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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Arotech Corporation | NASDAQ:ARTX | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 2.995 | 2.99 | 3.00 | 0 | 01:00:00 |
OMB APPROVAL
|
OMB Number: 3235-0070
Expires: October 31, 2021
Estimated average burden
hours per response 190.42
|
FORM 10-Q
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2019.
|
Delaware
|
|
95-4302784
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(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
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1229 Oak Valley Drive, Ann Arbor, Michigan
|
|
48108
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(Address of principal executive offices)
|
|
(Zip Code)
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800 281-0356
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(Registrant’s telephone number, including area code)
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______________________________________________________________________________________
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(Former name, former address and former fiscal year, if changed since last report)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, $0.01 par value
|
ARTX
|
The Nasdaq Stock Market LLC
|
Large accelerated filer: ¨
|
Accelerated filer: x
|
Non-accelerated filer: ¨
(Do not check if a smaller reporting company)
|
Smaller reporting company: x
|
Emerging growth company: ¨
|
|
Potential persons who are to respond to the collection of information contained in this form are not
required to respond unless the form displays a currently valid OMB control number.
|
Item
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|
Page
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PART I - FINANCIAL INFORMATION
|
|
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||
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PART II - OTHER INFORMATION
|
|
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||
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||
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September 30, 2019
|
|
December 31, 2018
|
||||
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(Unaudited)
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|
|
||||
ASSETS
|
|
|
|
||||
CURRENT ASSETS:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
5,196,806
|
|
|
$
|
4,222,246
|
|
Restricted collateral deposits
|
157,775
|
|
|
222,712
|
|
||
Trade receivables, net
|
17,163,788
|
|
|
16,259,809
|
|
||
Contract assets
|
24,970,939
|
|
|
17,867,896
|
|
||
Other accounts receivable and prepaid expenses
|
3,628,600
|
|
|
5,989,263
|
|
||
Inventories, net
|
8,905,529
|
|
|
9,912,748
|
|
||
Total current assets
|
60,023,437
|
|
|
54,474,674
|
|
||
LONG TERM ASSETS:
|
|
|
|
||||
Contractual and Israeli statutory severance pay fund
|
3,883,947
|
|
|
3,427,705
|
|
||
Other long term receivables
|
537,007
|
|
|
543,205
|
|
||
Property and equipment, net
|
9,504,583
|
|
|
8,914,247
|
|
||
Right of use asset
|
5,887,243
|
|
|
—
|
|
||
Other intangible assets, net
|
4,919,657
|
|
|
4,465,778
|
|
||
Goodwill
|
46,138,036
|
|
|
46,138,036
|
|
||
Total long term assets
|
70,870,473
|
|
|
63,488,971
|
|
||
Total assets
|
$
|
130,893,910
|
|
|
$
|
117,963,645
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
CURRENT LIABILITIES:
|
|
|
|
||||
Trade payables
|
$
|
7,882,797
|
|
|
$
|
6,442,919
|
|
Other accounts payable and accrued expenses
|
6,245,907
|
|
|
6,498,045
|
|
||
Current portion of lease obligations
|
628,294
|
|
|
—
|
|
||
Current portion of long term debt
|
2,983,905
|
|
|
2,204,653
|
|
||
Short term bank credit
|
10,334,840
|
|
|
5,500,416
|
|
||
Contract liabilities
|
7,504,965
|
|
|
7,054,779
|
|
||
Total current liabilities
|
35,580,708
|
|
|
27,700,812
|
|
||
LONG TERM LIABILITIES:
|
|
|
|
||||
