Filed
pursuant to Rule 424(b)(1)
Registration
File No. 333-153487
P R O S P
E C T U S
C
o r p o r a t i o n
3,627,238
Shares
Common
Stock
____________
This
prospectus relates to the offer and sale of up to 3,627,238 shares of the common
stock of Arotech Corporation from time to time by the selling stockholders
listed in this prospectus.
You
should read this prospectus and any prospectus supplement, as well as the
documents incorporated or deemed to be incorporated by reference in this
prospectus, carefully before you invest.
The
prices at which the selling stockholders may sell the shares in this offering
will be determined by the prevailing market price for the shares or in
negotiated transactions. We will not receive any of the proceeds from the sale
of the shares. However, we will receive gross proceeds of up to approximately
$1,250,000 from the issuance of the shares of common stock being registered
pursuant to the registration statement of which this prospectus forms a part in
connection with the exercise of certain warrants, if and when they are
exercised, unless such warrants are exercised on a cashless basis.
Our
common stock is listed on the Nasdaq Global Market under the symbol “ARTX.” The
last reported sale price for our common stock on September 18, 2008 as
quoted on the Nasdaq Global Market was $1.19 per share.
Investing in our common stock
involves a high degree of risk. See “Risk Factors” on page 6 for various
risks that you should consider before you purchase any shares of our common
stock.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is September 19, 2008
|
Table
of Contents
|
|
|
Page
|
|
|
Summary
|
3
|
|
Risk
Factors
|
6
|
|
Information
Regarding Forward-Looking Statements
|
16
|
|
About
the Offering
|
17
|
|
Use
of Proceeds
|
18
|
|
Selling
Stockholders
|
18
|
|
Plan
of Distribution
|
20
|
|
Description
of Capital Stock
|
22
|
|
Description
of Common Stock Warrants
|
23
|
|
Legal
Matters
|
23
|
|
Experts
|
24
|
|
Where
You Can Find Additional Information
|
24
|
|
Incorporation
of Documents by Reference
|
24
|
Unless
the context otherwise requires, references to us refer to Arotech Corporation
and its subsidiaries.
You may
only rely on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with different
information. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the common shares
offered by this prospectus. This prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any common shares in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
prospectus nor any sale made in connection with this prospectus shall, under any
circumstances, create any implication that there has been no change in our
affairs since the date of this prospectus or that the information contained by
reference to this prospectus is correct as of any time after its
date.
2
|
The
following summary highlights some information from this prospectus. It is
not complete and does not contain all of the information that you should
consider before making an investment decision. You should read this entire
prospectus, including the “Risk Factors” section, the financial statements
and related notes and the other more detailed information appearing
elsewhere or incorporated by reference in this prospectus. Unless
otherwise indicated, “we,” “us,” “our” and similar terms refer to Arotech
Corporation and its subsidiaries and not to the selling
stockholders.
Arotech™
is a trademark, and Electric Fuel® is
a registered trademark, that belongs to us. All company and product names
mentioned may be trademarks or registered trademarks of their respective
holders.
About
Us
We
are a defense and security products and services company, engaged in three
business areas: high-level armoring for military and nonmilitary air and
ground vehicles; interactive simulation for military, law enforcement and
commercial markets; and batteries and charging systems for the military.
We operate primarily through our various subsidiaries, which we have
organized into three divisions. Our divisions and subsidiaries (all 100%
owned by us) are as follows:
Ø We
develop, manufacture and market advanced high-tech multimedia and
interactive digital solutions for use-of-force training and driver
training of military, law enforcement, security and other personnel
through our Training
and Simulation Division:
· We
provide simulators, systems engineering and software products to the
United States military, government and private industry through our
subsidiary FAAC Incorporated, located in Ann Arbor, Michigan (“FAAC”), and
FAAC’s subsidiary Realtime Training, Inc. (“RTI”); and
· We
provide specialized “use of force” training for police, security personnel
and the military through our subsidiary IES Interactive Training, located
in Ann Arbor, Michigan, which we merged into our FAAC subsidiary in
October of 2007 (“IES”).
Ø We
utilize sophisticated lightweight materials and advanced engineering
processes to armor vehicles and to manufacture aviation armor through our
Armor
Division:
· We
use state-of-the-art lightweight armoring materials, special ballistic
glass and advanced engineering processes to fully armor military and
civilian SUV’s, buses and vans, through our subsidiaries MDT Protective
Industries, Ltd., located in Lod, Israel (“MDT”), and MDT Armor
Corporation, located in Auburn, Alabama (“MDT Armor”); and
· We
provide personal protection devices along with ballistic armor kits for
rotary and fixed wing aircraft and marine armor through our subsidiary
Armour of America, located in Auburn, Alabama (“AoA”).
Ø We
manufacture and sell lithium and Zinc-Air batteries for defense and
security products and other military applications through our Battery and
Power Systems Division:
· We
develop and sell rechargeable and primary lithium batteries and smart
chargers to the military and to private defense industry in the Middle
East, Europe and Asia through our subsidiary Epsilor Electronic
Industries, Ltd., located in Dimona, Israel (in Israel’s Negev desert
area) (“Epsilor”);
· We
develop, manufacture and market primary Zinc-Air batteries, rechargeable
batteries and battery chargers for the military, focusing on applications
that demand high energy and light weight, through our subsidiary Electric
Fuel Battery Corporation, located in Auburn, Alabama (“EFB”);
and
· We
produce water-activated lifejacket lights for commercial aviation and
marine applications through our subsidiary Electric Fuel (E.F.L.) Ltd.,
located in Beit Shemesh, Israel (“EFL”).
Training
and Simulation Division
We
develop, manufacture and market advanced high-tech multimedia and
interactive digital solutions for use-of-force training and driver
training of military, law enforcement, security and other personnel
through our Training and Simulation Division, the largest of our three
divisions. During 2007 and 2006, revenues from our Training and Simulation
Division were approximately $27.8 million and $22.0 million,
respectively.
|
3
|
Vehicle
Simulation
We
provide simulators, systems engineering and software products focused on
training vehicle operators for cars and trucks. We provide these products
to the United States military, government, municipalities, and private
industry through our FAAC nameplate. Our fully interactive driver-training
systems feature state-of-the-art vehicle simulator technology enabling
training in situation awareness, risk analysis and decision making,
emergency reaction and avoidance procedures, and proper equipment
operation techniques. Our simulators have successfully trained hundreds of
thousands of drivers.
Our
Vehicle Simulation group focuses on the development and delivery of
complete driving simulations for a wide range of vehicle types – such as
trucks, automobiles, subway trains, buses, fire trucks, police cars,
ambulances, airport ground vehicles, and military vehicles. In 2007, our
Vehicle Simulations group accounted for approximately 55% of our Training
and Simulation Division’s revenues.
We
believe that we have held near a 100% market share in U.S. military
wheeled vehicle driver training simulators since 1999 and that we are
currently one of three significant participants in the U.S. municipal
wheeled vehicle simulators market.
Military
Operations
FAAC
is a premier developer of validated, high fidelity analytical models and
simulations of tactical air and land warfare systems for all branches of
the Department of Defense and its related industrial contractors. Our
simulations are found in systems ranging from instrumented air combat and
maneuver training ranges (such as Top Gun), full task training devices
such as the F-18 Weapon Tactics Trainer, and in the on-board computer of
many fighter jet aircraft. In 2007, our Military Operations group
accounted for 20% of our Training and Simulation Division’s
revenues.
We
also supply on-board software to support weapon launch decisions for the
F-15, F-16, F-18, and Joint Strike Fighter (JSF) fighter aircraft.
Use-of-Force
We
are a leading provider of interactive, multimedia, fully digital training
simulators for law enforcement, security, military and similar
applications. With a large customer base spread over twenty countries
around the world, we are a leader in the supply of simulation training
products to law enforcement, governmental, and commercial clients. We
conduct our interactive training activities using our IES Interactive
Training nameplate. In 2007, our Use of Force group accounted for 25% of
our Training and Simulation Division’s revenues.
Armor
Division
We
armor vehicles and manufacture aviation and other armor through our Armor
Division. During 2007 and 2006, revenues from our Armor Division were
approximately $18.7 million and $12.6 million, respectively.
We
specialize in armoring vehicles and manufacturing armor kits for aircraft
and vessels by using state-of-the-art lightweight ballistic materials,
special ballistic glass and advanced engineering processes. We fully armor
vehicles, vans, SUVs and small buses. We also provide ballistic armor kits
for rotary and fixed wing aircraft, marine armor, personnel armor, and
armor for architectural applications.
