UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 28, 2003

                                       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 0-20852
                                                -------

                            ULTRALIFE BATTERIES, INC.
                            -------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                      16-1387013
           --------                                      ----------
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

                 2000 Technology Parkway, Newark, New York   14513
                 -------------------------------------------------
                  (Address of principal executive offices) (Zip Code)

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

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes..X... No.....

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ..... No ...X...

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
      Common stock, $.10 par value - 13,146,294 shares of common stock
      outstanding, net of 727,250 treasury shares, as of June 28, 2003.


                            ULTRALIFE BATTERIES, INC.
                                      INDEX
--------------------------------------------------------------------------------

                                                                            Page
                                                                            ----

PART I   FINANCIAL INFORMATION

Item 1.     Financial Statements (Unaudited)

            Condensed Consolidated Balance Sheets -
              June 28, 2003 and December 31, 2002............................  3

            Condensed Consolidated Statements of Operations -
              Three and six months ended June 28, 2003 and June 30, 2002.....  4

            Condensed Consolidated Statements of Cash Flows -
              Six months ended June 28, 2003 and June 30, 2002...............  5

            Notes to Consolidated Financial Statements.......................  6

Item 2.     Management's Discussion and Analysis of
              Financial Condition and Results of Operations.................. 16

Item 3.     Quantitative and Qualitative Disclosures
              About Market Risks............................................. 24

Item 4.     Controls and Procedures.......................................... 24

PART-II  OTHER INFORMATION

Item 1.     Legal Proceedings................................................ 26

Item 2.     Changes in Securities and Use of Proceeds........................ 27

Item 4.     Submission of Matters to a Vote of Securities Holders............ 27

Item 6.     Exhibits and Reports on Form 8-K................................. 28

            Signatures....................................................... 29

            CEO and CFO Certifications....................................... 30


                                       2


Item 1. Financial Statements

                            ULTRALIFE BATTERIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (Dollars in Thousands, Except Per Share Amounts)
                                   (unaudited)
--------------------------------------------------------------------------------



                                                                                       June 28,       December 31,
                                              ASSETS                                     2003             2002
                                                                                         ----             ----
                                                                                                  
Current assets:
   Cash and cash equivalents                                                           $  1,612         $  1,322
   Available-for-sale securities                                                              2                2
   Restricted cash                                                                           50               50
   Trade accounts receivable (less allowance for doubtful accounts
      of $215 at June 28, 2003 and $297 at December 31, 2002)                            13,140            6,200
   Inventories                                                                            6,729            5,813
   Prepaid expenses and other current assets                                              1,110              968
                                                                                       --------         --------

       Total current assets                                                              22,643           14,355
                                                                                       --------         --------

Property, plant and equipment                                                            17,260           15,336

Other assets:
  Investment in UTI                                                                       1,550            1,550
  Technology license agreements (net of accumulated
      amortization of $1,368 at June 28, 2003 and $1,318 at December 31, 2002)               83              133
                                                                                       --------         --------
                                                                                          1,633            1,683
                                                                                       --------         --------

Total Assets                                                                           $ 41,536         $ 31,374
                                                                                       ========         ========

                               LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Short-term debt and current portion of long-term debt                               $  3,256            $ 816
   Accounts payable                                                                       7,065            4,283
   Other current liabilities                                                              3,220            2,045
                                                                                       --------         --------
       Total current liabilities                                                         13,541            7,144

Long-term liabilities:
   Debt and capital lease obligations                                                       953            1,354
   Grant                                                                                    750              633
                                                                                       --------         --------
                                                                                          1,703            1,987
Commitments and contingencies (Note 10)

Shareholders' equity:
   Preferred stock, par value $0.10 per share, authorized 1,000,000 shares;
      none outstanding                                                                       --               --
   Common stock, par value $0.10 per share, authorized 40,000,000 shares
      issued - 13,873,544 at June 28, 2003 and 13,579,519 at December 31, 2002)           1,387            1,358
   Capital in excess of par value                                                       116,876          115,251
   Accumulated other comprehensive loss                                                  (1,081)          (1,016)
   Accumulated deficit                                                                  (88,512)         (90,972)
                                                                                       --------         --------
                                                                                         28,670           24,621

   Less -- Treasury stock, at cost -- 727,250 shares                                      2,378            2,378
                                                                                       --------         --------
        Total shareholders' equity                                                       26,292           22,243
                                                                                       --------         --------
Total Liabilities and Shareholders' Equity                                             $ 41,536         $ 31,374
                                                                                       ========         ========


   The accompanying Notes to Consolidated Financial Statements are an integral
                           part of these statements.


                                       3


                            ULTRALIFE BATTERIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in Thousands, Except Per Share Amounts)
                                   (unaudited)



                                                            Three Months Ended                    Six Months Ended
                                                        June 28,          June 30,           June 28,          June 30,
                                                          2003              2002               2003              2002
                                                          ----              ----               ----              ----

                                                                                                   
Revenues                                                $20,110           $  8,578           $35,538           $ 17,440

Cost of products sold                                    15,379              7,493            27,648             15,433
                                                        -------           --------           -------           --------

Gross margin                                              4,731              1,085             7,890              2,007
                                                        -------           --------           -------           --------

Operating expenses:
  Research and development                                  646              1,099             1,231              2,137
  Selling, general, and administrative                    2,187              1,755             4,149              3,736
  Impairment of long-lived assets                            --             14,318                --             14,318
                                                        -------           --------           -------           --------
Total operating expenses                                  2,833             17,172             5,380             20,191
                                                        -------           --------           -------           --------

Operating income (loss)                                   1,898            (16,087)            2,510            (18,184)

Other income (expense):
  Interest income                                             4                  3                 5                  6
  Interest expense                                         (150)              (106)             (242)              (207)
  Equity loss in UTI                                         --               (678)               --             (1,179)
  Miscellaneous                                             397                362               187                265
                                                        -------           --------           -------           --------
Income (loss) before income taxes                         2,149            (16,506)            2,460            (19,299)
                                                        -------           --------           -------           --------

Income taxes                                                 --                 --                --                 --
                                                        -------           --------           -------           --------

Net income (loss)                                       $ 2,149           $(16,506)          $ 2,460           $(19,299)
                                                        =======           ========           =======           ========

Earnings (loss) per share - basic                       $  0.17           $  (1.28)          $  0.19           $  (1.52)
                                                        =======           ========           =======           ========
Earnings (loss) per share - diluted                     $  0.16           $  (1.28)          $  0.19           $  (1.52)
                                                        =======           ========           =======           ========

Weighted average shares outstanding - basic              12,927             12,920            12,895             12,662
                                                        =======           ========           =======           ========
Weighted average shares outstanding - diluted            13,651             12,920            13,266             12,662
                                                        =======           ========           =======           ========


   The accompanying Notes to Consolidated Financial Statements are an integral
                           part of these statements.


                                       4


                            ULTRALIFE BATTERIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (unaudited)
--------------------------------------------------------------------------------



                                                                                  Six Months Ended
                                                                             June 28,           June 30,
                                                                               2003               2002
                                                                               ----               ----

                                                                                          
OPERATING ACTIVITIES
Net income (loss)                                                            $ 2,460            $(19,299)
Adjustments to reconcile net income (loss)
  to net cash used in operating activities:
Depreciation and amortization                                                  1,504               2,131
Foreign exchange gains                                                          (192)               (265)
Equity loss in UTI                                                                --               1,179
Non-cash stock-based compensation                                                 26                  --
Impairment of long-lived assets                                                   --              14,318
Changes in operating assets and liabilities:
   Accounts receivable                                                        (6,940)             (1,623)
   Inventories                                                                  (916)                826
   Prepaid expenses and other current assets                                    (142)                286
   Accounts payable and other current liabilities                              3,957                (483)
                                                                             -------            --------
Net cash used in operating activities                                           (243)             (2,930)
                                                                             -------            --------

INVESTING ACTIVITIES
Purchase of property and equipment                                            (3,278)               (792)
Proceeds from sale leaseback                                                      --                 451
Purchase of securities                                                            --                 666
Sales of securities                                                               --               1,399
                                                                             -------            --------
Net cash (used in) provided by investing activities                           (3,278)              1,724
                                                                             -------            --------

FINANCING ACTIVITIES
Change in revolving credit facilities                                          2,440                  --
Proceeds from issuance of common stock                                         1,128               2,350
Proceeds from issuance of debt                                                   500                 600
Principal payments on long-term debt and capital lease obligations              (401)               (506)
Proceeds from grant                                                              117                  --
                                                                             -------            --------
Net cash provided by financing activities                                      3,784               2,444
                                                                             -------            --------

Effect of exchange rate changes on cash                                           27                  72
                                                                             -------            --------

Increase in cash and cash equivalents                                            290               1,310

Cash and cash equivalents at beginning of period                               1,322                 706

                                                                             -------            --------
Cash and cash equivalents at end of period                                   $ 1,612            $  2,016
                                                                             =======            ========

SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid                                                                $   116            $    266
                                                                             =======            ========


   The accompanying Notes to Consolidated Financial Statements are an integral
                           part of these statements.