Contractual and accrued Israeli statutory severance pay
|
4,682,611
|
|
|
4,125,675
|
|
||
Long term portion of lease obligations
|
5,569,696
|
|
|
—
|
|
||
Long term portion of debt
|
5,856,494
|
|
|
6,360,569
|
|
||
Deferred income tax liability
|
3,219,008
|
|
|
2,863,098
|
|
||
Other long term liabilities
|
42,364
|
|
|
137,774
|
|
||
Total long-term liabilities
|
19,370,173
|
|
|
13,487,116
|
|
||
Total liabilities
|
54,950,881
|
|
|
41,187,928
|
|
||
STOCKHOLDERS’ EQUITY:
|
|
|
|
||||
Share capital –
|
|
|
|
||||
Common stock – $0.01 par value each;
Authorized: 50,000,000 shares as of September 30, 2019 and December 31, 2018; Issued and outstanding: 26,665,240 shares and 26,486,152 shares as of September 30, 2019 and December 31, 2018, respectively |
266,653
|
|
|
264,862
|
|
||
Preferred shares – $0.01 par value each;
Authorized: 1,000,000 shares as of September 30, 2019 and December 31, 2018; No shares issued or outstanding as of September 30, 2019 and December 31, 2018 |
—
|
|
|
—
|
|
||
Additional paid-in capital
|
251,727,312
|
|
|
251,551,001
|
|
||
Accumulated deficit
|
(177,576,117
|
)
|
|
(176,498,057
|
)
|
||
Notes receivable from stockholders
|
(908,054
|
)
|
|
(908,054
|
)
|
||
Accumulated other comprehensive income
|
2,433,235
|
|
|
2,365,965
|
|
||
Total stockholders’ equity
|
75,943,029
|
|
|
76,775,717
|
|
||
Total liabilities and stockholders’ equity
|
$
|
130,893,910
|
|
|
$
|
117,963,645
|
|
|
Nine months ended September 30,
|
|
Three months ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues
|
$
|
67,618,934
|
|
|
$
|
72,967,596
|
|
|
$
|
23,573,731
|
|
|
$
|
23,844,477
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of revenues
|
46,185,133
|
|
|
51,328,827
|
|
|
15,597,611
|
|
|
16,516,663
|
|
||||
Research and development expenses
|
3,206,207
|
|
|
2,518,787
|
|
|
1,110,285
|
|
|
753,792
|
|
||||
Selling and marketing expenses
|
6,214,200
|
|
|
5,647,284
|
|
|
1,870,739
|
|
|
1,837,823
|
|
||||
General and administrative expenses
|
10,579,909
|
|
|
9,413,379
|
|
|
4,193,949
|
|
|
3,201,566
|
|
||||
Amortization of intangible assets
|
931,527
|
|
|
1,298,573
|
|
|
280,662
|
|
|
391,831
|
|
||||
Total operating costs and expenses
|
$
|
67,116,976
|
|
|
$
|
70,206,850
|
|
|
$
|
23,053,246
|
|
|
$
|
22,701,675
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income
|
501,958
|
|
|
2,760,746
|
|
|
520,485
|
|
|
1,142,802
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other income (expense), net
|
(9,944
|
)
|
|
5,878
|
|
|
(853
|
)
|
|
(1,521
|
)
|
||||
Financial expense, net
|
(1,066,027
|
)
|
|
(696,232
|
)
|
|
(396,170
|
)
|
|
(173,345
|
)
|
||||
Total other expense
|
(1,075,971
|
)
|
|
(690,354
|
)
|
|
(397,023
|
)
|
|
(174,866
|
)
|
||||
Income (loss) before income tax expense
|
(574,013
|
)
|
|
2,070,392
|
|
|
123,462
|
|
|
967,936
|
|
||||
|
|
|
|
|
|
|
|
|
|||||||
Income tax expense
|
504,047
|
|
|
650,765
|
|
|
186,785
|
|
|
227,380
|
|
||||
Net income (loss)
|
(1,078,060
|
)
|
|
1,419,627
|
|
|
(63,323
|
)
|
|
740,556
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of income tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
67,270
|
|
|
(66,162
|
)
|
|
—
|
|
|
13,100
|
|
||||
Comprehensive income (loss)
|
$
|
(1,010,790
|
)
|
|
$
|
1,353,465
|
|
|
$
|
(63,323
|
)
|
|
$
|
753,656
|
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) per share of common stock:
|
|
|
|
|
|
|
|
||||||||
Basic net income (loss) per share
|
$
|
(0.04
|
)
|
|
$
|
0.05
|
|
|
$
|
0.00
|
|
|
$
|
0.03
|
|
Diluted net income (loss) per share
|
$
|
(0.04
|
)
|
|
$
|
0.05
|
|
|
$
|
0.00
|
|
|
$
|
0.03
|
|
Weighted average number of shares used in computing basic net income (loss) per share
|
26,547,045
|
|
|
26,466,948
|
|
|
26,547,045
|
|
|
26,486,152
|
|
||||
Weighted average number of shares used in computing diluted net income (loss) per share
|
26,547,045
|
|
|
26,466,948
|
|
|
26,547,045
|
|
|
26,486,152
|
|
|
