comepensation expense	$ 16	$ 4

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Note 8 - Shareholders' Equity - Stock Option Activity (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Apr. 01, 2018 USD ($) $ / shares shares
Options outstanding (in shares) | shares	1,860,211
Options outstanding - weighted average exercise price (in dollars per share) | $ / shares	$ 6.10
Granted (in shares) | shares	14,000
Granted - weighted average exercise price (in dollars per share) | $ / shares	$ 7.16
Exercised (in shares) | shares	(221,009)
Exercised - weighted average exercise price (in dollars per share) | $ / shares	$ 4.60
Forfeited or Expired (in shares) | shares	(114,449)
Forfeited or expired - weighted average exercise price (in dollars per share) | $ / shares	$ 11.60
Options outstanding (in shares) | shares	1,538,753
Options outstanding - weighted average exercise price (in dollars per share) | $ / shares	$ 5.91
Options outstanding - weighted average remaining contractual term (Year)	3 years 226 days
Options outstanding - aggregate intrinsic value | $	$ 6,786
Vested and Expected to Vest (in shares) | shares	1,449,498
Options vested and expected to vest - weighted average exercise price (in dollars per share) | $ / shares	$ 5.96
Options vested and expected to vest - weighted average remaining contractual term (Year)	3 years 182 days
Options vested and expected to vest - aggregate intrinsic value | $	$ 6,350
Options exercisable (in shares) | shares	917,915
Exercisable - weighted average exercise price (in dollars per share) | $ / shares	$ 4.82
Exercisable - weighted average remaining contractual term (Year)	2 years 324 days
Exercisable - aggregate intrinsic value | $	$ 4,751

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Note 8 - Shareholders' Equity - Stock Option Assumptions (Details)	3 Months Ended
	Apr. 01, 2018
Risk-Free Interest Rate	1.70%
Volatility Factor	50.00%
Weighted Average Expected Life (Year)	5 years
Dividends	0.00%

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Note 9 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Apr. 01, 2018	Apr. 02, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent				35.00%
Income Tax Expense (Benefit), Total	$ 55	$ 87
Unrecognized Tax Benefits, Ending Balance	$ 0			$ 0
Domestic Tax Authority [Member]
Operating Loss Carryforwards, Total				69,594
Tax Credit Carryforward, Amount				1,837
Domestic Tax Authority [Member] | Earliest Tax Year [Member] | Internal Revenue Service (IRS) [Member]
Open Tax Year	2002
Domestic Tax Authority [Member] | Latest Tax Year [Member] | Internal Revenue Service (IRS) [Member]
Open Tax Year	2017
Foreign Tax Authority [Member]
Operating Loss Carryforwards, Total				$ 12,760	$ 12,760
Foreign Tax Authority [Member] | Earliest Tax Year [Member]
Open Tax Year	2009
Foreign Tax Authority [Member] | Latest Tax Year [Member]
Open Tax Year	2017
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%

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Note 9 - Income Taxes - Income Tax Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Foreign	$ 52	$ 21
Federal		22
State	4	5
Deferred Income Tax (Benefit) Provision	(1)	39
Total	$ 55	$ 87

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Note 9 - Income Taxes - Effective Consolidated Tax Rate (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Income Before Income Taxes	$ 2,223	$ 1,748
Income Tax Provision	$ 55	$ 87
Effective Income Tax Rate	2.50%	5.00%

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Note 10 - Earnings Per Share (Details Textual) - shares	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Dilutive Securities Included in Computation of Earnings Per Share Amount	1,324,753	1,180,031
Dilutive Securities Included in Computation of Earnings Per Share Amount Restricted Stock	17,500	15,900
Incremental Common Shares Attributable to Share-based Payment Arrangements, Total	498,109	244,591
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	214,000	1,015,050

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Note 11 - Commitments and Contingencies (Details Textual) $ in Thousands	3 Months Ended
	Apr. 01, 2018 USD ($)
Capital Addition Purchase Commitments [Member]
Long-term Purchase Commitment, Amount	$ 2,483

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Note 11 - Commitments and Contingencies - Changes in Produce Warranty Liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Accrued Warranty Obligations – Beginning	$ 149	$ 172
Accruals for Warranties Issued	14	7
Settlements Made	(6)	(24)
Accrued Warranty Obligations – Ending	$ 157	$ 155

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Note 12 - Business Segment Information (Details Textual)	3 Months Ended
	Apr. 01, 2018
Number of Operating Segments	2

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Note 12 - Business Segment Information - Segment Activity (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Revenues	$ 23,069	$ 22,035
Segment Contribution	2,356	1,841
Interest, Financing and Miscellaneous Expense, Net	(133)	(93)
Tax Provision	(55)	(87)
Non-Controlling Interest	(17)	(6)
Net Income Attributable to Ultralife	2,151	1,655
Battery & Energy Products Segment [Member]
Revenues	17,224	17,479
Segment Contribution	5,036	4,930
Communications Systems Segment [Member]
Revenues	5,845	4,556
Segment Contribution	2,246	1,960
Corporate Segment [Member]
Revenues
Segment Contribution	(4,926)	(5,049)
Interest, Financing and Miscellaneous Expense, Net	(133)	(93)
Tax Provision	(55)	(87)
Non-Controlling Interest	$ (17)	$ (6)

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Note 12 - Business Segment Information - Domestic and International Revenue by Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Revenues	$ 23,069	$ 22,035
Revenue, percentage
UNITED STATES
Revenues	$ 9,626	$ 9,351
Revenue, percentage	42.00%	42.00%
Non-US [Member]
Revenues	$ 13,443	$ 12,684
Revenue, percentage	58.00%	58.00%
Battery & Energy Products Segment [Member]
Revenues	$ 17,224	$ 17,479
Battery & Energy Products Segment [Member] | UNITED STATES
Revenues	9,626	9,351
Battery & Energy Products Segment [Member] | Non-US [Member]
Revenues	7,598	8,128
Communications Systems Segment [Member]
Revenues	5,845	4,556
Communications Systems Segment [Member] | UNITED STATES
Revenues
Communications Systems Segment [Member] | Non-US [Member]
Revenues	$ 5,845	$ 4,556

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Note 12 - Business Segment Information - Revenue by Business Segment Sector (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Apr. 02, 2017
Revenues	$ 23,069	$ 22,035
Revenue, percentage
Commercial [Member]
Revenues	$ 14,988	$ 13,890
Revenue, percentage	65.00%	63.00%
Government & Defense [Member]
Revenues	$ 8,081	$ 8,145
Revenue, percentage	35.00%	37.00%
Battery & Energy Products Segment [Member]
Revenues	$ 17,224	$ 17,479
Battery & Energy Products Segment [Member] | Commercial [Member]
Revenues	9,415	9,422
Battery & Energy Products Segment [Member] | Government & Defense [Member]
Revenues	7,809	8,057
Communications Systems Segment [Member]
Revenues	5,845	4,556
Communications Systems Segment [Member] | Commercial [Member]
Revenues	5,573	4,468
Communications Systems Segment [Member] | Government & Defense [Member]
Revenues	$ 272	$ 88