                                       5


                            ULTRALIFE BATTERIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       (Dollar Amounts in Thousands - Except Share and Per Share Amounts)
                                   (unaudited)

--------------------------------------------------------------------------------

1. BASIS OF PRESENTATION

      The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Article 10 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 condensed 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 contained in the
Company's Transition Report on Form 10-K for the six-month period ended December
31, 2002.

      As of July 1, 2002, the Company changed its monthly closing schedule,
moving to a weekly-based cycle as opposed to a calendar month - based cycle.
While the actual dates for the quarter-ends will change slightly each year, the
Company believes that there will not be any material differences when making
quarterly comparisons.

      Effective December 31, 2002, the Company changed its fiscal year-end from
June 30 to December 31.

      Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform to the current year presentation.

2. IMPAIRMENT OF LONG-LIVED ASSETS

      In June 2002, the Company reported a $14,318 impairment charge. This
impairment charge related to a writedown of long-lived assets in the Company's
rechargeable production operations, reflecting a change in the Company's
strategy. Changes in external economic conditions culminated in June 2002,
reflecting a slowdown in the mobile electronics marketplace and a realization
that near-term business opportunities utilizing the high volume rechargeable
production equipment had dissipated. These changes caused the Company to shift
away from high volume polymer battery production to higher value, lower volume
opportunities. The Company's redefined strategy eliminates the need for its high
volume production line that had been built mainly to manufacture Nokia cell
phone replacement batteries. The new strategy is a three-pronged approach.
First, the Company will manufacture in-house for the higher value, lower volume
polymer rechargeable opportunities. Second, the Company will utilize its
affiliate in Taiwan, Ultralife Taiwan, Inc., as a source for both polymer and
liquid lithium cells. And third, the Company will look to other rechargeable
cell manufacturers as sources for cells that the Company can then assemble into
completed battery packs.

      The impairment charge was accounted for under Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", which requires evaluating the assets'
carrying value based on future cash flows. As a result of the impairment of the
Company's fixed assets, depreciation charges were reduced by approximately
$1,800 per year.


                                       6


3. EARNINGS (LOSS) PER SHARE

      Basic earnings per share are calculated by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share are calculated by dividing net income, adjusted for interest
on convertible securities, by potentially dilutive common shares, which include
stock options, warrants and convertible securities.

      Net loss per share is calculated by dividing net loss by the weighted
average number of common shares outstanding during the period. The impact of
conversion of dilutive securities, such as stock options and warrants, are not
considered where a net loss is reported as the inclusion of such securities
would be anti-dilutive. As a result, basic loss per share is the same as diluted
loss per share.

      The computation of basic and diluted earnings per share is summarized as
follows:



(In thousands, except per share data)                   Three Months Ended          Six Months Ended
                                                       --------------------       ---------------------
                                                       June 28,    June 30,       June 28,    June 30,
                                                           2003        2002          2003        2002
                                                       ------------------------------------------------
                                                                                  
Net Income (a)                                           $2,149    ($16,506)        $2,460    ($19,299)
Effect of Dilutive Securities:
     Stock Options / Warrants                                44          --             44         --
     Convertible Note                                         6          --              9         --
                                                       ------------------------------------------------
          Net Income - Adjusted (b)                      $2,199    ($16,506)        $2,513    ($19,299)
                                                       ================================================

Average Shares Outstanding - Basic (c)                   12,927      12,920         12,895      12,662
Effect of Dilutive Securities:
     Stock Options / Warrants                               557         --             246          --
     Convertible Note                                       167         --             125          --
                                                       ------------------------------------------------
          Average Shares Outstanding - Diluted (d)       13,651      12,920         13,266      12,662
                                                       ================================================

EPS - Basic (a/c)                                         $0.17      ($1.28)         $0.19      ($1.52)
EPS - Diluted (b/d)                                       $0.16      ($1.28)         $0.19      ($1.52)


      The Company also had the equivalent of 618,000 and 2,514,000 options and
warrants outstanding for the three-month periods ended as of June 28, 2003 and
June 30, 2002, respectively, and 974,000 and 2,277,000 options and warrants
outstanding for the six-month periods ended as of June 28, 2003 and June 30,
2002, respectively, which were not included in the computation of diluted EPS
because these securities would have been anti-dilutive for the periods
presented.

4. STOCK-BASED COMPENSATION

      The Company has various stock-based employee compensation plans. The
Company applies Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations which require
compensation costs to be recognized based on the difference, if any, between the
quoted market price of the stock on the grant date and the exercise price. As
all options granted to employees under such plans had an exercise price at least
equal to the market value of the underlying common stock on the date of grant,
and given the fixed nature of the equity instruments, no stock-based employee
compensation cost is reflected in net income (loss). The effect on net income
(loss) and earnings per share if the Company had applied the fair value


                                       7


recognition provisions of Statement of Financial Accounting Standards ("SFAS")
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure,
an Amendment of SFAS No. 123" (as discussed below in Note 12 - Recent Accounting
Pronouncements), to stock-based employee compensation is as follows:



                                                   Three Months Ended            Six Months Ended
                                                   ------------------            ----------------
                                                  June 28,     June 30,        June 28,     June 30,
                                                  --------     --------        --------     --------
                                                    2003         2002            2003         2002
                                                    ----         ----            ----         ----
                                                  ---------------------------------------------------

                                                                                
Net income (loss), as reported                     $2,149      $(16,506)        $2,460      $(19,299)

Add: Stock-based employee compensation
expense included in reported net income
(loss), net of related tax effects
                                                       --            --             --            --
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects
                                                     (317)         (356)          (540)         (652)
                                                  ---------------------------------------------------

Pro forma net income (loss)                        $1,832      $(16,862)        $1,920      $(19,951)

Earnings (loss) per share:
    Basic - as reported                             $0.17        $(1.28)         $0.19        $(1.52)
    Basic - pro forma                               $0.14        $(1.31)         $0.15        $(1.58)
    Diluted - as reported                           $0.16        $(1.28)         $0.19        $(1.52)
    Diluted - pro forma                             $0.13        $(1.31)         $0.14        $(1.58)


5. COMPREHENSIVE INCOME (LOSS)

      The components of the Company's total comprehensive income (loss) were:



                                                     Three Months Ended           Six Months Ended
                                                   June 28,     June 30,       June 28,     June 30,
                                                     2003         2002           2003         2002
                                                   --------------------------------------------------

                                                                                
Net income (loss)                                   $2,149      $(16,506)       $2,460      $(19,299)
Foreign currency translation adjustments              (124)            2           (65)          (21)
                                                   --------------------------------------------------
Total comprehensive income (loss)                   $2,025      $(16,504)       $2,395      $(19,320)
                                                   ==================================================



                                       8


6. INVENTORIES

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

                                         June 28, 2003     December 31, 2002
                                         -----------------------------------
Raw materials                                   $4,603                $3,259
Work in process                                  2,045                 1,882
Finished goods                                   1,101                 1,207
                                         -----------------------------------
                                                 7,749                 6,348
Less: Reserve for obsolescence                   1,020                   535
                                         -----------------------------------
                                                $6,729                $5,813
                                         ===================================

7. PROPERTY, PLANT AND EQUIPMENT

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

                                         June 28, 2003     December 31, 2002
                                         -----------------------------------
Land                                              $123                 $ 123
Buildings and leasehold improvements             1,625                 1,619
Machinery and equipment                         30,306                28,772
Furniture and fixtures                             338                   319
Computer hardware and software                   1,474                 1,405
Construction in progress                         2,135                   291
                                         -----------------------------------
                                                36,001                32,529
Less:  Accumulated depreciation                 18,741                17,193
                                         -----------------------------------
                                               $17,260               $15,336
                                         ===================================

8. DEBT

      In November 2001, the Company received approval for a $750 grant/loan from
a federally sponsored small cities program. The grant/loan has assisted in
funding capital expansion plans that the Company expects will lead to job
creation. The Company has been reimbursed for approved capital as it incurred
the cost. In August 2002, the $750 small cities grant/loan documentation was
finalized and the Company was reimbursed approximately $400 for costs it had
incurred to date for equipment purchases applicable under this grant/loan. By
the end of March 2003, all $750 had been advanced to the Company. During the
first quarter of 2003, $117 under this grant/loan was reimbursed as the Company
incurred additional expenses and submitted requests for reimbursement. If the
Company meets its employment quota requirements by April 1, 2005, the loan and
all associated accrued interest will be forgiven. If the Company does not meet
its employment quota requirements, then the funds advanced and the associated
interest will be converted into a loan that will be repaid over a seven-year
period. The Company has initially recorded the proceeds from this grant/loan as
a long-term liability and will record these proceeds as income as the certainty
of meeting the employment criteria become definitive. Interest has been accrued
at a rate of 5% per year. Due to the growth of the Company during 2003, the
Company expects to meet this employment obligation during the second half of
2003.