Nine months ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income (loss)
|
$
|
(1,078,060
|
)
|
|
$
|
1,419,627
|
|
Adjustments required to reconcile net income (loss) to net cash (used in) provided by operating activities:
|
|
|
|
||||
Depreciation
|
1,534,133
|
|
|
1,465,716
|
|
||
Amortization of intangible assets
|
931,527
|
|
|
1,298,573
|
|
||
Stock based compensation
|
291,023
|
|
|
491,654
|
|
||
Deferred tax provision
|
355,910
|
|
|
506,544
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Trade receivables
|
(903,979
|
)
|
|
4,992,521
|
|
||
Contract assets
|
(7,103,043
|
)
|
|
(3,454,977
|
)
|
||
Other accounts receivable and prepaid expenses
|
2,677,608
|
|
|
(1,195,029
|
)
|
||
Inventories
|
1,008,749
|
|
|
(1,116,401
|
)
|
||
Severance pay, net
|
136,914
|
|
|
(12,886
|
)
|
||
Trade payables
|
1,439,873
|
|
|
319,488
|
|
||
Other accounts payable and accrued expenses
|
(335,589
|
)
|
|
(1,068,136
|
)
|
||
Contract liabilities
|
450,186
|
|
|
(264,212
|
)
|
||
Net cash (used in) provided by operating activities
|
$
|
(594,748
|
)
|
|
$
|
3,382,482
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of property and equipment
|
$
|
(2,124,469
|
)
|
|
$
|
(1,342,060
|
)
|
Additions to capitalized software
|
(1,385,406
|
)
|
|
(406,147
|
)
|
||
Net cash used in investing activities
|
$
|
(3,509,875
|
)
|
|
$
|
(1,748,207
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Proceeds from long term debt
|
1,917,577
|
|
|
—
|
|
||
Repayment of long term debt
|
(1,642,400
|
)
|
|
(1,689,895
|
)
|
||
Other financing activities
|
(118,649
|
)
|
|
(54,155
|
)
|
||
Change in short term bank credit
|
4,834,424
|
|
|
(317,730
|
)
|
||
Net cash provided by (used in) financing activities
|
$
|
4,990,952
|
|
|
$
|
(2,061,780
|
)
|
INCREASE (DECREASE) IN CASH, RESTRICTED CASH, AND CASH EQUIVALENTS
|
$
|
886,329
|
|
|
$
|
(427,505
|
)
|
CASH DIFFERENCES DUE TO EXCHANGE RATE DIFFERENCES
|
$
|
23,294
|
|
|
$
|
120,939
|
|
CASH, RESTRICTED CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
|
$
|
4,444,958
|
|
|
$
|
5,488,754
|
|
CASH, RESTRICTED CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
|
$
|
5,354,581
|
|
|
$
|
5,182,188
|
|
|
Common stock
|
|
Additional
paid-in capital |
|
Accumulated deficit
|
|
Notes
receivable from stockholders |
|
Accumulated
other comprehensive income |
|
Total
stockholders’ equity |
||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|||||||||||||||||||
Balance as of January 1, 2019
|
26,486,152
|
|
|
$
|
264,862
|
|
|
$
|
251,551,001
|
|
|
$
|
(176,498,057
|
)
|
|
$
|
(908,054
|
)
|
|
$
|
2,365,965
|
|
|
$
|
76,775,717
|
|
|
Stock based compensation
|
—
|
|
|
—
|
|
|
291,023
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
291,023
|
|
|||||||
Restricted stock issued
|
71,780
|
|
|
718
|
|
|
(718
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Restricted stock units vested, net of taxes
|
112,775
|
|
|
1,128
|
|
|
(114,049
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(112,921
|
)
|
|||||||
Restricted stock forfeitures
|
(5,467
|
)
|
|
(55
|
)
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67,270
|
|
|
67,270
|
|
|||||||
Net Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,078,060
|
)
|
|
—
|
|
|
—
|
|
|
(1,078,060
|
)
|
|||||||
Balance as of September 30, 2019
|
26,665,240
|
|
|
$
|
266,653
|
|
|
$
|
251,727,312
|
|
|
$
|
(177,576,117
|
)
|
|
$
|
(908,054
|
)
|
|
$
|
2,433,235
|
|
|
$
|
75,943,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance as of July l, 2019
|
26,665,240
|
|
|
$
|
266,653
|
|
|
$
|
251,638,418
|
|
|
$
|
(177,512,794
|
)
|
|
$
|
(908,054
|
)
|
|
$
|
2,433,235
|
|
|
$
|
75,917,458
|
|
|
Stock based compensation
|
—
|
|
|
—
|
|
|
88,894
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88,894
|
|
|||||||
Net Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(63,323
|
)
|
|
—
|
|
|
—
|
|
|
(63,323
|
)
|
|||||||
Balance as of September 30, 2019
|
26,665,240
|
