OMB
APPROVAL
|
OMB
Number:
3235-0070
Expires:
January
31, 2008
Estimated
average burden
hours
per
response
192.00
|
AROTECH
CORPORATION
|
(Exact
name of registrant as specified in its charter)
|
Delaware
|
95-4302784
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
1229
Oak Valley Drive, Ann Arbor, Michigan
|
48108
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(800)
281-0356
|
(Registrant’s
telephone number, including area
code)
|
|
(Former
address, if changed since last
report)
|
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.
|
PART
I - FINANCIAL INFORMATION
|
Item
1 -Financial Statements (Unaudited):
|
|
Condensed
Consolidated Balance Sheets at June 30, 2006 and December 31,
2005
|
3
|
Condensed
Consolidated Statements of Operations for the Six and Three Months
Ended
June 30, 2006 and 2005
|
5
|
Condensed
Consolidated Statements of Changes in Shareholders’ Equity during the
Six-Month Period Ended June 30, 2006
|
6
|
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended
June 30,
2006 and 2005
|
7
|
Notes
to the Interim Condensed Consolidated Financial Statements
|
10
|
Item
2 - Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
22
|
Item
3 - Quantitative and Qualitative Disclosures about Market
Risk
|
34
|
Item
4 - Controls and Procedures
|
35
|
PART
II - OTHER INFORMATION
|
Item
1A - Risk Factors
|
37
|
Item
4 - Submission of Matters to a Vote of Security
Holders
|
44
|
Item
6 - Exhibits
|
44
|
SIGNATURES
|
45
|
ITEM
1.
|
FINANCIAL
STATEMENTS (UNAUDITED)
|
June
30, 2006
|
December
31, 2005
|
||||||
ASSETS
|
(Unaudited)
|
|
|||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$ |
4,565,725
|
$
|
6,150,652
|
|||
Restricted
collateral deposits
|
8,283,905
|
3,897,113
|
|||||
Available-for-sale
marketable securities
|
38,172
|
35,984
|
|||||
Trade
receivables (net of allowance for doubtful accounts in the amount
of
$159,349 and $176,180 as of June 30, 2006 and December 31, 2005,
respectively)
|
7,766,761
|
11,747,876
|
|||||
Unbilled
receivables
|
4,871,255
|
5,228,504
|
|||||
Other
accounts receivable and prepaid expenses
|
1,545,059
|
2,114,331
|
|||||
Inventories
|
8,724,101
|
7,815,806
|
|||||
Total
current assets
|
35,794,978
|
36,990,266
|
|||||
SEVERANCE
PAY FUND
|
2,109,660
|
2,072,034
|
|||||
RESTRICTED
DEPOSITS
|
21,571
|
779,286
|
|||||
PROPERTY
AND EQUIPMENT, NET
|
4,025,999
|
4,252,931
|
|||||
INVESTMENT
IN AFFILIATED COMPANY
|
175,530
|
37,500
|
|||||
OTHER
INTANGIBLE ASSETS, NET
|
10,468,321
|
11,027,499
|
|||||
GOODWILL
|
29,774,878
|
29,559,157
|
|||||
$
|
82,370,937
|
$
|
84,718,673
|
|
June
30, 2006
|
December
31, 2005
|
|||||
(Unaudited)
|
|||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Trade
payables
|
$ |
2,708,730
|
$
|
5,830,820
|
|||
Other
accounts payable and accrued expenses
|
6,009,805
|
5,586,061
|
|||||
Current
portion of promissory notes due to purchase of
subsidiaries
|
208,581
|
453,764
|
|||||
Short-term
bank loans and current portion of long-term loans
|
3,093,829
|
2,036,977
|
|||||
Deferred
revenues
|
1,709,350
|
603,022
|
|||||
Convertible
debenture
|
11,367,231
|
11,492,238
|
|||||
Liability
in connection with warrants issuance
|
--
|
44,047
|
|||||
Liabilities
of discontinued operation
|
--
|
120,000
|
|||||
Total
current liabilities
|
25,097,526
|
26,166,929
|
|||||
LONG
TERM LIABILITIES
|
|||||||
Accrued
severance pay
|
3,900,072
|
3,657,328
|
|||||
Convertible
debenture
|
1,142,763
|
8,590,233
|
|||||
Total
long-term liabilities
|
5,042,835
|
12,247,561
|
|||||
MINORITY
INTEREST
|
--
|
38,927
|
|||||
SHAREHOLDERS’
EQUITY:
|
|||||||
Share
capital -
|
|||||||
Common
stock - $0.01 par value each;
