OMB
APPROVAL
|
||
OMB
Number:
|
3235-0063
|
|
Expires:
|
November
30, 2006
|
|
Estimated
average burden
|
||
hours
per response
|
1,647.00
|
Delaware
|
95-4302784
|
||
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
||
354
Industry Drive, Auburn, Alabama
|
36830
|
||
(Address
of principal executive offices)
|
(Zip
Code)
|
(334)
502-9001
|
(Registrant’s
telephone number, including area code)
|
Title
of each class
|
Name
of each exchange on which registered
|
|
None
|
Not
applicable
|
Securities
registered pursuant to Section 12(g) of the Act:
|
Common
Stock, $0.01 par value
|
|
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
o
|
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference
in
Part III of this Form 10-K or any amendment to this Form
10-K.
|
o
|
|
Indicate
by check mark whether the registrant is an accelerated filer (as
defined
in Rule 12b-2 of the Act).
|
Yes
x No
o
|
|
The
aggregate market value of the registrant’s voting stock held by
non-affiliates of the registrant as of June 30, 2004 was approximately
$128,605,410 (based on the last sale price of such stock on such
date as
reported by The Nasdaq National Market and assuming, for the purpose
of
this calculation only, that all of the registrant’s directors and
executive officers are affiliates).
|
||
(Applicable
only to corporate registrants)
Indicate the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date:
|
80,103,668
as of 3/10/05
|
|
Documents
incorporated by reference:
|
None
|
Potential
persons who are to respond to the collection of information
contained in this form are not required to respond unless
the form displays a currently valid OMB control
number.
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDI-TION AND RESULTS OF
OPERATION
|
Ø |
we
develop, manufacture and market advanced hi-tech multimedia and
interactive digital solutions for use-of-force and driving training
of
military, law enforcement, security and other personnel, as well
as
offering security consulting and other services (our Simulation,
Security and Consulting Division);
|
Ø |
we
manufacture aviation armor and we utilize sophisticated lightweight
materials and advanced engineering processes to armor vehicles (our
Armoring
Division);
and
|
Ø |
we
manufacture and sell Zinc-Air and lithium batteries for defense and
security products and other military applications and we pioneer
advancements in Zinc-Air battery technology for electric vehicles
(our
Battery
and Power Systems Division).
|
For
the Year ended December 31, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
General
and administrative expenses
|
$
|
6,196,779
|
$
|
(338,903
|
)
|
$
|
5,857,876
|
|||
Operating
loss
|
5,408,932
|
(338,903
|
)
|
5,070,029
|
||||||
Financial
expenses, net
|
3,470,459
|
568,250
|
4,038,709
|
|||||||
Loss
from continuing operations
|
9,118,684
|
229,347
|
9,348,031
|
|||||||
Net
loss
|
9,008,274
|
229,347
|
9,237,621
|
|||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
350,000
|
350,000
|
|||||||
Net
loss attributable to common stockholders
|
$
|
9,008,274
|
$
|
579,347
|
$
|
9,587,621
|
||||
Basic
and diluted net loss per share from continuing operations
|
$
|
0.23
|
$
|
0.01
|
$
|
0.24
|
||||
Basic
and diluted net loss per share
|
$
|
0.23
|
$
|
0.02
|
$
|
0.25
|
As
of December 31, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Other
accounts payable and accrued expenses
|
$
|
4,180,411
|
$
|
(150,000
|
)
|
$
|
4,030,411
|
|||
Total
current liabilities
|
6,859,752
|
(150,000
|
)
|
6,709,752
|
||||||
Convertible
debenture
|
881,944
|
568,250
|
1,450,194
|
|||||||
Total
long term liabilities
|
4,066,579
|
568,250
|
4,634,829
|
|||||||
Additional
paid in capital
|
135,891,316
|
(188,903
|
)
|
135,702,413
|
||||||
Accumulated
deficit
|
(109,681,893
|
)
|
(229,347
|
)
|
(109,911,240
|
)
|
||||
Total
shareholders’ equity
|
22,044,127
|
(418,250
|
)
|
21,625,877
|
For
the Year ended December 31, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Net
loss
|
$
|
9,008,274
|
$
|
229,347
|
$
|
9,237,621
|
||||
Stock
based compensation related to repricing of warrants granted to investors
and the grant of new warrants
|
388,403
|
(188,903
|
)
|
199,500
|
||||||
Increase
in other accounts payable and accrued expenses
|
1,827,668
|
(150,000
|
)
|
1,677,668
|
||||||
Amortization
of compensation related to beneficial conversion feature and warrants
issued to holders of convertible debentures
|
3,359,987
|
568,250
|
3,928,237
|
Ø |
Our
Simulation
and Security Division,
consisting of:
|
· |
FAAC
Incorporated, located in Ann Arbor, Michigan, which provides simulators,
systems engineering and software products to the United States military,
government and private industry (“FAAC”);
and
|
· |
IES
Interactive Training, Inc., located in Littleton, Colorado, which
provides
specialized “use of force” training for police, security personnel and the
military (“IES”).
|
Ø |
Our
Armor
Division,
consisting of:
|
· |
Armour
of America, located in Los Angeles, California, which manufacturers
ballistic and fragmentation armor kits for rotary and fixed wing
aircraft,
marine armor, personnel armor, military vehicles and architectural
applications, including both the LEGUARD Tactical Leg Armor and the
Armourfloat Ballistic Floatation Device, which is a unique vest that
is
certified by the U.S. Coast Guard (“AoA”);
|
· |
MDT
Protective Industries, Ltd., located in Lod, Israel, which specializes
in using state-of-the-art lightweight ceramic materials, special
ballistic
glass and advanced engineering processes to fully armor vans and
SUVs, and
is a leading supplier to the Israeli military, Israeli special forces
and
special services (“MDT”) (75.5% owned);
and
|
· |
MDT
Armor Corporation, located in Auburn, Alabama, which conducts MDT’s United
States activities (“MDT Armor”)
(88% owned).
|
Ø |
Our
Battery
and Power Systems Division,
consisting of:
|
· |
Epsilor
Electronic Industries, Ltd., located in Dimona, Israel (in Israel’s Negev
desert area), which develops and sells rechargeable and primary lithium
batteries and smart chargers to the military and to private industry
in
the Middle East, Europe and Asia (“Epsilor”);
|
· |
Electric
Fuel Battery Corporation, located in Auburn, Alabama, which manufactures
and sells Zinc-Air fuel sells, batteries and chargers for the military,
focusing on applications that demand high energy and light weight
(“EFB”);
and
|
· |
Electric
Fuel (E.F.L.) Ltd., located in Beit Shemesh, Israel, which produces
water-activated lifejacket lights for commercial aviation and marine
applications, and which conducts our Electric Vehicle effort, focusing
on
obtaining and implementing demonstration projects in the U.S. and
Europe,
and on building broad industry partnerships that can lead to eventual
commercialization of our Zinc-Air energy system for electric vehicles
(“EFL”).
|
Year
Ended December 31,
|
|||||||
2004
|
2003*
|
||||||
Revenues:
|
|||||||
Simulation
and Security Division
|
$
|
21,464,406
|
$
|
8,022,026
|
|||
Armor
Division
|
17,988,687
|
3,435,716
|
|||||
Battery
and Power Systems Division
|
10,500,753
|
5,868,899
|
|||||
$
|
49,953,846
|
$
|
17,326,641
|
||||
Cost
of revenues:
|
|||||||
Simulation
and Security Division
|
$
|
11,739,690
|
$
|
3,944,701
|
|||
Armor
Division
|
15,449,084
|
2,621,550
|
|||||
Battery
and Power Systems Division
|
6,822,320
|
4,521,589
|
|||||
$
|
34,011,094
|
$
|
11,087,840
|
||||
Research
and development expenses:
|
|||||||
Simulation
and Security Division
|
$
|
395,636
|
$
|
132,615
|
|||
Armor
Division
|
17,065
|
84,186
|
|||||
Battery
and Power Systems Division
|
1,318,678
|
836,607
|
|||||
$
|
1,731,379
|
$
|
1,053,408
|
||||
Sales
and marketing expenses:
|
|||||||
Simulation
and Security Division
|
$
|
3,185,001
|
$
|
2,237,386
|
|||
Armor
Division
|
565,981
|
180,631
|
|||||
Battery
and Power Systems Division
|
1,171,235
|
926,872
|
|||||
All
Other
|
-
|
187,747
|
|||||
$
|
4,922,217
|
$
|
3,532,636
|
||||
General
and administrative expenses:
|
|||||||
Simulation
and Security Division
|
$
|
2,852,969
|
$
|
1,001,404
|
|||
Armor
Division
|
1,323,982
|
518,053
|
|||||
Battery
and Power Systems Division
|
965,058
|
188,655
|
|||||
All
Other
|
5,514,857
|
4,149,764
|
|||||
$
|
10,656,866
|
$
|
5,857,876
|
Year
Ended December 31,
|
|||||||
2004
|
2003*
|
||||||
Financial
expense (income):
|
|||||||
Simulation
and Security Division
|
$
|
27,842
|
$
|
(119,750
|
)
|
||
Armor
Division
|
13,503
|
(19,918
|
)
|
||||
Battery
and Power Systems Division
|
54,511
|
7,936
|
|||||
All
Other
|
4,133,109
|
4,170,441
|
|||||
$
|
4,228,965
|
$
|
4,038,709
|
||||
Tax
expenses:
|
|||||||
Simulation
and Security Division
|
$
|
77,811
|
$
|
30,130
|
|||
Armor
Division
|
134,949
|
363,173
|
|||||
Battery
and Power Systems Division
|
320,878
|
-
|
|||||
All
Other
|
52,471
|
2,890
|
|||||
$
|
586,109
|
$
|
396,193
|
||||
Amortization
of intangible assets and impairment losses:
|
|||||||
Simulation
and Security Division
|
$
|
1,643,682
|
$
|
720,410
|
|||
Armor
Division
|
661,914
|
144,500
|
|||||
Battery
and Power Systems Division
|
509,239
|
-
|
|||||
$
|
2,814,835
|
$
|
864,910
|
||||
Minority
interest in loss (profit) of subsidiaries:
|
|||||||
Simulation
and Security Division
|
$
|
-
|
$
|
-
|
|||
Armor
Division
|
(44,694
|
)
|
156,900
|
||||
Battery
and Power Systems Division
|
-
|
-
|
|||||
$
|
(44,694
|
)
|
$
|
156,900
|
|||
Loss
from continuing operations:
|
|||||||
Simulation
and Security Division
|
$
|
1,541,775
|
$
|
75,130
|
|||
Armor
Division
|
(222,485
|
)
|
(299,559
|
)
|
|||
Battery
and Power Systems Division
|
(661,166
|
)
|
(612,760
|
)
|
|||
All
Other
|
(9,700,437
|
)
|
(8,510,842
|
)
|
|||
$
|
(9,042,313
|
)
|
$
|
(9,348,031
|
)
|
||
Income
from discontinued operations:
|
|||||||
Simulation
and Security Division
|
$
|
-
|
$
|
-
|
|||
Armor
Division
|
-
|
-
|
|||||
Battery
and Power Systems Division
|
-
|
110,410
|
|||||
|
$ |
-
|
$
|
110,410
|
|||
Net
loss:
|
|||||||
Simulation
and Security Division
|
$
|
1,541,775
|
$
|
75,130
|
|||
Armor
Division
|
(222,485
|
)
|
(299,559
|
)
|
|||
Battery
and Power Systems Division
|
(661,166
|
)
|
(502,350
|
)
|
|||
All
Other
|
(9,700,437
|
)
|
(8,510,842
|
)
|
|||
$
|
(9,042,313
|
)
|
$
|
(9,237,621
|
)
|
Year
Ended December 31,
|
|||||||
2004
|
2003*
|
||||||
Revenues:
|
|||||||
Simulation
and Security Division
|
$
|
21,464,406
|
$
|
8,022,026
|
|||
Armor
Division
|
17,988,687
|
3,435,716
|
|||||
Battery
and Power Systems Division
|
10,500,753
|
5,868,899
|
|||||
$
|
49,953,846
|
$
|
17,326,641
|
||||
Cost
of revenues:
|
|||||||
Simulation
and Security Division
|
$
|
11,739,690
|
$
|
3,944,701
|
|||
Armor
Division
|
15,449,084
|
2,621,550
|
|||||
Battery
and Power Systems Division
|
6,822,320
|
4,521,589
|
|||||
$
|
34,011,094
|
$
|
11,087,840
|
||||
Research
and development expenses:
|
|||||||
Simulation
and Security Division
|
$
|
395,636
|
$
|
132,615
|
|||
Armor
Division
|
17,065
|
84,186
|
|||||
Battery
and Power Systems Division
|
1,318,678
|
836,607
|
|||||
$
|
1,731,379
|
$
|
1,053,408
|
||||
Sales
and marketing expenses:
|
|||||||
Simulation
and Security Division
|
$
|
3,185,001
|
$
|
2,237,386
|
|||
Armor
Division
|
565,981
|
180,631
|
|||||
Battery
and Power Systems Division
|
1,171,235
|
926,872
|
|||||
All
Other
|
-
|
187,747
|
|||||
$
|
4,922,217
|
$
|
3,532,636
|
||||
General
and administrative expenses:
|
|||||||
Simulation
and Security Division
|
$
|
2,852,969
|
$
|
1,001,404
|
|||
Armor
Division
|
1,323,982
|
518,053
|
|||||
Battery
and Power Systems Division
|
965,058
|
188,655
|
|||||
All
Other
|
5,514,857
|
4,149,764
|
|||||
$
|
10,656,866
|
$
|
5,857,876
|
Ø |
From
the sale of interactive training systems and from the provision of
warranty services in connection with such systems (FAAC and
IES);
|
Ø |
From
payments under armor contracts and for service and repair of armored
vehicles (AoA and MDT);
|
Ø |
From
the sale of batteries, chargers and adapters to the military, and
under
certain development contracts with the U.S. Army (EFB and Epsilor);
|
Ø |
From
the sale of lifejacket lights (EFL);
and
|
Ø |
From
subcontracting fees received in connection with Phase III of the
United
States Department of Transportation (DOT) electric bus program, which
began in October 2003 and was completed in March 2004. Phase IV of
the DOT
program, which began in October 2004, did not result in any revenues
during 2004 (EFL).