We
operate through three business units: MDT Protective Industries Ltd.,
located in Lod, Israel (in which we acquired a majority stake in 2002),
MDT Armor Corporation, which we established in 2003 in Auburn, Alabama and
Armour of America, which we acquired in 2004 and relocated to Auburn,
Alabama.
We
are a leading supplier to the Israeli military, Israeli Special Forces and
special services. We provide products to the US Army, and to military and
defense and paramilitary customers worldwide.
Our
products have been proven in intensive battlefield situations and under
actual terrorist attack conditions, and are designed to meet the demanding
requirements of governmental and private sector customers worldwide. We
have acquired many years of battlefield experience in Israel. Our vehicles
have provided proven life-saving protection for their passengers in
incidents of rock throwing, handgun and assault rifle attack at
point-blank range, roadside bombings and suicide bombings.
|
4
|
During
2006 and 2007, we received over $26 million in orders from the Israel
Defense Forces for the U.S.-built David, a patrol, combat command and
reconnaissance armored vehicle that is specifically designed as an urban
combat vehicle.
Our
proprietary designs have been developed to meet a wide variety of customer
and industry needs.
Battery
and Power Systems Division
We
manufacture and sell lithium and Zinc-Air batteries for defense and
security products and other military applications through our Battery and
Power Systems Division. During 2007 and 2006, revenues from our Battery
and Power Systems Division were approximately $11.2 million and $8.6
million, respectively.
Lithium
Batteries and Charging Systems for the Military
We
sell lithium batteries and charging systems to the military through our
subsidiary Epsilor Electronic Industries, Ltd., an Israeli corporation
established in 1985 that we purchased early in 2004.
We
specialize in the design and manufacture of primary and rechargeable
batteries, related electronic circuits and associated chargers for
military applications. We have experience in working with government
agencies, the military and large corporations. Our technical team has
significant expertise in the fields of electrochemistry, electronics,
software and battery design, production, packaging and
testing.
We
have added lithium-ion battery production capabilities at EFB’s facility
in Auburn. The goal is to enable U.S.-produced lithium-ion batteries and
chargers to be sold using funding from the Foreign Military Funding (FMF)
program to countries such as Israel and Turkey. These products are
marketed and designed by Epsilor and manufactured by EFB.
Zinc-Air
Fuel Cells, Batteries and Chargers for the Military
We
base our strategy in the field of Zinc-Air military batteries on the
development and commercialization of our Zinc-Air battery technology, as
applied in the batteries we produce for the U.S. Army’s Communications and
Electronics Command (CECOM) through our subsidiary EFB. We will continue
to seek new applications for our technology in defense projects, wherever
synergistic technology and business benefits may exist. We intend to
continue to develop our battery products for defense agencies, and plan to
sell our products either directly to such agencies or through prime
contractors. We will also look to extend our reach to military markets
outside the United States.
Our
batteries have been used in both Afghanistan (Operation Enduring Freedom)
and in Iraq (Operation Iraqi Freedom). In June of 2004, our BA-8180/U
Zinc-Air battery was recognized by the U.S Army Research, Development and
Engineering Command as one of the top ten inventions of 2003.
Our
Zinc-Air batteries, rechargeable batteries and battery chargers for the
military are manufactured through EFB. In 2003, EFB’s facilities were
granted ISO 9001 “Top Quality Standard” certification.
Lifejacket
Lights
We
have a product line consisting of seven lifejacket light models, five for
use with marine life jackets and two for use with aviation life vests, all
of which work in both freshwater and seawater. Each of our lifejacket
lights is certified for use by relevant governmental agencies under
various U.S. and international regulations. We manufacture, assemble and
package all our lifejacket lights through EFL in our factory in Beit
Shemesh, Israel.
Facilities
Our
principal executive offices are located at 1229 Oak Valley Drive, Ann
Arbor, Michigan 48108, and our toll-free telephone number at our executive
offices is (800) 281-0356. Our corporate website is www.arotech.com. Our periodic reports, as
well as recent filings relating to transactions in our securities by our
executive officers and directors, that have been filed with the Securities
and Exchange Commission in EDGAR format are made available through
hyperlinks located on the investor relations page of our website, at http://www.arotech.com/compro/investor.html,
as soon as reasonably practicable after such material is electronically
filed with or furnished to the SEC. Reference to our websites does not
constitute incorporation of any of the information thereon or linked
thereto into this prospectus.
The
offices and facilities of three of our principal subsidiaries, EFL, MDT
and Epsilor, are located in Israel (in Beit Shemesh, Lod and Dimona,
respectively, all of which are within Israel’s pre-1967 borders). Most of
the members of our senior management work extensively out of EFL’s
facilities; our financial operations are conducted primarily from our
principal executive offices in Ann Arbor. IES’s and FAAC’s home offices
and facilities are located in Ann Arbor, Michigan, RTI’s home office and
facility are located in Royal Oak, Michigan, and the offices and
facilities of EFB, MDT Armor and AoA are located in Auburn,
Alabama.
|
5
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
carefully consider
the
following risk factors and other information in this prospectus in addition to
our financial
statements
before investing in our common stock. In addition to the following risks, there
may
also
be risks that we do not yet know of or that we currently think are immaterial
that may
also
impair our business operations. The trading price of our common stock
could
decline
due to any of these risks, and you may lose all or part of your
investment.
Business-Related
Risks
We
have had a history of losses and may incur future losses.
We were
incorporated in 1990 and began our operations in 1991. We have funded our
operations principally from funds raised in each of the initial public offering
of our common stock in February 1994; through subsequent public and private
offerings of our common stock and equity and debt securities convertible or
exercisable into shares of our common stock; research contracts and supply
contracts; funds received under research and development grants from the
Government of Israel; and sales of products that we and our subsidiaries
manufacture. We have incurred significant net losses since our inception.
Additionally, as of June 30, 2008, we had an accumulated deficit of
approximately $165.4 million. In an effort to reduce operating expenses and
maximize available resources, we have consolidated certain of our subsidiaries,
shifted personnel and reassigned responsibilities. We have also taken a variety
of other measures to limit spending and will continue to assess our internal
processes to seek additional cost-structure improvements. Although we believe
that such steps will help to reduce our operating expenses and maximize our
available resources, there can be no assurance that we will ever be able to
achieve or maintain profitability consistently or that our business will
continue to exist.
We
need significant amounts of capital to operate and grow our business and to pay
our debt.
We
require substantial funds to operate our business, including to market our
products and develop and market new products and to pay our outstanding debt as
it comes due. To the extent that we are unable to fully fund our operations,
including repaying our outstanding debt, through profitable sales of our
products and services, we will need to seek additional funding, including
through the issuance of equity or debt securities. In addition, based on our
internal forecasts, the assumptions described under “Liquidity and Capital
Resources” below, and subject to the other risk factors described herein, we
believe that our present cash position and anticipated cash flows from
operations, lines of credit and anticipated additions to paid-in capital should
be sufficient to satisfy our current estimated cash requirements through the
next twelve months. However, in the event our internal forecasts and other
assumptions regarding our liquidity prove to be incorrect, we may need to seek
additional funding. There can be no assurance that we will obtain any such
additional financing in a timely manner, on acceptable terms, or at all.
Moreover, the issuance by us of additional debt or equity is severely restricted
by the terms of our existing indebtedness which is payable through August 2011.
If additional funds are raised by issuing equity securities or convertible debt
securities, stockholders may incur further dilution. If we incur additional
indebtedness, we may be subject to affirmative and negative covenants that may
restrict our ability to operate or finance our business. If additional funding
is not secured, we will have to modify, reduce, defer or eliminate parts of our
present and anticipated future commitments and/or programs.
Our
existing indebtedness may adversely affect our ability to obtain additional
funds and may increase our vulnerability to economic or business
downturns.
Our and
our subsidiaries’ bank and certificated indebtedness (short and long term)
aggregated approximately $7.8 million principal amount as of August 31, 2008
(not including trade payables, other account payables, seller-financed
mortgages and accrued severance pay), of which $5.0 million is in respect
of our subordinated convertible notes and $2.8 million is bank working capital
lines of credit. In addition, we may incur additional indebtedness in the
future. Accordingly, we are subject to the risks associated with significant
indebtedness, including:
6
|
·
|
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.
|
The
occurrence of any of these events could materially adversely affect our results
of operations and financial condition and adversely affect our stock
price.
The
agreements governing the terms of our notes that mature between 2009 and 2011
contain numerous affirmative and negative covenants that limit the discretion of
our management with respect to certain business matters and place restrictions
on us, including obligations on our part to preserve and maintain our assets and
restrictions on our ability to incur or guarantee debt, to merge with or sell
our assets to another company, and to make significant capital expenditures
without the consent of the note holders. Our ability to comply with these and
other provisions of such agreements may be affected by changes in economic or
business conditions or other events beyond our control.