|
|
$
|
266,653
|
|
|
$
|
251,727,312
|
|
|
$
|
(177,576,117
|
)
|
|
$
|
(908,054
|
)
|
|
$
|
2,433,235
|
|
|
$
|
75,943,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance as of January 1, 2018
|
26,395,048
|
|
|
$
|
263,951
|
|
|
$
|
250,826,873
|
|
|
$
|
(178,368,012
|
)
|
|
$
|
(908,054
|
)
|
|
$
|
2,479,205
|
|
|
$
|
74,293,963
|
|
|
Stock based compensation
|
—
|
|
|
—
|
|
|
491,654
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
491,654
|
|
|||||||
Restricted stock issued
|
86,900
|
|
|
869
|
|
|
(869
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Restricted stock units vested, net of taxes
|
50,247
|
|
|
502
|
|
|
(54,657
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(54,155
|
)
|
|||||||
Restricted stock forfeitures
|
(46,043
|
)
|
|
(460
|
)
|
|
460
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66,162
|
)
|
|
(66,162
|
)
|
|||||||
Net Income
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
1,419,627
|
|
|
—
|
|
|
—
|
|
|
1,419,627
|
|
||||||
Balance as of September 30, 2018
|
26,486,152
|
|
|
$
|
264,862
|
|
|
$
|
251,263,461
|
|
|
$
|
(176,948,385
|
)
|
|
$
|
(908,054
|
)
|
|
$
|
2,413,043
|
|
|
$
|
76,084,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance as of July 1, 2018
|
26,486,152
|
|
|
$
|
264,862
|
|
|
$
|
250,962,076
|
|
|
$
|
(177,688,941
|
)
|
|
$
|
(908,054
|
)
|
|
$
|
2,399,943
|
|
|
$
|
75,029,886
|
|
|
Stock based compensation
|
—
|
|
|
—
|
|
|
301,385
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
301,385
|
|
|||||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,100
|
|
|
13,100
|
|
|||||||
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
740,556
|
|
|
—
|
|
|
—
|
|
|
740,556
|
|
|||||||
Balance as of September 30, 2018
|
26,486,152
|
|
|
$
|
264,862
|
|
|
$
|
251,263,461
|
|
|
$
|
(176,948,385
|
)
|
|
$
|
(908,054
|
)
|
|
$
|
2,413,043
|
|
|
$
|
76,084,927
|
|
|
|
Nine months ended September 30,
|
|
Three months ended September 30,
|
||||
|
|
2019
|
|
2019
|
||||
Operating lease cost
|
|
$
|
840,672
|
|
|
$
|
280,180
|
|
|
|
|
|
|
||||
Finance lease cost:
|
|
|
|
|
||||
Amortization of right-of-use assets
|
|
$
|
9,498
|
|
|
$
|
3,166
|
|
Interest on lease liabilities
|
|
2,432
|
|
|
828
|
|
||
Total finance lease costs
|
|
$
|
11,930
|
|
|
$
|
3,994
|
|
|
|
|
|
|
||||
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
||||
Operating leases
|
|
$
|
2,951,253
|
|
|
$
|
165,809
|
|
Finance leases
|
|
31,386
|
|
|
—
|
|
|
|
September 30, 2019
|
||
Operating Leases:
|
|
|
||
Right of use asset
|
|
$
|
5,887,243
|
|
|
|
|
||
Current portion of lease obligations
|
|
628,294
|
|
|
Long term portion of lease obligations
|
|
5,569,696
|
|
|
Total operating lease obligations
|
|
6,197,990
|
|
|
|
|
|
||
Financing Leases:
|
|
|
||
Property and Equipment, at cost
|
|
56,933
|
|
|
Accumulated depreciation
|
|
(11,627
|
)
|
|
Property and Equipment, net
|
|
45,306
|
|
|
|
|
|
||
Other accounts payable and accrued expenses
|
|
11,834
|
|
|
Other long term liabilities
|
|
34,513
|
|
|
Total financing lease liabilities
|
|
$
|
46,347
|
|
|
|
|
||
Weighted Average Remaining Lease Term
|
|
|
||
Operating leases
|
|
10 years
|
|
|
Finance leases
|
|
4 years
|
|
|
|
|
|
||
Weighted Average Discount Rate
|
|
|
||
Operating leases
|
|
7.47
|
%
|
|
Finance leases
|
|
6.86
|
%
|
Year Ending December 31,
|
|
Operating Leases
|
|
Finance Leases
|
||||
2019 (excluding the nine months ended September 30, 2019)
|
|
$
|
270,232
|
|
|
$
|
3,666
|
|
2020
|
|
1,106,585
|
|
|
14,664
|
|
||
2021
|
|
901,267
|
|
|
14,664
|
|
||
2022
|
|
875,177
|
|
|
12,276
|
|
||
2023
|
|
769,041
|
|
|
7,500
|
|
||
Thereafter
|
|
5,622,703
|
|
|
—
|
|
||
Total future minimum lease payments
|
|
9,545,005
|
|
|
52,770
|
|
||
Less imputed interest
|
|
(3,347,015
|
)
|
|
(6,423
|
)
|
||
Total:
|
|
$
|
6,197,990
|
|
|
$
|
46,347
|
|
•
|
Identification of the contract, or contracts, with a customer
|
•
|