|
Ø |
Increased
revenues from vehicle armoring; and
|
Ø |
Revenues
generated by FAAC, Epsilor and AoA in 2004 that were not present
in
2003.
|
Ø |
The
inclusion of the general and administrative expenses of FAAC, Epsilor
and
AoA in our results for 2004 ($2.4
million);
|
Ø |
Expenses
in 2004 in connection with grant of options and shares to employees
that
were not present in 2003 ($830,000);
|
Ø |
Costs
associated with our compliance with Section 404 of the Sarbanes-Oxley
Act
of 2002 that were not present in 2003 ($150,000);
and
|
Ø |
Increases
in other general and administrative expenses, such as employee salaries
and bonuses, travel expenses, audit fees, director fees, legal fees,
and
expenses related to due diligence performed in connection to certain
potential acquisitions, that were not present in
2003.
|
Ø |
Expenses
in 2003 in connection with a litigation settlement agreement that
were not
present in 2004 ($700,000); and
|
Ø |
Amortization
of legal and consulting expenses in 2003 in connection with our
convertible debentures that were lower (by $260,000) than in
2004.
|
Ø |
IES
recognized revenues from the sale of interactive use-of-force training
systems and from the provision of warranty services in connection
with
such systems;
|
Ø |
MDT
recognized revenues from payments under vehicle armoring contracts
and for
service and repair of armored
vehicles;
|
Ø |
EFB
recognized revenues from the sale of batteries and adapters to the
military, and under certain development contracts with the U.S.
Army;
|
Ø |
Arocon
recognized revenues under consulting agreements;
and
|
Ø |
EFL
recognized revenues from the sale of lifejacket lights and from
subcontracting fees received in connection with Phase III of the
United
States Department of Transportation (DOT) electric bus program, which
began in October 2002 and was completed in March 2004. Phase IV of
the DOT
program, which began in October 2003, did not result in any revenues
during 2003.
|
Ø |
The
inclusion of the sales and marketing expenses of IES and MDT in our
results for the full year of 2003 but only part of
2002;
|
Ø |
An
increase in IES’s sales activity during 2003, which resulted in both
increased sales and increased sales and marketing expenses during
2003;
and
|
Ø |
We
incurred expenses for consultants in the amount of $810,000 in connection
with our CECOM battery program with the U.S. Army and $345,000 in
connection with our security consulting
business.
|
Ø |
The
inclusion of the general and administrative expenses of IES and MDT
in our
results for the full year of 2003 but only part of
2002;
|
Ø |
Expenses
in 2003 in connection with a litigation settlement agreement, in
the
amount of $714,000, that were not present in
2002;
|
Ø |
Expenses
in 2003 in connection with warrant grants, in the amount of $199,500,
that
were not present in 2002;
|
Ø |
Legal
and consulting expenses in 2003 in connection with our convertible
debentures, in the amount of $484,000, that were not present in 2002;
and
|
Ø |
Expenses
in 2003 in connection with the start-up of our security consulting
business in the United States and with the beginning of operations
of MDT
Armor, in the amount of $250,000, that were not present in
2002.
|
Payment
Due by Period
|
||||||||||||||||
Contractual Obligations |
Total
|
Less
Than 1 Year
|
1-3
Years
|
3-5
Years
|
More
than 5 Years
|
|||||||||||
Long-term
debt*
|
$
|
5,558,391
|
$
|
-
|
$
|
5,558,391
|
$
|
-
|
$
|
-
|
||||||
Short-term
debt**
|
$
|
13,766,677
|
$
|
13,766,677
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Operating
lease obligations
|
$
|
1,427,965
|
$
|
762,636
|
$
|
641,017
|
$
|
24,312
|
$
|
-
|
||||||
Severance
obligations***
|
$
|
1,642,801
|
$
|
223,333
|
$
|
1,240,871
|
$
|
-
|
$
|
178,597
|
· |
we
must dedicate a portion of our cash flows from operations to pay
debt
service costs and, as a result, we have less funds available for
operations, future acquisitions of consumer receivable portfolios,
and
other purposes;
|
· |
it
may be more difficult and expensive to obtain additional funds through
financings, if available at all;
|
· |
we
are more vulnerable to economic downturns and fluctuations in interest
rates, less able to withstand competitive pressures and less flexible
in
reacting to changes in our industry and general economic conditions;
and
|
· |
if
we default under any of our existing debt instruments or if our creditors
demand payment of a portion or all of our indebtedness, we may not
have
sufficient funds to make such
payments.
|
· |
the
U.S. Federal Acquisition Regulations, which regulate the formation,
administration and performance of government contracts;
|
· |
the
U.S. Truth in Negotiations Act, which requires certification and
disclosure of all cost and pricing data in connection with contract
negotiations; and
|
· |
the
U.S. Cost Accounting Standards, which impose accounting requirements
that
govern our right to reimbursement under certain cost-based government
contracts.
|
· |
Announcements
by us, our competitors or our
customers;
|
· |
The
introduction of new or enhanced products and services by us or our
competitors;
|
· |
Changes
in the perceived ability to commercialize our technology compared
to that
of our competitors;
|
· |
Rumors
relating to our competitors or us;
|
· |
Actual
or anticipated fluctuations in our operating results;
|
· |
The
issuance of our securities, including warrants, in connection with
financings and acquisitions; and
|
· |
General
market or economic conditions.
|
· |
divide
our board of directors into three classes serving staggered three-year
terms;
|
· |
only
permit removal of directors by stockholders “for cause,” and require the
affirmative vote of at least 85% of the outstanding common stock
to so
remove; and
|
· |
allow
us to issue preferred stock without any vote or further action by
the
stockholders.
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA
|
Page
|
|
Consolidated
Financial Statements
|
|
Reports
of Independent Registered Public Accounting Firms
|
F-2
|
Consolidated
Balance Sheets
|
F-4
|
Consolidated
Statements of Operations
|
F-6
|
Statements
of Changes in Shareholders’ Equity
|
F-7
|
Consolidated
Statements of Cash Flows
|
F-10
|
Notes
to Consolidated Financial Statements
|
F-14
|
Supplementary
Financial Data
|
|
Quarterly
Financial Data (unaudited) for the two years ended December 31,
2004
|
F-61
|
Financial
Statement Schedule
|
|
Schedule
II - Valuation and Qualifying Accounts
|
F-62
|
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
Ø |
Preparing
appropriate written documentation of our financial control
procedures;
|
Ø |
Adding
additional qualified staff to our finance
department;
|
Ø |
Scheduling
training for accounting staff to heighten awareness of generally
accepted
accounting principles applicable to complex transactions;
|
Ø |
Strengthening
our internal review procedures in conjunction with our ongoing work
to
enhance our internal controls so as to enable us to identify and
adjust
items proactively;
|
Ø |
Engaging
an outside accounting firm to support our Sarbanes-Oxley Section
404
compliance activities and to provide technical expertise in the selection
and application of generally accepted accounting principles related
to
complex transactions to identify areas that require control or process
improvements and to consult with us on the appropriate accounting
treatment applicable to complex transactions;
and
|
Ø |
Implementing
the recommendations of our outside accounting
consultants.
|
ITEM
15.
|
EXHIBITS,
FINANCIAL STATEMENT
SCHEDULES
|
(a) |
The
following documents are filed as part of this amended
report:
|
(1) |
Financial
Statements - See Index to Financial Statements on page above.
|
(2) |
Financial
Statements Schedules - Schedule II - Valuation and Qualifying Accounts.
All schedules other than those listed above are omitted because
of the
absence of conditions under which they are required or because
the
required information is presented in the financial statements or
related
notes thereto.
|
(3) |
Exhibits
- The following Exhibits are either filed herewith or have previously
been
filed with the Securities and Exchange Commission and are referred
to and
incorporated herein by reference to such
filings:
|
Exhibit
No.
|
Description
|
*23.1
|
Consent
of Kost, Forer, Gabbay & Kassierer, a member of Ernst & Young
Global
|
*23.2
|
Consent
of Stark Winter Schenkein & Co., LLP
|
*31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002
|
*31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002
|
*32.1
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002
|
*32.2
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002
|
AROTECH CORPORATION | ||
|
|
|
By: | /s/ Robert S. Ehrlich | |
Name: Robert S. Ehrlich |
||
Title:
Chairman,
President and Chief Executive
Officer
|
Signature
|
Title
|
Date
|
||
/s/
Robert S. Ehrlich
Robert
S. Ehrlich
|
Chairman,
President, Chief Executive Officer and Director
(Principal
Executive Officer)
|
August
15
,
2005
|
||
/s/
Avihai Shen
Avihai
Shen
|
Vice
President - Finance
(Principal
Financial Officer)
|
August
15 ,
2005
|
||
/s/
Danny Waldner
Danny
Waldner
|
Controller
(Principal
Accounting Officer)
|
August
15 ,
2005
|
||
/s/
Steven Esses
Steven
Esses
|
Executive
Vice President, Chief Operating Officer and Director
|
August 15 ,
2005
|
||
/s/
Jay M. Eastman
Dr.