|
|||||||
Authorized:
250,000,000 shares as of June 30, 2006 and December 31, 2005; Issued:
8,508,623 shares as of June 30, 2006 and 6,221,193
shares as of December 31, 2005; Outstanding: 8,468,957
shares as of June 30, 2006 and 6,181,527
shares as of December 31, 2005
|
1,191,230
|
870,969
|
|||||
Preferred
shares - $0.01 par value each;
|
|||||||
Authorized:
1,000,000 shares as of June
30, 2006
and December 31, 2005; No shares issued and outstanding as of June
30, 2006
and December 31, 2005
|
--
|
--
|
|||||
Additional
paid-in capital
|
211,277,011
|
193,560,579
|
|||||
Accumulated
deficit
|
(155,425,747
|
)
|
(142,996,964
|
)
|
|||
Treasury
stock, at cost (common stock - 39,666 shares as of June
30, 2006
and December 31, 2005)
|
(3,537,106
|
)
|
(3,537,106
|
)
|
|||
Notes
receivable from shareholders
|
(1,280,768
|
)
|
(1,256,777
|
)
|
|||
Accumulated
other comprehensive loss
|
5,956
|
(375,445
|
)
|
||||
Total
shareholders’ equity
|
52,230,576
|
46,265,256
|
|||||
$
|
82,370,937
|
$
|
84,718,673
|
Six
months ended June 30,
|
Three
months ended June 30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Revenues
|
$
|
16,310,747
|
$
|
22,624,355
|
$
|
7,414,335
|
$
|
12,236,910
|
|||||
Cost
of revenues
|
12,742,129
|
14,981,150
|
6,089,377
|
8,609,276
|
|||||||||
Gross
profit
|
3,568,618
|
7,643,205
|
1,324,958
|
3,627,634
|
|||||||||
Operating
expenses:
|
|||||||||||||
Research
and development
|
520,629
|
898,504
|
216,017
|
483,826
|
|||||||||
Selling
and marketing
|
1,748,132
|
2,222,692
|
848,864
|
1,063,873
|
|||||||||
General
and administrative
|
6,240,808
|
6,720,816
|
3,138,272
|
3,364,406
|
|||||||||
Amortization
of intangible assets
|
970,885
|
1,646,241
|
460,193
|
823,153
|
|||||||||
Impairment
of goodwill and other intangible assets
|
204,059
|
2,389,129
|
--
|
2,389,129
|
|||||||||
Total
operating costs and expenses
|
9,684,513
|
13,877,382
|
4,663,346
|
8,124,387
|
|||||||||
Operating
loss
|
(6,115,895
|
)
|
(6,234,177
|
)
|
(3,338,388
|
)
|
(4,496,753
|
)
|
|||||
Other
income
|
35,988
|
--
|
18,482
|
--
|
|||||||||
Financial
expenses, net
|
(6,458,796
|
)
|
(1,306,466
|
)
|
(4,997,660
|
)
|
(837,608
|
)
|
|||||
Loss
before minority interest in (loss) earnings of subsidiaries, earnings
from
affiliated company and tax expenses
|
(12,538,703
|
)
|
(7,540,643
|
)
|
(8,317,566
|
)
|
(5,334,315
|
)
|
|||||
Income
tax expenses
|
(54,053
|
)
|
(267,218
|
)
|
(14,081
|
)
|
(49,954
|
)
|
|||||
Minority
interest in (loss) earnings of subsidiaries
|
25,943
|
(71,153
|
)
|
16,754
|
(38,199
|
)
|
|||||||
Earnings
from affiliated company
|
138,030
|
--
|
99,558
|
--
|
|||||||||
Loss
from continuing operations
|
(12,428,783
|
)
|
(7,879,014
|
)
|
(8,215,335
|
)
|
(5,422,514
|
)
|
|||||
Loss
from discontinued operations
|
--
|
(200,000
|
)
|
--
|
(200,000
|
)
|
|||||||
Net
loss
|
(12,428,783
|
)
|
(8,079,014
|
)
|
(8,215,335
|
)
|
(5,622,514
|
)
|
|||||
Deemed
dividend to certain shareholders
|
(434,185
|
)
|
--
|
(116,978
|
)
|
--
|
|||||||
Net
loss attributable to common shareholders
|
$
|
(12,862,968
|
)
|
$
|
(8,079,014
|
)
|
$
|
(8,332,313
|
)
|
$
|
(5,622,514
|
)
|
|
Basic
and diluted net loss per share from continuing operations
|
$
|
(1.67
|
)
|
$
|
(1.37
|
)
|
$
|
(0.98
|
)
|
$
|
(0.94
|
)
|
|
Basic
and diluted net loss per share from discontinued operation
|
$
|
0.00
|
$
|
(0.03
|
)
|
$
|
0.00
|
$
|
(0.03
|
)
|
|||
Basic
and diluted net loss per share1
|
$
|
(1.73
|
)
|
$
|
(1.41
|
)
|
$
|
(0.99
|
)
|
$
|
(0.97
|
)
|
|
Weighted
average number of shares used in computing basic and diluted net
loss per
share
|
7,438,333
|
5,745,826
|
8,384,433
|
5,770,009
|
(U.S.