Identification of the performance obligations within the contract
|
•
|
Determination of the transaction price
|
•
|
Allocation of the transaction price to the performance obligations within the contract
|
•
|
Recognition of revenue when, or as the performance obligation has been satisfied
|
|
Nine months ended September 30,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
|
Training and Simulation Division
|
|
Power Systems Division
|
|
Training and Simulation Division
|
|
Power Systems Division
|
||||||||
Net income (loss)
|
$
|
974,067
|
|
|
$
|
723,271
|
|
|
$
|
449,580
|
|
|
$
|
77,403
|
|
|
Three months ended September 30,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
|
Training and Simulation Division
|
|
Power Systems Division
|
|
Training and Simulation Division
|
|
Power Systems Division
|
||||||||
Net income (loss)
|
$
|
283,691
|
|
|
$
|
489,321
|
|
|
$
|
(139,016
|
)
|
|
$
|
320,269
|
|
|
Nine months ended September 30,
|
|
Three months ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Product Revenue
|
|
|
|
|
|
|
|
||||||||
Air Warfare Simulation
|
$
|
10,528,294
|
|
|
$
|
13,324,429
|
|
|
$
|
3,421,823
|
|
|
$
|
3,667,058
|
|
Vehicle Simulation
|
21,770,017
|
|
|
17,040,554
|
|
|
6,922,146
|
|
|
6,040,922
|
|
||||
Use-of-Force
|
8,776,417
|
|
|
10,677,612
|
|
|
3,379,033
|
|
|
4,132,059
|
|
||||
Service Revenue
|
|
|
|
|
|
|
|
||||||||
Warranty
|
3,177,873
|
|
|
2,533,558
|
|
|
1,170,809
|
|
|
825,863
|
|
||||
Total Training and Simulation Division
|
$
|
44,252,601
|
|
|
$
|
43,576,153
|
|
|
$
|
14,893,811
|
|
|
$
|
14,665,902
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Contract Manufacturing
|
$
|
11,026,100
|
|
|
$
|
10,130,597
|
|
|
$
|
4,181,902
|
|
|
$
|
3,100,586
|
|
Power Distribution and Generation
|
691,063
|
|
|
5,695,039
|
|
|
360,278
|
|
|
1,413,117
|
|
||||
Batteries
|
6,677,842
|
|
|
9,767,890
|
|
|
2,144,104
|
|
|
3,118,375
|
|
||||
Engineering Services and Other
|
4,971,328
|
|
|
3,797,917
|
|
|
1,993,636
|
|
|
1,546,497
|
|
||||
Total Power Division
|
$
|
23,366,333
|
|
|
$
|
29,391,443
|
|
|
$
|
8,679,920
|
|
|
$
|
9,178,575
|
|
|
Nine months ended September 30,
|
|
Three months ended September 30,
|
||||||||
Type of Revenue
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Sale of products
|
92.3
|
%
|
|
95.0
|
%
|
|
92.3
|
%
|
|
94.5
|
%
|
Maintenance and support agreements
|
4.7
|
%
|
|
3.5
|
%
|
|
5.0
|
%
|
|
3.5
|
%
|
Long term research and development contracts
|
3.0
|
%
|
|
1.5
|
%
|
|
2.7
|
%
|
|
2.0
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Training and
Simulation
Division
|
|
Power Systems
Division
|
||||
Nine months ended September 30, 2019
|
|
|
|
||||
Fixed Price
|
$
|
35,442,918
|
|
|
$
|
22,346,111
|
|
Cost Reimbursement (Cost Plus)
|
4,773,406
|
|
|
478,957
|
|
||
Time and Materials
|
4,036,277
|
|
|
541,265
|
|
||
Total
|
$
|
44,252,601
|
|
|
$
|
23,366,333
|
|
Nine months ended September 30, 2018
|
|
|
|
||||
Fixed Price
|
$
|
35,975,495
|
|
|
$
|
26,807,005
|
|
Cost Reimbursement (Cost Plus)
|
4,120,987
|
|
|
1,822,659
|
|
||
Time and Materials
|
3,479,671
|
|
|
761,779
|
|
||
Total
|
$
|
43,576,153
|
|
|
$
|
29,391,443
|
|
Three months ended September 30, 2019
|
|
|
|
||||
Fixed Price
|
$
|
11,888,617
|
|
|
$
|
8,455,355
|
|
Cost Reimbursement (Cost Plus)
|
1,996,293
|
|
|
45,376
|
|
||
Time and Materials
|
1,008,901
|
|
|
179,189
|
|
||
Total
|
$
|
14,893,811
|
|
|
$
|
8,679,920
|
|
Three months ended September 30, 2018
|
|
|
|
||||
Fixed Price
|
$
|
11,948,500
|
|
|
$
|
8,372,521
|
|
Cost Reimbursement (Cost Plus)
|
1,511,711
|
|
|
567,767
|
|
||
Time and Materials
|
1,205,691
|
|
|
238,287
|
|
||
Total
|
$
|
14,665,902
|
|
|
$
|
9,178,575
|
|
|
Training and
Simulation
Division
|
|
Power Systems
Division
|
||||
Nine months ended September 30, 2019
|
|
|
|
||||
U.S. Government
|
|
|
|
||||
Department of Defense (DoD)
|
$
|
13,364,239
|
|
|
$
|
818,070
|
|
Non-DoD