Jay M. Eastman
|
Director
|
August
15 ,
2005
|
||
/s/
Lawrence M. Miller
Lawrence
M. Miller
|
Director
|
August
15 ,
2005
|
||
Jack
E. Rosenfeld
|
Director
|
August
,
2005
|
||
/s/
Seymour Jones
Seymour
Jones
|
Director
|
August
15 ,
2005
|
||
Edward
J. Borey
|
Director
|
August ,
2005
|
Page
|
|
Reports
of Independent Registered Public Accounting Firms
|
2
-
3
|
Consolidated
Balance Sheets
|
4
-
5
|
Consolidated
Statements of Operations
|
6
|
Statements
of Changes in Stockholders’ Equity
|
7
-
9
|
Consolidated
Statements of Cash Flows
|
10
- 13
|
Notes
to Consolidated Financial Statements
|
14
- 60
|
Tel
Aviv, Israel
|
KOST,
FORER, GABBAY & KASIERER
|
March
24, 2005
|
A
Member of Ernst & Young Global
|
Tel-Aviv,
Israel
|
KOST,
FORER, GABBAY & KASIERER
|
April
21, 2005
|
A
Member of Ernst & Young Global
|
December
31,
|
|||||||
2004
|
2003*
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
6,734,512
|
$
|
13,685,125
|
|||
Restricted
collateral deposits and restricted held-to-maturity
securities
|
6,962,110
|
706,180
|
|||||
Available
for sale marketable securities
|
135,568
|
-
|
|||||
Trade
receivables (net of allowance for doubtful accounts in the amounts
of
$55,394 and $61,282 as of December 31, 2004 and 2003, respectively)
|
8,266,880
|
4,706,423
|
|||||
Unbilled
receivables
|
2,881,468
|
-
|
|||||
Other
accounts receivable and prepaid expenses
|
1,339,393
|
1,187,371
|
|||||
Inventories
|
7,277,301
|
1,914,748
|
|||||
Assets
of discontinued operations
|
-
|
66,068
|
|||||
Total
current assets
|
33,597,232
|
22,265,915
|
|||||
SEVERANCE
PAY FUND
|
1,980,047
|
1,023,342
|
|||||
RESTRICTED
DEPOSITS
|
4,000,000
|
-
|
|||||
PROPERTY
AND EQUIPMENT, NET
|
4,600,691
|
2,292,741
|
|||||
OTHER
INTANGIBLE ASSETS, NET
|
14,368,701
|
2,375,195
|
|||||
GOODWILL
|
39,745,516
|
5,064,555
|
|||||
$
|
98,292,187
|
$
|
33,021,748
|
December
31,
|
|||||||
2004
|
2003*
|
||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Trade
payables
|
$
|
6,177,546
|
$
|
1,967,448
|
|||
Other
accounts payable and accrued expenses
|
5,818,188
|
4,030,411
**
|
|||||
Current
portion of promissory notes due to purchase of subsidiaries
|
13,585,325
|
150,000
|
|||||
Short
term bank credit and current portion of long term loans
|
181,352
|
40,849
|
|||||
Deferred
revenues
|
618,229
|
140,936
**
|
|||||
Liabilities
of discontinued operations
|
-
|
380,108
|
|||||
Total
current liabilities
|
26,380,640
|
6,709,752
|
|||||
LONG
TERM LIABILITIES
|
|||||||
Accrued
severance pay
|
3,422,951
|
2,814,492
|
|||||
Convertible
debenture
|
1,754,803
|
1,450,194
|
|||||
Deferred
revenues
|
163,781
|
220,143
|
|||||
Long
term loan
|
20,891
|
-
|
|||||
Long-term
portion of promissory note due to purchase of subsidiaries
|
980,296
|
150,000
|
|||||
Total
long-term liabilities
|
6,342,722
|
4,634,829
|
|||||
COMMITMENTS
AND CONTINGENT LIABILITIES (Note 12)
|
|||||||
MINORITY
INTEREST
|
95,842
|
51,290
|
|||||
STOCKHOLDERS’
EQUITY:
|
|||||||
Share
capital -
|
|||||||
Common
stock - $0.01 par value each;
|
|||||||
Authorized:
250,000,000 shares and 100,000,000 shares as of December 31, 2004
and
2003, respectively; Issued: 80,576,902 shares and 47,972,407 shares
as of
December 31, 2004 and 2003, respectively; Outstanding - 80,021,569
shares
and 47,417,074 shares as of December 31, 2004 and 2003,
respectively
|
805,769
|
479,726
|
|||||
Preferred
shares - $0.01 par value each;
|
|||||||
Authorized:
1,000,000 shares as of December 31, 2004 and 2003; No shares issued
and
outstanding as of December 31, 2004 and 2003
|
-
|
-
|
|||||
Additional
paid-in capital
|
189,266,704
|
135,702,413
|
|||||
Accumulated
deficit
|
(118,953,553
|
)
|
(109,911,240
|
)
|
|||
Deferred
stock compensation
|
|
|
(1,258,295
|
)
|
|
(8,464
|
)
|
Treasury
stock, at cost (common stock - 555,333 shares as of December 31,
2004 and
2003)
|
(3,537,106
|
)
|
(3,537,106
|
)
|
|||
Notes
receivable from stockholders
|
(1,222,871
|
)
|
(1,203,881
|
)
|
|||
Accumulated
other comprehensive income
|
372,335
|
104,429
|
|||||
Total
stockholders’ equity
|
65,472,983
|
21,625,877
|
|||||
$
|
98,292,187
|
$
|
33,021,748
|
Year
ended December 31,
|
||||||||||
2004
|
2003*
|
2002
|
||||||||
Revenues
|
$
|
49,953,846
|
$
|
17,326,641
|
$
|
6,406,739
|
||||
Cost
of revenues
|
34,011,094
|
11,087,840
|
4,421,748
|
|||||||
Gross
profit
|
15,942,752
|
6,238,801
|
1,984,991
|
|||||||
Operating
expenses:
|
||||||||||
Research
and development, net
|
1,731,379
|
1,053,408
|
685,919
|
|||||||
Selling
and marketing expenses
|
4,922,217
|
3,532,636
|
1,309,669
|
|||||||
General
and administrative expenses
|
10,656,866
|
5,857,876
|
4,023,103
|
|||||||
Amortization
of intangible assets and impairment losses
|
2,814,835
|
864,910
|
623,543
|
|||||||
In-process
research and development write-off
|
-
|
-
|
26,000
|
|||||||
Total
operating costs and expenses
|
20,125,297
|
11,308,830
|
6,668,234
|
|||||||
Operating
loss
|
(4,182,545
|
)
|
(5,070,029
|
)
|
(4,683,243
|
)
|
||||
Financial
income (expenses), net
|
(4,228,965
|
)
|
(4,038,709
|
)
|
100,451
|
|||||
Loss
before minorities interests in loss (earnings) of a subsidiaries
and tax
expenses
|
(8,411,510
|
)
|
(9,108,738
|
)
|
(4,582,792
|
)
|
||||
Income
taxes
|
(586,109
|
)
|
(396,193
|
)
|
-
|
|||||
Minorities
interests in loss (earnings) of a subsidiaries
|
(44,694
|
)
|
156,900
|
(355,360
|
)
|
|||||
Loss
from continuing operations
|
(9,042,313
|
)
|
(9,348,031
|
)
|
(4,938,152
|
)
|
||||
Income
(loss) from discontinued operations (including loss on disposal of
$4,446,684 during 2002)
|
-
|
110,410
|
(13,566,206
|
)
|
||||||
Net
loss
|
$
|
(9,042,313
|
)
|
$
|
(9,237,621
|
)
|
$
|
(18,504,358
|
)
|
|
Deemed
dividend to certain stockholders
|
$
|
(3,328,952
|
)
|
$
|
(350,000
|
)
|
$
|
-
|
||
Net
loss attributable to common stockholders
|
$
|
(12,371,265
|
)
|
$
|
(9,587,621
|
)
|
$
|
(18,504,358
|
)
|
|
Basic
and diluted net loss per share from continuing operations
|
$
|
(0.13
|
)
|
$
|
(0.24
|
)
|
$
|
(0.15
|
)
|
|
Basic
and diluted net loss per share from discontinued
operations
|
$
|
0.00
|
$
|
0.00
|
$
|
(0.42
|
)
|
|||
Basic
and diluted net loss per share
|
$
|
(0.18
|
)
|
$
|
(0.25
|
)
|
$
|
(0.57
|
)
|
|
Weighted
average number of shares used in computing basic and diluted net
loss per
share
|
69,933,057
|
38,890,174
|
32,381,502
|
Common
stock
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Deferred
stock
compensation
|
Treasury
stock
|
Notes
receivable
from
stockholders
|
Accumulated
other
comprehensive
loss
|
Total
comprehensive
loss
|
Total
stockholders’
equity
|
||||||||||||||||||||||
Balance
as of January 1, 2002
|
29,059,469
|
$
|
290,596
|
$
|
105,686,909
|
$
|
(82,169,261
|
)
|
$
|
(18,000
|
)
|
$
|
(3,537,106
|
)
|
$
|
(845,081
|
)
|
$
|
-
|
$
|
19,408,057
|
||||||||||
Adjustment
of notes from stockholders
|
(178,579
|
)
|
(178,579
|
)
|
|||||||||||||||||||||||||||
Repayment
of notes from employees
|
43,308
|
43,308
|
|||||||||||||||||||||||||||||
Issuance
of shares to investors
|
2,041,176
|
20,412
|
3,209,588
|
3,230,000
|
|||||||||||||||||||||||||||
Issuance
of shares to service providers
|
368,468
|
3,685
|
539,068
|
542,753
|
|||||||||||||||||||||||||||
Issuance
of shares to lender in respect of prepaid interest
expenses
|
387,301
|
3,873
|
232,377
|
236,250
|
|||||||||||||||||||||||||||
Exercise
of options by employees
|
191,542
|
1,915
|
184,435
|
(36,500
|
)
|
149,850
|
|||||||||||||||||||||||||
Amortization
of deferred stock com-pensation
|
6,000
|
6,000
|
|||||||||||||||||||||||||||||
Stock
compensation re-lated to options issued to employees
|
13,000
|
130
|
12,870
|
13,000
|
|||||||||||||||||||||||||||
Issuance
of shares in respect of acquisition
|
3,640,638
|
36,406
|
4,056,600
|
4,093,006
|
|||||||||||||||||||||||||||
Accrued
interest on notes re-ceivable
|
160,737
|
(160,737
|
)
|
-
|
|||||||||||||||||||||||||||
Other
comprehensive loss Foreign currency translation adjustment
|
(1,786
|
)
|
$
|
(1,786
|
)
|
(1,786
|
)
|
||||||||||||||||||||||||
Net
loss
|
(18,504,358
|
)
|
(18,504,358
|
)
|
(18,504,358
|
)
|
|||||||||||||||||||||||||
Total
comprehensive loss
|
$
|
(18,506,144
|
)
|
||||||||||||||||||||||||||||
Balance
as of December 31, 2002
|
35,701,594
|
$
|
357,017
|
$
|
114,082,584
|
$
|
(100,673,619
|
)
|
$
|
(12,000
|
)
|
$
|
(3,537,106
|
)
|
$
|
(1,177,589
|
)
|
$
|
(1,786
|
)
|
$
|
9,037,501
|
Common
stock
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Deferred
stock
compensation
|
Treasury
stock
|
Notes
receivable
from
stockholders
|
Accumulated
other
comprehensive
loss
|
Total
comprehensive
loss
|
Total
stockholders’
equity
|
||||||||||||||||||||||
Balance
as of January 1, 2003*
|
35,701,594
|
$
|
357,017
|
$
|
114,082,584
|
$
|
(100,673,619
|
)
|
$
|
(12,000
|
)
|
$
|
(3,537,106
|
)
|
$
|
(1,177,589
|
)
|
$
|
(1,786
|
)
|
$
|
9,037,501
|
|||||||||
Compensation
related to warrants issued to the holders of convertible
debentures
|
5,157,500
|
5,157,500
|
|||||||||||||||||||||||||||||
Compensation
related to beneficial conversion feature of convertible
debentures
|
5,695,543
|
5,695,543
|
|||||||||||||||||||||||||||||
Issuance
of shares on conversion of convertible debentures
|
6,969,605
|
69,696
|
6,064,981
|
(9,677
|
)
|
6,125,000
|
|||||||||||||||||||||||||
Issuance
of shares on exercise of warrants
|
3,682,997
|
36,831
|
3,259,422
|
3,296,253
|
|||||||||||||||||||||||||||
Issuance
of shares to consultants
|
223,600
|
2,236
|
159,711
|
161,947
|
|||||||||||||||||||||||||||
Compensation
related to grant and reprcing of warrants and options issued to
consultants
|
229,259
|
229,259
|
|||||||||||||||||||||||||||||
Compensation
related to non-recourse loan granted to shareholder
|
38,500
|
38,500
|
|||||||||||||||||||||||||||||
Deferred
stock compensation
|
4,750
|
(4,750
|
)
|
-
|
|||||||||||||||||||||||||||
Amortization
of deferred stock compensation
|
8,286
|
8,286
|
|||||||||||||||||||||||||||||
Exercise
of options by employees
|
689,640
|
6,896
|
426,668
|
433,564
|
|||||||||||||||||||||||||||
Exercise
of options by consultants
|
15,000
|
150
|
7,200
|
7,350
|
|||||||||||||||||||||||||||
Conversion
of convertible promissory note
|
563,971
|
5,640
|
438,720
|
444,360
|
|||||||||||||||||||||||||||
Increase
in investment in subsidiary against common stock issuance
|
126,000
|
1,260
|
120,960
|
122,220
|
|||||||||||||||||||||||||||
Accrued
interest on notes receivable from stockholders
|
16,615
|
(16,615
|
)
|
-
|
|||||||||||||||||||||||||||
Other
comprehensive income - foreign currency translation
adjustment
|
106,215
|
$
|
106,215
|
106,215
|
|||||||||||||||||||||||||||
Net
loss
|
(9,237,621
|
)
|
(9,237,621
|
)
|
(9,237,621
|
)
|
|||||||||||||||||||||||||
$
|
(9,131,406