Failure
to comply with the terms of our indebtedness could result in a default that
could have material adverse consequences for us.
A failure
to comply with the obligations contained in the agreements governing our
indebtedness could result in an event of default under such agreements which
could result in an acceleration of the notes and the acceleration of debt under
other instruments evidencing indebtedness that may contain cross-acceleration or
cross-default provisions. If the indebtedness under the notes or other
indebtedness were to be accelerated, there can be no assurance that our future
cash flow or assets would be sufficient to repay in full such
indebtedness.
We
may not generate sufficient cash flow to service all of our debt
obligations.
Our
ability to make payments on and to refinance our indebtedness and to fund our
operations depends on our ability to generate cash in the future. Our future
operating performance is subject to market conditions and business factors that
are beyond our control. Consequently, we cannot assure you that we will generate
sufficient cash flow to pay the principal and interest on our debt. If our cash
flows and capital resources are insufficient to allow us to make scheduled
payments on our debt, we may have to reduce or delay capital expenditures, sell
assets, seek additional capital or restructure or refinance our debt. We cannot
assure you that the terms of our debt will allow for these alternative measures
or that such measures would satisfy our scheduled debt service obligations. In
addition, in the event that we are required to dispose of material assets or
restructure or refinance our debt to meet our debt obligations, we cannot assure
you as to the terms of any such transaction or how quickly such transaction
could be completed. Our ability to refinance our indebtedness or obtain
additional financing will depend on, among other things:
|
·
|
our
financial condition at the time;
|
|
·
|
restrictions
in the agreements governing our other indebtedness;
and
|
|
·
|
other
factors, including the condition of the financial markets and our
industry.
|
7
The
payment by us of our subordinated convertible notes in stock or the conversion
of such notes by the holders could result in substantial numbers of additional
shares being issued, with the number of such shares increasing if and to the
extent our market price declines, diluting the ownership percentage of our
existing stockholders.
In August
2008, we issued $5.0 million in subordinated convertible notes due August 15,
2011. The notes are convertible at the option of the holders at a fixed
conversion price of $2.24. The principal amount of the notes is payable over a
period of three years, with the principal amount being amortized in eleven
payments payable at our option in cash and/or stock, by requiring the holders to
convert a portion of their notes into shares of our common stock, provided
certain conditions were met. The failure to meet such conditions could make us
unable to pay our notes, causing us to default. If the price of our common stock
is above $2.24, the holders of our notes will presumably convert their notes to
stock when payments are due, or before, resulting in the issuance of additional
shares of our common stock.
Principal
payments of $454,545.45 are due on each of February 13, 2009, May 15, 2009,
August 14, 2009, November 13, 2009, February 15, 2010, May 14, 2010, August 13,
2010, November 15, 2010, February 15, 2011, May 13, 2011 and August 15, 2011,
either in cash or by requiring the holder to convert the principal payment into
shares of our common stock. In the event we elect to make payments of principal
on our convertible notes in stock by requiring the holders to convert a portion
of their Notes, either because our cash position at the time makes it necessary
or we otherwise deem it advisable, the price used to determine the number of
shares to be issued on conversion will be calculated using an 8% discount to the
average trading price of our common stock during 17 of the 20 consecutive
trading days ending two days before the payment date. Accordingly, the lower the
market price of our common stock at the time at which we make payments of
principal in stock, the greater the number of shares we will be obliged to issue
and the greater the dilution to our existing stockholders.
In either
case, the issuance of the additional shares of our common stock could adversely
affect the market price of our common stock.
We can
require the holder of our Notes to convert a portion of their Notes into shares
of our common stock at the time principal payments are due only if such shares
are registered for resale and certain other conditions are met. If our stock
price were to decline, we might not have a sufficient number of shares of our
stock registered for resale in order to continue requiring the holders to
convert a portion of their Notes. As a result, we would need to file an
additional registration statement with the SEC to register for resale more
shares of our common stock in order to continue requiring conversion of our
Notes upon principal payment becoming due. Any delay in the registration
process, including through routine SEC review of our registration statement or
other filings with the SEC, could result in our having to pay scheduled
principal repayments on our Notes in cash, which would negatively impact our
cash position and, if we do not have sufficient cash to make such payments in
cash, could cause us to default on our Notes.
Certain
provisions of the senior subordinated notes may have an impact on our financial
results due to the volatility of our stock and certain other
factors.
In
August 2008, we issued warrants to purchase 558,036 shares of common stock to
purchasers of our senior subordinated notes. We are currently evaluating the
potential impact of these warrants as we may be required to treat the warrants
as a liability and then adjust the warrants to fair value at the end of each
reporting period until the warrants are exercised or expire unexercised.
Additionally, we are still evaluating the impact of other provisions of the
note, including the beneficial conversion feature, to determine the potential
impact on our operating results. Generally, this accounting treatment would
result in a non-cash reported loss during any accounting period in which there
is a net increase in the sales price of our common stock on the Nasdaq Global
Market, and a non-cash reported gain during any accounting period in which there
is a net decrease in the sales price of our common stock on the Nasdaq Global
Market.
We may
consider acquiring companies that will complement our existing operations or
provide us with an entry into markets we do not currently serve. Growth through
acquisitions involves substantial risks, including the risk of improper
valuation of the acquired business and the risk of inadequate integration. There
can be no assurance that suitable acquisition candidates will be available, that
we will be able to acquire or manage profitably such additional companies or
that future acquisitions will produce returns that justify our investments in
such companies. In addition, we may compete for acquisition and expansion
opportunities with companies that have significantly greater resources than we
do. Furthermore, acquisitions could disrupt our ongoing business, distract the
attention of our senior officers, increase our expenses, make it difficult to
maintain our operational standards, controls and procedures and subject us to
contingent and latent risks that are different, in nature and magnitude, than
the risks we currently face.
We may
finance future acquisitions with cash from operations or additional debt or
equity financings. There can be no assurance that we will be able to generate
internal cash or obtain financing from external sources or that, if
8
available,
such financing will be on terms acceptable to us. The issuance of additional
common stock to finance acquisitions may result in substantial dilution to our
stockholders. Any debt financing may significantly increase our leverage and may
involve restrictive covenants which limit our operations.
If we are
successful in acquiring additional businesses, we may experience a period of
rapid growth that could place significant additional demands on, and require us
to expand, our management, resources and management information systems. Our
failure to manage any such rapid growth effectively could have a material
adverse effect on our financial condition, results of operations and cash
flows.
If
we are unable to manage our growth, our operating results will be
impaired.
As a
result of our acquisitions, we have experienced a period of significant growth
and development activity which has placed a significant strain on our personnel
and resources. Our activity has resulted in increased levels of responsibility
for both existing and new management personnel. Many of our management personnel
have had limited or no experience in managing growing companies. We have sought
to manage our current and anticipated growth through the recruitment of
additional management and technical personnel and the implementation of internal
systems and controls. However, our failure to manage growth effectively could
adversely affect our results of operations.
There
are limited sources for some of our raw materials, which may significantly
curtail our manufacturing operations.
The raw
materials that we use in manufacturing our armor products include Kevlar®, a
patented product of E.I. du Pont de Nemours Co., Inc. We purchase Kevlar in the
form of woven cloth from various independent weaving companies. In the event Du
Pont and/or these independent weaving companies were to cease, for any reason,
to produce or sell Kevlar to us, we might be unable to replace it with a
material of like weight and strength, or at all. Thus, if our supply of Kevlar
were materially reduced or cut off or if there were a material increase in the
price of Kevlar, our manufacturing operations could be adversely affected and
our costs increased, and our business, financial condition and results of
operations could be materially adversely affected.
Some
of the components of our products pose potential safety risks which could create
potential liability exposure for us.
Some of
the components of our products contain elements that are known to pose potential
safety risks. In addition to these risks, there can be no assurance that
accidents in our facilities will not occur. Any accident, whether occasioned by
the use of all or any part of our products or technology or by our manufacturing
operations, could adversely affect commercial acceptance of our products and
could result in significant production delays or claims for damages resulting
from injuries. Any of these occurrences would materially adversely affect our
operations and financial condition. In the event that our products, including
the products manufactured by MDT and AoA, fail to perform as specified, users of
these products may assert claims for substantial amounts. These claims could
have a materially adverse effect on our financial condition and results of
operations. There is no assurance that the amount of the general product
liability insurance that we maintain will be sufficient to cover potential
claims or that the present amount of insurance can be maintained at the present
level of cost, or at all.
Our
fields of business are highly competitive.
The
competition to develop defense and security products and to obtain funding for
the development of these products, is, and is expected to remain,
intense.