      On March 4, 2003, the Company completed a short-term financing to help it
meet certain working capital needs as the Company was growing rapidly. The
three-month, $500 note, which


                                       9


accrued interest at 7.5% per annum, was converted into 125,000 shares of common
stock at $4.00 per share on June 4, 2003, at the option of the note holder.

      On March 25, 2003, the Company's primary lending bank agreed to amend the
Company's credit facility. Among other things, this amendment included an
extension of the credit agreement through June 30, 2004, a release of accounts
receivable at the Company's U.K. subsidiary in order to allow that subsidiary to
obtain its own revolving credit facility with a U.K. bank, and a formula
adjustment in the borrowing base that enhanced the eligible receivables related
to the U.S. military in recognition of the increasing business with the U.S.
Army. As a result of the extension of this credit facility, the Company has
classified the portion of this debt that is due and payable beyond one year as a
long-term liability on the June 28, 2003 and the December 31, 2002 Consolidated
Balance Sheets.

      On April 29, 2003, Ultralife Batteries (UK) Ltd., the Company's
wholly-owned U.K. subsidiary, completed an agreement for a revolving credit
facility with a commercial bank in the U.K. Any borrowings against this credit
facility are collateralized with that company's outstanding accounts receivable
balances. The maximum credit available to that company under the facility is
approximately $700. This credit facility provides the Company's U.K. operation
with additional financing flexibility for its working capital needs. At June 28,
2003, the outstanding borrowings under this revolver were $586.

9. INCOME TAXES

      The liability method, prescribed by SFAS No. 109, "Accounting for Income
Taxes", is used in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that may be in effect when the differences are
expected to reverse. The Company recorded no income tax benefit or expense
relating to the operating results generated during the six-month periods ended
June 28, 2003 and June 30, 2002, as such income tax benefit or expense was
offset by changes in the valuation allowance. A valuation allowance is required
when it is more likely than not that the recorded value of a deferred tax asset
will not be realized.

10. COMMITMENTS AND CONTINGENCIES

      As of June 28, 2003, the Company had $50 in restricted cash in support of
a corporate credit card account.

      In March 1998, the Company received a $500 grant from the Empire State
Development Corporation to fund certain equipment purchases. The grant was
contingent upon the Company achieving and maintaining minimum employment levels
for a period of five years. If annual levels of employment were not maintained,
a portion of the grant might have become repayable. Through the first four years
of the grant period, the Company met the requirements. The Company believes that
it has also met the requirements in the fifth and final year, and it has
recognized this portion of the grant into income. However, there is some
uncertainty with the interpretation of the grant agreement, and it is possible
that the Company may be required to repay $100 of the grant. The Company
believes that the likelihood of a repayment is remote, and it is discussing its
position with the Empire State Development Corporation accordingly. At June 28,
2003, there is no balance pertaining to this grant on the balance sheet.


                                       10


      The Company estimates future costs associated with expected product
failure rates, material usage and service costs in the development of its
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 the Company's product warranty liability during the first six months
of 2003 were as follows:

    Balance at December 31, 2002                               $236
    Accruals for warranties issued                               63
    Settlements made                                            (33)
                                                               ----
    Balance at June 28, 2003                                   $266
                                                               ====

      The Company is subject to legal proceedings and claims which arise in the
normal course of business. The Company believes that the final disposition of
such matters will not have a material adverse effect on the financial position
or results of operations of the Company.

      In August 1998, the Company, its Directors, and certain underwriters were
named as defendants in a complaint filed in the United States District Court for
the District of New Jersey by certain shareholders, purportedly on behalf of a
class of shareholders, alleging that the defendants, during the period April 30,
1998 through June 12, 1998, violated various provisions of the federal
securities laws in connection with an offering of 2,500,000 shares of the
Company's Common Stock. The complaint alleged that the Company's offering
documents were materially incomplete, and as a result misleading, and that the
purported class members purchased the Company's Common Stock at artificially
inflated prices and were damaged thereby. Upon a motion made on behalf of the
Company, the Court dismissed the shareholder action, without prejudice, allowing
the complaint to be refiled. The shareholder action was subsequently refiled,
asserting substantially the same claims as in the prior pleading. The Company
again moved to dismiss the complaint. By Opinion and Order dated September 28,
2000, the Court dismissed the action, this time with prejudice, thereby barring
plaintiffs from any further amendments to their complaint and directing that the
case be closed. Plaintiffs filed a Notice of Appeal to the Third Circuit Court
of Appeals and the parties submitted their briefs. Subsequently, the parties
notified the Court of Appeals that they had reached an agreement in principle to
resolve the outstanding appeal and settle the case upon terms and conditions
which require submission to the District Court for approval. Upon application of
the parties and in order to facilitate the parties' pursuit of settlement, the
Court of Appeals issued an Order dated May 18, 2001 adjourning oral argument on
the appeal and remanding the case to the District Court for further proceedings
in connection with the proposed settlement.

      Subsequent to the parties entering into the settlement agreement, the
Company's insurance carrier commenced liquidation proceedings. The insurance
carrier informed the Company that in light of the liquidation proceedings, it
would no longer fund the settlement. In addition, the value of the insurance
policy is in serious doubt. In April 2002, the Company and the insurance carrier
for the underwriters offered to proceed with the settlement. Plaintiffs' counsel
accepted the terms of the proposed settlement, amounting to $175 for the
Company, which was previously accrued. The settlement has been approved by the
Court and by the shareholders comprising the class, and the Company paid the
settlement in June of 2003.

      This matter is now completed and the Company will not incur any further
expenses with regard to this lawsuit.


                                       11


      In conjunction with the Company's purchase/lease of its Newark, New York
facility in 1998, the Company entered into a payment-in-lieu of tax agreement
which provides the Company with real estate tax concessions upon meeting certain
conditions. In connection with this agreement, a consulting firm performed a
Phase I and II Environmental Site Assessment which revealed the existence of
contaminated soil and ground water around one of the buildings. The Company
retained an engineering firm which estimated that the cost of remediation should
be in the range of $230. This cost, however, is merely an estimate and the cost
may in fact be much higher. In February, 1998, the Company entered into an
agreement with a third party which provides that the Company and this third
party will retain an environmental consulting firm to conduct a supplemental
Phase II investigation to verify the existence of the contaminants and further
delineate the nature of the environmental concern. The third party agreed to
reimburse the Company for fifty percent (50%) of the cost of correcting the
environmental concern on the Newark property. The Company has fully reserved for
its portion of the estimated liability. Test sampling was completed in the
spring of 2001, and the engineering report was submitted to the New York State
Department of Environmental Conservation (NYSDEC) for review. NYSDEC reviewed
the report and, in January 2002, recommended additional testing. The Company
responded by submitting a work plan to NYSDEC, which was approved in April 2002.
The Company has sought proposals from engineering firms to complete the remedial
work contained in the work plan, but it is unknown at this time whether the
final cost to remediate will be in the range of the original estimate, given the
passage of time. Because this is a voluntary remediation, there is no
requirement for the Company to complete the project within any specific time
frame. The ultimate resolution of this matter may have a significant adverse
impact on the results of operations in the period in which it is resolved.
Furthermore, the Company may face claims resulting in substantial liability
which could have a material adverse effect on the Company's business, financial
condition and the results of operations in the period in which such claims are
resolved.

      A retail end-user of a product manufactured by one of Ultralife's
customers (the "Customer"), has made a claim against the Customer wherein it is
asserted that the Customer's product, which is powered by an Ultralife battery,
does not operate according to the Customer's product specification. No claim has
been filed against Ultralife. However, in the interest of fostering good
customer relations, in September 2002, Ultralife has agreed to lend technical
support to the Customer in defense of its claim. Additionally, Ultralife will
honor its warranty by replacing any batteries that may be determined to be
defective. In the event a claim is filed against Ultralife and it is ultimately
determined that Ultralife's product was defective, replacement of batteries to
this Customer or end-user may have a material adverse effect on the Company's
financial position and results of operations.