|
)
|
|||||||||||||||||||||||||||||
Balance
as of December 31, 2003
|
47,972,407
|
$
|
479,726
|
$
|
135,702,413
|
$
|
(109,911,240
|
)
|
$
|
(8,464
|
)
|
$
|
(3,537,106
|
)
|
$
|
(1,203,881
|
)
|
$
|
104,429
|
$
|
21,625,877
|
Common
stock
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Deferred
stock
compensation
|
Treasury
stock
|
Notes
receivable
from
stockholders
|
Accumulated
other
comprehensive
loss
|
Total
comprehensive
loss
|
Total
stockholders’
equity
|
||||||||||||||||||||||
Balance
as of January 1, 2004
|
47,972,407
|
$
|
479,726
|
$
|
135,702,413
|
$
|
(109,911,240
|
)
|
$
|
(8,464
|
)
|
$
|
(3,537,106
|
)
|
$
|
(1,203,881
|
)
|
$
|
104,429
|
$
|
21,625,877
|
||||||||||
Issuance
of shares, net
|
14,138,491
|
141,384
|
24,252,939
|
24,394,323
|
|||||||||||||||||||||||||||
Issuance
of shares and warrants due to settlement of litigation
|
450,000
|
4,500
|
1,244,328
|
1,248,828
|
|||||||||||||||||||||||||||
Issuance
of shares to employees
|
40,000
|
400
|
92,800
|
93,200
|
|||||||||||||||||||||||||||
Conversion
of convertible debentures
|
3,843,728
|
38,437
|
3,754,279
|
3,792,716
|
|||||||||||||||||||||||||||
Exercise
of warrants by investors and others
|
11,363,342
|
113,633
|
19,119,638
|
19,233,271
|
|||||||||||||||||||||||||||
Issuance
of shares to consultants
|
90,215
|
902
|
198,489
|
199,391
|
|||||||||||||||||||||||||||
Reclassification
to liability in connection with warrants granted
|
(10,841,020
|
)
|
(10,841,020
|
)
|
|||||||||||||||||||||||||||
Reclassification
of liability to equity related to the fair value of
warrants
|
10,514,181
|
10,514,181
|
|||||||||||||||||||||||||||||
Compensation
related to non-recourse loan granted to shareholder
|
(10,000
|
)
|
(10,000
|
)
|
|||||||||||||||||||||||||||
Deferred
stock compensation related to options and restricted stock
|
740,000
|
7,400
|
2,074,057
|
(2,081,457
|
)
|
-
|
|||||||||||||||||||||||||
Amortization
of deferred stock com-pensation
|
831,626
|
831,626
|
|||||||||||||||||||||||||||||
Exercise
of options by employees
|
897,248
|
8,972
|
1,101,172
|
1,110,144
|
|||||||||||||||||||||||||||
Exercise
of options by consultants
|
37,615
|
376
|
50,799
|
51,175
|
|||||||||||||||||||||||||||
Issuance
of shares in respect of FAAC acquisition
|
1,003,856
|
10,039
|
1,993,639
|
2,003,678
|
|||||||||||||||||||||||||||
Accrued
interest on notes receivable from stockholders
|
18,990
|
(18,990
|
)
|
-
|
|||||||||||||||||||||||||||
Other
comprehensive income - foreign currency translation
adjustment
|
263,404
|
$
|
263,404
|
263,404
|
|||||||||||||||||||||||||||
Other
comprehensive income
-
realized gain on available for sale marketable securities
|
4,502
|
4,502
|
4,502
|
||||||||||||||||||||||||||||
Net
loss
|
(9,042,313
|
)
|
(9,042,313
|
)
|
(9,042,313
|
)
|
|||||||||||||||||||||||||
$
|
(8,774,407
|
)
|
|||||||||||||||||||||||||||||
Balance
as of December 31, 2004
|
80,576,902
|
$
|
805,769
|
$
|
189,266,704
|
$
|
(118,953,553
|
)
|
$
|
(1,258,295
|
)
|
$
|
(3,537,106
|
)
|
$
|
(1,222,871
|
)
|
$
|
372,335
|
$
|
65,472,983
|
Year
ended December 31,
|
||||||||||
2004
|
2003*
|
2002
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$
|
(9,042,313
|
)
|
$
|
(9,237,621
|
)
|
$
|
(18,504,358
|
)
|
|
Less
loss (profit) for the period from discontinued operations
|
-
|
(110,410
|
)
|
13,566,206
|
||||||
Adjustments
required to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Minorities
interests in earnings (loss) of subsidiary
|
44,694
|
(156,900
|
)
|
355,360
|
||||||
Depreciation
|
1,199,465
|
730,159
|
473,739
|
|||||||
Amortization
of intangible assets, capitalized software costs and impairment of
intangible assets
|
2,888,226
|
879,311
|
623,543
|
|||||||
Remeasurement
of liability in connection to warrants granted
|
(326,839
|
)
|
-
|
-
|
||||||
In-process
research and development write-off
|
-
|
-
|
26,000
|
|||||||
Accrued
severance pay, net
|
(441,610
|
)
|
3,693
|
(357,808
|
)
|
|||||
Amortization
of deferred stock compensation and compensation related to shares
issued
to employees
|
884,826
|
8,286
|
19,000
|
|||||||
(Mark
up) write-off of loans to stockholders
|
(32,397
|
)
|
(12,519
|
)
|
542,317
|
|||||
Write-off
of inventories
|
121,322
|
96,350
|
116,008
|
|||||||
Impairment
of property and equipment
|
-
|
68,945
|
-
|
|||||||
Amortization
of compensation related to warrants issued to the holders of convertible
debentures and beneficial conversion feature
|
4,142,109
|
3,928,237
|
-
|
|||||||
Amortization
of deferred charges related to convertible debentures
issuance
|
222,732
|
483,713
|
-
|
|||||||
Amortization
of prepaid financial expenses
|
-
|
236,250
|
-
|
|||||||
Stock-based
compensation related to grant of new warrants and repricing of warrants
granted to consultants
|
-
|
229,259
|
-
|
|||||||
Stock-based
compensation related to shares issued and to be issued to consultants
and
shares granted as a donation
|
89,078
|
161,947
|
-
|
|||||||
Stock-based
compensation related to non-recourse note granted to
stockholder
|
(10,000
|
)
|
38,500
|
-
|
||||||
Interest
accrued on promissory notes due to acquisition
|
39,311
|
(66,793
|
)
|
29,829
|
||||||
Interest
accrued on restricted collateral deposits
|
(267,179
|
)
|
-
|
(3,213
|
)
|
|||||
Capital
gain from sale of marketable securities
|
(4,247
|
)
|
-
|
-
|
||||||
Amortization
of premium related to restricted held to maturity
securities
|
202,467
|
-
|
-
|
|||||||
Capital
gain from sale of property and equipment
|
(16,479
|
)
|
(11,504
|
)
|
(4,444
|
)
|
||||
Decrease
(increase) in trade receivables
|
732,828
|
(820,137
|
)
|
389,516
|
||||||
(Increase)
decrease in other accounts receivable and prepaid expenses
|
(49,513
|
)
|
40,520
|
257,218
|
||||||
Decrease
in deferred tax assets
|
(89,823
|
)
|
-
|
-
|
||||||
Increase
in inventories
|
(2,040,854
|
)
|
(193,222
|
)
|
(520,408
|
)
|
||||
Increase
in unbilled revenues
|
(1,581,080
|
)
|
-
|
-
|
||||||
|
||||||||||
Decrease
in deferred revenues
|
(91,271
|
)
|
-
|
-
|
||||||
Decrease
in trade payables
|
2,913,623
|
(986,022
|
)
|
(62,536
|
)
|
|||||
Increase
(decrease) in other accounts payable and accrued expenses
|
(125,231
|
)
|
1,677,668
|
(423,664
|
)
|
|||||
Net
cash used in operating activities from continuing operations (reconciled
from continuing operations)
|
(638,155
|
)
|
(3,012,290
|
)
|
(3,477,695
|
)
|
||||
Net
cash used in operating activities from discontinued operations (reconciled
from discontinued operations)
|
(214,041
|
)
|
(313,454
|
)
|
(5,456,912
|
)
|
||||
Net
cash used in operating activities
|
$
|
(852,196
|
)
|
$
|
(3,325,744
|
)
|
$
|
(8,934,607
|
)
|
In
U.S. dollars
|
Year
ended December 31,
|
|||||||||
2004
|
2003*
|
2002
|
||||||||
Cash
flows from investing activities:
|
||||||||||
Purchase
of property and equipment
|
(1,659,688
|
)
|
(580,949
|
)
|
(314,876
|
)
|
||||
Increase
in capitalized software costs
|
(365,350
|
)
|
(209,616
|
)
|
-
|
|||||
Loans
granted to stockholders
|
(1,036
|
)
|
(13,737
|
)
|
(4,529
|
)
|
||||
Repayment
of loans granted to stockholders
|
32,397
|
9,280
|
-
|
|||||||
Proceeds
from sale of property and equipment
|
114,275
|
16,753
|
8,199
|
|||||||
Proceeds
from sale of marketable securities
|
90,016
|
-
|
-
|
|||||||
Investment
in marketable securities
|
(89,204
|
)
|
-
|
-
|
||||||
Acquisition
of IES (1)
|
-
|
-
|
(2,958,083
|
)
|
||||||
Acquisition
of MDT (2)
|
-
|
-
|
(1,201,843
|
)
|
||||||
Acquisition
of Epsilor (3)
|
(7,190,777
|
)
|
-
|
-
|
||||||
Acquisition
of FAAC (4)
|
(12,129,103
|
)
|
-
|
-
|
||||||
Acquisition
of AoA (5)
|
(17,339,522
|
)
|
-
|
-
|
||||||
Repayment
of promissory notes related to acquisition of subsidiaries
|
(2,000,000
|
)
|
(750,000
|
)
|
-
|
|||||
Purchase
of certain tangible and intangible assets
|
(150,000
|
)
|
(196,331
|
)
|
-
|
|||||
Increase
in restricted cash and held to maturity securities
|
(9,809,091
|
)
|
(72,840
|
)
|
(595,341
|
)
|
||||
Net
cash used in discontinued operations (purchase of property and
equipment)
|
-
|
-
|
(290,650
|
)
|
||||||
Net
cash used in investing activities
|
(50,497,083
|
)
|
(1,797,440
|
)
|
(5,357,123
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of shares, net
|
24,361,750
|
(6,900
|
)
|
3,230,000
|
||||||
Proceeds
from exercise of options to employees and consultants
|
1,148,819
|
440,914
|
113,350
|
|||||||
Proceeds
from exercise of warrants
|
19,233,271
|
3,296,254
|
-
|
|||||||
Proceeds
from issuance of convertible debentures, net
|
-
|
13,708,662
|
-
|
|||||||
Payment
of interest and principal on notes receivable from
stockholders
|
-
|
-
|
43,308
|
|||||||
Profit
distribution to minority
|
-
|
-
|
(412,231
|
)
|
||||||
Long
term loan received
|
69,638
|
-
|
-
|
|||||||
Repayment
of long term loan
|
(65,674
|
)
|
-
|
-
|
||||||
Increase
(decrease) in short term bank credit
|
(376,783
|
)
|
(74,158
|
)
|
108,659
|
|||||
Payment
on capital lease obligation
|
(4,145
|
)
|
(4,427
|
)
|
(5,584
|
)
|
||||
Net
cash provided by financing activities
|
44,366,876
|
17,360,345
|
3,077,502
|
|||||||
Increase
(decrease) in cash and cash equivalents
|
(6,982,403
|
)
|
12,237,161
|
(11,214,228
|
)
|
|||||
Cash
erosion due to exchange rate differences
|
31,790
|
(9,562
|
)
|
-
|
||||||
Cash
and cash equivalents at the beginning of the year
|
13,685,125
|
1,457,526
|
12,671,754
|
|||||||
Cash
and cash equivalents at the end of the year
|
$
|
6,734,512
|
$
|
13,685,125
|
$
|
1,457,526
|
||||
Supplementary
information on non-cash transactions:
|
||||||||||
Issuance
of shares and warrants against accrued expenses and restricted
deposit
|
$
|
1,310,394
|
$
|
-
|
$
|
-
|
||||
Issuance
of shares to consultants in respect of prepaid interest
expenses
|
$
|
-
|
$
|
-
|
$
|
236,250
|
||||
Exercise
of options against notes receivable
|
$
|
-
|
$
|
-
|
$
|
36,500
|
||||
Purchase
of intangible assets against note receivable
|
$
|
-
|
$
|
300,000
|
$
|
-
|
||||
Increase
of investment in subsidiary against issuance of shares of common
stock
|
$
|
-
|
$
|
123,480
|
$
|
-
|
||||
Conversion
of promissory note to shares of common stock
|
$
|
-
|
$
|
450,000
|
$
|
-
|
||||
Conversion
of convertible debenture to shares of common stock
|
$
|
3,837,500
|
$
|
6,125,000
|
$
|
-
|
||||
Benefit
due to convertible debentures and warrants
|
$
|
-
|
$
|
10,853,043
|
$
|
-
|
||||
Accrual
for earn out in regard to subsidiary acquisition
|
$
|
13,435,325
|
$
|
-
|
$
|
-
|
||||
Supplemental
disclosure of cash flows activities:
|
||||||||||
Cash
paid during the year for:
|
||||||||||
Interest
|
$
|
532,750
|
$
|
39,412
|
$
|
10,640
|
||||
Taxes
on income
|
$
|
969,009
|
$
|
527,053
|
$
|
114,901
|
(1)
|
In
July 2002, the Company acquired substantially all of the assets of
I.E.S.
