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 September 30, 1998

                                       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.)
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 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 - 10,484,886 shares outstanding as of September 30,
1998.



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

                                                                            Page
                                                                            ----

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

        Condensed Consolidated Balance Sheets -June 30, 1998 and
          September 30, 1998...............................................    3

        Condensed Consolidated Statements of Operations -
         Three months ended September 30, 1997 and 1998....................    4

        Condensed Consolidated Statements of Cash Flows Three months
         ended September 30, 1997 and 1998.................................    5

        Notes to Condensed Consolidated Financial Statements ..............  6-8

Item 2. Management's Discussion and Analysis of
          Financial Condition and Results of Operations ................... 9-11

PART II OTHER INFORMATION

SIGNATURES ................................................................   12


                                      -2-


PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements

                    ULTRALIFE BATTERIES, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)
                                   (Unaudited)
- --------------------------------------------------------------------------------

                                                                As of
                                                        June 30,   September 30,
                      ASSETS                             1998         1998
                                                         ----         ----
Current assets:
   Cash and cash equivalents                           $    872     $     46
   Available-for-sale securities                         34,816       30,300
   Trade accounts receivable ( less
   allowance for doubtful accounts
   of $158, and $161 at June 30, 1998
   and September 30, 1998, respectively)                  3,046        3,007
   Inventories                                            3,911        4,424
   Prepaid expenses and other current assets              2,144        3,080
                                                       --------     --------

  Total current assets                                   44,789       40,857
                                                       --------     --------
Property and equipment:
  Machinery and equipment                                33,113       34,345
  Leasehold improvements                                    863          863
                                                       --------     --------
                                                         33,976       35,208
  Less - Accumulated depreciation and amortization        3,828        4,272
                                                       --------     --------
                                                         30,148       30,936
                                                       --------     --------
Other  assets and deferred charges:
  Technology licensee agreements
   (net of accumulated  amortization of
   $561 and $676, at June 30, 1998
   and September 30,1998 respectively)                      890          775
                                                       --------     --------
                                                            890          775
                                                       --------     --------

  Total Assets                                         $ 75,827     $ 72,568
                                                       ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Capital lease                                       $     50     $     50
   Accounts payable                                       4,785        3,617
   Accrued compensation                                     335          417
   Customer advances                                        334          334
   Other current liabilities                              1,540        1,786
                                                       --------     --------
Total current  liabilities                                7,044        6,204
                                                       --------     --------
Long - term liabilities:
    Capital lease obligation                                197          197
                                                       --------     --------
Total long - term  liabilities                              197          197
                                                       --------     --------
Commitments and contingencies (Note 6)
Stockholders' 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
   12,000,000 shares in 1997 and
   20,000,000 in 1998; outstanding -
   7,926,086 in 1997 and 10,485,136 in 1998               1,051        1,051
   Capital in excess of par value                        93,605       93,605
   Accumuleted other comprehensive income                 1,368          878
   Accumulated deficit                                  (27,135)     (29,064)
                                                       --------     --------
                                                         68,889       66,470

   Less --Treasury stock, at cost 27,250 shares            (303)        (303)
                                                       --------     --------
Total Stockholders' Equity                               68,586       66,167
                                                       --------     --------
Total Liabilities and Stockholders' Equity             $ 75,827     $ 72,568
                                                       ========     ========

    The accompanying notes are an integral part of the financial statements.


                                      -3-


                    ULTRALIFE BATTERIES, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in Thousands, Except Per Share Amounts)
                                   (Unaudited)
- --------------------------------------------------------------------------------

                                                Three Months Ended September 30,

                                                     1997           1998
                                                     ----           ----
Revenues:
     Battery sales                               $      3,693    $      3,757
     Technology contracts                               1,183             465
                                                 ------------    ------------
Total revenues                                          4,876           4,222

Cost of products sold:
     Battery costs                                      3,182           3,548
     Technology contracts                               1,046             386
                                                 ------------    ------------
Total cost of products sold                             4,228           3,934
                                                 ------------    ------------