|
10,146,377
|
|
|
—
|
|
||
Foreign Military Sales (FMS)
|
2,531,338
|
|
|
—
|
|
||
Total U.S. Government
|
$
|
26,041,954
|
|
|
$
|
818,070
|
|
|
|
|
|
||||
U.S. Commercial
|
$
|
15,574,732
|
|
|
$
|
11,443,706
|
|
Non-U.S. Government
|
613,356
|
|
|
728,931
|
|
||
Non-U.S. Commercial
|
2,022,559
|
|
|
10,375,626
|
|
||
Total Revenue
|
$
|
44,252,601
|
|
|
$
|
23,366,333
|
|
Nine months ended September 30, 2018
|
|
|
|
||||
U.S. Government
|
|
|
|
||||
Department of Defense (DoD)
|
$
|
12,399,861
|
|
|
$
|
2,115,108
|
|
Non-DoD
|
7,655,130
|
|
|
—
|
|
||
Foreign Military Sales (FMS)
|
2,055,333
|
|
|
—
|
|
||
Total U.S. Government
|
22,110,324
|
|
|
2,115,108
|
|
||
|
|
|
|
||||
U.S. Commercial
|
$
|
16,546,210
|
|
|
$
|
16,159,067
|
|
Non-U.S. Government
|
1,786,538
|
|
|
2,003,417
|
|
||
Non-U.S. Commercial
|
3,133,081
|
|
|
9,113,851
|
|
||
Total Revenue
|
$
|
43,576,153
|
|
|
$
|
29,391,443
|
|
Three months ended September 30, 2019
|
|
|
|
||||
U.S. Government
|
|
|
|
||||
Department of Defense (DoD)
|
$
|
3,749,868
|
|
|
$
|
338,076
|
|
Non-DoD
|
3,758,068
|
|
|
—
|
|
||
Foreign Military Sales (FMS)
|
950,843
|
|
|
—
|
|
||
Total U.S. Government
|
$
|
8,458,779
|
|
|
$
|
338,076
|
|
|
|
|
|
||||
U.S. Commercial
|
$
|
5,565,858
|
|
|
$
|
4,461,350
|
|
Non-U.S. Government
|
145,368
|
|
|
270,957
|
|
||
Non-U.S. Commercial
|
723,806
|
|
|
3,609,537
|
|
||
Total Revenue
|
$
|
14,893,811
|
|
|
$
|
8,679,920
|
|
Three months ended September 30, 2018
|
|
|
|
||||
U.S. Government
|
|
|
|
||||
Department of Defense (DoD)
|
$
|
4,753,006
|
|
|
$
|
772,751
|
|
Non-DoD
|
3,272,251
|
|
|
—
|
|
||
Foreign Military Sales (FMS)
|
341,933
|
|
|
—
|
|
||
Total U.S. Government
|
$
|
8,367,190
|
|
|
$
|
772,751
|
|
|
|
|
|
||||
U.S. Commercial
|
$
|
4,744,148
|
|
|
$
|
4,669,493
|
|
Non-U.S. Government
|
394,091
|
|
|
180,253
|
|
||
Non-U.S. Commercial
|
1,160,473
|
|
|
3,556,078
|
|
||
Total Revenue
|
$
|
14,665,902
|
|
|
$
|
9,178,575
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Training and Simulation Division
|
|
Power Systems Division
|
|
Total
|
|
Training and Simulation Division
|
|
Power Systems Division
|
|
Total
|
||||||||||||
Contract Assets - Current
|
$
|
16,259,646
|
|
|
$
|
8,711,293
|
|
|
$
|
24,970,939
|
|
|
$
|
10,358,679
|
|
|
$
|
7,509,217
|
|
|
$
|
17,867,896
|
|
Contract Liabilities - Current
|
(7,222,968
|
)
|
|
(281,997
|
)
|
|
(7,504,965
|
)
|
|
(6,697,522
|
)
|
|
(357,257
|
)
|
|
(7,054,779
|
)
|
||||||
Net Contract Assets and Liabilities:
|
$
|
9,036,678
|
|
|
$
|
8,429,296
|
|
|
$
|
17,465,974
|
|
|
$
|
3,661,157
|
|
|
$
|
7,151,960
|
|
|
$
|
10,813,117
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Raw and packaging materials
|
$
|
7,496,211
|
|
|
$
|
7,912,883
|
|
Work in progress
|
958,912
|
|
|
1,626,960
|
|
||
Finished products
|
450,406
|
|
|
372,905
|
|
||
Total:
|
$
|
8,905,529
|
|
|
$
|
9,912,748
|
|
|
Training and
Simulation Division |
|
Power Systems
Division |
|
Corporate
Expenses |
|
Total
Company |
||||||||
Nine months ended September 30, 2019
|
|
|
|
|
|
|
|
||||||||
Revenues from outside customers
|
$
|
44,252,601
|
|
|
$
|
23,366,333
|
|
|
$
|
—
|
|
|
$
|
67,618,934
|
|
Depreciation and amortization(1)
|
(581,466
|
)
|
|
(1,884,194
|
)
|
|
—
|
|
|
(2,465,660
|
)
|
||||
Direct expenses(2)
|
(35,677,099
|
)
|
|
(25,234,110
|
)
|
|
(3,740,107
|
)
|
|
(64,651,316
|
)
|
||||
Segment operating income (loss)
|
$
|
7,994,036
|
|
|
$
|
(3,751,971
|
)
|
|
$
|
(3,740,107
|
)
|
|
$
|
501,958
|
|
Total other expense
|
(178,868
|
)
|
|
(207,986
|
)
|
|
(689,117
|
)
|
|
(1,075,971
|
)
|
||||
Income tax expense
|
(154,496
|
)
|
|
11,359
|
|
|
(360,910
|
)
|
|
(504,047
|
)
|
||||
Net income (loss)
|
$
|
7,660,672
|
|
|
$
|
(3,948,598
|
)
|
|
$
|
(4,790,134
|
)
|
|
$
|
(1,078,060
|
)
|
Segment assets(3)(4)
|
$
|
63,077,725
|
|
|
$
|
63,687,157
|
|
|
$
|
4,129,028
|
|
|
$
|
130,893,910
|
|
Additions to long-lived assets