Dollars, except share data)
|
||||||||||||||||||||||||||||||||||||||||
|
Common
Stock
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Treasury
stock
|
Notes
receivable
from
shareholders
|
Accumulated
other
comprehensive
income
(loss)
|
|
Total
comprehensive
loss
|
Total
|
|||||||||||||||||||||||||||||||
|
Shares
|
Amount
|
||||||||||||||||||||||||||||||||||||||
BALANCE
AT JANUARY 1, 2006 - NOTE 1
|
6,221,193
|
$
|
870,969
|
$
|
193,560,579
|
$
|
(142,996,964
|
)
|
$
|
(3,537,106
|
)
|
$
|
(1,256,777
|
)
|
$
|
(375,445
|
)
|
$
|
--
|
$
|
46,265,256
|
|||||||||||||||||||
CHANGES
DURING THE SIX-MONTH
PERIOD ENDED JUNE 30, 2006
|
||||||||||||||||||||||||||||||||||||||||
Principal
installment of convertible debenture payment in shares
|
1,542,023
|
215,884
|
13,136,089
|
--
|
--
|
--
|
--
|
--
|
13,351,973
|
|||||||||||||||||||||||||||||||
Warrants
exercise
|
745,549
|
104,377
|
4,246,258
|
--
|
--
|
--
|
--
|
--
|
4,350,635
|
|||||||||||||||||||||||||||||||
Amortization
of deferred stock compensation
|
--
|
--
|
310,094
|
--
|
--
|
--
|
--
|
--
|
310,094
|
|||||||||||||||||||||||||||||||
Interest
accrued on notes receivable from shareholders
|
--
|
--
|
23,991
|
--
|
--
|
(23,991
|
)
|
--
|
--
|
--
|
||||||||||||||||||||||||||||||
Other
comprehensive loss - foreign currency translation
adjustment
|
--
|
--
|
--
|
--
|
--
|
--
|
380,534
|
380,534
|
380,534
|
|||||||||||||||||||||||||||||||
Other
comprehensive loss - unrealized gain on available for sale marketable
securities
|
--
|
--
|
--
|
--
|
--
|
--
|
867
|
867
|
867
|
|||||||||||||||||||||||||||||||
Adjustment
of fractional shares due to reverse split
|
(142 | ) | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||||||||
Net
loss
|
--
|
--
|
--
|
(12,428,783
|
)
|
--
|
--
|
--
|
(12,428,783
|
)
|
(12,428,783
|
)
|
||||||||||||||||||||||||||||
Total
comprehensive loss
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
$
|
(12,047,382
|
)
|
--
|
|||||||||||||||||||||||||||||
BALANCE
AT JUNE
30, 2006
- UNAUDITED
|
8,508,623
|
$
|
1,191,230
|
$
|
211,277,011
|
$
|
(155,425,747
|
)
|
$
|
(3,537,106
|
)
|
$
|
(1,280,768
|
)
|
$
|
5,956
|
$
|
52,230,576
|
||||||||||||||||||||||
Six
months ended June 30,
|
||||||||||
2006
|
2005
|
|||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||
Net
loss for the period before deemed dividend to certain shareholders
of
common stock
|
$
|
(12,428,783
|
)
|
$
(8,079,014)
|
||||||
Less
loss for the period from discontinued operations
|
--
|
200,000
|
||||||||
Adjustments
required to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Depreciation
|
733,426
|
613,368
|
||||||||
Amortization
of intangible assets, capitalized software costs and impairment
of
intangible assets
|
1,236,497
|
4,099,454
|
||||||||
Amortization
of compensation related to warrants issued to the holders of convertible
debentures and beneficial conversion feature
|
1,040,041
|
789,448
|
||||||||
Amortization
of deferred stock based compensation due to shares issued to
employees
|
224,864
|
270,738
|
||||||||
Financial
expenses in connection with convertible debenture principal
repayment
|
5,395,338
|
--
|
||||||||
Amortization
of deferred expenses related to convertible debenture
issuance
|
659,140
|
24,256
|
||||||||
Remeasurement
of liability in connection with warrants granted
|
(700,113
|
)
|
--
|