Gross profit                                              648             288


Operating expenses:
  Research and development                                906           1,828
  Selling, general, and administrative                  1,189           1,300
  Loss (Gain) on fires                                   --              (468)
                                                 ------------    ------------
Total Operating and other expenses                      2,095           2,660


Other income (expense):
  Interest income                                         253             449
  Miscellaneous                                           (13)             (7)
                                                 ------------    ------------
Loss before income taxes                               (1,207)         (1,930)
                                                 ------------    ------------

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

Net loss                                         $     (1,207)   $     (1,930)
                                                 ============    ============

Net loss per common share                        $      (0.15)   $      (0.18)
                                                 ============    ============

Weighted average number of shares outstanding       7,949,727      10,484,886
                                                 ============    ============

    The accompanying notes are an integral part of the financial statements.


                                      -4-


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

                                                Three Months Ended September 30,

                                                     1997             1998
                                                     ----             ----
                                                                    
OPERATING ACTIVITIES                                                
Net loss                                          $ (1,207)         $ (1,930)
Adjustments to reconcile net loss                                   
  to net cash used in operating activities:                         
Depreciation and amortization                          214               559
Provision for inventory obsolescence                  --                  (6)
Changes in operating assets and liabilities:                        
  (Increase) decrease in accounts receivable          (949)               39
  Decrease (increase) in inventories                   665              (507)
  Decrease (increase) in prepaid expenses                           
       and other current assets                        702              (936)
  Increase (decrease) in accounts payable                           
       and other current liabilities                   299              (840)
                                                  --------          --------
Net cash used in operating activities                 (276)           (3,621)
                                                  --------          --------
                                                                    
INVESTING ACTIVITIES                                                
Purchase of property and equipment                  (1,564)           (1,232)
Purchase of securities                             (15,946)          (27,871)
Sales of securities                                    768            26,298
Maturities of securities                            16,757             5,481
                                                  --------          --------
Net cash provided by investing activities               15             2,676
                                                  --------          --------
                                                                    
FINANCING ACTIVITIES                                                
Proceeds from issuance of common stock                 176              --
                                                  --------          --------
Net cash provided by  financing activities             176              --
                                                  --------          --------
                                                                    
Effect of exchange rate changes on cash               (197)              119
                                                  --------          --------
                                                                    
Decrease in cash and cash equivalents                 (282)             (826)
                                                                    
Cash and cash equivalents at                                        
  beginning of period                                2,311               872
                                                                    
                                                  --------          --------
Cash and cash equivalents at end of period        $  2,029          $     46
                                                  ========          ========
                                                                
Supplemental disclosure of noncash investing 
  and financing activities

Unrealized gain on securities                     $    209          $    608
                                                  ========          ========

    The accompanying notes are an integral part of the financial statements.


                                      -5-


                            ULTRALIFE BATTERIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. BASIS OF PRESENTATION

            In the opinion of the Company, the accompanying unaudited condensed
      consolidated financial statements contain all adjustments, which are of a
      normal recurring nature, necessary to present fairly the financial
      position at September 30, 1998 and the results of operations and cash
      flows for the three month periods ended September 30,1997 and 1998. The
      results for the three months September 30, 1998 are not necessarily
      indicative of the results to be expected for the entire year. The
      Financial Statements and Management's Discussion and Analysis of Financial
      Condition and Results of Operations should be read in conjunction with the
      Company's financial statements for the year ended June 30, 1998, filed on
      Form 10-K on September 29, 1998.

2. NET LOSS PER SHARE

            Net loss per share is calculated by dividing net loss by the
      weighted average number of common shares outstanding during the period;
      common stock options have not been included since their inclusion would be
      antidilutive.

3. NEW ACCOUNTING PRONOUNCEMENTS

            Statement of Financial Accounting Standard (SFAS) No. 130 "Reporting
      Comprehensive Income" establishes standards for reporting and display of
      comprehensive income and its components. The standard is applicable for
      fiscal years beginning after December 15, 1997. The Company has adopted
      the provision of SFAS No. 130. In the three months September 30, 1997 and
      1998 other comprehensive income totaled $12,000 and $490,000. The other
      comprehensive income relates to changes in foreign currency translation
      and unrealized gains on securities.