Our
defense and security products compete with other manufacturers of specialized
training systems, including Firearms Training Systems, Inc., a producer of
interactive simulation systems designed to provide training in the handling and
use of small and supporting arms. In addition, we compete with manufacturers and
developers of armor for cars and vans, including O’Gara-Hess & Eisenhardt, a
division of Armor Holdings, Inc.
9
Various
battery technologies are being considered for use in defense and safety products
by other manufacturers and developers, including the following: lead-acid,
nickel-cadmium, nickel-iron, nickel-zinc, nickel-metal hydride, sodium-sulfur,
sodium-nickel chloride, zinc-bromine, lithium-ion, lithium-polymer, lithium-iron
sulfide, primary lithium, rechargeable alkaline and Zinc-Air.
Many of
our competitors have financial, technical, marketing, sales, manufacturing,
distribution and other resources significantly greater than ours. If we are
unable to compete successfully in each of our operating areas, our business and
results of operations could be materially adversely affected.
Our
business is dependent on proprietary rights that may be difficult to protect and
could affect our ability to compete effectively.
Our
ability to compete effectively will depend on our ability to maintain the
proprietary nature of our technology and manufacturing processes through a
combination of patent and trade secret protection, non-disclosure agreements and
licensing arrangements.
Litigation,
or participation in administrative proceedings, may be necessary to protect our
proprietary rights. This type of litigation can be costly and time consuming and
could divert company resources and management attention to defend our rights,
and this could harm us even if we were to be successful in the litigation. In
the absence of patent protection, and despite our reliance upon our proprietary
confidential information, our competitors may be able to use innovations similar
to those used by us to design and manufacture products directly competitive with
our products. In addition, no assurance can be given that others will not obtain
patents that we will need to license or design around. To the extent any of our
products are covered by third-party patents, we could need to acquire a license
under such patents to develop and market our products.
Despite
our efforts to safeguard and maintain our proprietary rights, we may not be
successful in doing so. In addition, competition is intense, and there can be no
assurance that our competitors will not independently develop or patent
technologies that are substantially equivalent or superior to our technology. In
the event of patent litigation, we cannot assure you that a court would
determine that we were the first creator of inventions covered by our issued
patents or pending patent applications or that we were the first to file patent
applications for those inventions. If existing or future third-party patents
containing broad claims were upheld by the courts or if we were found to
infringe third-party patents, we may not be able to obtain the required licenses
from the holders of such patents on acceptable terms, if at all. Failure to
obtain these licenses could cause delays in the introduction of our products or
necessitate costly attempts to design around such patents, or could foreclose
the development, manufacture or sale of our products. We could also incur
substantial costs in defending ourselves in patent infringement suits brought by
others and in prosecuting patent infringement suits against
infringers.
We also
rely on trade secrets and proprietary know-how that we seek to protect, in part,
through non-disclosure and confidentiality agreements with our customers,
employees, consultants, and entities with which we maintain strategic
relationships. We cannot assure you that these agreements will not be breached,
that we would have adequate remedies for any breach or that our trade secrets
will not otherwise become known or be independently developed by
competitors.
We
are dependent on key personnel and our business would suffer if we fail to
retain them.
We are
highly dependent on the president of our FAAC subsidiary and the general
managers of our MDT and Epsilor subsidiaries, and the loss of the services of
one or more of these persons could adversely affect us. We are especially
dependent on the services of our Chairman and Chief Executive Officer, Robert S.
Ehrlich, and our President and Chief Operating Officer, Steven Esses. The loss
of either Mr. Ehrlich or Mr. Esses could have a material adverse effect on us.
We are party to an employment agreement with Mr. Ehrlich, which agreement
expires at the end of 2009, and an employment agreement with Mr. Esses, which
agreement expires at the end of 2010. We do not have key-man life insurance on
either Mr. Ehrlich or Mr. Esses.
10
There
are risks involved with the international nature of our business.
A
significant portion of our sales are made to customers located outside the U.S.,
primarily in Europe and Asia. In 2007 and 2006, 22% and 24%, respectively, of
our revenues, were derived from sales to customers located outside the U.S. We
expect that our international customers will continue to account for a
substantial portion of our revenues in the near future. Sales to international
customers may be subject to political and economic risks, including political
instability, currency controls, exchange rate fluctuations, foreign taxes,
longer payment cycles and changes in import/export regulations and tariff rates.
In addition, various forms of protectionist trade legislation have been and in
the future may be proposed in the U.S. and certain other countries. Any
resulting changes in current tariff structures or other trade and monetary
policies could adversely affect our sales to international customers. See also
“Israel-Related Risks,” below.
We do not anticipate paying cash
dividends.
We
currently intend to retain any future earnings for funding growth and, as a
result, do not expect to pay any cash dividends in the foreseeable
future.
Risks
Related to Government Contracts
A
significant portion of our business is dependent on government contracts and
reduction or reallocation of defense or law enforcement spending could reduce
our revenues.
Many of
the customers of IES, FAAC and AoA to date have been in the public sector of the
U.S., including the federal, state and local governments, and in the public
sectors of a number of other countries, and most of MDT’s customers have been in
the public sector in Israel, in particular the Ministry of Defense.
Additionally, all of EFB’s sales to date of battery products for the military
and defense sectors have been in the public sector in the United States. A
significant decrease in the overall level or allocation of defense or law
enforcement spending in the U.S. or other countries could reduce our revenues
and have a material adverse effect on our future results of operations and
financial condition.
Sales to
public sector customers are subject to a multiplicity of detailed regulatory
requirements and public policies as well as to changes in training and
purchasing priorities. Contracts with public sector customers may be conditioned
upon the continuing availability of public funds, which in turn depends upon
lengthy and complex budgetary procedures, and may be subject to certain pricing
constraints. Moreover, U.S. government contracts and those of many international
government customers may generally be terminated for a variety of factors when
it is in the best interests of the government and contractors may be suspended
or debarred for misconduct at the discretion of the government. There can be no
assurance that these factors or others unique to government contracts or the
loss or suspension of necessary regulatory licenses will not reduce our revenues
and have a material adverse effect on our future results of operations and
financial condition.
Our
U.S. government contracts may be terminated at any time and may contain other
unfavorable provisions.
The U.S.
government typically can terminate or modify any of its contracts with us either
for its convenience or if we default by failing to perform under the terms of
the applicable contract. A termination arising out of our default could expose
us to liability and have a material adverse effect on our ability to re-compete
for future contracts and orders. Our U.S. government contracts contain
provisions that allow the U.S. government to unilaterally suspend us from
receiving new contracts pending resolution of alleged violations of procurement
laws or regulations, reduce the value of existing contracts, issue modifications
to a contract and control and potentially prohibit the export of our products,
services and associated materials.
Government
agencies routinely audit government contracts. These agencies review a
contractor's performance on its contract, pricing practices, cost structure and
compliance with applicable laws, regulations and standards. If we are audited,
we will not be reimbursed for any costs found to be improperly allocated to a
specific contract,
11
while we
would be required to refund any improper costs for which we had already been
reimbursed. Therefore, an audit could result in a substantial adjustment to our
revenues. If a government audit uncovers improper or illegal activities, we may
be subject to civil and criminal penalties and administrative sanctions,
including termination of contracts, forfeitures of profits, suspension of
payments, fines and suspension or debarment from doing business with United
States government agencies. We could suffer serious reputational harm if
allegations of impropriety were made against us. A governmental determination of
impropriety or illegality, or an allegation of impropriety, could have a
material adverse effect on our business, financial condition or results of
operations.
We
may be liable for penalties under a variety of procurement rules and
regulations, and changes in government regulations could adversely impact our
revenues, operating expenses and profitability.
Our
defense and commercial businesses must comply with and are affected by various
government regulations that impact our operating costs, profit margins and our
internal organization and operation of our businesses. Among the most
significant regulations are the following:
|
·
|
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.
|
These
regulations affect how we and our customers do business and, in some instances,
impose added costs on our businesses. Any changes in applicable laws could
adversely affect the financial performance of the business affected by the
changed regulations. With respect to U.S. government contracts, any failure to
comply with applicable laws could result in contract termination, price or fee
reductions or suspension or debarment from contracting with the U.S.
government.
We
may not be able to receive or retain the necessary licenses or authorizations
required for us to export or re-export our products, technical data or services,
or to transfer technology from foreign sources (including our own subsidiaries)
and to work collaboratively with them. Denials of such licenses and
authorizations could have a material adverse effect on our business and results
of operations.
U.S.
regulations concerning export controls require us to screen potential customers,
destinations, and technology to ensure that sensitive equipment, technology and
services are not exported in violation of U.S. policy or diverted to improper
uses or users.