Electronics Industries U.S.A., Inc. (“IES”). The net fair value of the
assets acquired and the liabilities assumed, at the date of acquisition,
was as follows:
|
Working
capital, excluding cash and cash equivalents
|
$
|
1,233,000
|
||
Property
and equipment, net
|
396,776
|
|||
Capital
lease obligation
|
(15,526
|
)
|
||
Technology
|
1,515,000
|
|||
Existing
contracts
|
46,000
|
|||
Covenants
not to compete
|
99,000
|
|||
In
process research and development
|
26,000
|
|||
Customer
list
|
527,000
|
|||
Trademarks
|
439,000
|
|||
Goodwill
|
4,032,726
|
|||
8,298,976
|
||||
Issuance
of shares
|
(3,653,929
|
)
|
||
Issuance
of promissory note
|
(1,686,964
|
)
|
||
$
|
2,958,083
|
(2)
|
In
July 2002, the Company acquired 51% of the outstanding ordinary shares
of
MDT Protective Industries Ltd. (“MDT”). The fair value of the assets
acquired and liabilities assumed, at the date of acquisition, was
as
follows:
|
Working
capital, excluding cash and cash and cash equivalents
|
$
|
350,085
|
||
Property,
and equipment, net
|
139,623
|
|||
Minority
rights
|
(300,043
|
)
|
||
Technology
|
280,000
|
|||
Customer
base
|
285,000
|
|||
Goodwill
|
886,255
|
|||
1,640,920
|
||||
Issuance
of shares
|
(439,077
|
)
|
||
$
|
1,201,843
|
(3)
|
In
January 2004, the Company acquired substantially all of the outstanding
ordinary shares of Epsilor Electronic Industries, Ltd. (“Epsilor”). The
net fair value of the assets acquired and the liabilities assumed,
at the
date of acquisition, was as
follows:
|
Working
capital, excluding cash and cash equivalents
|
$
|
(849,992
|
)
|
|
Property
and equipment
|
709,847
|
|||
Intangible
assets and goodwill
|
10,284,407
|
|||
10,144,262
|
||||
Issuance
of shares in respect to transaction costs
|
(12,500
|
)
|
||
Issuance
of promissory note *)
|
(2,940,985
|
)
|
||
$
|
7,190,777
|
(4)
|
In
January 2004, the Company acquired all of the outstanding common
stock of
FAAC Incorporated (“FAAC”). The net fair value of the assets acquired and
the liabilities assumed at the date of acquisition was as
follows:
|
Working
capital, excluding cash and cash equivalents
|
$
|
1,796,791
|
||
Property
and equipment
|
263,669
|
|||
Intangible
assets and goodwill
|
25,507,646
|
|||
27,568,106
|
||||
Accrual
of earn out payment
|
(13,435,325
|
)
|
||
Issuance
of shares, net
|
(2,003,678
|
)
|
||
$
|
12,129,103
|
(5)
|
In
August 2004, the Company acquired all of the outstanding common stock
of
Armour of America, Incorporated (“AoA”). The net fair value of the assets
acquired and the liabilities assumed at the date of acquisition was
as
follows:
|
Working
capital, excluding cash and cash equivalents
|
$
|
3,219,728
|
||
Property
and equipment
|
997,148
|
|||
Intangible
assets and goodwill
|
13,122,646
|
|||
$
|
17,339,522
|
For
the Three Months ended June 30, 2004
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
General
and administrative expenses
|
$
|
3,521,461
|
$
|
(149,527
|
)
|
$
|
3,371,934
|
|||
Operating
loss
|
2,191,705
|
(149,527
|
)
|
2,042,178
|
||||||
Financial
expenses, net
|
1,985,576
|
167,235
|
2,152,811
|
|||||||
Loss
from continuing operations
|
4,378,415
|
17,708
|
4,396,123
|
|||||||
Net
loss
|
4,378,415
|
17,708
|
4,396,123
|
|||||||
Basic
and diluted net loss per share from continuing operations
|
$
|
0.07
|
$
|
0.00
|
$
|
0.07
|
||||
Basic
and diluted net loss per share
|
$
|
0.07
|
$
|
0.00
|
$
|
0.07
|
For
the Six Months ended June 30, 2004
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
General
and administrative expenses
|
$
|
7,202,454
|
$
|
(1,742,384
|
)
|
$
|
5,460,070
|
|||
Operating
loss
|
5,228,267
|
(1,742,384
|
)
|
3,485,883
|
||||||
Financial
expenses, net
|
3,259,530
|
(28,174
|
)
|
3,231,356
|
||||||
Loss
from continuing operations
|
8,684,570
|
(1,770,558
|
)
|
6,914,012
|
||||||
Net
loss
|
8,684,570
|
(1,770,558
|
)
|
6,914,012
|
||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
1,163,000
|
1,163,000
|
|||||||
Net
loss attributable to common stockholders
|
$
|
8,684,570
|
$
|
(607,558
|
)
|
$
|
8,077,012
|
|||
Basic
and diluted net loss per share from continuing operations
|
$
|
0.14
|
$
|
(0.03
|
)
|
$
|
0.11
|
|||
Basic
and diluted net loss per share
|
$
|
0.14
|
$
|
(0.01
|
)
|
$
|
0.13
|
|
For
the Three Months ended March 31, 2004
|
|||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
General
and administrative expenses
|
$
|
3,680,993
|
$
|
(1,592,857
|
)
|
$
|
2,088,136
|
|||
Operating
loss
|
3,036,562
|
(1,592,857
|
)
|
1,443,705
|
||||||
Financial
expenses, net
|
1,273,954
|
(195,409
|
)
|
1,078,545
|
||||||
Loss
from continuing operations
|
4,306,155
|
(1,788,266
|
)
|
2,517,889
|
||||||
Net
loss
|
4,306,155
|
(1,788,266
|
)
|
2,517,889
|
||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
1,163,000
|
1,163,000
|
|||||||
Net
loss attributable to common stockholders
|
$
|
4,306,155
|
$
|
(625,266
|
)
|
$
|
3,680,889
|
|||
Basic
and diluted net loss per share from continuing operations
|
$
|
0.07
|
$
|
(0.03
|
)
|
$
|
0.04
|
|||
Basic
and diluted net loss per share
|
$
|
0.07
|
$
|
(0.01
|
)
|
$
|
0.06
|
For
the Year ended December 31, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
General
and administrative expenses
|
$
|
6,196,779
|
$
|
(338,903
|
)
|
$
|
5,857,876
|
|||
Operating
loss
|
5,408,932
|
(338,903
|
)
|
5,070,029
|
||||||
Financial
expenses, net
|
3,470,459
|
568,250
|
4,038,709
|
|||||||
Loss
from continuing operations
|
9,118,684
|
229,347
|
9,348,031
|
|||||||
Net
loss
|
9,008,274
|
229,347
|
9,237,621
|
|||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
350,000
|
350,000
|
|||||||
Net
loss attributable to common stockholders
|
$
|
9,008,274
|
$
|
579,347
|
$
|
9,587,621
|
||||
Basic
and diluted net loss per share from continuing operations
|
$
|
0.23
|
$
|
0.01
|
$
|
0.24
|
||||
Basic
and diluted net loss per share
|
$
|
0.23
|
$
|
0.02
|
$
|
0.25
|
For
the Nine Months ended September 30, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
General
and administrative expenses
|
$
|
3,579,371
|
$
|
(123,085
|
)
|
$
|
3,456,286
|
|||
Operating
loss
|
2,597,043
|
(123,085)
|
2,473,958
|
|||||||
Financial
expenses, net
|
1,084,582
|
129,000
|
1,213,582
|
|||||||
Net
income from continuing operations
|
3,854,949
|
5,915
|
3,860,864
|
|||||||
Net
loss
|
3,774,066
|
5,915
|
3,779,981
|
|||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
267,026
|
267,026
|
|||||||
Net
loss attributable to common stockholders
|
$
|
3,774,066
|
$
|
272,941
|
$
|
4,047,007
|
||||
Basic
and diluted net loss per share from continuing operations
|
$
|
0.10
|
$
|
0.01
|
$
|
0.11
|
||||
Basic
and diluted net loss per share
|
$
|
0.10
|
$
|
0.01
|
$
|
0.11
|
For
the Three Months ended September 30, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
General
and administrative expenses
|
$
|
1,105,864
|
$
|
(123,085
|
)
|
$
|
982,779
|
|||
Operating
income
|
234,428
|
123,085
|
357,513
|
|||||||
Financial
expenses, net
|
100,761
|
(18,428
|
)
|
82,333
|
||||||
Net
income from continuing operations
|
77,093
|
141,513
|
218,606
|
|||||||
Net
income
|
74,808
|
141,513
|
216,321
|
|||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
(94,676
|
)
|
(94,676
|
)
|
|||||
Net
income attributable to common stockholders
|
$
|
74,808
|
$
|
46,837
|
$
|
121,645
|
||||
Basic
and diluted net earnings per share from continuing operations
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
||||
Basic
and diluted net earnings per share
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
For
the Six Months ended June 30, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Financial
expenses, net
|
$
|
983,821
|
$
|
147,428
|
$
|
1,131,249
|
||||
Loss
from continuing operations
|
3,932,041
|
147,428
|
4,079,469
|
|||||||
Net
loss
|
3,848,875
|
147,428
|
3,996,303
|
|||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
172,350
|
172,350
|
|||||||
Net
loss attributable to common stockholders
|
$
|
3,848,875
|
$
|
319,778
|
$
|
4,168,653
|
||||
Basic
and diluted net loss per share from continuing operations
|
$
|
0.11
|
$
|
0.00
|
$
|
0.11
|
||||
Basic
and diluted net loss per share
|
$
|
0.11
|
$
|
0.01
|
$
|
0.12
|
For
the Three Months ended June 30, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Financial
expenses, net
|
$
|
725,609
|
$
|
147,428
|
$
|
873,037
|
||||
Loss
from continuing operations
|
2,640,920
|
147,428
|
2,788,348
|
|||||||
Net
loss
|
2,461,793
|
147,428
|
2,609,221
|
|||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
172,350
|
172,350
|
|||||||
Net
loss attributable to common stockholders
|
$
|
2,461,793
|
$
|
319,778
|
$
|
2,781,571
|
||||
Basic
and diluted net loss per share from continuing operations
|
$
|
0.07
|
$
|
0.01
|
$
|
0.08
|
||||
Basic
and diluted net loss per share
|
$
|
0.07
|
$
|
0.01
|
$
|
0.08
|
As
of June 30, 2004
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Convertible
debenture
|
$
|
737,235
|
$
|
540,075
|
$
|
1,277,310
|
||||
Total
long term liabilities
|
6,278,225
|
540,075
|
6,818,300
|
|||||||
Additional
paid in capital
|
167,789,043
|
(2,081,287
|
)
|
165,707,756
|
||||||
Accumulated
deficit
|
(118,366,463
|
)
|
1,541,212
|
(116,825,257
|
)
|
|||||
Total
shareholders’ equity
|
44,707,225
|
(540,075
|
)
|
44,167,150
|
As
of March 31, 2004
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Convertible
debenture
|
$
|
849,037
|
$
|
372,841
|
$
|
1,221,878
|
||||
Total
long term liabilities
|
6,062,891
|
372,841
|
6,435,732
|
|||||||
Additional
paid in capital
|
162,331,180
|
(1,931,760
|
)
|
160,399,420
|
||||||
Accumulated
deficit
|
(113,988,048
|
)
|
1,558,919
|
(112,429,129
|
)
|
|||||
Total
shareholders’ equity
|
44,019,328
|
(372,841
|
)
|
43,646,487
|
As
of December 31, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Other
accounts payable and accrued expenses
|
$
|
4,180,411
|
$
|
(150,000
|
)
|
$
|
4,030,411
|
|||
Convertible
debenture
|
881,944
|
568,250
|
1,450,194
|
|||||||
Total
long term liabilities
|
4,066,579
|
568,250
|
4,634,829
|
|||||||
Additional
paid in capital
|
135,891,316
|
(188,903
|
)
|
135,702,413
|
||||||
Accumulated
deficit
|
(109,681,893
|
)
|
(229,347
|
)
|
(109,911,240
|
)
|
||||
Total
shareholders’ equity
|
22,044,127
|
(418,250
|
)
|
(21,625,877
|
)
|
As
of September 30, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Convertible
debenture
|
$
|
1,115,001
|
$
|
129,000
|
$
|
1,244,001
|
||||
Total
long term liabilities
|
4,178,147
|
129,000
|
4,307,147
|
|||||||
Additional
paid in capital
|
120,105,276
|
(123,085
|
)
|
119,982,191
|
||||||
Accumulated
deficit
|
(104,447,685
|
)
|
(5,915
|
)
|
(104,453,600
|
)
|
||||
Total
shareholders’ equity
|
11,411,175
|
(129,000
|
)
|
11,282,175
|
As
of June 30, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Convertible
debenture
|
$
|
988,572
|
$
|
147,428
|
$
|
1,136,000
|
||||
Total
long term liabilities
|
4,358,568
|
147,428
|
4,505,996
|
|||||||
Accumulated
deficit
|
(104,522,494
|
)
|
(147,428
|
)
|
(104,669,922
|
)
|
||||
Total
shareholders’ equity
|
10,356,181
|
(147,428
|
)
|
10,208,753
|
For
the Six Months ended June 30, 2004
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Net
loss
|
$
|
8,684,570
|
$
|
(1,770,558
|
)
|
$
|
6,914,012
|
|||
Stock
based compensation related to repricing of warrants granted to
investors
and the grant of new warrants
|
1,742,384
|
(1,742,384
|
)
|
-
|
||||||
Amortization
of compensation related to beneficial conversion feature and warrants
issued to holders of convertible debentures
|
2,967,791
|
(28,174
|
)
|
2,939,617
|
For
the Three Months ended March 31, 2004
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Net
loss
|
$
|
4,306,155
|
$
|
(1,788,266
|
)
|
$
|
2,517,889
|
|||
Stock
based compensation related to repricing of warrants granted to
investors
and the grant of new warrants
|
1,592,857
|
(1,592,857
|
)
|
-
|
||||||
Amortization
of compensation related to beneficial conversion feature and warrants
issued to holders of convertible debentures
|
1,117,093
|
(195,409
|
)
|
921,684
|
For
the Year ended December 31, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Net
loss
|
$
|
9,008,274
|
$
|
229,347
|
$
|
9,237,621
|
||||
Stock
based compensation related to repricing of warrants granted to
investors
and the grant of new warrants
|
388,403
|
(188,903
|
)
|
199,500
|
||||||
Amortization
of compensation related to beneficial conversion feature and warrants
issued to holders of convertible debentures
|
3,359,987
|
568,250
|
3,928,237
|
For
the Nine Months ended September 30, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Net
loss
|
$
|
3,774,066
|
$
|
5,915
|
$
|
3,779,981
|
||||
Stock
based compensation related to repricing of warrants granted to
investors
and the grant of new warrants
|
152,844
|
(123,085
|
)
|
29,759
|
||||||
Amortization
of compensation related to beneficial conversion feature and warrants
issued to holders of convertible debentures
|
1,005,001
|
129,000
|
1,134,001
|
For
the Six Months ended June 30, 2003
|
||||||||||
Previously
Reported
|
Adjustment
|
As
Restated
|
||||||||
Net
loss
|
$
|
3,848,875
|
$
|
147,428
|
$
|
3,996,303
|
||||
Amortization
of compensation related to beneficial conversion feature and warrants
issued to holders of convertible debentures
|
878,572
|
147,428
|
1,026,000
|
Tangible
assets acquired
|
2,239,848
|
|||
Intangible
assets
|
||||
Customer
list
|
5,092,395
|
|||
Goodwill
|
5,192,012
|
|||
Liabilities
assumed
|
(2,379,993
|
)
|
||
Total
consideration
|
$
|
10,144,262
|
1. |
To
determine the estimated market value of Epsilor’s net current assets,
property and equipment, and net liabilities, the “Cost Approach” was used.