|||||||
Stock-based
compensation due to shares granted and to be granted to consultants
and
shares granted as a donation
|
--
|
98,010
|
||||||||
Stock
based compensation due to options and shares granted to
employees
|
85,230
|
177,633
|
||||||||
Adjustment
of stock based compensation related to non-recourse note granted
to
shareholder
|
--
|
(28,500)
|
||||||||
(Earnings)
loss to minority
|
(25,943
|
)
|
71,153
|
|||||||
Share
in earnings of affiliated company
|
(138,030
|
)
|
--
|
|||||||
Interest
expenses accrued on promissory notes issued to purchase of
subsidiary
|
--
|
284,140
|
||||||||
Amortization
of premium related to restricted securities
|
--
|
42,234
|
||||||||
Liability
for employee rights upon retirement, net
|
157,243
|
10,711
|
||||||||
Capital
gain from sale of marketable securities
|
--
|
2,693
|
||||||||
Write-off
of inventory
|
272,650
|
--
|
||||||||
Impairment
of fixed assets
|
16,672
|
--
|
||||||||
Decrease
in deferred tax assets
|
15,830
|
64,595
|
||||||||
Changes
in operating asset and liability items:
|
||||||||||
Decrease
in trade receivables and notes receivable
|
4,044,450
|
694,803
|
||||||||
Decrease
in unbilled receivables
|
357,249
|
485,390
|
||||||||
Increase
in other accounts receivable and prepaid expenses
|
(88,544
|
)
|
(184,965)
|
|||||||
Increase
in inventories
|
(1,131,729
|
)
|
(1,230,866)
|
|||||||
Decrease
in trade payables
|
(3,177,065
|
)
|
(1,676,572)
|
|||||||
Increase
in deferred revenues
|
1,106,328
|
549,474
|
||||||||
Increase
(decrease) in accounts payable and accruals
|
425,130
|
(1,209,465)
|
||||||||
Net
cash used in operating activities from continuing
operations
|
(1,920,119
|
)
|
(3,931,282)
|
|||||||
Net
cash used in operating activities from discontinuing
operations
|
(120,000
|
)
|
--
|
|||||||
Net
cash used in operating activities
|
(2,040,119
|
)
|
(3,931,282)
|
|||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Repayment
of promissory note related to purchase of subsidiary
|
(245,183 | ) | (7,055,937) |
Purchase
of property and equipment
|
(493,347 | ) | (534,678) | |||||||
Proceeds
from sale of marketable securities
|
-- | 92,519 | ||||||||
Payment
of transactions expenses in relation to previous year investment
in
subsidiary
|
-- | (12,945) |
Six
months ended June 30,
|
||||||||||
|
|
|
2006
|
2005
|
||||||
Investment
in affiliated company
|
-- | (112,500) | ||||||||
Increase
in capitalized research and development projects
|
(325,877 | ) | (56,109) | |||||||
Increase
in restricted securities and deposits, net
|
(3,828,124 | ) | 6,667,886 | |||||||
Net
cash used in investing activities
|
(4,892,531 | ) | (1,011,764) | |||||||
FORWARD | $ | (6,932,650 | ) |
$
(4,943,046)
|
||||||
Six
months ended June 30,
|
|||||||
2006
|
2005
|
||||||
FORWARD
|
$
|
(6,932,650
|
)
|
$
|
(4,943,046
|
)
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Increase
in short-term credit from banks
|
1,074,877
|
1,117,477
|
|||||
Proceeds
from exercise of options
|
--
|
17,192
|
|||||
Proceeds
from issuance of share capital, net
|
--
|
1,275,325
|
|||||
Proceeds
from exercise of warrants
|
4,350,634
|
--
|
|||||
Repayment
of long-term loans
|
(19,552
|
)
|
(44,471
|
)
|
|||
Net
cash provided by financing activities
|
5,405,959
|
2,365,523
|
|||||
DECREASE
IN CASH AND CASH EQUIVALENTS
|
(1,526,691
|
)
|
(2,577,523
|
)
|