In order
for us to export certain products, technical data or services, we are required
to obtain licenses from the U.S. government, often on a
transaction-by-transaction basis. These licenses are generally required for the
export of the military versions of our products and technical data and for
defense services. We cannot be sure of our ability to obtain the U.S. government
licenses or other approvals required to export our products, technical data and
services for sales to foreign governments, foreign commercial customers or
foreign destinations.
In
addition, in order for us to obtain certain technical know-how from foreign
vendors and to collaborate on improvements on such technology with foreign
vendors, including at times our own foreign subsidiaries, we may need to obtain
U.S. government approval for such collaboration through manufacturing license or
technical assistance agreements approved by U.S. government export control
agencies.
The U.S.
government has the right, without notice, to revoke or suspend export licenses
and authorizations for reasons of foreign policy, issues over which we have no
control.
12
Failure
to receive required licenses or authorizations would hinder our ability to
export our products, data and services and to use some advanced technology from
foreign sources. This could have a material adverse effect on our business,
results of operations and financial condition.
Our
failure to comply with export control rules could have a material adverse effect
on our business.
Our
failure to comply with these rules could expose us to significant criminal or
civil enforcement action by the U.S. government, and a conviction could result
in denial of export privileges, as well as contractual suspension or debarment
under U.S. government contracts, either of which could have a material adverse
effect on our business, results of operations and financial
condition.
Our
operating margins may decline under our fixed-price contracts if we fail to
estimate accurately the time and resources necessary to satisfy our
obligations.
Some of
our contracts are fixed-price contracts under which we bear the risk of any cost
overruns. Our profits are adversely affected if our costs under these contracts
exceed the assumptions that we used in bidding for the contract. Often, we are
required to fix the price for a contract before we finalize the project
specifications, which increases the risk that we will mis-price these contracts.
The complexity of many of our engagements makes accurately estimating our time
and resources more difficult. In the event we fail to estimate our time and
resources accurately, our expenses will increase and our profitability, if any,
under such contracts will decrease.
If
we are unable to retain our contracts with the U.S. government and subcontracts
under U.S. government prime contracts in the competitive rebidding process, our
revenues may suffer.
Upon
expiration of a U.S. government contract or subcontract under a U.S. government
prime contract, if the government customer requires further services of the type
provided in the contract, there is frequently a competitive rebidding process.
We cannot guarantee that we, or if we are a subcontractor that the prime
contractor, will win any particular bid, or that we will be able to replace
business lost upon expiration or completion of a contract. Further, all U.S.
government contracts are subject to protest by competitors. The termination of
several of our significant contracts or nonrenewal of several of our significant
contracts could result in significant revenue shortfalls.
The
loss of, or a significant reduction in, U.S. military business would have a
material adverse effect on us.
U.S.
military contracts account for a significant portion of our business. The U.S.
military funds these contracts in annual increments. These contracts require
subsequent authorization and appropriation that may not occur or that may be
greater than or less than the total amount of the contract. Changes in the U.S.
military’s budget, spending allocations and the timing of such spending could
adversely affect our ability to receive future contracts. None of our contracts
with the U.S. military has a minimum purchase commitment, and the U.S. military
generally has the right to cancel its contracts unilaterally without prior
notice. We manufacture for the U.S. aircraft and land vehicle armor systems,
protective equipment for military personnel and other technologies used to
protect soldiers in a variety of life-threatening or catastrophic situations,
and batteries for communications devices. The loss of, or a significant
reduction in, U.S. military business for our aircraft and land vehicle armor
systems, other protective equipment, or batteries could have a material adverse
effect on our business, financial condition, results of operations and
liquidity.
A
reduction of U.S. force levels in Iraq may affect our results of
operations.
Since the
invasion of Iraq by the U.S. and other forces in March 2003, we have received
orders from the U.S. military for armoring of vehicles and military batteries.
These orders are the result, in substantial part, of the particular combat
situations encountered by the U.S. military in Iraq. We cannot be certain to
what degree the U.S. military would continue placing orders for our products if
the U.S. military were to reduce its force levels or withdraw completely from
Iraq. A significant reduction in orders from the U.S. military could have a
material adverse effect on our business, financial condition, results of
operations and liquidity.
13
Market-Related
Risks
The
price of our common stock is volatile.
The
market price of our common stock has been volatile in the past and may change
rapidly in the future. The following factors, among others, may cause
significant volatility in our stock price:
|
·
|
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.
|
One of
the continued listing standards for our stock on the Nasdaq Stock Market (both
the Nasdaq Global Market, on which our stock is currently listed, and the Nasdaq
Capital Market) is the maintenance of a $1.00 bid price. Our stock price was
below $1.00 between August 15, 2005 and June 20, 2006; however, on June 21,
2006, we effected a one-for-fourteen reverse stock split, which brought the bid
price of our common stock back over $1.00. If our bid price were to go and
remain below $1.00 for 30 consecutive business days, Nasdaq could notify us of
our failure to meet the continued listing standards, after which we would have
180 calendar days to correct such failure or be delisted from the Nasdaq Global
Market. In addition, we may be unable to satisfy the other continued listing
requirements.
If we
fail to maintain Nasdaq listing for our securities, and no other exclusion from
the definition of a “penny stock” under the Securities Exchange Act of 1934, as
amended, is available, then any broker engaging in a transaction in our
securities would be required to provide any customer with a risk disclosure
document, disclosure of market quotations, if any, disclosure of the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market values of our securities held in
the customer’s account. The bid and offer quotation and compensation information
must be provided prior to effecting the transaction and must be contained on the
customer’s confirmation. If brokers become subject to the “penny stock” rules
when engaging in transactions in our securities, they would become less willing
to engage in transactions, thereby making it more difficult for our stockholders
to dispose of their shares.
Exercise
of our warrants, options and convertible debt could adversely affect our stock
price and will be dilutive.
As of
August 31, 2008, we had 13,637,639 shares issued and outstanding, there were
outstanding warrants to purchase a total of 734,617 shares of our common stock
at a weighted average exercise price of $6.89 per share, options to purchase a
total of 454,935 shares of our common stock at a weighted average exercise price
of $6.00 per share, and outstanding notes convertible into a total of 2,232,145
shares of our common stock at a weighted average conversion price of $2.24 per
share. Holders of our options, warrants and convertible debt will probably
exercise or convert them only at a time when the price of our common stock is
higher than their respective exercise or conversion prices. Accordingly, we may
be required to issue shares of our common stock at a price substantially lower
than the market price of our stock. This could adversely affect our stock price.
In addition, if and when these shares are issued, the percentage of our common
stock that existing stockholders own will be diluted.
14
Our
certificate of incorporation and bylaws and Delaware law contain provisions that
could discourage a takeover.
Provisions
of our amended and restated certificate of incorporation may have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of us. These provisions could
limit the price that certain investors might be willing to pay in the future for
shares of our common stock. These provisions:
|
·
|
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.
|
The
classification system of electing directors and the removal provision may tend
to discourage a third-party from making a tender offer or otherwise attempting
to obtain control of us and may maintain the incumbency of our board of
directors, as the classification of the board of directors increases the
difficulty of replacing a majority of the directors. These provisions may have
the effect of deferring hostile takeovers, delaying changes in our control or
management, or may make it more difficult for stockholders to take certain
corporate actions. The amendment of any of these provisions would require
approval by holders of at least 85% of the outstanding common
stock.
Israel-Related
Risks
A
significant portion of our operations takes place in Israel, and we could be
adversely affected by the economic, political and military conditions in that
region.
The
offices and facilities of three of our subsidiaries, EFL, MDT and Epsilor, are
located in Israel (in Beit Shemesh, Lod and Dimona, respectively, all of which
are within Israel’s pre-1967 borders). Most of our senior management is located
at EFL’s facilities. Although we expect that most of our sales will be made to
customers outside Israel, we are nonetheless directly affected by economic,
political and military conditions in that country. Accordingly, any major
hostilities involving Israel or the interruption or curtailment of trade between
Israel and its present trading partners could have a material adverse effect on
our operations. Since the establishment of the State of Israel in 1948, a number
of armed conflicts have taken place between Israel and its Arab neighbors and a
state of hostility, varying in degree and intensity, has led to security and
economic problems for Israel.