|
$
|
1,481,270
|
|
|
$
|
1,645,850
|
|
|
$
|
382,755
|
|
|
$
|
3,509,875
|
|
Nine months ended September 30, 2018
|
|
|
|
|
|
|
|
||||||||
Revenues from outside customers
|
$
|
43,576,153
|
|
|
$
|
29,391,443
|
|
|
$
|
—
|
|
|
$
|
72,967,596
|
|
Depreciation and amortization(1)
|
(605,195
|
)
|
|
(2,159,094
|
)
|
|
—
|
|
|
(2,764,289
|
)
|
||||
Direct expenses(2)
|
(34,352,017
|
)
|
|
(30,103,527
|
)
|
|
(2,987,017
|
)
|
|
(67,442,561
|
)
|
||||
Segment operating income (loss)
|
$
|
8,618,941
|
|
|
$
|
(2,871,178
|
)
|
|
$
|
(2,987,017
|
)
|
|
$
|
2,760,746
|
|
Total other expense
|
(178,011
|
)
|
|
11,513
|
|
|
(523,856
|
)
|
|
(690,354
|
)
|
||||
Income tax expense
|
(144,221
|
)
|
|
—
|
|
|
(506,544
|
)
|
|
(650,765
|
)
|
||||
Net income (loss)
|
$
|
8,296,709
|
|
|
$
|
(2,859,665
|
)
|
|
$
|
(4,017,417
|
)
|
|
$
|
1,419,627
|
|
Segment assets(3)
|
$
|
54,996,173
|
|
|
$
|
57,639,253
|
|
|
$
|
3,116,700
|
|
|
$
|
115,752,126
|
|
Additions to long-lived assets
|
$
|
965,651
|
|
|
$
|
782,556
|
|
|
$
|
—
|
|
|
$
|
1,748,207
|
|
Three months ended September 30, 2019
|
|
|
|
|
|
|
|
||||||||
Revenues from outside customers
|
$
|
14,893,811
|
|
|
$
|
8,679,920
|
|
|
$
|
—
|
|
|
$
|
23,573,731
|
|
Depreciation and amortization(1)
|
(199,002
|
)
|
|
(603,889
|
)
|
|
—
|
|
|
(802,891
|
)
|
||||
Direct expenses(2)
|
(11,779,536
|
)
|
|
(8,682,002
|
)
|
|
(1,788,817
|
)
|
|
(22,250,355
|
)
|
||||
Segment operating income (loss)
|
2,915,273
|
|
|
(605,971
|
)
|
|
(1,788,817
|
)
|
|
520,485
|
|
||||
Total other expense
|
(59,495
|
)
|
|
(76,749
|
)
|
|
(260,779
|
)
|
|
(397,023
|
)
|
||||
Income tax expense
|
(59,896
|
)
|
|
11,359
|
|
|
(138,248
|
)
|
|
(186,785
|
)
|
||||
Net income (loss)
|
$
|
2,795,882
|
|
|
$
|
(671,361
|
)
|
|
$
|
(2,187,844
|
)
|
|
$
|
(63,323
|
)
|
Three months ended September 30, 2018
|
|
|
|
|
|
|
|
||||||||
Revenues from outside customers
|
$
|
14,665,902
|
|
|
$
|
9,178,575
|
|
|
$
|
—
|
|
|
$
|
23,844,477
|
|
Depreciation, amortization and impairment expenses(1)
|
(208,055
|
)
|
|
(688,935
|
)
|
|
—
|
|
|
(896,990
|
)
|
||||
Direct expenses(2)
|
(11,507,506
|
)
|
|
(9,174,676
|
)
|
|
(1,122,503
|
)
|
|
(21,804,685
|
)
|
||||
Segment operating income (loss)
|
$
|
2,950,341
|
|
|
$
|
(685,036
|
)
|
|
$
|
(1,122,503
|
)
|
|
$
|
1,142,802
|
|
Total other expense
|
(45,865
|
)
|
|
14,340
|
|
|
(143,341
|
)
|
|
(174,866
|
)
|
||||
Income tax expense
|
(82,670
|
)
|
|
—
|
|
|
(144,710
|
)
|
|
(227,380
|
)
|
||||
Net income (loss)
|
$
|
2,821,806
|
|
|
$
|
(670,696
|
)
|
|
$
|
(1,410,554
|
)
|
|
$
|
740,556
|
|
(1)
|
Includes depreciation of property and equipment and amortization expenses of intangible assets.
|
(2)
|
Including, inter alia, sales and marketing, general and administrative.
|
(3)
|
Out of those amounts, goodwill in the Company’s Training and Simulation Division and Power Systems Division totaled $24,435,641 and $21,702,395, respectively, as of September 30, 2019 and 2018.
|
(4)
|
Out of those amounts, right-of-use assets for the Company’s Training and Simulation Division and Power Systems Division totaled $558,501and $5,328,742, respectively, as of September 30, 2019.
|
|
|
|
|
|
September 30, 2019
|
||||||
|
Maturity
|
|
Effective Interest Rate
|
|
Current
|
|
Long Term
|
||||
Debt:
|
|
|
|
|
|
|
|
||||
Revolver
|
March 11, 2021
|
|
5.75%
|
|
$
|
7,334,840
|
|
|
$
|
—
|
|
Revolver B
|
February 28, 2020
|
|
5.50%
|
|
3,000,000
|
|
|
—
|
|
||
Term Loan A
|
March 11, 2021
|
|
6.00%
|
|
2,416,667
|
|
|
1,739,625
|
|
||
Term Loan B & C
|
June 1, 2024
|
|
6.00%
|
|
154,464
|
|
|
2,574,015
|
|
||
Leumi
|
September 20, 2024
|
|
3.44%
|
|
339,463
|
|
|
1,357,850
|
|
||
Other Debt (1)
|
|
|
|
|
73,311
|
|
|
185,004
|
|
||
Total Debt
|
|
|
|
|
$
|
13,318,745
|
|
|
$
|
5,856,494
|
|
(1)
|
Other Debt includes various debt instruments that have maturities up to March 20, 2024 with varying interest rates between 2.75% and 3.6%.