11. BUSINESS SEGMENT INFORMATION

      The Company reports its results in four operating segments: Primary
Batteries, Rechargeable Batteries, Technology Contracts and Corporate. The
Primary Batteries segment includes 9-volt, cylindrical and various other
non-rechargeable specialty batteries. The Rechargeable Batteries segment
includes the Company's lithium polymer and lithium ion rechargeable batteries.
The Technology Contracts segment includes revenues and related costs associated
with various government and military development contracts. The Corporate
segment consists of all other items that do not specifically relate to the three
other segments and are not considered in the performance of the other segments.

      Effective January 1, 2003, the Company revised its definition of segment
contribution for each of its segments to be defined as gross margin (excluding
the Corporate segment). Previously, segment contribution included applicable
research and development costs. The Corporate segment now includes all of the
Company's operating expenses, including research and development costs. This
change in presentation was made to be consistent with the manner in which the
Company's management views its


                                       12


results from operations. Certain amounts in the prior year's segment information
have been reclassified to conform to the current year presentation.

Three Months Ended June 28, 2003
--------------------------------
                        Primary   Rechargeable  Technology
                       Batteries    Batteries   Contracts   Corporate    Total
                       --------------------------------------------------------
Revenues                $19,570        $258        $282     $     --   $ 20,110
Segment contribution      5,008        (389)        112       (2,833)     1,898
Interest expense, net                                           (146)      (146)
Equity loss in UTI                                                --         --
Miscellaneous                                                    397        397
Income taxes                                                      --         --
                                                                       --------
Net income (loss)                                                      $  2,149
Total assets            $31,956      $3,249        $140     $  6,191   $ 41,536

Three Months Ended June 30, 2002
--------------------------------
                        Primary   Rechargeable  Technology
                       Batteries    Batteries   Contracts   Corporate    Total
                       --------------------------------------------------------
Revenues                $ 8,299      $   71        $208     $     --   $  8,578
Segment contribution      1,562        (497)         20      (17,172)   (16,087)
Interest expense, net                                           (103)      (103)
Equity loss in UTI                                              (678)      (678)
Miscellaneous                                                    362        362
Income taxes                                                      --         --
                                                                       --------
Net income (loss)                                                      $(16,506)
Total assets            $21,351      $4,256        $ 33     $  8,681   $ 34,321

Six Months Ended June 28, 2003
------------------------------
                        Primary   Rechargeable  Technology
                       Batteries    Batteries   Contracts   Corporate    Total
                       --------------------------------------------------------
Revenues                $34,202      $  638        $698     $     --   $ 35,538
Segment contribution      8,172        (596)        314       (5,380)     2,510
Interest expense, net                                           (237)      (237)
Equity loss in UTI                                                --         --
Miscellaneous                                                    187        187
Income taxes                                                      --         --
                                                                       --------
Net income (loss)                                                      $  2,460
Total assets            $31,956      $3,249        $140     $  6,191   $ 41,536

Six Months Ended June 30, 2002
------------------------------
                        Primary   Rechargeable  Technology
                       Batteries    Batteries   Contracts   Corporate    Total
                       --------------------------------------------------------
Revenues                $17,039     $   158        $243     $     --   $ 17,440
Segment contribution      3,003      (1,018)         22      (20,191)   (18,184)
Interest expense, net                                           (201)      (201)
Equity loss in UTI                                            (1,179)    (1,179)
Miscellaneous                                                    265        265
Income taxes                                                      --         --
                                                                       --------
Net income (loss)                                                      $(19,299)
Total assets            $21,351     $ 4,256        $ 33     $  8,681   $ 34,321


                                       13


12. RECENT ACCOUNTING PRONOUNCEMENTS

      In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Others Indebtedness." This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. This Interpretation also
incorporates, without change, the guidance in FASB Interpretation No. 34,
"Disclosure of Indirect Guarantees of Indebtedness of Others." The initial
recognition and measurement provisions of this Interpretation are applicable on
a prospective basis to guarantees issued or modified after December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure requirements in
this Interpretation are effective for financial statements of interim or annual
periods ending after December 15, 2002. The only material guarantees that the
Company has in accordance with FASB Interpretation No. 45 are product
warranties. All such guarantees have been appropriately recorded in the
financial statements.

      In December 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation-Transition
and Disclosure-an amendment of FASB Statement No. 123." This statement amends
SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 does not permit the use of the original
SFAS No. 123 prospective method of transition for changes to the fair value
based method made in fiscal years after December 15, 2003. The Company currently
applies the intrinsic value method and has no plans to convert to the fair value
method.

      In December 2002, the FASB issued Interpretation No. 46 "Consolidation of
Variable Interest Entities." This Interpretation requires companies to
reevaluate their accounting for certain investments in "variable interest
entities." A variable interest entity is a corporation, partnership, trust, or
any other legal structure used for business purposes that either (a) does not
have equity investors with voting rights or (b) has equity investors that do not
provide sufficient financial resources for the entity to support its activities.
A variable interest entity often holds financial assets, including loans or
receivables, real estate or other property. A variable interest entity may be
essentially passive or it may engage in research and development or other
activities on behalf of another company. Variable interest entities are to be
consolidated if the Company is subject to a majority of the risk of loss from
the variable interest entity's activities or entitled to receive a majority of
the entity's residual returns or both. The disclosure requirements of this
Interpretation are effective for all financial statements issued after January
31, 2003. The consolidation requirements of this Interpretation are effective
for all periods beginning after June 15, 2003. The Company has no investments in
variable interest entities.

      In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." The standard amends and
clarifies financial reporting for derivative instruments and for hedging
activities accounted for under SFAS No. 133 and is effective for contracts
entered into or modified, and for hedges designated, after June 30, 2003. The
Company has


                                       14


no derivative instruments and adoption of the standard is not expected to have a
material impact on the Company's consolidated financial position, results of
operations or cash flows.

      In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Instruments with Characteristics of Both Liabilities and Equity." The standard
establishes how an issuer classifies and measures certain freestanding financial
instruments with characteristics of liabilities and equity and requires that
such instruments be classified as liabilities. The standard is effective for
financial instruments entered into or modified after May 31, 2003 and is
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. Adoption of the standard is not expected to have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.


                                       15


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (in whole dollars)

      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, future demand for the Company's
products and services, the successful commercialization of the Company's
advanced rechargeable batteries, general economic conditions, government and
environmental regulation, competition and customer strategies, technological
innovations in the primary and rechargeable battery industries, changes in the
Company's business strategy or development plans, capital deployment, business
disruptions, including those caused by fires, raw materials supplies,
environmental regulations, and other risks and uncertainties, certain of which
are beyond the Company's control. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may differ materially from those described herein as anticipated,
believed, estimated or expected.

      This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the accompanying
consolidated financial statements and notes thereto contained herein and the
Company's consolidated financial statements and notes thereto contained in the
Company's Transition Report on Form 10-K as of and for the six-month period
ended December 31, 2002.

General
-------

      Ultralife Batteries, Inc. develops, manufactures and markets a wide range
of standard and customized lithium primary (non-rechargeable), lithium ion and
lithium polymer rechargeable batteries for use in a wide array of applications.
The Company believes that its technologies allow the Company to offer batteries
that are flexibly configured, lightweight and generally achieve longer operating
time than many competing batteries currently available. The Company has focused
on manufacturing a family of lithium primary batteries for military, industrial
and consumer applications, which it believes is one of the most comprehensive
lines of lithium manganese dioxide primary batteries commercially available. The
Company also supplies rechargeable lithium ion and lithium polymer batteries for
use in portable electronic applications.

      Effective December 31, 2002, the Company changed its fiscal year-end from
June 30 to December 31.

      For several years, the Company had incurred net operating losses primarily
as a result of funding research and development activities and, to a lesser
extent, incurring manufacturing and selling, general and administrative costs.
During the twelve month period ended June 30, 2002, the Company realigned its
resources to bring costs more in line with revenues, moving the Company closer
to achieving operating cash breakeven and profitability. In addition, the
Company refined its rechargeable strategy to allow it to be more effective in
the marketplace. As a result of the Company's focus on its key financial goals,
the Company successfully achieved operating profitability for the first time in
its history in the quarter ended March 29, 2003.

      The Company reports its results in four operating segments: Primary
Batteries, Rechargeable Batteries, Technology Contracts and Corporate. The
Primary Batteries segment includes 9-volt, cylindrical and various other
non-rechargeable specialty batteries. The Rechargeable Batteries segment
includes the Company's lithium polymer and lithium ion rechargeable batteries.
The Technology Contracts segment includes revenues and related costs associated
with various government and military


                                       16


development contracts. The Corporate segment consists of all other items that do
not specifically relate to the three other segments and are not considered in
the performance of the other segments.