Historically,
Arab states have boycotted any direct trade with Israel and to varying degrees
have imposed a secondary boycott on any company carrying on trade with or doing
business in Israel. Although in October 1994, the states comprising the Gulf
Cooperation Council (Saudi Arabia, the United Arab Emirates, Kuwait, Dubai,
Bahrain and Oman) announced that they would no longer adhere to the secondary
boycott against Israel, and Israel has entered into certain agreements with
Egypt, Jordan, the Palestine Liberation Organization and the Palestinian
Authority, Israel has not entered into any peace arrangement with Syria or
Lebanon. Moreover, since September 2000, there has been a significant
deterioration in Israel’s relationship with the Palestinian Authority, and a
significant increase in terror and violence. Efforts to resolve the problem have
failed to result in an agreeable solution. Israel withdrew unilaterally from the
Gaza Strip and certain areas in northern Samaria in 2005. It is unclear what the
long-term effects of such disengagement plan will be. The election of
representatives of the Hamas movement to a majority of seats in the Palestinian
Legislative Council has created additional unrest and uncertainty.
In July
and August of 2006, Israel was involved in a full-scale armed conflict with
Hezbollah, a Lebanese Islamist Shiite militia group and political party, in
southern Lebanon, which involved missile strikes against civilian targets in
northern Israel that resulted in economic losses. On August 14, 2006, a
ceasefire was declared relating to that armed conflict, although it is uncertain
whether or not the ceasefire will continue to hold.
15
Continued
hostilities between Israel and its neighbors and any failure to settle the
conflict could have a material adverse effect on our business and us. Moreover,
the current political and security situation in the region has already had an
adverse effect on the economy of Israel, which in turn may have an adverse
effect on us.
Service
of process and enforcement of civil liabilities on us and our officers may be
difficult to obtain.
We are
organized under the laws of the State of Delaware and will be subject to service
of process in the United States. However, approximately 29% of our assets are
located outside the United States. In addition, two of our directors and most of
our executive officers are residents of Israel and a portion of the assets of
such directors and executive officers are located outside the United
States.
There is
doubt as to the enforceability of civil liabilities under the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, in
original actions instituted in Israel. As a result, it may not be possible for
investors to enforce or effect service of process upon these directors and
executive officers or to judgments of U.S. courts predicated upon the civil
liability provisions of U.S. laws against our assets, as well as the assets of
these directors and executive officers. In addition, awards of punitive damages
in actions brought in the U.S. or elsewhere may be unenforceable in
Israel.
Exchange
rate fluctuations between the U.S. dollar and the Israeli NIS may negatively
affect our earnings.
Although
a substantial majority of our revenues and a substantial portion of our expenses
are denominated in U.S. dollars, a portion of our costs, including personnel and
facilities-related expenses, is incurred in New Israeli Shekels (NIS). Inflation
in Israel will have the effect of increasing the dollar cost of our operations
in Israel, unless it is offset on a timely basis by a devaluation of the NIS
relative to the dollar. In 2007, the inflation adjusted NIS appreciated against
the dollar.
When used
in this prospectus, the words “expects,” “anticipates,” “estimates” and similar
expressions identify forward-looking statements. These statements are
“forward-looking” statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. These statements, which include
statements under the caption “Risk Factors” and elsewhere in this prospectus,
refer to product and technology development; the uncertainty of the market for
our 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 our common stock upon conversion or payment of our outstanding
convertible debt, which would be increasingly dilutive if and to the extent that
the market price of our stock decreases. The forward-looking statements also
include our expectations concerning factors affecting the markets for our
products.
These
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from the results that we anticipate.
These risks and uncertainties include, but are not limited to, those risks
discussed in this prospectus and in the documents incorporated by reference in
this prospectus.
All such
forward-looking statements are current only as of the date on which such
statements were made. We assume no obligation to update these forward-looking
statements or to update the reasons actual results could differ materially from
the results anticipated in the forward-looking statements.
You
should rely only on the information in this prospectus and the additional
information described under the heading “Where You Can Find Additional
Information.” We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely upon it. You should assume that the information
in this prospectus was accurate on the date of the front cover of this
prospectus only. Our business, financial condition, results of operations and
prospects may have changed since that date.
16
We are
registering the resale of our common stock by the selling stockholders. The
selling stockholders and the specific number of shares that they may resell
through this prospectus are listed on page 19. The shares offered for resale by
this prospectus consist of the following:
|
Ø
|
2,901,790
shares of common stock, which is 130% of the 2,232,145 shares that may be
acquired upon the conversion of currently outstanding convertible notes;
and
|
|
Ø
|
725,448
shares of common stock, which is 130% of the 558,036 shares that may be
acquired upon the exercise of currently outstanding
warrants.
|
The above
securities were issued in reliance upon the exemption from registration provided
by Section 4(2) of the Securities Act as transactions by an issuer not involving
a public offering.
Shares
Underlying Convertible Notes
On August
14, 2008, we entered into a Securities Purchase Agreement with the selling
stockholders pursuant to which we raised an aggregate of $5,000,000 before
issuance and related costs, and issued senior subordinated convertible notes in
the aggregate principal amount of $5,000,000 and warrants to purchase up to
558,036 shares of our common stock at an exercise price of $2.24 per
share.
The notes
have a final maturity date of August 15, 2011 and bear interest at a rate of 10%
per annum payable quarterly in cash. The notes are convertible at the holders’
option at an initial conversion price of $2.24. Upon conversion of the notes,
the holders also will receive a make-whole premium equal to the interest that
would have been earned through the maturity date on the amount converted,
subject to a maximum of 21 months of interest.
The notes
also contain proportional anti-dilution protection that, should we issue equity
or equity-linked securities during the two years following effectiveness of this
registration statement at a price per common share below the conversion price of
the notes, will automatically adjust the conversion price of the notes to a
price based on (i) the price at which we issue such equity or equity-linked
securities, and (ii) the amount of such equity or equity-linked securities that
we issue.
We are
obligated to repay the principal amount of the notes in installments commencing
in February 2009, with the principal amount being amortized in eleven payments.
We have the option to pay principal in cash or, subject to the satisfaction of
the “Equity Conditions” described below, by requiring the holders to convert
such principal amount of the notes into shares of our common stock or a
combination thereof. In the event we elect to make such payments in stock, the
price used to determine the number of shares to be issued will be calculated
using an 8% discount to the average trading price of our common stock during 17
of 20 consecutive trading days ending two days before the payment date. The
notes can be redeemed at any time at our option upon payment of 115% of the
remaining outstanding amount of the notes. In order to have a sufficient
number of registered common stock to facilitate payments of principal
installments in shares of our common stock, we are registering 130% of the
number of shares issuable upon conversion of the notes.
The
“Equity Conditions” require that, during the period beginning 15 trading days
before the date we are required to provide notice of our election until the date
of the applicable principal payment, interest payment or mandatory conversion,
(1) this registration statement must be effective or all shares of our common
stock must be eligible for sale without restriction and without the need for
registration, (2) our common stock must be designated for quotation on an
“Eligible Market” (which term includes the Nasdaq Global Market, the Nasdaq
Capital Market and the OTC Bulletin Board) and shall not have been
suspended from trading nor shall suspension have been threatened or pending
(other than in connection with failure to satisfy Nasdaq’s $1.00 minimum bid
price listing standard), (3) we must have delivered shares to the holders on a
timely basis in connection with any conversion of the notes or
17
any
exercise of the warrants, (4) we must be able to issue the applicable shares in
full without exceeding the volume limitations set forth in the notes and the
warrants, (5) we must have timely made any payments that became due and payable
under the notes, (6) there must not have been a public announcement of a pending
or intended fundamental transaction which has not been abandoned, (7) there must
not have occurred an event of default or an event that could constitute an event
of default under the notes, (8) we must not have knowledge of any fact that
would cause the shares not to be eligible for resale, and (9) we must not be in
breach of any provision, covenant, representation or warranty of any agreement
executed in connection with the transaction to the extent that such breach would
have a material adverse effect.
Shares
Underlying Warrants
The
warrants to purchase up to 558,036 shares of our common stock are exercisable at
$2.24 per share beginning August 14, 2008 through August 15, 2011. For a
description of the terms of the warrants, see “Description of Common Stock
Warrants,” below.
All net
proceeds from the sale of the shares of common stock will go to the stockholder
who offers and sells them. We will not receive any proceeds from this offering.
However, we would receive proceeds of approximately $1,250,000 if all of the
warrants issued to the selling stockholders and outstanding as of the date of
this prospectus are exercised for cash. Any such funds would be used for general
corporate purposes.
The
shares of common stock being offered by the selling stockholders are issuable
upon conversion of the convertible notes and upon exercise of the warrants. For
additional information regarding the issuance of those convertible notes and
warrants, see “About the Offering,” above. We are registering the shares of
common stock in order to permit the selling stockholders to offer the shares for
resale from time to time. Except for the ownership of (i) the convertible notes
and the warrants issued pursuant to the Securities Purchase Agreement, and (ii)
convertible notes and warrants issued pursuant to the securities purchase
agreement dated September 29, 2005, the selling stockholders have not had any
material relationship with us within the past three years.
