Ultralife Batteries Completes Acquisition of McDowell Research

Under the terms of the agreement, the purchase price ofapproximately $25 million consists of $5 million in cash and a $20million non-transferable convertible note held by the sellers.Ultralife's primary lending banks have assisted with financing thecash portion of the purchase price by enhancing the company's creditfacility. The $20 million convertible note carries a five-year termand is convertible at $15 per share into 1.33 million shares ofUltralife common stock, with a forced conversion feature at $17.50 pershare.

Established in 1992, McDowell, which ranked 357th on Inc.Magazine's 2005 "Inc. 500" list of the fastest growing privatecompanies in the U.S., designs and manufactures power solutions andaccessories to support military communications systems including powersupplies, RF Amplifiers, battery chargers, amplified speakers,equipment mounts, case equipment and integrated communication systems.In 2005 McDowell generated approximately $1.6 million in operatingincome on approximately $22 million in revenue. The 2005 operatingincome included $1.6 million in non-recurring costs associated with adevelopment function that is not part of the acquisition.

"We acquired McDowell to enhance our channels into the rapidlygrowing special operations area and to strengthen our presence inglobal military markets," said John D. Kavazanjian, Ultralife'spresident and chief executive officer. "This acquisition willsignificantly broaden our solutions offerings in the military andgovernment sectors."

"This is a terrific move forward for us," said Hauke. "Our 140local employees will continue to do the same great work making thequality products our customers know they can depend on. Joining forceswith a recognized industry leader positions us for greater marketshare and product penetration. We will continue to do business as'McDowell Research, an Ultralife Company,' with the combined skillsand talents of both entities."

Mr. Hauke has been president of McDowell Research since foundingthe company in 1992. Prior to founding McDowell, Mr. Hauke was thegeneral manager of Pats, Inc. from 1990 to 1992. From 1973 to 1990,Mr. Hauke was Vice President of the Avionics Electronic WarfareSystems Division of Chrysler Technologies Airborne Systems, Inc. Mr.Hauke has a B.S.E.E. from the Milwaukee School of Engineering and aM.S.E.E. from Southern Methodist University.

Information about McDowell Research is available at:www.mcdowellresearch.com.

About Ultralife Batteries, Inc.

Ultralife is a global provider of high-energy power systems fordiverse applications. The company develops, manufactures and markets awide range of non-rechargeable and rechargeable batteries, chargingsystems and accessories for use in military, industrial and consumerportable electronic products.

Through its portfolio of standard products and engineeredsolutions, Ultralife is at the forefront of providing the nextgeneration of power systems. Industrial, retail and governmentcustomers include General Dynamics, Philips Medical Systems, GeneralMotors, Energizer, Kidde Safety, Lowe's, Radio Shack and the nationaldefense agencies of the United States, United Kingdom, Germany andAustralia, among others.

Ultralife's headquarters, principal manufacturing and researchfacilities are in Newark, New York, near Rochester. Ultralife's threeother operating units are: Ultralife Batteries (UK) Ltd., in Abingdon,England; McDowell Research in Waco, Texas; and ABLE New Energy inShenzhen, China. Detailed information on Ultralife is available at:www.ultralifebatteries.com.

This press release may contain forward-looking statements based oncurrent expectations that involve a number of risks and uncertainties.The potential risks and uncertainties that could cause actual resultsto differ materially include: worsening global economic conditions,increased competitive environment and pricing pressures, disruptionsrelated to restructuring actions and delays. Further information onthese factors and other factors that could affect Ultralife'sfinancial results is included in Ultralife's Securities and ExchangeCommission (SEC) filings, including the latest Annual Report on Form10-K.