Results of Operations
---------------------

Three months ended June 28, 2003 and June 30, 2002

      Revenues. Consolidated revenues reached a quarterly record of $20,110,000
for the three-month period ended June 28, 2003, an increase of $11,532,000, or
134%, from the $8,578,000 reported in the same quarter in the prior year.
Primary battery sales increased $11,271,000, or 136%, from $8,299,000 last year
to $19,570,000 this year, mainly as a result of strong shipments of HiRate(R)
battery products, including sales of BA-5390 batteries used mainly in various
communications and weapons applications in the military. Rechargeable revenues
rose $187,000 to $258,000 as the Company's broadened strategy to include battery
assemblies resulted in new customers. Technology Contract revenues increased
$74,000 to $282,000 in the second quarter of 2003 as certain milestones were met
on a development contract with the U.S. Army.

      Cost of Products Sold. Cost of products sold totaled $15,379,000 for the
quarter ended June 28, 2003, an increase of $7,886,000, or 105% over the same
three-month period a year ago. The gross margin on consolidated revenues for the
quarter was $4,731,000, or 24% of revenues, an improvement of $3,646,000 over
the $1,085,000, or 13% of revenues, in the same quarter in the prior year. Gross
margins in the Company's primary battery operations improved $3,446,000, from
$1,562,000 in 2002 to $5,008,000 in 2003. As a percentage of revenues, primary
battery margins amounted to 26% in the second quarter of 2003 compared with 19%
in 2002. This improvement resulted mainly from higher sales and production
volumes that spread manufacturing overhead costs over a broader base, as well as
improvements in manufacturing efficiencies. In the Company's rechargeable
operations, the gross margin loss amounted to $389,000 in the second quarter of
2003 compared with $497,000 in the same period in 2002. This improvement in the
rechargeable area was the result of higher sales volumes and the favorable
impact from cost savings initiatives that were implemented during the first
quarter in 2002, as well as lower depreciation charges. Gross margins in the
Technology Contract segment increased from $20,000 in 2002 to $112,000 in 2003
as a result of higher sales.

      During the second quarter of 2003, the Company's production volumes
continued to increase in order to keep pace with product demand. As a result,
the Company increased its direct labor force by more than 130 people, or
approximately 25% since March 2003. Certain inefficiencies in the production
operation that resulted from the rapid manufacturing ramp-up, including the need
to work significant amounts of overtime to meet customer delivery requirements,
are expected to improve as the direct labor force stabilizes and additional
production equipment is installed to alleviate various manual processes. In
addition, the Company expects to realize further direct material cost reductions
over the levels achieved in the first half of 2003 as production volumes
increase.

      Operating Expenses. Operating expenses for the three months ended June 28,
2003 totaled $2,833,000, quite consistent with the prior year's amount of
$2,854,000, excluding the $14,318,000 impairment charge related to rechargeable
assets. While research and development costs declined $453,000 as the
development efforts for rechargeable products were diminished and depreciation
expenses declined, selling, general and administrative expenses increased
$432,000 between the two periods due to higher compensation expenses and higher
professional fees. Overall, operating expenses as a percentage of sales improved
significantly, from 33% in the June 2002 quarter to 14% in the June 2003
quarter, as the revenue base increased significantly.

      Other Income (Expense). Interest expense, net, for the second quarter of
2003 was $146,000, an increase of $43,000 from the comparable period in 2002,
due mainly as a result of interest expense


                                       17


associated with the $500,000 short-term note that was issued in March 2003.
Equity loss in Ultralife Taiwan, Inc., (UTI) was $678,000 in the second quarter
of 2002 compared with zero in the second quarter of 2003. This change resulted
mainly from an October 2002 change in the method of accounting for the Company's
investment in UTI, from the equity method of accounting to the cost method of
accounting. In October 2002, the Company sold a portion of its equity investment
in UTI, reducing its ownership interest from approximately 30% to approximately
10.6%. Subsequent to the completion of this transaction, UTI has raised
additional equity capital and the Company's ownership interest in UTI has
declined to approximately 9.2% as of June 28, 2003. Miscellaneous income rose
from $362,000 in 2002 to $397,000 in 2003. This change related primarily to
higher gains on foreign currency transactions, mainly due to changes between the
British pound sterling and the U.S. dollar. More specifically, the Company has
had intercompany transactions over the years with its wholly-owned U.K.
subsidiary, Ultralife Batteries (UK) Ltd., that have resulted in a net payable
balance to the U.S. parent company, denominated in U.S. dollars. While there was
no cash impact to the Company as a result of the translation of these
intercompany balances during the periods presented, foreign currency translation
losses were recognized as the British pound sterling strengthened against the
U.S. dollar during each of the three-month periods ended June 28, 2003 and June
30, 2002.

      Net Income. Net income and diluted earnings per share were $2,149,000 and
$0.16, respectively, for the three months ended June 28, 2003, compared to a net
loss and loss per share of $16,506,000 and $1.28, respectively, for the same
quarter last year, primarily as a result of the reasons described above. Average
common shares outstanding increased mainly due to the Company's private equity
offering in April 2002, stock option exercises in 2003, and the conversion of a
short-term note in June 2003, offset in part by the reacquisition of shares from
UTI that resulted from the Company's sale of a portion of its interest in UTI in
October 2002. The increase in the Company's stock price during 2003 had a
greater dilutive effect on the average diluted shares outstanding computation
compared with the same period in 2002.

Six months ended June 28, 2003 and June 30, 2002

      Revenues. Consolidated revenues totaled $35,538,000 for the six-month
period ended June 28, 2003, an increase of $18,098,000, or 104%, from the
$17,440,000 reported in the same quarter in the prior year. Primary battery
sales increased $17,163,000, or 101%, from $17,039,000 last year to $34,202,000
this year, mainly as a result of strong shipments of HiRate(R) battery products,
including sales of BA-5390 batteries used mainly in various communications and
weapons applications in the military, as well as higher 9-volt sales.
Rechargeable revenues rose $480,000 to $638,000 as the Company's broadened
strategy including battery assemblies began to develop new customers. Technology
Contract revenues increased $455,000 to $698,000 in the first six months of 2003
as certain milestones were met on a development contract with the U.S. Army.

      Cost of Products Sold. Cost of products sold totaled $27,648,000 for the
first half of 2003, an increase of $12,215,000, or 79% over the same six-month
period a year ago. The gross margin on consolidated revenues for the first six
months of 2003 was $7,890,000, or 22% of revenues, an improvement of $5,883,000
over the $2,007,000, or 12% of revenues, in the same period in the prior year.
Gross margins in the Company's primary battery operations improved $5,169,000,
from $3,003,000 in 2002 to $8,172,000 in 2003. As a percentage of revenues,
primary battery margins amounted to 24% in the first half of 2003 compared with
18% in 2002. This improvement resulted mainly from higher sales and production
volumes, in addition to manufacturing efficiencies. In the Company's
rechargeable operations, the gross margin loss amounted to $596,000 in the first
six months of 2003 compared with a loss of $1,018,000 in the same period in
2002. This improvement in the rechargeable area was the result of higher sales
volumes and the favorable impact from cost savings initiatives that were
implemented during the first quarter in 2002, as well as lower depreciation
charges. Gross margins in the Technology Contract segment increased from $22,000
in 2002 to $314,000 in 2003 as a result of higher sales.


                                       18


      During the first half of 2003, the Company's production volumes increased
in order to keep pace with product demand. As a result, the Company increased
its direct labor force by more than 300 people, or approximately 80% since
December 2002. Certain inefficiencies in the production operation resulting from
the rapid manufacturing ramp-up, including the need to work significant amounts
of overtime to meet customer delivery requirements, are expected to improve as
the direct labor force stabilizes and additional production equipment is
installed to alleviate various manual processes. In addition, the Company
expects to realize further direct material cost reductions over the levels
achieved in the first half of 2003 as production volumes increase.

      Operating Expenses. Operating expenses for the six months ended June 28,
2003 totaled $5,380,000, a decrease of $493,000 from the prior year, excluding
the $14,318,000 impairment charge related to rechargeable assets. This decrease
was primarily attributable to lower research and development costs, which
declined $906,000, as the development efforts for rechargeable products were
diminished and depreciation expenses declined. Selling, general and
administrative expenses increased $413,000 to $4,149,000 in 2003, mainly as a
result of higher compensation expenses and higher professional fees. As a
percentage of sales, total operating expenses (excluding impairment charges)
declined noticeably from 34% in the first six months of 2002 to 15% in the same
period in 2003, mostly due to the higher revenue base.