The table
below lists the selling stockholders and other information regarding the
beneficial ownership of the shares of common stock by each of the selling
stockholders. The second column lists the number of shares of common stock
beneficially owned by each selling stockholder, based on its ownership of the
convertible notes and warrants, as of September 10, 2008, assuming conversion of
all convertible notes and exercise of all warrants held by the selling
stockholders on that date.
The third
column lists the shares of common stock being offered by this prospectus by the
selling stockholders.
In
accordance with the terms of registration rights agreements with the selling
stockholders, this prospectus generally covers the resale of at least 130% of
the sum of (i) the maximum number of shares of common stock issuable upon
conversion of the convertible notes as of the trading day immediately preceding
the date the registration statement is initially filed with the SEC and (ii) the
maximum number of shares of common stock issued and issuable upon exercise of
the warrants, as of the Trading Day immediately preceding the date this
registration statement is initially filed with the SEC. Because the conversion
price of the convertible notes and the exercise price of the warrants may be
adjusted, the number of shares that will actually be issued may be more or less
than the number of shares being offered by this prospectus. The fourth column
assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus.
Under the
terms of the convertible notes and the warrants, a selling stockholder may not
convert the convertible notes or exercise the warrants to the extent such
conversion or exercise would cause such selling stockholder, together with its
affiliates, to beneficially own a number of shares of common stock which would
exceed
18
4.99% of
our then outstanding shares of common stock following such conversion or
exercise, excluding for purposes of such determination shares of common stock
issuable upon conversion of the convertible notes which have not been converted
or upon exercise of the warrants which have not been exercised. However, at any
time, the selling stockholder may increase this Maximum Percentage up to 9.99%
upon sixty-one (61) days prior written notice to us.
The
number of shares in the second column reflects this limitation. The selling
stockholders may sell all, some or none of their shares in this offering. See
“Plan of Distribution.”
|
Number
of Shares
Beneficially
Owned
Prior
to Offering (1)
|
Maximum
Number of
Shares to be Sold
Pursuant to
this Prospectus
|
Shares
Beneficially Owned
After Offering(2)
|
||||||
|
Number
|
Percent
|
|||||||
|
Smithfield
Fiduciary LLC (3)
|
2,516,290(4)
|
3,228,239
|
33,030
|
*
|
||||
| Cranshire Capital L.P. (3) |
167,411(5)
|
217,635 |
0
|
*
|
||||
|
Iroquois
Master Fund Ltd. (3)
|
157,536(6)
|
181,364
|
18,026
|
*
|
||||
|
*
|
Less
than 1%.
|
|
|
(1)
|
Assumes
that the selling stockholders acquire no additional shares of common stock
before completion of this offering.
|
|
|
(2)
|
Assumes
that all of the shares offered by the selling stockholders under this
prospectus are sold. Percentage ownership is computed in accordance with
Rule 13d-3 promulgated by the Securities and Exchange Commission, and is
based on 13,637,639 shares issued and outstanding as of September 10,
2008.
|
|
|
(3)
|
The
terms of the notes and warrants whose underlying shares of common stock
are included for resale under this prospectus prohibit conversion of the
notes and exercise of the warrants to the extent that conversion of the
notes and exercise of the warrants would result in the holder, together
with its affiliates, beneficially owning in excess of 4.999% of our
outstanding shares of common stock. At any time, the selling stockholder
may increase this to up to 9.99% upon sixty-one (61) days prior written
notice to us.
|
|
|
(4)
|
Consists
of (i) 1,986,608 shares of common stock issuable upon conversion of the
notes issued in August 2008 (an additional 30% of such shares (595,983
shares), or a total of 2,582,591 shares, are being registered hereby),
(ii) 496,652 shares of common stock issuable upon exercise of the warrants
issued in August 2008 (an additional 30% of such shares (148,996 shares),
or a total of 645,648 shares, are being registered hereby), and (iii)
33,030 shares of common stock. Highbridge Capital Management, LLC is the
trading manager of Highbridge International LLC and has voting control and
investment discretion over securities held by Highbridge International
LLC. Glenn Dubin and Henry Swieca control Highbridge Capital Management,
LLC and have voting control and investment discretion over the securities
held by Highbridge International LLC. Each of Highbridge Capital
Management, LLC, Glenn Dubin and Henry Swieca disclaim beneficial
ownership of the securities held by Highbridge International
LLC.
|
|
|
(5)
|
Consists
of (i) 133,929 shares of common stock issuable upon conversion of the
notes issued in August 2008 (an additional 30% of such shares (40,179), or
a total of 174,108 shares, are being registered hereby), and (ii) 33,482
shares of common stock issuable upon exercise of the warrants issued in
August 2008 (an additional 30% of such shares (10,045 shares), or a total
of 43,527 shares, are being registered hereby). Downsview Capital, Inc.
(“Downsview”) is the general partner of Cranshire Capital, L.P.
(“Cranshire”) and consequently has voting control and investment
discretion over securities held by Cranshire. Mitchell P. Kopin (“Mr.
Kopin”), President of Downsview, has voting control over Downsview. As a
result, each of Mr. Kopin, Downsview and Cranshire may be deemed to have
beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended) of the shares owned by Cranshire that
are being registered hereunder.
|
|
|
(6)
|
Consists
of (i) 111,608 shares of common stock issuable upon conversion of the
notes issued in August 2008 (an additional 30% of such shares (33,483), or
a total of 145,091 shares, are being registered hereby), (ii) 27,902
shares of common stock issuable upon exercise of the warrants issued in
August 2008 (an additional 30% of such shares (8,371 shares), or a total
of 36,273 shares, are being registered hereby), and (iii) 18,026
shares of common stock. Joshua Silverman has voting control and investment
discretion over the securities held by this selling stockholder. Mr.
Silverman disclaims beneficial ownership of the securities held by
Iroquois Master Fund Ltd.
|
|
19
We are
registering the shares of common stock issuable upon conversion of the
convertible notes and the shares of common stock issuable upon exercise of the
warrants to permit the resale of these shares of common stock by the
holders of the convertible notes and warrants from time to time after the date
of this prospectus. We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of common stock. We will bear all fees and
expenses incident to our obligation to register the shares of common
stock.
The
selling stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions or
agent’s commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
|
Ø
|
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
|
Ø
|
in
the over-the-counter market;
|
|
Ø
|
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
|
Ø
|
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
|
Ø
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
Ø
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
Ø
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
Ø
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
Ø
|
privately
negotiated transactions;
|
|
Ø
|
short
sales;
|
|
Ø
|
sales
pursuant to Rule 144;
|
|
Ø
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
Ø
|
a
combination of any such methods of sale;
and
|
|
Ø
|
any
other method permitted pursuant to applicable
law.
|
If the
selling stockholders effect such transactions by selling shares of common stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the shares of common stock or otherwise, the selling stockholders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the shares of common stock in the course of
hedging in positions they assume. The selling stockholders may also sell shares
of common stock short and deliver shares of common stock covered by this
prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The selling stockholders may also loan or
pledge shares of common stock to broker-dealers that in turn may sell such
shares.
20
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the convertible notes, warrants or shares of common stock
owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time pursuant to this prospectus or any amendment to
this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933, as amended, amending, if necessary, the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also may
transfer and donate the shares of common stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will be
the selling beneficial owners for purposes of this prospectus. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
selling stockholders and any broker-dealer participating in the distribution of
the shares of common stock may be deemed to be “underwriters” within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of the
shares of common stock is made, a prospectus supplement, if required, will be
distributed which will set forth the aggregate amount of shares of common stock
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
Under the
securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
some states the shares of common stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There can
be no assurance that any selling stockholder will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The
selling stockholders and any other person participating in such distribution may
be subject to applicable provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
We will
pay all expenses of the registration of the shares of common stock pursuant to
the registration rights agreement, estimated to be $10,000 in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses
of compliance with state securities or “blue sky” laws; provided, however, that
a selling stockholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling stockholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling stockholders will be
entitled to contribution. We may be indemnified by the selling stockholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
stockholder specifically for use in this prospectus, in accordance with the
related registration rights agreements, or we may be entitled to
contribution.
Once sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of common stock will be freely tradable in the hands of persons other
than our affiliates.
21
Our
common stock is currently traded on the Nasdaq Stock Market under the symbol
“ARTX.”
DESCRIPTION
OF CAPITAL STOCK
General
Our
authorized capital stock consists of 250,000,000 shares of common stock par
value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01
per share. As of September 10, 2008, 13,637,639 shares of common stock were
issued and outstanding, and no shares of preferred stock were issued and
outstanding.