|||
CASH
EROSION (ACCRETION) DUE TO EXCHANGE RATE
DIFFERENCES
|
(58,236
|
)
|
36,935
|
||||
BALANCE
OF CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD
|
6,150,652
|
6,734,512
|
|||||
BALANCE
OF CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD
|
$
|
4,565,725
|
$
|
4,193,924
|
|||
SUPPLEMENTARY
INFORMATION ON NON-CASH TRANSACTIONS:
|
|||||||
Payment
of principal installment of convertible debenture in
shares
|
$
|
8,612,518
|
$
|
--
|
|||
Issuance
of shares and warrants against accrued expenses
|
--
|
56,577
|
|||||
Accrual
for earnout in respect of subsidiary acquisition
|
--
|
152,973
|
|||||
Shares
issuance in regard to subsidiary acquisition
|
--
|
82,645
|
|||||
|
Six
months ended
June
30, 2006
|
Three
months ended
June
30, 2006
|
|||||
Unaudited
|
Unaudited
|
||||||
Net
loss as reported
|
$
|
(8,079,014
|
)
|
$
|
(5,622,514
|
)
|
|
Add
- stock-based compensation expense determined under APB 25
|
448,371
|
232,739
|
|||||
Deduct
- stock based compensation expense determined under fair value
method for
all awards
|
(851,391
|
)
|
(401,799
|
)
|
|||
Pro
forma net loss
|
$
|
(8,482,034
|
)
|
$
|
(5,791,574
|
)
|
|
Loss
per share:
|
|||||||
Basic
and diluted, as reported
|
$
|
(1.41
|
)
|
$
|
(0.97
|
)
|
|
Pro
forma basic and diluted
|
$
|
(1.48
|
)
|
$
|
(1.00
|
)
|
2006
|
|||||||
Amount
|
Weighted
average
exercise
price
|
||||||
$
|
|||||||
Options
outstanding at beginning of quarter
|
660,354
|
$
|
9.38
|
||||
Changes
during quarter:
|
|||||||
Granted
|
12,500
|
3.64
|
|||||
Exercised
|
--
|
--
|
|||||
Forfeited
|
(16,078
|
)
|
6.02
|
||||
Options
outstanding at June 30, 2006
|
656,776
|
$
|
9.36
|
||||
Options
exercisable at end of quarter
|
577,612
|
$
|
10.02
|
|
June
30, 2006
|
December
31, 2005
|
|||||
(Unaudited)
|
|||||||
Raw
and packaging materials
|
$
|
3,720,031
|
$
|
3,296,453
|
|||
Work-in-progress
|
3,885,419
|
3,697,361
|
|||||
Finished
goods
|
1,118,651
|
821,992
|
|||||
$
|
8,724,101
|
$
|
7,815,806
|
Simulation
and Training
|
Battery
and
Power
Systems
|
|
|
Armor
|
|
|
All
Others
|
|
|
Total
|
||||||
Six
months ended June
30, 2006
|
||||||||||||||||
Revenues
from outside customers
|
$
|
9,444,801
|
$
|
4,140,654
|
$
|
2,725,292
|
$
|
--
|
$
|
16,310,747
|
||||||
Depreciation,
amortization and impairment expenses (1)
|
(778,981
|
)
|
(466,438
|
)
|
(596,911
|
)
|
(127,593
|
)
|
(1,969,923
|
)
|
||||||
Direct
expenses (2)
|
(8,383,310
|
)
|
(4,230,119
|
)
|
(4,123,123
|
)
|
(3,574,259
|
)
|
(20,310,811
|
)
|
||||||
Segment
income (loss)
|
$
|
282,510
|
$
|
(555,903
|
)
|
$
|
(1,994,742
|
)
|
$
|
(3,701,894
|
)
|
(5,969,987
|
)
|
|||
Financial
expenses (after deduction of minority interest)
|
(6,458,796
|
)
|
||||||||||||||
Loss
from continuing operations
|
$
|
(12,428,783
|
)
|
|||||||||||||
Segment
assets
(3), (4)
|
$
|
32,885,330
|
$
|
12,432,232
|
$
|
7,031,686
|
$
|
644,050
|
$
|
52,993,298
|
||||||
Six
months ended June
30, 2005
|
||||||||||||||||
Revenues
from outside customers
|
$
|
9,639,071
|
$
|
5,060,971
|
$
|
7,924,313
|
$
|
--
|
$
|
22,624,355
|
||||||
Depreciation
expenses and amortization (1)
|
(806,350
|
)
|
(454,840
|
)
|
(3,378,631
|
)
|
(73,000
|
)
|
(4,712,821
|
)
|
||||||
Direct
expenses (2)
|
(8,491,590
|
)
|
(5,062,577
|
)
|
(7,750,259
|
)
|
(3,178,029
|
)
|
(24,482,455
|
)
|
||||||
Segment
income (loss)
|
$
|
341,131