      Other Income (Expense). Interest expense, net, for the first six months of
2003 rose $36,000 to $237,000 in the first six months of 2003, primarily due to
interest expense associated with the $500,000 short-term convertible note that
was issued in March 2003. Equity loss in Ultralife Taiwan, Inc., (UTI) was
$1,179,000 in the first half of 2002 compared with zero in the first half of
2003. This change resulted mainly from an October 2002 change in the method of
accounting for the Company's investment in UTI, from the equity method of
accounting to the cost method of accounting. In October 2002, the Company sold a
portion of its equity investment in UTI, reducing its ownership interest from
approximately 30% to approximately 10.6%. Subsequent to the completion of this
transaction, UTI has raised additional equity capital and the Company's
ownership interest in UTI has declined to approximately 9.2% as of June 28,
2003. Miscellaneous income declined from $265,000 in 2002 to $187,000 in 2003,
due to lower gains from the impact of foreign currency translations. These
foreign currency gains relate mainly to changes between the British pound
sterling and the U.S. dollar. More specifically, the Company has had
intercompany transactions over the years with its wholly-owned U.K. subsidiary,
Ultralife Batteries (UK) Ltd., that have resulted in a net payable balance to
the U.S. parent company, denominated in U.S. dollars. While there was no cash
impact to the Company as a result of the translation of these intercompany
balances during the periods presented, foreign currency translation gains were
recognized as the British pound sterling strengthened against the U.S. dollar
during each of the six-month periods ended June 28, 2003 and June 30, 2002.

      Net Income. Net income and diluted earnings per share were $2,460,000 and
$0.19, respectively, for the six months ended June 28, 2003, compared to a net
loss and loss per share of $19,299,000 and $1.49, respectively, for the same
six-month period last year, primarily as a result of the reasons described
above. Average common shares outstanding changed due to the Company's private
equity offering in April 2002, stock option exercises during the first half of
2003, and the conversion of a short-term note in June 2003, offset in part by
the reacquisition of shares from UTI that resulted from the Company's sale of a
portion of its interest in UTI in October 2002. The increase in the Company's
stock price during 2003 had a greater dilutive effect on the average diluted
shares outstanding computation compared with the same period in 2002.


                                       19


Liquidity and Capital Resources

      As of June 28, 2003, cash equivalents and available for sale securities
totaled $1,614,000, excluding restricted cash of $50,000. During the six months
ended June 28, 2003, the Company used $243,000 of cash in operating activities
as compared to $2,930,000 for the six months ended June 30, 2002. During the
first six months of 2003, the Company's net income plus depreciation and
amortization were offset by an increase in working capital usage, particularly
an increase in accounts receivable related to the significant rise in sales
during the period. In the six months ended June 28, 2003, the Company used
$3,278,000 to purchase plant, property and equipment, an increase of $2,486,000
from the prior year's capital expenditures, mainly as a result of the need to
increase production capacity for cylindrical cells as demand from military
customers grew significantly. During the six month period ended June 28, 2003,
the Company generated $3,784,000 in funds from financing activities. The
financing activities included inflows from issuance of stock, mainly as stock
options were exercised during the period, a $500,000 90-day note converted into
shares of common stock in June 2003, and the final payment of $117,000 that was
received on a $750,000 government grant/loan, offset in part by payments on debt
obligations. In addition, the Company had accessed $2,440,000 of its revolving
credit facilities as of June 28, 2003 to finance working capital needs.

      Months cost of sales in inventory at June 28, 2003 was 1.7 months based on
a rolling three-month average, compared with 2.0 months at December 31, 2002.
This metric is indicative of the rapid turnaround of product to the military and
the high volume of sales during the first half of 2003, as well as the Company's
continuing focus to improve purchasing procedures and inventory controls. The
Company's Days Sales Outstanding (DSOs) was an average of 46 days for the first
half of 2003, compared with an average of 60 days for the same six-month period
in 2002. This improvement in DSOs mainly reflects the significant increase in
sales to the U.S. military and the associated favorable impact from the timely
payments made by them.

      At June 28, 2003, the Company had a capital lease obligation outstanding
of $103,000 for the Company's Newark, New York offices and manufacturing
facilities.

      As of June 28, 2003, the Company had open capital commitments to purchase
approximately $840,000 of production machinery and equipment.

      On March 25, 2003, the Company's primary lending bank and the Company
agreed to amend the Company's $15,000,000 credit facility. Among other things,
the amendment extended the maturity date to June 30, 2004, allowed for the
collateral release of accounts receivable related to the Company's subsidiary in
the U.K. affording it the ability to enter into a separate revolving credit
facility, and also revised certain limitations on customer concentration to
account for the increased sales activity with the U.S. military. The Company has
classified the portion of this debt that is due and payable beyond one year as a
long-term liability on the June 28, 2003 and December 31, 2002 Consolidated
Balance Sheets. As of June 28, 2003, the Company had $1,667,000 outstanding
under the term loan component of its $15,000,000 credit facility, and had
$1,853,000 of borrowings outstanding under the revolver component of the credit
facility. The Company's additional borrowing capacity under the revolver
component of the credit facility as of June 28, 2003 was approximately
$4,000,000, net of outstanding letters of credit of $3,800,000. At June 28,
2003, the Company's net worth was $26,292,000, compared to the debt covenant
requiring a minimum net worth of approximately $19,200,000.

      On April 29, 2003, Ultralife Batteries (UK) Ltd., the Company's
wholly-owned U.K. subsidiary, completed an agreement for a revolving credit
facility with a commercial bank in the U.K. Any borrowings against this credit
facility are collateralized with that company's outstanding accounts receivable
balances. The maximum credit available to that company under the facility is
approximately $700,000. This credit facility provides the Company's U.K.
operation with additional financing flexibility for its working capital needs.
At June 28, 2003, the outstanding borrowings under this revolver were $586,000.


                                       20


      In November 2001, the Company received approval for a $750,000 grant/loan
from a federally sponsored small cities program. The grant/loan has assisted in
funding capital expansion plans that the Company expects will lead to job
creation. The Company has been reimbursed for approved capital as it incurred
the cost. In August 2002, the $750,000 small cities grant/loan documentation was
finalized and the Company was reimbursed approximately $400,000 for costs it had
incurred to date for equipment purchases applicable under this grant/loan. By
the end of March 2003, all $750,000 had been advanced to the Company. During the
first quarter of 2003, $117,000 under this grant/loan was reimbursed as the
Company incurred additional expenses and submitted requests for reimbursement.
If the Company meets its employment quota requirements by April 1, 2005, the
loan and all associated accrued interest will be forgiven. If the Company does
not meet its employment quota requirements, then the funds advanced and the
associated interest will be converted into a loan that will be repaid over a
seven-year period. The Company has initially recorded the proceeds from this
grant/loan as a long-term liability and will record these proceeds as income as
the certainty of meeting the employment criteria become definitive. Interest has
been accrued at a rate of 5% per year. Due to the growth of the Company during
2003, the Company expects to meet this employment obligation during the second
half of 2003.

      On March 4, 2003, the Company completed a short-term financing to help it
meet certain working capital needs as the Company was growing rapidly. Pursuant
to the terms of the note, the three-month, $500,000 note, which accrued interest
at 7.5% per annum, was converted into 125,000 shares of common stock at $4.00
per share on June 4, 2003. Accrued interest was paid to the noteholder on the
maturity date.

      During the first six months of 2003, the Company issued 169,025 shares of
common stock as a result of exercises of stock options and warrants. The Company
received approximately $1,100,000 in cash proceeds as a result of these
transactions.

      The Company is optimistic about its future prospects and growth potential.
However, the recent rapid growth of the business has created a near-term need
for certain machinery, equipment and working capital in order to increase
capacity and build product to meet demand. In certain areas of manufacturing,
the Company has been producing at or near capacity. In order to increase its
capacity in these areas, the Company has added a significant number of people
and is adding machinery and equipment in order to continue to fulfill this
demand. The Company continues to explore other sources of capital, including
utilizing its unleveraged assets as collateral for additional borrowing
capacity, issuing debt and raising equity through a private or public offering.
Although it is evaluating these alternatives, the Company believes it has the
ability over the next 12 months to finance its operations primarily through
internally generated funds, or through the use of additional financing that
currently is available to the Company.

      As described in Part II, Item 1, "Legal Proceedings", the Company is
involved in certain environmental matters with respect to its facility in
Newark, New York. Although the Company has reserved for expenses related to
this, there can be no assurance that this will be the maximum amount. The
ultimate resolution of this matter may have a significant adverse impact on the
results of operations in the period in which it is resolved.