            SFAS No. 131 "Disclosures about Segments of an Enterprise and
      Related Information" establishes standards for reporting information about
      operating segments in the financial statements. The standard is required
      to be adopted for fiscal years beginning after December 15, 1997. The
      Company will adopt this standard in its 1999 financial statements. The
      Company has not yet determined the impact of this standard on its
      financial statements.

            SFAS No. 133 "Accounting for Derivative Instruments and Hedging
      Activities" established accounting and reporting for derivative
      instruments and hedging activities. The statement is effective for all
      fiscal years beginning after June 15, 1999. The company has not yet
      determined the impact of this standard on its financial statements.

4. 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 were:

                                                            $(000)
                                               June 30, 1998   September 30,1998
                                           -------------------------------------

      Raw materials                                   $2,613              $3,121
      Work in process                                  1,333               1,266
      Finished products                                  192                 258
                                           -------------------------------------
                                                       4,138               4,645
      Less: Reserve for obsolescence                     227                 221
                                           -------------------------------------
                                                      $3,911              $4,424
                                           -------------------------------------


                                      -6-


5. PROPERTY AND EQUIPMENT

            Property and equipment is stated at cost. Depreciation and
      amortization is computed using the straight-line method over the estimated
      useful lives of three to ten years. Betterments, renewals and
      extraordinary repairs that extend the life of the assets are capitalized.
      Other repairs and maintenance costs are expensed. When sold, the cost and
      accumulated depreciation applicable to assets retired are removed from the
      accounts and the gain or loss on disposition is recognized in income.

6. COMMITMENTS and CONTINGENCIES

a. China Program

            In July 1992, the Company entered into several agreements related to
      the establishment of a manufacturing facility in Changzhou, China, for the
      production and distribution in and from China of 2/3A lithium primary
      batteries. Changzhou Ultra Power Battery Co., Ltd, a company organized in
      China ("China Battery"), purchased from the Company certain technology,
      equipment, training and consulting services relating to the design and
      operation of a lithium battery manufacturing plant. China Battery was
      required to pay approximately $6.0 million to the Company over the first
      two years of the agreement, of which approximately $5.6 million has been
      paid to date. The Company has been attempting to collect the balance due
      under this contract. China Battery has indicated that these payments will
      not be made until certain contractual issues have been resolved. Due to
      China Battery's questionable willingness to pay, the Company wrote off in
      fiscal 1997 the entire balance owed to the Company as well as the
      Company's investment aggregating $805,000. Since China Battery has not
      purchased technology, equipment, training or consulting services from the
      Company to produce batteries other than 2/3A lithium batteries, the
      Company does not believe that China Battery has the capacity to become a
      competitor of the Company. The Company does not anticipate that the
      manufacturing or marketing of 2/3A lithium batteries will be a substantial
      portion of its product line in the future. However, in December 1997,
      China Battery sent to the Company a letter demanding reimbursement of an
      unspecified amount of losses they have incurred plus a refund for certain
      equipment that the Company sold to China Battery. The Company has
      attempted to initiate negotiations to resolve the dispute. However, an
      agreement has not yet materialized. Although China Battery has not taken
      any additional steps, there can be no assurance that China Battery will
      not further pursue such a claim which, if successful, would have a
      material adverse effect on the Company's business, financial condition and
      results of operations. The Company believes that such a claim is without
      merit.

b. Legal Matters

            A company has filed a claim against the Company seeking amounts
      related to commissions and breach of good faith and fair dealings. The
      Company's counsel believes that an unfavorable outcome is unlikely in this
      matter.

            An individual has filed suit claiming the Company interfered with
      his opportunity to purchase Dowty Group, PLC (now the Company's U.K.
      subsidiary). The claim amounts to $25 million. The Company believes that
      the claim is without merit and the Company intends to vigorously defend
      its position. At this time, the outcome of this suit is uncertain. An
      unfavorable outcome of this suit may have a material adverse impact on the
      Company's financial position and results of operations.