|
$
|
(456,446
|
)
|
$
|
(3,204,577
|
)
|
$
|
(3,251,029
|
)
|
(6,570,921
|
)
|
|||
Financial
expenses (after deduction of minority interest)
|
(1,308,093
|
)
|
||||||||||||||
Loss
from continuing operations
|
$
|
(7,879,014
|
)
|
|||||||||||||
Segment
assets
(3)
|
32,558,188
|
12,567,167
|
16,582,452
|
763,148
|
62,470,955
|
|||||||||||
Three
months ended June
30, 2006
|
||||||||||||||||
Revenues
from outside customers
|
$
|
4,508,236
|
$
|
2,098,712
|
$
|
807,387
|
$
|
--
|
$
|
7,414,335
|
||||||
Depreciation
, amortization and impairment expenses (1)
|
(345,272
|
)
|
(234,241
|
)
|
(197,038
|
)
|
(67,767
|
)
|
(844,318
|
)
|
||||||
Direct
expenses (2)
|
(4,187,962
|
)
|
(2,078,857
|
)
|
(1,766,918
|
)
|
(1,753,955
|
)
|
(9,787,692
|
)
|
||||||
Segment
income (loss)
|
$
|
(24,998
|
)
|
$
|
(214,386
|
)
|
$
|
(1,156,569
|
)
|
$
|
(1,821,722
|
)
|
(3,217,675
|
)
|
||
Financial
expenses (after deduction of minority interest)
|
(4,997,660
|
)
|
||||||||||||||
Loss
from continuing operations
|
$
|
(8,215,335
|
)
|
|||||||||||||
Three
months ended June
30, 2005
|
||||||||||||||||
Revenues
from outside customers
|
$
|
5,523,421
|
$
|
2,054,832
|
$
|
4,658,657
|
$
|
--
|
$
|
12,236,910
|
||||||
Depreciation
, amortization and impairment expenses (1)
|
(403,690
|
)
|
(232,140
|
)
|
(2,887,083
|
)
|
(38,000
|
)
|
(3,560,913
|
)
|
||||||
Direct
expenses (2)
|
(4,983,466
|
)
|
(2,305,587
|
)
|
(4,434,210
|
)
|
(1,536,132
|
)
|
(13,259,395
|
)
|
||||||
Segment
income (loss)
|
$
|
136,265
|
$
|
(482,895
|
)
|
$
|
(2,662,636
|
)
|
$
|
(1,574,132
|
)
|
(4,583,398
|
)
|
|||
Financial
expenses (after deduction of minority interest)
|
(839,116
|
)
|
||||||||||||||
Loss
from continuing operations
|
$
|
(5,422,514
|
)
|
|||||||||||||
a.
|
Warrants
issued in June 2003:
|
b.
|
Warrants
issued in September 2003:
|
c.
|
Warrants
issued in December 2003:
|
d.
|
Warrants
issued in September 2003:
|
Ø
|
Our
Simulation
and Training 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 Ann Arbor, Michigan,
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 Auburn, Alabama, which manufactures 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 battery (“WAB”) 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”).
|
ITEM
4.
|
Ø
|
Revenue
recognition.
We will institute procedures at FAAC to determine that revenue
recognition
calculations are reviewed by an appropriate accounting
person.
|
·
|
we
must dedicate a portion of our cash flows from operations to pay
principal
and interest and, as a result, we may have less funds available
for
operations 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, including
paying
the outstanding principal when due, and if our creditors demand
payment of
a portion or all of our indebtedness, we may not have sufficient
funds to
make such payments.
|
Exhibit
Number
|
Description
|
|
3.1
|
Amendment
to the Company’s Amended and Restated Certificate of Incorporation filed
on June 20, 2006 and effective on June 21, 2006
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
AROTECH
CORPORATION
|
||||
By:
|
/s/
Robert S. Ehrlich
|
|||
Name:
|
Robert
S. Ehrlich
|
|||
Title:
|
Chairman
and CEO
|
|||
(Principal
Executive Officer)
|
By:
|
/s/
Thomas J. Paup
|
||
Name:
|
Thomas
J. Paup
|
||
Title:
|
Vice
President - Finance and CFO
|
||
(Principal
Financial Officer)
|