      The Company typically offers warranties against any defects due to product
malfunction or workmanship for a period up to one year from the date of
purchase. The Company also offers a 10-year warranty on its 9-volt batteries
that are used in ionization-type smoke detector applications. The Company
provides for a reserve for this potential warranty expense, which is based on an
analysis of historical warranty issues. There is no assurance that future
warranty claims will be consistent with past history, and in the event the
Company's experiences a significant increase in warranty claims, there is no
assurance that the Company's reserves are sufficient. This could have a material
adverse effect on the Company's business, financial condition and results of
operations.


                                       21


Outlook

      The Company expects revenues in its third quarter of calendar 2003 to
reach at least $20,000,000. Demand for the BA-5390 battery remains very strong,
and the Company continues to respond as quickly as possible to the orders on
hand. The Company believes that the order activity from the military will
continue to be strong throughout the remainder of 2003 and that it is likely to
continue into 2004. In support of this, on August 5, 2003, the Company announced
that it had been awarded its largest contract to date for its BA-5390/U battery
valued at up to $28,000,000, by the U.S. Army Communications Electronics Command
(CECOM). Shipments are scheduled to begin in November 2003 and continue into the
first half of 2004, subject to negotiated delivery requirements. In addition to
the strong demand from the military, orders from commercial customers for
9-volts and other batteries remain strong. Sampling and design activity for
various rechargeable products remains high, although the Company is
conservatively projecting modest revenues in this part of the business for the
remainder of 2003.

      Looking ahead for the full calendar year of 2003, the Company remains
optimistic about its sales prospects and the status of the manufacturing
operations. At this time, the Company is now projecting revenues of
approximately $75,000,000 (up from the previous guidance of at least
$65,000,000), an approximately 125% increase over the $33,039,000 reported for
the comparable 12 months in the period ended December 31, 2002. The Company is
raising its outlook due to the strong order activity it has experienced
recently, particularly from the military, and its success in ramping up
production to meet demand.

      The Company has a fairly substantial fixed cost infrastructure to support
its overall operations. The Company believes that incremental sales volumes will
generate added gross margins in the range of 30% to 50%. Conversely, decreasing
sales volumes will result in the opposite effect. During the December 2001 and
March 2002 quarters, the Company was able to significantly reduce costs through
various cost savings actions, moving it toward cash generation and
profitability. As the Company continues to grow and leverage this
infrastructure, it believes that sustainable profitability can be achieved. The
Company believes that consistent, quarterly revenues in the range of $11,000,000
to $12,000,000, depending on mix, is the operating income breakeven point for
profitability.

      The Company continues to monitor its operating costs very tightly. Over
the remainder of the calendar year, the Company is projecting operating expenses
to be in line with or modestly higher than the first two quarters of 2003.

      The Company expects that operating income in the September 2003 quarter
will exceed $2,100,000, based on the Company's projected revenues and improving
manufacturing efficiencies. This compares to an operating loss of $1,917,000 in
the September 2002 quarter. For the full year of 2003, the Company is projecting
that operating income will be at least $7,000,000, based on a continuing strong
demand for the Company's products, compared with an operating loss of
$21,838,000, including a $14,318,000 asset impairment charge, for the full
calendar year of 2002. The guidance previously provided called for basic
earnings per share in the range of $0.35 to $0.45 and revenue of $65,000,000,
which suggested operating income in the range of approximately $5,000,000 to
$6,300,000.

      In order to meet the significant demand from the military, the Company
expects to continue to make prudent investments in capital equipment that have a
very short payback. At this time, the Company believes that expenditures for
capital projects during 2003 will be approximately $5,000,000, based on the
recent volume of orders and the expectation that demand will continue to
increase across all product lines. Since the lead time for ordering certain
production equipment can range from six to twelve months, the Company must make
some up front investments in capital in order to increase its capacity to meet
anticipated demand. The recent success and the continued outlook for growth is
requiring the Company to make some such investments in new equipment during
2003. The Company carefully


                                       22


evaluates such projects and will only make capital investments when necessary
and when there is typically a favorable payback period.

      As the Company's volume grows, it expects that working capital needs
related to increasing sales volumes and inventory levels will be able to be
financed by its revolving credit facility. The Company continually explores its
financing alternatives, including utilizing its unleveraged assets as collateral
for additional borrowing capacity, refinancing current debt or issuing new debt,
and raising equity through a private or public offering. Although it is
evaluating these alternatives, the Company believes it has the ability over the
next 12 months to finance its operations primarily through internally generated
funds, or through the use of additional financing that currently is available to
the Company. While the Company is confident that it will be successful in
continuing to arrange adequate financing to support its growth, there can be no
assurance that the Company will be able to do so. Therefore, this could have a
material adverse effect on the Company's business, financial position and
results of operations.

New Accounting Pronouncements

      In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Others Indebtedness." This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. This Interpretation also
incorporates, without change, the guidance in FASB Interpretation No. 34,
"Disclosure of Indirect Guarantees of Indebtedness of Others." The initial
recognition and measurement provisions of this Interpretation are applicable on
a prospective basis to guarantees issued or modified after December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure requirements in
this Interpretation are effective for financial statements of interim or annual
periods ending after December 15, 2002. The only material guarantees that the
Company has in accordance with FASB Interpretation No. 45 are product
warranties. All such guarantees have been appropriately recorded in the
financial statements.

      In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure-an amendment of FASB
Statement No. 123." This statement amends SFAS No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
SFAS No. 148 does not permit the use of the original SFAS No. 123 prospective
method of transition for changes to the fair value based method made in fiscal
years after December 15, 2003. The Company currently applies the intrinsic value
method and has no plans to convert to the fair value method.

      In December 2002, the FASB issued Interpretation No. 46 "Consolidation of
Variable Interest Entities." This Interpretation requires companies to
reevaluate their accounting for certain investments in "variable interest
entities." A variable interest entity is a corporation, partnership, trust, or
any other legal structure used for business purposes that either (a) does not
have equity investors with voting rights or (b) has equity investors that do not
provide sufficient financial resources for the entity to support its activities.
A variable interest entity often holds financial assets, including loans or
receivables, real estate or other property. A variable interest entity may be
essentially passive or it may engage in research and development or other
activities on behalf of another company. Variable interest entities are to be
consolidated if the Company is subject to a majority of the risk of loss from
the variable interest entity's activities or entitled to receive a majority of
the entity's residual returns or both. The disclosure


                                       23


requirements of this Interpretation are effective for all financial statements
issued after January 31, 2003. The consolidation requirements of this
Interpretation are effective for all periods beginning after June 15, 2003. The
Company has no investments in variable interest entities.

      In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." The standard amends and
clarifies financial reporting for derivative instruments and for hedging
activities accounted for under SFAS No. 133 and is effective for contracts
entered into or modified, and for hedges designated, after June 30, 2003. The
Company has no derivative instruments and adoption of the standard is not
expected to have a material impact on the Company's consolidated financial
position, results of operations or cash flows.

      In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Instruments with Characteristics of Both Liabilities and Equity." The standard
establishes how an issuer classifies and measures certain freestanding financial
instruments with characteristics of liabilities and equity and requires that
such instruments be classified as liabilities. The standard is effective for
financial instruments entered into or modified after May 31, 2003 and is
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. Adoption of the standard is not expected to have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

      The Company is exposed to various market risks in the normal course of
business, primarily interest rate risk and changes in market value of its
investments and believes its exposure to these risks is minimal. The Company's
investments are made in accordance with the Company's investment policy and
primarily consist of commercial paper and U.S. corporate bonds. The Company does
not currently invest in derivative financial instruments.

Item 4. CONTROLS AND PROCEDURES

      Within the 90 days prior to the date of this Form 10-Q, the Company
carried out an evaluation, under the supervision and with the participation of
the company's management, including the Company's president and chief executive
officer, along with the Company's vice president - finance and chief financial
officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act 13a-14. Based upon
that evaluation, the Company's president and chief executive officer, along with
the Company's vice president - finance and chief financial officer, concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information related to the Company (including its
consolidated subsidiaries) required to be included in the Company's periodic
filings with the Securities and Exchange Commission. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect internal controls subsequent to the date the Company
carried out its evaluation.


                                       24


PART II OTHER INFORMATION

Item 1. Legal Proceedings

      The Company is subject to legal proceedings and claims which arise in the
normal course of business. The Company believes that the final disposition of
such matters will not have a material adverse effect on the financial position
or results of operations of the Company.