                                      -7-


            In August 1998, the Company, its Directors, certain underwriters
      were named as defendants in a complaint filed in the United States
      District Court for the District of New Jersey by a stockholder,
      purportedly on behalf of a class of stockholders, 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 alleges 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. The Company believes that the litigation
      is without merit and intends to defend it vigorously. This litigation has
      just been commenced and the amount of alleged damages, if any, cannot be
      quantified, nor can the outcome of this litigation be predicted.
      Accordingly, management cannot determine whether the ultimate resolution
      of this litigation could have a material adverse effect on the Company's
      financial position and results of operation.


                                      -8-


            The discussion and analysis below, and throughout this report,
      contains forward-looking statements within the meaning of Section 27A of
      the Securities and Exchange Act of 1933 and Section 21E of the Securities
      and Exchange Act of 1934. Actual results could differ materially from
      those projected or suggested in the forward-looking statements.

            This Management's Discussion and Analysis of Financial Condition and
      Results of Operations should be read in conjunction with the accompanying
      condensed consolidated financial statements and notes thereto contained
      herein and the Company's consolidated financial statements and notes
      thereto contained in the Company's Annual Report on Form 10-K as of and
      for the year ended June 30, 1998.

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

Results of Operations

Three months ended September 30, 1998 and 1997

            Total revenues of the Company decreased $654,000 from $4,876,000 for
      the three months ended September 30, 1997 to $4,222,000 for the three
      months ended September 30, 1998. Battery sales increased $64,000, or
      approximately 2%, from $3,693,000 for the three months ended September 30,
      1997 to $3,757,000 for the three months period ended September 30, 1998.
      The increase in battery sales was primarily due to a 38% increase in
      9-volt battery sales and the resumption of high rate lithium battery sales
      at the Company's U.K. subsidiary. These gains were substantially offset by
      lower sales of military batteries (BA-5372) following the completion of a
      U. S. Army production contract in fiscal 1998. Technology contract
      revenues decreased $718,000, or approximately 61%, from $1,183,000 in the
      three months ended September 30, 1997 to $465,000 for the same period this
      year. This decrease reflects both the completion of certain contracts
      during fiscal 1998 and the timing of new contract awards.

            Cost of products sold decreased $294,000 from $4,228,000 for the
      three months ended September 30, 1997 to $3,934,000 for the three months
      ended September 30, 1998. Cost of batteries sold increased $366,000 from
      $3,182,000 for the three months ended Septembers 30, 1997 to $3,548,000
      for the comparable period this year. As a percentage of sales, cost of
      batteries sold increased from 86% to 94% for the three months ended
      September 30, 1998. The increase in cost of batteries sold as a percentage
      of sales primarily reflects a shift in product mix. The cost of the U. S.
      Army military batteries (BA-5372) in the first quarter last year as a
      percentage of sales was relatively lower than that achieved for the
      Company's other batteries. There were no (BA-5372) battery sales in the
      current quarter. Cost of products sold includes insurance proceeds
      received by Ultralife UK for business interruption amounting to $355,000
      in the three month period last year and $506,000 in the current year
      period. These receipts offset unabsorbed overhead expenses resulting from
      lower production volumes associated with suspended manufacturing
      operations following the December 1996 fire. Technology contracts cost of
      sales decreased $660,000 from $1,046,000, or 88% of revenue, for the three
      months ended September 30, 1997 to $386,000, or 83% of revenue, for the
      same period this year. The decrease in technology contract cost of sales
      as a percentage of revenue reflects improved performance on contracts,
      principally at the Company's UK subsidiary.


                                      -9-


            Operating and other expenses increased $565,000 from $2,095,000 for
      the three months ended September 30, 1997 to $2,660,000 for the three
      months ended September 30, 1998. Of the Company's operating and other
      expenses, research and development expenses increased $922,000 from
      $906,000 in the three month period last year to $1,828,000 for the
      comparable period this year. Research and development expenses increased
      as a result of the Company's efforts to improve its production processes
      and performance of its advanced rechargeable battery coupled with the
      lower level of technology contracts which absorbed a much higher level of
      development expenses in the year ago period. Selling, general and
      administration expenses increased $111,000 from $1,189,000 for the three
      month period last year to $1,300,000 for the same period this year. This
      increase is primarily attributable to increased personnel to support he
      company's expansion plans. Operating and other expenses also decreased by
      $468,000 reflecting gains from insurance proceeds to replace assets
      previously written off due to the fire in December 1996 at Ultralife UK.