The
additional shares of our authorized stock available for issuance might be issued
at times and under circumstances so as to have a dilutive effect on earnings per
share and on the equity ownership of the holders of our common stock. The
ability of our board of directors to issue additional shares of stock could
enhance the board’s ability to negotiate on behalf of the stockholders in a
takeover situation but could also be used by the board to make a
change-in-control more difficult, thereby denying stockholders the potential to
sell their shares at a premium and entrenching current management. The following
description is a summary of the material provisions of our capital stock. You
should refer to our amended and restated certificate of incorporation, as
amended, and bylaws for additional information.
Common
Stock
The
holders of common stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders. Except as required under
Delaware law or the rules of the Nasdaq Global Market, the rights of
stockholders may not be modified otherwise than by a vote of a majority or more
of the shares outstanding. Subject to preferences that may be applicable to any
outstanding shares of preferred stock, the holders of common stock are entitled
to receive ratably any dividends as may be declared by the board of directors
out of funds legally available for the payment of dividends. In the event of our
liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in all assets, subject to prior distribution rights of the
preferred stock, if any, then outstanding. Holders of common stock have no
preemptive rights or rights to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
non-assessable.
Preferred
Stock
Our board
of directors has the authority, within the limitations and restrictions stated
in our amended and restated certificate of incorporation and without stockholder
approval, to provide by resolution for the issuance of shares of preferred
stock, and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preference and the number of shares constituting any
series of the designation of such series. The issuance of preferred stock could
have the effect of decreasing the market price of the common stock, impeding or
delaying a possible takeover and adversely affecting the voting and other rights
of the holders of our common stock. At present, we have no plans to issue
preferred stock.
Certain
Charter Provisions
Provisions
of our amended and restated certificate of incorporation may have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of us. These provisions could
limit the price that certain investors might be willing to pay in the future for
shares of our common stock. These provisions:
|
·
|
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
|
22
|
·
|
allow
us to issue preferred stock without any vote or further action by the
stockholders.
|
The
classification system of electing directors and the removal provision may tend
to discourage a third-party from making a tender offer or otherwise attempting
to obtain control of us and may maintain the incumbency of our board of
directors, as the classification of the board of directors increases the
difficulty of replacing a majority of the directors. These provisions may have
the effect of deferring hostile takeovers, delaying changes in our control or
management, or may make it more difficult for stockholders to take certain
corporate actions. The amendment of any of these provisions would require
approval by holders of at least 85% of the outstanding common
stock.
Each
warrant entitles the holder to purchase, at an exercise price $2.24 per share,
one share of our common stock. Subject to the provision contained in the warrant
restricting exercise of the warrant and described under “selling
stockholders,” the warrant is exercisable by the holder at any time after
August 14, 2008 and will expire on August 15, 2011.
The
warrants are generally exercisable by the holder, in whole or in part, by
delivery to us of the completed exercise agreement, and payment by the holder of
the aggregate exercise price in cash, or, in limited circumstances, by effecting
a cashless exercise. Upon any exercise of the warrant, we will forward to the
holder, as soon as practicable, but not exceeding three business days after
proper exercise, a certificate representing the number of shares of common stock
purchased upon such exercise. If less than all of the shares represented by the
warrant are purchased, we will also deliver to the holder a new warrant
representing the right to purchase the remaining shares. The shares of common
stock purchased by the holder upon exercise of the warrant will be deemed to
have been issued as of the close of business on the date the warrant is
surrendered to us as described above.
The
exercise price payable and number of shares purchasable upon exercise of a
warrant will generally be adjusted to prevent the dilution of the holder’s
beneficial interest in the common stock in the event we:
|
Ø
|
declare
or pay a dividend in shares of common stock or make a distribution of
shares of common stock to holders of our outstanding common
stock;
|
|
Ø
|
subdivide
or combine our common stock; or
|
|
Ø
|
issue
shares of our capital stock in any reclassification of our common
stock.
|
Additionally,
the warrants also contain proportional anti-dilution protection that,
should we issue equity or equity-linked securities during the two years
following effectiveness of this registration statement at a price per common
share below the exercise price of the warrants, will automatically adjust the
exercise price of the warrants to a price based on (i) the price at which we
issue such equity or equity-linked securities, and (ii) the amount of such
equity or equity-linked securities that we issue.
Except as
described above, a holder of a warrant will not have any of the rights of a
holder of common stock before the common stock is purchased upon exercise of the
warrant. Therefore, before a warrant is exercised, the holder of the warrant
will not be entitled to receive any dividend payments or exercise any voting or
other rights associated with the shares of common stock which may be purchased
when the warrant is exercised.
LEGAL
MATTERS
Lowenstein
Sandler PC, Roseland, New Jersey will pass upon the validity of the shares of
common stock offered by this prospectus for us.
23
The
financial statements and schedule as of December 31, 2007 and 2006 and for the
years then ended, incorporated by reference in this Prospectus, have been so
incorporated in reliance on the report of BDO Seidman, LLP, an independent
registered public accounting firm, incorporated herein by reference, given on
the authority of said firm as experts in auditing and
accounting.
We file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission. You can read and copy any materials
we file with the Securities and Exchange Commission at its Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549 and at its regional offices, a
list of which is available on the Internet at http://www.sec.gov/contact/addresses.htm.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at http://www.sec.gov
that contains reports, proxy and information statements, and other information
regarding issuers, such as us, that file electronically with the SEC.
Additionally, you may access many of these filings through our website at http://www.arotech.com/compro/index.html.
The information on our website is not part of this prospectus.
This
prospectus is part of a Form S-3 registration statement that we have filed with
the Securities and Exchange Commission relating to the shares of our common
stock being offered hereby. This prospectus does not contain all of the
information in the Registration Statement and its exhibits. The Registration
Statement, its exhibits and the documents incorporated by reference in this
prospectus and their exhibits, all contain information that is material to the
offering of the common stock. Whenever a reference is made in this prospectus to
any of our contracts or other documents, the reference may not be complete. You
should refer to the exhibits that are a part of the Registration Statement in
order to review a copy of the contract or documents. The registration statement
and the exhibits are available at the Securities and Exchange Commission’s
Public Reference Room or through its website.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The
Securities and Exchange Commission allows us to “incorporate by reference” the
information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is an important part of this prospectus, and later
information that we file with the Securities and Exchange Commission will
automatically update and supersede some of this information. The documents we
incorporate by reference are:
|
|
●
|
the
description of our common stock contained in our registration statement on
Form 8-A, Commission File No. 0-23336, as filed with the Securities and
Exchange Commission on February 2,
1994;
|
|
|
●
|
our
Annual Report on Form 10-K for the fiscal year ended December 31, 2007
filed with the Securities and
Exchange Commission on April 14, 2008, as amended by our Form
10-K/A filed with the Securities and
Exchange Commission on April
28, 2008;
|
|
|
●
|
our
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008,
filed with the Securities and
Exchange Commission on May 20, 2008, as amended by our Form 10-Q/A
filed with the Securities and Exchange Commission on September 15,
2008;
|
|
|
●
|
our
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008,
filed with the Securities and
Exchange Commission on August 14,
2008;
|
|
|
●
|
our
Current Reports on Form 8-K filed with the Securities and
Exchange Commission on
January 3, 2008, February 19, 2008 and August 15, 2008;
and
|
|
|
●
|
our
definitive proxy statement on Schedule 14A, as filed with the Securities
and Exchange Commission on September 15,
2008.
|
All
reports and other documents that we file with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
but before the termination of the offering of the common stock hereunder will
also be considered to be incorporated by reference into this prospectus from the
date of the filing of these reports and documents, and will supersede the
information herein; provided, however, that all reports that we
24
“furnish”
to the Commission will not be considered incorporated by reference into this
prospectus. We undertake to provide without charge to each person who receives a
copy of this prospectus, upon written or oral request, a copy of all of the
preceding documents that are incorporated by reference (other than exhibits,
unless the exhibits are specifically incorporated by reference into these
documents). You may request a copy of these materials, at no cost, by
telephoning us at the following address:
Arotech
Corporation
1229 Oak
Valley Drive
Ann
Arbor, Michigan 48108
Attention:
General Counsel and Secretary
(800)
281-0356
You
should rely only on the information in this prospectus and the additional
information described under the heading “Where You Can Find More Information.”
We have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely upon it. Neither we nor the selling stockholders are making
an offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information in this prospectus was
accurate on the date of the front cover of this prospectus only. Our business,
financial condition, results of operations and prospects may have changed since
that date.
25
3,627,238
Shares
Common
Stock
|
PROSPECTUS
|
September
19, 2008