According to the valuation made, the book values for the current
assets
and liabilities were reasonable proxies for their market
values.
|
2. |
The
customer list is the asset that generates most of the Company’s sales.
Hence, the “Income Approach” was used to estimate its value, resulting in
a value of $5,092,395.
|
Tangible
assets acquired
|
$
|
4,833,553
|
||
Intangible
assets
|
||||
Technology
|
4,610,000
|
|||
Backlog
|
636,000
|
|||
Customer
list
|
1,125,000
|
|||
Trademarks
|
374,000
|
|||
Goodwill
|
18,762,646
|
|||
Liabilities
assumed
|
(2,770,843
|
)
|
||
Total
consideration
|
$
|
27,570,356
|
1. |
To
determine the estimated fair value of FAAC’s net current assets, property
and equipment, and net liabilities, the “Cost Approach” was used.
According to the valuation made, the book values for the current
assets
and liabilities were reasonable proxies for their market
values.
|
2. |
The
amount of the cost attributable to technology of the software,
documentation and know-how that drives the vehicle simulators and
the
high-speed missile fly-out simulators is $4,610,000 and was determined
using the “Income Approach.”
|
3. |
FAAC’s
sales are all made on a contractual basis, most of which are over
a
relatively long period of time. At the date of the purchase FAAC
had
several signed contracts at various stages of completion. The value
of the
existing contracts was determined using the Income approach and resulting
in a value of $636,000.
|
4. |
FAAC’s
customer list includes various branches of the U.S. military, major
defense contractors, various city and country governments and others.
Since customer relationship represent one of the most important revenue
generating assets for FAAC, its value was estimated using the Income
Approach, resulting in a value of
$1,125,000.
|
5. |
FAAC’s
trade name value represents the name recognition value of the FAAC
brand
name as a result of advertising spending by the company. The Cost
Approach
was used to determine the value of FAAC’s trade name in the amount of
$374,000.
|
Tangible
assets acquired
|
6,346,316
|
|||
Intangible
assets
|
||||
Certifications
|
246,969
|
|||
Backlog
|
1,512,000
|
|||
Customer
relationships
|
490,000
|
|||
Tradename
/Trademark
|
70,000
|
|||
Covenants
not to compete
|
260,000
|
|||
Goodwill
|
10,543,677
|
|||
Liabilities
assumed
|
(347,770
|
)
|
||
Total
consideration
|
$
|
19,121,192
|
Tangible
assets acquired
|
$
|
2,856,951
|
||
Intangible
assets
|
||||
Technology
|
1,515,000
|
|||
Existing
contracts
|
46,000
|
|||
Covenants
not to compete
|
99,000
|
|||
In
process research and development
|
26,000
|
|||
Customer
|
527,000
|
|||
Trademarks
|
439,000
|
|||
Goodwill
|
4,032,726
|
|||
Liabilities
assumed
|
(1,186,784
|
)
|
||
Total
consideration
|
$
|
8,354,893
|
Cash
consideration
|
$
|
183,688
|
||
Present
value of promissory notes
|
289,333
|
|||
Transaction
expenses
|
12,643
|
|||
Total
consideration
|
$
|
485,664
|
Tangible
assets acquired
|
$
|
33,668
|
||
Intangible
assets
|
||||
Technology
and patents
|
436,746
|
|||
Customer
list
|
15,250
|
|||
Total
consideration
|
$
|
485,664
|
Tangible
assets acquired
|
$
|
1,337,048
|
||
Intangible
assets
|
||||
Technology
|
280,000
|
|||
Customer
base
|
285,000
|
|||
Goodwill
|
886,255
|
|||
Liabilities
assumed
|
(1,020,426
|
)
|
||
Total
consideration
|
$
|
1,767,877
|
Year
Ended December 31,
|
||||||||||
2004
|
2003*
|
2002
|
||||||||
(Unaudited)
|
||||||||||
Total
revenues
|
$
|
61,086,697
|
$
|
39,680,394
|
$
|
12,997,289
|
||||
Gross
profit
|
22,528,254
|
17,214,249
|
4,424,952
|
|||||||
Net
loss
|
(5,810,114
|
)
|
(6,959,174
|
)
|
(6,103,771
|
)
|
||||
Deemed
dividend of common stock attributable to certain
stockholders
|
(3,328,952
|
)
|
(350,000
|
)
|
-
|
|||||
Net
loss attributable to stockholders of common stock
|
$
|
(9,139,066
|
)
|
$
|
(7,309,174
|
)
|
$
|
(6,103,771
|
)
|
|
Basic
and diluted net loss per share
|
$
|
(0.13
|
)
|
$
|
(0.14
|
)
|
$
|
(0.18
|
)
|
|
Weighted
average number of shares used in computing basic net loss per
share
|
69,933,057
|
52,966,330
|
34,495,185
|
December
31, 2002
|
||||
Write-off
of inventories
|
$
|
2,611,000
|
||
Impairment
of property and equipment
|
4,446,684
|
|||
$
|
7,057,684
|
Year
Ended December 31,
|
||||||||||
2004
|
2003
|
2002
|
||||||||
Revenues
|
$
|
-
|
$
|
117,267
|
$
|
1,100,442
|
||||
Cost
of sales (1)
|
-
|
-
|
(5,293,120
|
)
|
||||||
Gross
profit (loss)
|
-
|
117,267
|
(4,192,678
|
)
|
||||||
Operating
expenses, net
|
-
|
6,857
|
4,926,844
|
|||||||
Impairment
of fixed assets
|
-
|
-
|
4,446,684
|
|||||||
Operating
profit (loss)
|
$
|
-
|
$
|
110,410
|
$
|
(13,566,206
|
)
|
%
|
|
Computers
and related equipment
|
33
|
Motor
vehicles
|
15
|
Office
furniture and equipment
|
6
-
10
|
Machinery
and equipment
|
10
- 25 (mainly 10)
|
Leasehold
improvements
|
By
the shorter of the term of the lease and the life of the
asset
|
Year
ended December 31,
|
||||||||||
2004
|
2003*
|
2002
|
||||||||
Net
loss as reported
|
$
|
(9,042,313
|
)
|
$
|
(9,237,621
|
)
|
$
|
(18,504,358
|
)
|
|
Add:
Stock-based compensation expenses included in reported net
loss
|
831,626
|
8,286
|
6,000
|
|||||||
Deduct:
Stock-based compensation expenses determined under fair value method
for
all awards
|
(2,741,463
|
)
|
(1,237,558
|
)
|
(2,072,903
|
)
|
||||
$
|
(10,952,150
|
)
|
$
|
(10,466,893
|
)
|
$
|
(20,571,261
|
)
|
||
Loss
per share:
|
||||||||||
Basic
and diluted, as reported
|
$
|
(0.18
|
)
|
$
|
(0.25
|
)
|
$
|
(0.57
|
)
|
|
Diluted,
pro forma
|
$
|
(0.16
|
)
|
$
|
(0.27
|
)
|
$
|
(0.64
|
)
|
NOTE
3:-
|
RESTRICTED
COLLATERAL DEPOSITS AND RESTRICTED HELD-TO-MATURITY
SECURITIES:
|
December
31,
|
|||||||
2004
|
2003
|
||||||
Short-term:
|
|||||||
Restricted,
held to maturity, bonds in connection with FAAC earn out (Note
1.d.)(1)
|
$
|
5,969,413
|
$
|
-
|
|||
IES
deposit in connection to the Company’s litigation with IES Electronics
Industries Ltd.
|
-
|
450,000
|
|||||
Deposits
in connection with FAAC projects
|
650,989
|
-
|
|||||
Forward
Deal
|
-
|
205,489
|
|||||
Property
lease
|
-
|
41,412
|
|||||
Other
|
341,708
|
9,279
|
|||||
Total
short-term
|
6,962,110
|
706,810
|
|||||
Long-term:
|
|||||||
Restricted
cash in connection with AoA earn out (Note 1.e.)
|
3,000,000
|
-
|
|||||
Restricted
deposit in connection with Epsilor acquisition (Note 1.c.)
|
1,000,000
|
-
|
|||||
Total
long-term
|
4,000,000
|
-
|
|||||
$
|
10,962,110
|
$
|
706,180
|
NOTE
3:-
|
RESTRICTED
COLLATERAL DEPOSIT AND OTHER RESTRICTED CASH
(Cont.)
