Arotech Corporation Reports Results for the First Quarter, 2006; Backlog Now Stands at $39 Million.ANN ARBOR Ann Arbor, city (1990 pop. 109,592), seat of Washtenaw co., S Mich., on the Huron River; inc. 1851. It is a research and educational center, with a large number of government and industrial research and development firms, many in high-technology fields such as , Mich. -- Arotech Corporation (NasdaqNM: ARTX), a provider of quality defense and security products for the military, law enforcement and security markets, today reported results for the quarter ending March 31, 2006. First Quarter Results Revenues for the first quarter were $8.9 million, compared to $10.4 million for the corresponding period in 2005. Gross Profit for the quarter was $2.2 million or 25.2% of revenues, compared to $4.0 million or 38.7% of revenues for the corresponding period in 2005. The decline in gross margins was attributable to the decrease in revenues in the Armor and Battery and Power Systems Divisions, as well as a change in the mix of products and customers in 2006 in comparison to 2005 and substantial expenses incurred in respect of production of a new product in the Armor Division. The Operating Loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the quarter was $2.8 million compared to a loss of $1.7 million for the corresponding period in 2005. The Company recorded a net loss of $4.2 million or ($0.05) per share for the quarter, before a deemed dividend, compared to a loss of $2.5 million or ($0.03) per share for the first quarter of 2005. "We are disappointed with our results for the quarter," said Robert S Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. . Ehrlich, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Arotech Corporation. "In addition to the expected seasonal pattern of a weaker first quarter, we needed to defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. the billing of a substantial Armor order to the second quarter, which negatively impacted our results." "We remain confident, however, in our ability to achieve better results for the remainder of the year, which will be primarily reflected in a stronger second half. We recently received several substantial orders contributing to our current funded backlog of close to $40 million. Our Simulation Division continues to perform well and experience strong demand, which we anticipate will carry on throughout the year. "We recently announced a strategic breakthrough for our Armor Division with the receipt of $22 million in orders from the Israel Defense Force for "David" combat armored vehicles. The David is David I, king of Scotland David I, 1084–1153, king of Scotland (1124–53), youngest son of Malcolm III and St. Margaret of Scotland. During the reign of his brother Alexander I, whom he succeeded, David was earl of Cumbria, ruling S of the Clyde an ultra-light armored personnel carrier for combat missions designed for the urban low intensity conflict. We believe the David can be appropriate to many urban warfare Urban warfare is a modern warfare conducted in urban areas such as towns and cities. As a distinction, warfare conducted in population centers before the 20th century is generally considered siege warfare. situations, and we are planning on presentations of the David to other militaries facing similar urban warfare situations. With the receipt of these orders, we anticipate an improvement in the Armor division's performance in the coming quarters. "During the first quarter, we continued to progress with our restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and consolidation program, resulting in a decrease in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . We remain focused on achieving sustainable profitable growth through existing operations and believe that the steps we have taken to monitor our costs, together with our funded backlog, will enable us to enhance market share and show overall growth in revenues and improvement in operating results going forward," concluded Ehrlich. Cash Position at March 31, 2006 Cash-on-hand and cash equivalents, restricted collateral deposits and other restricted cash at the end of the quarter stood at $5.3 million in cash, $6.8 million in restricted collateral securities COLLATERAL SECURITY, contracts. A separate obligation attached to another contract, to guaranty its performance. By this term is also meant the transfer of property or of other contracts to insure the performance of a principal engagement. and restricted held-to-maturity securities Held-to-Maturity Securities Debt securities that a firm has the ability and intent to hold until maturity. Notes: These are reported at amortized cost, therefore, they are not affected by swings in the financial markets. See also: Debt, Maturity due within one year and $525,000 in long term restricted deposits, as compared with $6.2 million in cash, $3.9 million in restricted collateral securities and restricted held-to-maturity securities due within one year and $779,000 million in long-term restricted securities and deposits at the end of 2005. Backlog