      In August 1998, the Company, its Directors, and certain underwriters were
named as defendants in a complaint filed in the United States District Court for
the District of New Jersey by certain shareholders, purportedly on behalf of a
class of shareholders, alleging that the defendants, during the period April 30,
1998 through June 12, 1998, violated various provisions of the federal
securities laws in connection with an offering of 2,500,000 shares of the
Company's Common Stock. The complaint alleged that the Company's offering
documents were materially incomplete, and as a result misleading, and that the
purported class members purchased the Company's Common Stock at artificially
inflated prices and were damaged thereby. Upon a motion made on behalf of the
Company, the Court dismissed the shareholder action, without prejudice, allowing
the complaint to be refiled. The shareholder action was subsequently refiled,
asserting substantially the same claims as in the prior pleading. The Company
again moved to dismiss the complaint. By Opinion and Order dated September 28,
2000, the Court dismissed the action, this time with prejudice, thereby barring
plaintiffs from any further amendments to their complaint and directing that the
case be closed. Plaintiffs filed a Notice of Appeal to the Third Circuit Court
of Appeals and the parties submitted their briefs. Subsequently, the parties
notified the Court of Appeals that they had reached an agreement in principle to
resolve the outstanding appeal and settle the case upon terms and conditions
which require submission to the District Court for approval. Upon application of
the parties and in order to facilitate the parties' pursuit of settlement, the
Court of Appeals issued an Order dated May 18, 2001 adjourning oral argument on
the appeal and remanding the case to the District Court for further proceedings
in connection with the proposed settlement.

      Subsequent to the parties entering into the settlement agreement, the
Company's insurance carrier commenced liquidation proceedings. The insurance
carrier informed the Company that in light of the liquidation proceedings, it
would no longer fund the settlement. In addition, the value of the insurance
policy is in serious doubt. In April 2002, the Company and the insurance carrier
for the underwriters offered to proceed with the settlement. Plaintiffs' counsel
accepted the terms of the proposed settlement, amounting to $175,000 for the
Company, which was previously accrued. . The settlement has been approved by the
Court and by the shareholders comprising the class, and the Company paid the
settlement in June of 2003.

      This matter is now completed and the Company will not incur any further
expenses with regard to this lawsuit.

      In conjunction with the Company's purchase/lease of its Newark, New York
facility in 1998, the Company entered into a payment-in-lieu of tax agreement
which provides the Company with real estate tax concessions upon meeting certain
conditions. In connection with this agreement, a consulting firm performed a
Phase I and II Environmental Site Assessment which revealed the existence of
contaminated soil and ground water around one of the buildings. The Company
retained an engineering firm which estimated that the cost of remediation should
be in the range of $230,000. This cost, however, is merely an estimate and the
cost may in fact be much higher. In February, 1998, the Company entered into an
agreement with a third party which provides that the Company and this third
party will retain an environmental consulting firm to conduct a supplemental
Phase II investigation to verify the existence of the contaminants and further
delineate the nature of the environmental concern. The third party agreed to
reimburse the Company for fifty percent (50%) of the cost of correcting the
environmental concern on the Newark property. The Company has fully reserved for
its portion of the estimated liability. Test


                                       25


sampling was completed in the spring of 2001, and the engineering report was
submitted to the New York State Department of Environmental Conservation
(NYSDEC) for review. NYSDEC reviewed the report and, in January 2002,
recommended additional testing. The Company responded by submitting a work plan
to NYSDEC, which was approved in April 2002. The Company has sought proposals
from engineering firms to complete the remedial work contained in the work plan,
but it is unknown at this time whether the final cost to remediate will be in
the range of the original estimate, given the passage of time. Because this is a
voluntary remediation, there is no requirement for the Company to complete the
project within any specific time frame. The ultimate resolution of this matter
may have a significant adverse impact on the results of operations in the period
in which it is resolved. Furthermore, the Company may face claims resulting in
substantial liability which could have a material adverse effect on the
Company's business, financial condition and the results of operations in the
period in which such claims are resolved.

      A retail end-user of a product manufactured by one of Ultralife's
customers (the "Customer"), has made a claim against the Customer wherein it is
asserted that the Customer's product, which is powered by an Ultralife battery,
does not operate according to the Customer's product specification. No claim has
been filed against Ultralife. However, in the interest of fostering good
customer relations, in September 2002, Ultralife has agreed to lend technical
support to the Customer in defense of its claim. Additionally, Ultralife will
honor its warranty by replacing any batteries that may be determined to be
defective. In the event a claim is filed against Ultralife and it is ultimately
determined that Ultralife's product was defective, replacement of batteries to
this Customer or end-user may have a material adverse effect on the Company's
financial position and results of operations.

Item 2. Changes in Securities and Use of Proceeds

      On June 4, 2003, the Company issued 125,000 shares of its common stock to
an accredited investor upon conversion of a three-month $500,000 note issued on
March 4, 2003 to raise funds to meet the Company's short-term working capital
needs. The shares were issued in reliance on the exemption provided by Section
4(2) of the Securities Act of 1933, as amended.

Item 4. Submission of Matters to a Vote of Securities Holders

      (a)   On June 10, 2003, an Annual Meeting of Shareholders of the Company
            was held.

      (b)   At the Annual Meeting, the Shareholders of the Company elected to
            the Board of Directors all seven nominees for Director with the
            following votes:

                      DIRECTOR                 FOR                AGAINST

                  Joseph C. Abeles           9,898,664           2,322,005
                  Joseph N. Barrella        12,183,040              37,625
                  Patricia C. Barron        12,183,040              37,625
                  Daniel W. Christman       12,182,960              37,705
                  John D. Kavazanjian       12,182,960              37,705
                  Carl H. Rosner            12,183,040              37,625
                  Ranjit C. Singh           12,181,040              37,625


                                       26


      (c)   At the Annual Meeting, the Shareholders of the Company voted for the
            ratification of PricewaterhouseCoopers LLP as independent auditors
            with the following votes:

                              FOR               AGAINST            ABSTAIN

                           12,181,340            7,025              32,300

Item 6. Exhibits and Reports on Form 8-K

      (a)   Exhibits

                  10    Financing Agreement between Ultralife Batteries (UK)
                        Ltd. and EuroFinance

                  99    CEO & CFO Certifications

      (b)   Reports on Form 8-K

                  On May 13, 2003, the Company filed a Form 8-K with the
            Securities and Exchange Commission announcing its first quarter 2003
            earnings.

                  On May 19, 2003, the Company filed a Form 8-K with the
            Securities and Exchange Commission announcing the receipt of a
            multi-million dollar order from a major consumer products company
            for a private-labeled version of its popular 9-volt lithium battery.
            Production began in May for scheduled shipments starting in June and
            extending throughout 2003.

                  On May 21, 2003, the Company filed a Form 8-K with the
            Securities and Exchange Commission announcing a contract awarded for
            its BA-5390/U battery (previously UBI5390) valued at approximately
            $19 million, by the U.S. Army Communications Electronics Command
            (CECOM). The order represents the fourth and largest contract to
            date for this battery. Shipments were to began in July and will
            continue into the fourth quarter.

                  On June 12, 2003, the Company filed a Form 8-K with the
            Securities and Exchange Commission indicating that Company, on March
            4, 2003, had issued a three-month, $500,000 note, convertible into
            shares of the Company's common stock at $4.00 per share, or 125,000
            shares, at the option of the note holder. On June 4, 2003, the
            maturity date of the note, the note holder elected to convert the
            note into common shares and the Company had thus extinguished this
            debt obligation.

                  On June 12, 2003, the Company filed a Form 8-K with the
            Securities and Exchange Commission announcing orders valued at
            approximately $2.7 million from two of its U.S. battery distributors
            for its BA-5390/U lithium military battery. Shipments have begun and
            are expected to be completed by August.


                                       27


                                   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 BATTERIES, INC.
                                           -------------------------
                                                  (Registrant)

      Date: August 8, 2003         By: /s/ John D. Kavazanjian
            --------------             -----------------------
                                           John D. Kavazanjian
                                           President and Chief Executive Officer

      Date: August 8, 2003         By: /s/ Robert W. Fishback
            --------------             -----------------------
                                           Robert W. Fishback
                                           Vice President - Finance and Chief
                                           Financial Officer


                                       28


I, John D. Kavazanjian, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      a) designed such disclosure controls and procedures 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 quarterly report is
      being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

      c) presented in this quarterly report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

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

      a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: August 8, 2003                       /s/ John D. Kavazanjian
                                           -----------------------
                                           John D. Kavazanjian,
                                           President and Chief Executive Officer


                                       29


I, Robert W. Fishback, certify that:

1. I have reviewed this quarterly report on 10-Q of Ultralife Batteries, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      a) designed such disclosure controls and procedures 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 quarterly report is
      being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

      c) presented in this quarterly report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

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

      a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: August 8, 2003        /s/ Robert W. Fishback
                            ---------------------------
                            Robert W. Fishback
                            Vice President - Finance and Chief Financial Officer


                                       30