            Interest income increased $196,000 from $253,000 in the three months
      ended September 30, 1997 to $449,000 for the three months ended September
      30, 1998. The increase of interest income is principally the result of
      higher average balances invested following the public offering completed
      April 30, 1998.

            Net losses increased $723,000 from $1,207,000, or $0.15 per share,
      for the three months ended September 30, 1997 to $1,930,000, or $0.18 per
      share, for the three months ended September 30, 1998, primarily as a
      result of the reasons described above.

      Liquidity and Capital Resources

            The Company used $3,621,000 cash in operating activities during the
      first three months of fiscal 1998. This is the net result of net losses
      for the period, increased inventories to support increasing production
      rates of the Company's 9-volt batteries, increased prepaid and other
      current assets including earned but unbilled government contract revenues
      and lower accounts payable partially offset by depreciation and
      amortization expense. Additionally, the Company spent $1,232,000 of cash
      for capital additions for production equipment and facilities
      improvements.

            The Company has long-term debt of $197,000 relating to the capital
      lease obligation for the Company's Newark, New York offices and
      manufacturing facilities. A line of credit in the amount of $330,000 is
      maintained by Ultralife UK for short term working capital requirements.
      With planned sales growth, the Company is exploring obtaining working
      capital lines of credit of approximately $15,000,000.

            The Company's capital resource commitments as of September 30, 1998
      consist principally of capital equipment commitments of approximately
      $1,286,000. The Company believes its current financial position and cash
      flows from operations will be adequate to support its financial
      requirements through fiscal 1998

      Year 2000 Disclosure

            The "year 2000 Issue" is the result of computer programs being
      written using only two digits as opposed to four to represent the
      applicable year. Computer programs that have time sensitive software may
      recognize "00" as the year 1900 rather than the year 2000. This could
      potentially result in a system failure or an error in calculation. This
      year 2000 issue is believed to affect all companies and organizations,
      including the Company.

            The Company is taking a number of steps in an effort to assess its
      readiness for year 2000 issues, including reviewing all business systems,
      testing equipment, surveying key material suppliers, and completing the
      remediation plan.


                                      -10-


            The Company's review and assessment to date has determined that the
      present accounting systems are not year 2000 compliant. The Company has an
      ongoing project to select and install an enterprise-wide software system
      to improve the flow of management information and control of operations.
      The Company has specified that the software system must be year 2000
      compliant. This project began last year and is expected to be completed
      during 1999. The cost of the software together with additional hardware is
      estimated to be between $400,000 and $600,000. Most of these costs will be
      capitalized.

            In addition to internal Year 2000 activities, the Company is in
      contact with its key suppliers and vendors to assess state of readiness
      and compliance. The company has issued documentation to key vendors and
      suppliers and is in the process of receiving assurances from these
      companies that all new equipment purchased is year 2000 compliant, and
      that the supply of materials necessary to the continued smooth operation
      of the company will not be materially effected by any year 2000 issues. It
      is difficult to predict the year 2000 problems at our vendors and
      suppliers, however, results to date have not indicated any significant
      problems.

            While at present, the Company believes that the cost of completing
      the assessment and remediations plan will not be material, and that the
      risks to the Company with respect to year 2000 issues are not significant,
      the Company cannot, at this time, fully assess the potential impact.
      Management will continue to examine the year 2000 issues as it potentially
      impacts the Company and will develop contingency plans as necessary.


                                      -11-


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:  November 13, 1998         By: /s/ Bruce Jagid
                                         ---------------------------------------
                                         Bruce Jagid
                                         Chief Executive Officer

    Date:  November 13,1998          By: /s/ Frederick F. Drulard
                                         ---------------------------------------
                                         Frederick F. Drulard
                                         Vice President, Chief Financial Officer


                                      -12-

 


5 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 46 30,300 3,007 161 4,424 40,857 35,208 4,272 72,568 6,204 0 0 0 1,051 878 72,568 4,222 4,222 3,934 3,934 2,660 (1,930) 449 (1,930) 0 0 0 0 0 (1,930) (.18) (.18)