|
Amortized
cost
|
Unrealized
losses
|
Estimated
fair value
|
|||||||||||||||||
2004
|
2003
|
2004
|
2003
|
2004
|
2003
|
||||||||||||||
Obligations
of States and political subdivisions
|
$
|
1,012,787
|
$
|
-
|
$
|
(1,870
|
)
|
$
|
-
|
$
|
1,010,917
|
$
|
-
|
||||||
Corporate
obligations
|
4,956,626
|
-
|
(11,966
|
)
|
-
|
4,944,660
|
-
|
||||||||||||
$
|
5,969,413
|
$
|
-
|
$
|
(13,836
|
)
|
$
|
-
|
$
|
5,955,577
|
$
|
-
|
Amortized
cost
|
Unrealized
losses
|
Estimated
fair value
|
||||||||
Due
in one year or less
|
$
|
5,969,413
|
$
|
(13,836
|
)
|
$
|
5,955,577
|
Cost
|
Unrealized
gains
|
Estimated
fair value
|
|||||||||||||||||
2004
|
2003
|
2004
|
2003
|
2004
|
2003
|
||||||||||||||
Available
for sale marketable securities
|
$
|
130,061
|
$
|
-
|
$
|
5,507
|
$
|
-
|
$
|
135,568
|
$
|
-
|
December
31,
|
|||||||
2004
|
2003
|
||||||
Government
authorities
|
$
|
433,427
|
$
|
65,402
|
|||
Employees
|
217,948
|
246,004
|
|||||
Prepaid
expenses
|
490,357
|
551,010
|
|||||
Deferred
taxes
|
135,482
|
-
|
|||||
Other
|
62,179
|
324,955
|
|||||
$
|
1,339,393
|
$
|
1,187,371
|
December
31,
|
|||||||
2004
|
2003
|
||||||
Raw
and packaging materials
|
$
|
3,969,400
|
$
|
657,677
|
|||
Work
in progress
|
1,996,139
|
634,221
|
|||||
Finished
products
|
1,311,762
|
622,850
|
|||||
$
|
7,277,301
|
$
|
1,914,748
|
December
31,
|
|||||||
2004
|
2003
|
||||||
Cost:
|
|||||||
Computers
and related equipment
|
$
|
3,374,695
|
$
|
1,015,836
|
|||
Motor
vehicles
|
653,255
|
288,852
|
|||||
Office
furniture and equipment
|
872,804
|
402,726
|
|||||
Machinery,
equipment and installations
|
7,464,470
|
4,866,904
|
|||||
Leasehold
improvements
|
1,321,025
|
882,047
|
|||||
Demo
inventory
|
141,961
|
150,996
|
|||||
13,828,210
|
7,607,361
|
||||||
Accumulated
depreciation:
|
|||||||
Computers
and related equipment
|
2,581,689
|
753,593
|
|||||
Motor
vehicles
|
197,071
|
95,434
|
|||||
Office
furniture and equipment
|
494,181
|
173,301
|
|||||
Machinery,
equipment and installations
|
5,143,186
|
3,637,111
|
|||||
Leasehold
improvements
|
811,392
|
655,181
|
|||||
9,227,519
|
5,314,620
|
||||||
Depreciated
cost
|
$
|
4,600,691
|
$
|
2,292,741
|
Year
ended December 31,
|
|||||||
2004
|
2003
|
||||||
Cost:
|
|||||||
Technology
|
$
|
6,841,746
|
$
|
2,231,746
|
|||
Capitalized
software costs
|
574,967
|
209,615
|
|||||
Backlog
|
2,194,000
|
46,000
|
|||||
Covenants
not to compete
|
359,000
|
99,000
|
|||||
Customer
list
|
7,548,645
|
827,250
|
|||||
Certification
|
246,969
|
-
|
|||||
17,765,327
|
3,413,611
|
||||||
Exchange
differences
|
125,455
|
25,438
|
|||||
Less
- accumulated amortization
|
(4,391,081
|
)
|
(1,502,854
|
)
|
|||
Amortized
cost
|
13,499,701
|
1,936,195
|
|||||
Trademarks
|
869,000
|
439,000
|
|||||
$
|
14,368,701
|
$
|
2,375,195
|
Year
ended December 31,
|
||||
2005
|
$
|
3,280,815
|
||
2006
|
2,073,209
|
|||
2007
|
1,381,883
|
|||
2008
|
1,276,075
|
|||
2009
and forward
|
5,000,546
|
|||
$
|
13,012,528
|
December
31,
|
|||||||
2004
|
2003*
|
||||||
Employees
and payroll accruals
|
$
|
1,534,295
|
$
|
1,232,608
|
|||
Accrued
vacation pay
|
469,527
|
216,768
|
|||||
Accrued
expenses
|
1,770,348
|
842,760
|
|||||
Minority
balance
|
243,116
|
149,441
|
|||||
Government
authorities
|
1,036,669
|
357,095
|
|||||
Litigation
settlement accrual(1)
|
-
|
1,163,642
|
|||||
Advances
from customers
|
746,819
|
-
|
|||||
Other
|
17,414
|
68,097
|
|||||
$
|
5,818,188
|
$
|
4,030,411
|
Year
ended December 31
|
||||
2005
|
$
|
762,636
|
||
2006
|
$
|
305,109
|
||
2007
|
$
|
269,220
|
||
2008
|
$
|
66,688
|
||
2009
|
$
|
24,312
|
2004
|
2003
|
2002
|
|||||||||||||||||
Amount
|
Weighted
average
exercise
price
|
Amount
|
Weighted
average
exercise
price
|
Amount
|
Weighted
average exercise price
|
||||||||||||||
$
|
$
|
$
|
|||||||||||||||||
Options
outstanding at beginning of year
|
9,018,311
|
$
|
1.37
|
5,260,366
|
$
|
2.26
|
4,240,228
|
$
|
2.74
|
||||||||||
Changes
during year:
|
|||||||||||||||||||
Granted
(1) (2)
|
2,248,490
|
$
|
1.06
|
5,264,260
|
$
|
0.71
|
1,634,567
|
$
|
0.87
|
||||||||||
Exercised
(3)
|
(897,248
|
)
|
$
|
1.24
|
(689,640
|
)
|
$
|
0.64
|
(191,542
|
)
|
$
|
1.29
|
|||||||
Forfeited
|
(514,793
|
)
|
$
|
3.77
|
(816,675
|
)
|
$
|
3.51
|
(422,887
|
)
|
$
|
1.92
|
|||||||
Options
outstanding at end of year
|
9,854,760
|
$
|
1.19
|
9,018,311
|
$
|
1.37
|
5,260,366
|
$
|
2.26
|
||||||||||
Options
exercisable at end of year
|
6,465,316
|
$
|
1.32
|
5,826,539
|
$
|
1.70
|
4,675,443
|
$
|
2.26
|
Total
options outstanding
|
Exercisable
options outstanding
|
|||||||||||||||
Range
of
exercise
prices
|
Amount
outstanding
at
December
31,
2004
|
Weighted
average
remaining
contractual
life
|
Weighted
average
exercise
price
|
Amount
exercisable
at
December
31, 2004
|
Weighted
average
exercise
price
|
|||||||||||
$
|
|
Years
|
$
|
$
|
||||||||||||
0.01-2.00
|
8,944,827
|
6.44
|
0.87
|
5,730,382
|
0.88
|
|||||||||||
2.01-4.00
|
270,933
|
3.79
|
2.46
|
95,934
|
2.56
|
|||||||||||
4.01-6.00
|
594,000
|
1.97
|
4.80
|
594,000
|
4.80
|
|||||||||||
6.01-8.00
|
35,000
|
1.05
|
7.73
|
35,000
|
7.73
|
|||||||||||
8.01
|
10,000
|
2.75
|
9.06
|
10,000
|
9.06
|
|||||||||||
9,854,760
|
6.07
|
1.19
|
6,465,316
|
1.32
|
Equals
market price
|
Less
than market price
|
||||||||||||||||||
Year
ended December 31,
|
Year
ended December 31,
|
||||||||||||||||||
2004
|
2003
|
2002
|
2004
|
2003
|
2002
|
||||||||||||||
Weighted
average exercise prices
|
$
|
1.494
|
$
|
0.950
|
$
|
1.265
|
$
|
1.672
|
$
|
-
|
$
|
0.755
|
|||||||
Weighted
average fair value on grant date
|
$
|
1.002
|
$
|
0.730
|
$
|
0.560
|
$
|
1.729
|
$
|
-
|
$
|
0.250
|
2004
|
2003
|
2002
|
|||||||||||||||||
Amount
|
Weighted
average exercise price
|
Amount
|
Weighted
average exercise price
|
Amount
|
Weighted
average exercise price
|
||||||||||||||
$ |
$
|
$
|
|||||||||||||||||
Options
outstanding at beginning of year
|
313,901
|
$
|
4.59
|
245,786
|
$
|
5.55
|
245,786
|
$
|
5.55
|
||||||||||
Changes
during year:
|
|||||||||||||||||||
Granted
|
10,000
|
$
|
-
|
83,115
|
$
|
0.99
|
-
|
$
|
-
|
||||||||||
Exercised
|
(37,615
|
)
|
$
|
1.03
|
(15,000
|
)
|
$
|
0.49
|
-
|
$
|
-
|
||||||||
Forfeited
or cancelled
|
(120,000
|
)
|
$
|
6.40
|
-
|
$
|
-
|
-
|
$
|
-
|
|||||||||
Options
outstanding at end of year
|
166,286
|
$
|
3.80
|
313,901
|
$
|
4.59
|
245,786
|
$
|
5.55
|
||||||||||
Options
exercisable at end of year
|
166,286
|
$
|
3.80
|
193,901
|
$
|
3.46
|
125,786
|
$
|
6.42
|
2004
|
2003
|
2002
|
||||
Dividend
yield
|
0%
|
0%
|
-
|
|||
Expected
volatility
|
81%
|
78%
|
-
|
|||
Risk-free
interest
|
3.4%
|
2.3%
|
-
|
|||
Contractual
life of up to
|
5
years
|
10
years
|
-
|
December
31,
|
|||||||
2004
|
2003
|
||||||
Operating
loss carryforward
|
$
|
32,532,998
|
$
|
33,958,434
|
|||
Reserve
and allowance
|
1,328,479
|
843,453
|
|||||
Net
deferred tax asset before valuation allowance
|
33,861,477
|
34,801,887
|
|||||
Valuation
allowance
|
(33,725,995
|
)
|
(34,801,887
|
)
|
|||
Total
deferred tax asset
|
$
|
135,482
|
$
|
-
|
|||
Deferred
tax liability
|
$
|
51,366
|
$
|
-
|
Year
ended December 31
|
|||||||||||||
2004
|
2003*
|
2002**
|
|||||||||||
Domestic
|
$
|
8,006,205
|
$
|
7,411,121
|
$5,250,633
|
||||||||
Foreign
|
405,305
|
1,697,617
|
13,253,725
|
||||||||||
$
|
8,411,510
|
$
|
9,108,738
|
$18,504,358
|
Year
ended December 31
|
||||||||||
2004
|
2003
|
2002
|
||||||||
Current
state and local taxes
|
$
|
539,674
|
$
|
44,102
|
$
|
-
|
||||
Deferred
taxes
|
(37,857
|
)
|
-
|
-
|
||||||
Taxes
in respect of prior years
|
84,292
|
352,091
|
-
|
|||||||
$
|
586,109
|
$
|
396,193
|
$
|
-
|
|||||
Domestic
|
$
|
163,087
|
$
|
33,020
|
$
|
-
|
||||
Foreign
|
423,022
|
363,173
|
-
|
|||||||
$
|
586,109
|
$
|
396,193
|
$
|
-
|
Year
ended December 31,
|
||||||||||
2004
|
2003*
|
2002
|
||||||||
Loss
from continuing operations before taxes, as reported in the consolidated
statements of income
|
$
|
(8,411,510
|
)
|
$
|
(9,108,738
|
)
|
$
|
(4,582,792
|
)
|
|
Statutory
tax rate
|
34
|
%
|
34
|
%
|
34
|
%
|
||||
Theoretical
income tax on the above amount at the U.S. statutory tax
rate
|
$
|
(2,859,914
|
)
|
$
|
(3,096,971
|
)
|
$
|
(1,558,149
|
)
|
|
Deferred
taxes on losses for which valuation allowance was provided
|
556,692
|
1,146,754
|
1,558,149
|
|||||||
Non-deductible
expenses
|
1,629,874
|
1,873,129
|
-
|
|||||||
State
taxes
|
168,081
|
33,020
|
-
|
|||||||
Accrual
for deferred taxes on undistributed earnings
|
49,416
|
-
|
-
|
|||||||
Foreign
income in tax rates other then U.S rate
|
919,895
|
86,954
|
-
|
|||||||
Taxes
in respect of prior years
|
84,292
|
352,091
|
-
|
|||||||
Others
|
37,773
|
1,216
|
-
|
|||||||
Actual
tax expense
|
$
|
586,109
|
$
|
396,193
|
$
|
-
|
Year
ended December 31,
|
||||||||||
2004
|
2003*
|
2002
|
||||||||
Financial
expenses:
|
||||||||||
Interest,
bank charges and fees
|
$
|
(622,638
|
)
|
$
|
(355,111
|
)
|
$
|
(89,271
|
)
|
|
Amortization
