BASIS OF PRESENTATION

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

of Regulation S-

Accordingly, they do

not

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

not

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

-K for the year ended

December 31, 2018.

The

December 31, 2018

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

not

include all disclosures required by GAAP.

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

Our monthly closing schedule is a

4/4/5

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

not

any material differences when making quarterly comparisons.

Recently Adopted Accounting Guidance

Leases

Effective

January 1, 2019,

the Company adopted Accounting Standards Update

2016

–

Leases

(Topic

842

). Adoption of the new standard did

not

materially impact the prior year consolidated statements of operations and cash flows. The prior year consolidated balance sheet has been revised for the effects of the new standard. The effects to our consolidated balance sheet as of

December 31, 2018

are presented below.

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

one

of our operating facilities.

At contract inception, the Company determines whether the arrangement is or contains a lease and determines the lease classification. The lease term is determined based on the noncancellable term of the lease adjusted to the extent optional renewal terms and termination rights are reasonably certain. Lease expense is recognized evenly over the lease term. Variable lease payments are recognized as period costs. The present value of remaining lease payments are recognized as a liability on the balance sheet with a corresponding right-of-use asset adjusted for prepaid or accrued lease payments. The Company uses its incremental borrowing rate for the discount rate, unless the interest rate implicit in the lease contract is readily determinable. The Company has adopted the practical expedients to

not

separate non-lease components from lease components and to

not

present short-term leases on the balance sheet.

The impact on the consolidated balance sheet as of

December 31, 2018

is shown below.

Impact to Previously Reported Results

Consolidated Balance Sheet as of

December 31, 2018:

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

See Note

for further disclosure regarding lease accounting.

Recent

Accounting Guidance

Not

Yet Adopted

There have been

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

2018

Annual Report on Form

-K.