|
|
|
|
|
|
December 31, 2018
|
||||||
|
Maturity
|
|
Effective Interest Rate
|
|
Current
|
|
Long Term
|
||||
Debt:
|
|
|
|
|
|
|
|
||||
Revolver
|
March 11, 2021
|
|
5.50%
|
|
$
|
5,500,416
|
|
|
$
|
—
|
|
Term Loan A
|
March 11, 2021
|
|
5.75%
|
|
2,000,000
|
|
|
3,656,291
|
|
||
Term Loan B & C
|
June 1, 2024
|
|
5.75%
|
|
154,464
|
|
|
2,689,863
|
|
||
Other Debt (1)
|
|
|
|
|
50,189
|
|
|
14,415
|
|
||
Total Debt
|
|
|
|
|
$
|
7,705,069
|
|
|
$
|
6,360,569
|
|
(1)
|
Other Debt includes various debt instruments that have maturities that range from February 3, 2019 to June 28, 2020 with an interest rate of 3.6%.
|
|
Nine months ended
September 30,
|
|
Three months ended
September 30,
|
||||||||
Type of Revenue
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Sale of products
|
92.3
|
%
|
|
95.0
|
%
|
|
92.3
|
%
|
|
94.5
|
%
|
Maintenance and support agreements
|
4.7
|
%
|
|
3.5
|
%
|
|
5.0
|
%
|
|
3.5
|
%
|
Long term research and development contracts
|
3.0
|
%
|
|
1.5
|
%
|
|
2.7
|
%
|
|
2.0
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
•
|
the impairment of our ability to attract, retain, and motivate our employees, including key personnel;
|
•
|
the diversion of significant management time and resources towards the completion of the proposed Merger;
|
•
|
difficulties maintaining relationships with customers, suppliers, and other business partners;
|
•
|
delays or deferments of certain business decisions by our customers, suppliers, and other business partners;
|
•
|
the inability to pursue alternative business opportunities or make appropriate changes to our business because the Merger Agreement requires us to conduct our business in the ordinary course of business consistent with past practice and not engage in certain kinds of transactions prior to the completion of the proposed Merger. The restrictions may prevent us from pursuing otherwise attractive business opportunities and taking other actions with respect to our business that we may consider advantageous and result in our inability to respond effectively to competitive pressures and industry developments, and may otherwise harm our business and operations;
|
•
|
the Merger may not be consummated within the expected time period or at all because of a number of factors, including the failure to obtain stockholder approval; the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; or the failure to satisfy closing conditions to the Merger, and other customary closing conditions;
|
•
|
the risk that if the proposed Merger is not completed, the market price of our common stock could decline, investor confidence could decline, stockholder litigation could be brought against us, relationships with customers, suppliers and other business partners may be adversely impacted, and profitability may be adversely impacted due to costs incurred in connection with the proposed Merger;
|
•
|
the risk that the Merger Agreement may be terminated in circumstances that require us to pay a termination fee and expenses in an amount up to $3.2 million
|
•
|
litigation relating to the proposed Merger and the costs related thereto; and
|
•
|
the incurrence of significant costs, expenses, and fees for professional services and other transaction costs in connection with the proposed Merger.
|
Exhibit Number
|
|
Description
|
|
10.1
|
|
Incorporated by Reference
|
|
10.1.1
|
|
Incorporated by Reference
|
|
10.1.2
|
|
Incorporated by Reference
|
|
10.1.3
|
|
Incorporated by Reference
|
|
10.1.4
|
|
Incorporated by Reference
|
|
10.1.5
|
|
Filed Herewith
|
|
10.2
|
|
Incorporated by Reference
|
|
10.3
|
|
Incorporated by Reference
|
|
10.4
|
|
Incorporated by Reference
|
|
31.1
|
|
Filed Herewith
|
|
31.2
|
|
Filed Herewith
|
|
32.1
|
|
Furnished with this Report
|
|
32.2
|
|
Furnished with this Report
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
Filed Herewith
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
Filed Herewith
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
Filed Herewith
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Filed Herewith
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
Filed Herewith
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
Filed Herewith
|
|
AROTECH CORPORATION
|
|||
|
|
|||
|
|
|||
|
By:
|
/s/ Dean M. Krutty
|
|
|
|
|
Name:
|
Dean M. Krutty
|
|
|
|
Title:
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
By:
|
/s/ Kelli L. Kellar
|
|
|
|
|
Name:
|
Kelli L. Kellar
|
|
|
|
Title:
|
Vice President – Finance and CFO
|
|
|
|
|
(Principal Financial Officer)
|
|
1 Year Arotech Chart |
1 Month Arotech Chart |
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