SOURCE: Arotech

November 11, 2008 16:05 ET

Arotech Corporation Reports Results for the Third Quarter and First Nine Months, 2008

Company Has Break Even Results for the Third Quarter, as Revenues Increase 24% Over the Same Period Last Year

ANN ARBOR, MI--(Marketwire - November 11, 2008) - Arotech Corporation (NASDAQ: ARTX), a provider of quality defense and security products for the military, law enforcement and security markets, today reported results for the quarter and nine months ending September 30, 2008.

Third Quarter Results

Revenues for the third quarter reached $19.2 million, compared to $15.5 million for the corresponding period in 2007, an increase of 24.4% over the same period last year.

Gross profit for the quarter was $5.7 million, or 29.8% of revenues, compared to $4.4 million, or 28.3% of revenues, for the corresponding period in 2007.

The net loss for the third quarter was $(44,000), or $(0.00) per share, versus a loss of $(783,000), or $(0.06) per share, for the corresponding period last year.

"During the third quarter our Armor and Battery Divisions were able to get back on track with their production and deliveries, while our Simulation Division continued its strong performance in what is shaping up to be a record year for that division, enabling us to break even in the third quarter," noted Arotech's Chairman and CEO Robert S. Ehrlich. "We hope to continue this positive performance during the remainder of 2008," concluded Ehrlich.

First Nine Months Results

Revenues for the first nine months reached $45.1 million, compared to $40.0 million for the corresponding period in 2007, an increase of 12.7% over the same period last year.

Gross profit for the nine months was $11.8 million, or 26.2% of revenues, compared to $12.2 million, or 30.6% of revenues, for the corresponding period in 2007.

The net loss for the first nine months was $(3.0) million, or $(0.24) per share, versus $(4.0) million, or $(0.35) per share, for the corresponding period last year.

Backlog

Backlog of orders totaled approximately $41.7 million as of September 30, 2008, as compared to $50.9 million at September 30, 2007.

Cash Position at Quarter End

As of September 30, 2008, the Company had $1.6 million in cash, $163,000 in restricted collateral securities and restricted held-to-maturity securities due within one year, and $54,000 in available-for-sale marketable securities, as compared to December 31, 2007, when the Company had $3.4 million in cash, $320,000 in restricted collateral deposits, $1.5 million in an escrow receivable, and $47,000 in available-for-sale marketable securities. Cash was invested in the Company's Armor Division and a pay down of its working capital bank line.

Short term bank borrowings were $2.8 million at the end of the third quarter 2008 compared to $4.6 million at the end of 2007.

The Company had trade receivables of $13.9 million as of September 30, 2008, compared to $14.6 million as of December 31, 2007. The Company had a current ratio (current assets/current liabilities) of 1.98, up from the December 31, 2007 current ratio of 1.93.

Conference Call

Those wishing to access the conference call should dial 1-888-300-2335 (U.S.) or 1-719-325-2280 (international) a few minutes before the 9:00 a.m. ET start time. The confirmation code is 2182343. A replay of the conference call will be available starting Wednesday, November 12, 2008 at 11:00 a.m. until Friday, November 14, 2008 at 12:00 p.m. The replay telephone number is 1-888-203-1112 (U.S) and 1-719-457-0820 (international). The replay passcode is: 2182343

About Arotech Corporation

Arotech Corporation is a leading provider of quality defense and security products for the military, law enforcement and homeland security markets. Arotech provides multimedia interactive simulators/trainers, lightweight armoring and advanced zinc-air and lithium batteries and chargers. Arotech operates through three major business divisions: Armor, Training and Simulation, and Batteries and Power Systems.

Arotech is incorporated in Delaware, with corporate offices in Ann Arbor, Michigan and research, development and production subsidiaries in Alabama, Michigan and Israel.

Except for the historical information herein, the matters discussed in this news release include forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect management's current knowledge, assumptions, judgment and expectations regarding future performance or events. Although management believes that the expectations reflected in such statements are reasonable, readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties that may cause actual results to vary materially. These risks and uncertainties include, but are not limited to, risks relating to: product and technology development; the uncertainty of the market for Arotech's products; changing economic conditions; delay, cancellation or non-renewal, in whole or in part, of contracts or of purchase orders; dilution resulting from issuances of Arotech's common stock upon conversion or payment of its outstanding convertible debt, which would be increasingly dilutive if and to the extent that the market price of Arotech's stock decreases; and other risk factors detailed in Arotech's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as amended, and other filings with the Securities and Exchange Commission. Arotech assumes no obligation to update the information in this release. Reference to the Company's website above does not constitute incorporation of any of the information thereon into this press release.

TABLE TO FOLLOW

                            AROTECH CORPORATION
            CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



                        Nine months ended           Three months ended
                          September 30,               September 30,
                    --------------------------  --------------------------
                        2008          2007          2008          2007
                    ------------  ------------  ------------  ------------
Revenues            $ 45,074,091  $ 40,011,014  $ 19,216,509  $ 15,453,124
Cost of revenues,
 exclusive of
 amortization of
 intangibles          33,256,814    27,764,509    13,484,314    11,079,269
Research and
 development           1,231,530     1,413,852       398,658       491,597
Selling and
 marketing expenses    3,290,499     2,999,226     1,003,504       905,725
General and
 administrative
 expenses             10,025,658     9,221,310     3,199,878     3,309,628
Amortization of
 intangible assets     1,362,251     1,481,764       377,230       307,871
Escrow adjustment -
 credit               (1,448,074)            -             -             -
                    ------------  ------------  ------------  ------------
Total operating
 costs and expenses   47,718,678    42,880,661    18,463,584    16,094,090
                    ------------  ------------  ------------  ------------
Operating income
 (loss)               (2,644,587)   (2,869,647)      752,925      (640,966)
Other income             670,483        75,452        11,334         6,333
Financial expenses,
 net                    (341,632)     (707,225)     (288,680)      (80,412)
                    ------------  ------------  ------------  ------------
Income (loss)
 before minority
 interest in
 earnings of a
 subsidiary,
 earnings from
 affiliated company
 and income tax
 expenses             (2,315,736)   (3,501,420)      475,579      (715,045)
Income tax expenses     (386,690)     (298,193)     (374,862)     (123,287)
Loss from
 affiliated company     (261,207)     (139,725)     (145,121)      (27,546)
Minority interest
 in loss (earnings)
 of subsidiaries               -       (27,402)            -        82,929
                    ------------  ------------  ------------  ------------
Net loss            $ (2,963,633) $ (3,966,740) $    (44,404) $   (782,949)
                    ============  ============  ============  ============
Basic and diluted
 net loss per share $      (0.24) $      (0.35) $      (0.00) $      (0.06)
                    ============  ============  ============  ============
Weighted average
 number of shares
 used in computing
 basic net loss per
 share                12,595,987    11,315,676    12,604,715    12,161,564
                    ============  ============  ============  ============



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