The Company's backlog stood at $38.8 million at the end of the quarter and at $38.7 million at the end of April, 2006. Stockholders' Equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. Stockholders' equity at the end of the quarter was approximately $47.6 million. Nasdaq Update Arotech is still awaiting a decision in respect of the April 27, 2006 Nasdaq Listing Qualifications Panel review of the Nasdaq Staff Determination regarding the proposed delisting Delisting When the stock of a company is removed from a stock exchange. Notes: Reasons for delisting include violating regulations and/or failure to meet financial specifications set out by the stock exchange. of Arotech's stock from the Nasdaq National Market. Arotech will update the public promptly upon its receipt of a decision. Conference Call Arotech Corporation will hold a conference call to discuss its first quarter 2006 results, today, May 15, 2006, at 5:00 p.m. ET. Those wishing to take part in the conference call should call U.S. (800) 474-8920 or International 1 (719) 457 2727 a few minutes before the 5:00 p.m. ET start time. In addition, a replay option will be available Monday, May 15, 2006 at 8:00 p.m. ET until Wednesday, May 17, 2006 at 11:59 p.m. ET. The replay telephone number is U.S. (888) 203-1112 or International 1 (719) 457-0820. The replay passcode is: 6502914. About Arotech Corporation Arotech Corporation is a leading provider of quality defense and security products for the military, law enforcement and homeland security Noun 1. Homeland Security - the federal department that administers all matters relating to homeland security Department of Homeland Security executive department - a federal department in the executive branch of the government of the United States markets, including multimedia interactive simulators/trainers, lightweight armoring and advanced zinc-air and lithium batteries Lithium batteries are primary batteries that have lithium metal or lithium compounds as an anode. Depending on the design and chemical compounds used lithium cells can produce voltages from 1.5V to about 3V, twice the voltage of an ordinary zinc-carbon battery or alkaline cell. and chargers. Arotech operates through three major business divisions: Armor, Simulation and Training and Battery and Power Systems. Arotech is incorporated in Delaware, with corporate offices in Ann Arbor, Michigan  “Ann Arbor” redirects here. For other uses, see Ann Arbor (disambiguation). Ann Arbor is a city in the U.S. state of Michigan and the county seat of Washtenaw County. , and research, development and production subsidiaries in Alabama, Colorado, Michigan, California and Israel. Except for the historical information herein, the matters discussed in this news release include forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, including the results of our restructuring program. 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc : the ineffectiveness of Arotech's internal control over financial reporting and disclosure controls and procedures; 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; Arotech's ability to remain listed on the Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the Nasdaq's $1.00 minimum bid price and other continued listing standards; 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2005 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 there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that into this press release.
AROTECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended March 31,
----------------------------
2006 2005
--------------- ------------
Revenues $ 8,896,412 $10,387,445
Cost of revenues 6,452,752 6,371,874
--------------- ------------
Gross profit 2,243,660 4,015,571
Research and development 304,612 414,678
Selling and marketing expenses 899,268 1,158,820
General and administrative expenses 3,102,536 3,356,412
Amortization of intangible assets 510,692 823,088
Impairment of intangible assets 204,059 -
--------------- ------------
Total operating costs and expenses 5,021,167 5,752,998
--------------- ------------
Operating loss (2,777,507) (1,737,427)
Other income 17,506 -
Financial expenses, net (1,461,136) (468,855)
--------------- ------------
Loss before minority interest in loss
(earnings) of subsidiaries, earnings from
affiliated company and tax expenses (4,221,137) (2,206,282)
Income taxes (39,972) (217,264)
Earnings from affiliated company 38,472 -
Minorities interest in loss (earnings) of
subsidiaries 9,189 (32,954)
--------------- ------------
Net loss (4,213,448) (2,456,500)
Deemed dividend to certain stockholders (317,207) -
--------------- ------------
Net loss attributable to common
stockholders $(4,530,655) $(2,456,500)
=============== ============
Basic and diluted net loss per share from
continuing operations $ (0.05) $ (0.03)
=============== ============
Basic and diluted net loss per share $ (0.05) $ (0.03)
=============== ============
Weighted average number of shares used in
computing basic net loss per share 90,722,273 80,102,089
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