of compensation related to warrants issued to the holders of convertible
debentures and beneficial conversion feature
|
(4,142,109
|
)
|
(3,928,237
|
)
|
-
|
|||||
Bonds
premium amortization
|
(202,467
|
)
|
-
|
-
|
||||||
Foreign
currency translation differences
|
(71,891
|
)
|
115,538
|
15,202
|
||||||
(5,039,105
|
)
|
(4,167,810
|
)
|
(74,069
|
)
|
|||||
Financial
income:
|
||||||||||
Interest
|
443,182
|
129,101
|
174,520
|
|||||||
Realized
gain from marketable securities sale
|
40,119
|
-
|
-
|
|||||||
Financial
income in connection with warrants granted (note 14.f.4)
|
326,839
|
-
|
-
|
|||||||
Total
|
$
|
(4,228,965
|
)
|
$
|
(4,038,709
|
)
|
$
|
100,451
|
Year
ended December 31,
|
||||||||||
2004
|
2003
|
2002
|
||||||||
Transactions:
|
||||||||||
Reimbursement
of general and administrative expenses
|
-
|
-
|
$
|
36,000
|
||||||
Financial
income (expenses), net from notes receivable and loan
holders
|
$
|
18,251
|
-
|
$
|
(7,309
|
)
|
Simulation
and Security
|
Armor
|
Battery
and
Power
Systems
|
All
Others(4)
|
Total
|
||||||||||||
2004
|
||||||||||||||||
Revenues
from outside customers
|
$
|
21,464,406
|
$
|
17,988,687
|
$
|
10,500,753
|
$
|
-
|
$
|
49,953,846
|
||||||
Depreciation
expenses and amortization (1)
|
(1,983,822
|
)
|
(1,755,847
|
)
|
(1,132,953
|
)
|
(135,613
|
)
|
(5,008,235
|
)
|
||||||
Direct
expenses (2)
|
(17,910,967
|
)
|
(16,444,476
|
)
|
(9,974,544
|
)
|
(5,431,627
|
)
|
(49,761,614
|
)
|
||||||
Segment
net income (loss)
|
$
|
1,569,617
|
$
|
(211,636
|
)
|
$
|
(606,744
|
)
|
$
|
(5,567,240
|
)
|
(4,816,003
|
)
|
|||
Financial
expenses (after deduction of minority interest)
|
(4,226,310
|
)
|
||||||||||||||
Net
loss from continuing operations
|
$
|
(9,042,313
|
)
|
|||||||||||||
Segment
assets (3)
|
$
|
1,872,943
|
$
|
5,819,266
|
$
|
3,455,188
|
$
|
730,595
|
$
|
11,877,992
|
||||||
Simulation
and Security
|
Armor
|
Battery
and
Power
Systems
|
All
Others(4)
|
Total
|
||||||||||||
2003*
|
||||||||||||||||
Revenues
from outside customers
|
$
|
8,022,026
|
$
|
3,435,716
|
$
|
5,868,899
|
$
|
-
|
$
|
17,326,641
|
||||||
Depreciation
expenses and amortization
|
(757,997
|
)
|
(169,668
|
)
|
(527,775
|
)
|
(139,630
|
)
|
(1,595,070
|
)
|
||||||
Direct
expenses (2)
|
(7,308,649
|
)
|
(3,584,284
|
)
|
(5,945,948
|
)
|
(4,200,770
|
)
|
(21,039,651
|
)
|
||||||
Segment
net income (loss)
|
$
|
(44,620
|
)
|
$
|
(318,236
|
)
|
$
|
(604,824
|
)
|
$
|
(4,340,400
|
)
|
(5,308,080
|
)
|
||
Financial
expenses (after deduction of minority interest)
|
(4,039,951
|
)
|
||||||||||||||
Net
loss from continuing operations
|
$
|
(9,348,031
|
)
|
|||||||||||||
Segment
assets (3)
|
$
|
898,271
|
$
|
730,291
|
$
|
2,128,062
|
$
|
450,864
|
$
|
4,207,488
|
||||||
2002
|
||||||||||||||||
Revenues
from outside customers
|
$
|
1,980,061
|
$
|
2,744,382
|
$
|
1,682,296
|
$
|
-
|
$
|
6,406,739
|
||||||
Depreciation
expenses and amortization (1)
|
(569,832
|
)
|
(106,921
|
)
|
(252,514
|
)
|
(194,014
|
)
|
(1,123,281
|
)
|
||||||
Direct
expenses (1)
|
(2,037,775
|
)
|
(2,315,995
|
)
|
(3,062,548
|
)
|
(2,905,743
|
)
|
(10,322,061
|
)
|
||||||
Segment
net income (loss)
|
$
|
(627,546
|
)
|
$
|
321,466
|
$
|
(1,632,766
|
)
|
$
|
(3,099,757
|
)
|
(5,038,603
|
)
|
|||
Financial
income (after deduction of minority interest)
|
100,451
|
|||||||||||||||
Net
income from continuing operations
|
$
|
(4,938,152
|
)
|
|||||||||||||
Segment
assets (3)
|
$
|
655,143
|
$
|
1,028,682
|
$
|
2,007,291
|
$
|
575,612
|
$
|
4,266,728
|
Year
ended December 31,
|
||||||||||
2004
|
2003
|
2002
|
||||||||
Simulation
and Security Division
|
$
|
22,845,372
|
$
|
4,032,726
|
$
|
4,068,726
|
||||
Armor
Division
|
$
|
11,591,228
|
$
|
1,031,829
|
$
|
886,255
|
||||
Battery
and Power Systems Division
|
$
|
5,308,916
|
$
|
-
|
$
|
-
|
2004
|
2003
|
2002
|
|||||||||||||||||
Total
revenues
|
Long-lived
assets
|
Total
revenues
|
Long-lived
assets
|
Total
revenues
|
Long-lived
assets
|
||||||||||||||
U.S.
dollars
|
|||||||||||||||||||
U.S.A.
|
$
|
40,656,729
|
$
|
45,154,086
|
$
|
10,099,652
|
$
|
6,778,050
|
$
|
2,787,250
|
$
|
6,710,367
|
|||||||
Germany
|
319,110
|
-
|
2,836,725
|
-
|
38,160
|
-
|
|||||||||||||
England
|
344,261
|
-
|
29,095
|
-
|
47,696
|
-
|
|||||||||||||
Thailand
|
-
|
-
|
95,434
|
-
|
291,200
|
-
|
|||||||||||||
India
|
3,061,705
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Israel
|
4,212,408
|
13,560,822
|
3,576,139
|
2,954,441
|
2,799,365
|
3,367,320
|
|||||||||||||
Other
|
1,359,633
|
-
|
689,596
|
-
|
443,068
|
-
|
|||||||||||||
$
|
49,953,846
|
$
|
58,714,908
|
$
|
17,326,641
|
$
|
9,732,491
|
$
|
6,406,739
|
$
|
10,077,687
|
Year
ended December 31,
|
|||||
2004
|
2003
|
2002
|
|||
%
|
|||||
Batteries
and power systems:
|
|||||
Customer
A
|
8%
|
27%
|
8%
|
||
Armor:
|
|||||
Customer
B
|
4%
|
17%
|
43%
|
||
Customer
C
|
24%
|
-
|
-
|
||
Simulation
and security:
|
|||||
Customer
D
|
13%
|
-
|
-
|
||
Customer
E
|
1%
|
16%
|
-
|
Year
ended December 31,
|
||||||||||
2004
|
2003
|
2002
|
||||||||
Electric
- vehicle
|
$
|
232,394
|
$
|
408,161
|
$
|
460,562
|
||||
Water
activated batteries
|
921,533
|
703,084
|
647,896
|
|||||||
Military
batteries
|
9,324,247
|
4,757,116
|
573,839
|
|||||||
Car
armoring
|
17,988,686
|
3,435,715
|
2,744,382
|
|||||||
Simulators
|
21,414,968
|
7,961,302
|
1,980,060
|
|||||||
Other
|
72,018
|
61,263
|
-
|
|||||||
Total
|
$
|
49,953,846
|
$
|
17,326,641
|
$
|
6,406,739
|
Quarter
Ended*
|
|||||||||||||
2004
|
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||
Net
revenue
|
$
|
7,182,254
|
$
|
9,928,248
|
$
|
16,272,521
|
$
|
16,570,823
|
|||||
Gross
profit
|
$
|
2,625,034
|
$
|
3,353,501
|
$
|
4,723,573
|
$
|
5,240,644
|
|||||
Net
profit (loss) from continuing operations
|
$
|
(2,517,889
|
)
|
$
|
(4,396,123
|
)
|
$
|
1,126,845
|
$
|
(3,255,146
|
)
|
||
Net
loss from discontinued operations
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Net
profit (loss) for the period
|
$
|
(2,517,889
|
)
|
$
|
(4,396,123
|
)
|
$
|
1,126,845
|
$
|
(3,255,146
|
)
|
||
Deemed
dividend to certain stockholders of common stock
|
$
|
(1,163,000
|
)
|
$
|
-
|
$
|
(2,165,952
|
)
|
$
|
-
|
|||
Net
loss attributable to common stockholders
|
$
|
(3,680,889
|
)
|
$
|
(4,396,123
|
)
|
$
|
(1,039,107
|
)
|
$
|
(3,255,146
|
)
|
|
Net
profit (loss) per share - basic and diluted
|
$
|
(0.06
|
)
|
$
|
(0.07
|
)
|
$
|
(0.01
|
)
|
$
|
(0.04
|
)
|
|
Shares
used in per share calculation
|
59,406,466
|
64,499,090
|
76,744,251
|
79,075,181
|
Quarter
Ended
|
|||||||||||||
2003*
|
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||
Net
revenue
|
$
|
4,033,453
|
$
|
3,493,135
|
$
|
5,705,898
|
$
|
4,094,155
|
|||||
Gross
profit
|
$
|
1,399,734
|
$
|
1,013,965
|
$
|
2,453,575
|
$
|
1,371,527
|
|||||
Net
loss from continuing operations
|
$
|
(1,291,122
|
)
|
$
|
(2,788,348
|
)
|
$
|
218,606
|
$
|
(5,487,167
|
)
|
||
Net
income (loss) from discontinued operations
|
$
|
(95,962
|
)
|
$
|
179,127
|
$
|
(2,285
|
)
|
$
|
29,529
|
|||
Net
income (loss) for the period
|
$
|
(1,387,083
|
)
|
$
|
(2,609,221
|
)
|
$
|
216,321
|
$
|
(5,457,638
|
)
|
||
Deemed
dividend to certain stockholders of common stock
|
$
|
-
|
$
|
(172,350
|
)
|
$
|
(94,676
|
)
|
$
|
(82,974
|
)
|
||
Net
income (loss) attributable to common stockholders
|
$
|
(1,387,083
|
)
|
$
|
(2,781,571
|
)
|
$
|
121,645
|
$
|
(5,540,612
|
)
|
||
Net
loss per share - basic and diluted
|
$
|
(0.04
|
)
|
$
|
(0.08
|
)
|
$
|
0.00
|
$
|
(0.13
|
)
|
||
Shares
used in per share calculation
|
34,758,960
|
36,209,872
|
40,371,940
|
43,604,830
|
|||||||||
Description
|
Balance
at
beginning
of
period
|
Additions
charged
to
costs
and
expenses
|
Balance
at
end
of
period
|
|||||||
Year
ended December 31, 2004
|
||||||||||
Allowance
for doubtful accounts
|
$
|
61,282
|
$
|
(5,888
|
)
|
$
|
55,394
|
|||
Allowance
for slow moving inventory
|
96,350
|
121,322
|
217,672
|
|||||||
Valuation
allowance for deferred taxes
|
34,801,887
|
(1,075,892
|
)
|
33,725,995
|
||||||
Totals
|
$
|
34,959,519
|
$
|
(960,458
|
)
|
$
|
33,999,061
|
|||
Year
ended December 31, 2003
|
||||||||||
Allowance
for doubtful accounts
|
$
|
40,636
|
$
|
20,646
|
$
|
61,282
|
||||
Allowance
for slow moving inventory
|
-
|
96,350
|
96,350
|
|||||||
Valuation
allowance for deferred taxes
|
29,560,322
|
5,241,565
|
34,801,887
|
|||||||
Totals
|
$
|
29,600,958
|
$
|
5,358,561
|
$
|
34,959,519
|
||||
Year
ended December 31, 2002
|
||||||||||
Allowance
for doubtful accounts
|
$
|
39,153
|
$
|
1,483
|
$
|
40,636
|
||||
Valuation
allowance for deferred taxes
|
12,640,103
|
16,920,219
|
29,560,322
|
|||||||
Totals
|
$
|
12,679,256
|
$
|
16,921,702
|
$
|
29,600,958
|
Exhibit
Number
|
Description
|
|
23.1
|
Consent
of Kost, Forer, Gabbay & Kassierer, a member of Ernst & Young
Global
|
|
23.2
|
Consent
of Stark Winter Schenkein & Co., LLP
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002
|
|
32.2
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002
|