UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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OMB APPROVAL
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OMB Number:
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3235-0063
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Expires:
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March 31, 2017
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Estimated average burden hours per response
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2,003.78
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Delaware
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95-4302784
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1229 Oak Valley Drive, Ann Arbor, Michigan
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48108
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(Address of principal executive offices)
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(Zip Code)
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(800) 281-0356
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(Registrant’s telephone number, including area code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.01 par value
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The Nasdaq Stock Market LLC
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Large accelerated filer:
☐
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Accelerated filer:
☒
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Non-accelerated filer:
☐
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Smaller reporting company:
☐
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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.
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PART I
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Page
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ITEM 1.
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4
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ITEM 1A.
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12
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ITEM 1B.
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20
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ITEM 2.
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21
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ITEM 3.
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21
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ITEM 4.
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21
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PART II
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ITEM 5.
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22
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ITEM 6.
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23
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ITEM 7.
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25
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ITEM 7A.
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35
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ITEM 8.
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35
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ITEM 9.
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36
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ITEM 9A.
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36
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ITEM 9B.
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37
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PART III
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ITEM 10.
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38
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ITEM 11.
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45
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ITEM 12.
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56
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ITEM 13.
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57
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ITEM 14.
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58
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PART IV
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ITEM 15.
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59
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ITEM 16.
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60
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61
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☐ |
We develop, manufacture and market advanced high-tech multimedia and interactive digital solutions for engineering, use-of-force training and operator training of military, law enforcement, security, emergency services and other personnel through our
Training and Simulation Division
:
|
● |
We provide interactive operator training systems featuring state-of-the-art vehicle simulator technology enabling training and research in situation awareness, risk analysis and decision-making, emergency reaction and avoidance procedures, conscientious equipment operation, and crew coordination;
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● |
We provide aircrew decision making support software, part-task aircraft simulators, and simulated weapon models to support military operations and aircrew training to the United States and foreign militaries; and
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● |
Under the trade name MILO Range™ (“MILO Range”), we provide specialized “use-of-force” and judgment skills training systems for police, security personnel and the military to train their personnel in safe, productive, and realistic environments; and.
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● |
Under the trade name Realtime Technologies (“Realtime”), we provide consulting and development support for engineering and research simulation solutions.
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☐ |
We provide advanced battery solutions, innovative energy management and power distribution technologies and world-class product design and manufacturing services for the aerospace, defense, law enforcement, and homeland security markets, and we manufacture and sell primary and rechargeable batteries, for defense and security products and medical and industrial applications through our
Power Systems Division
:
|
● |
We provide high-end electronics engineering and design services, system integration services, rapid prototyping, and vertically-integrated production services for military, aerospace, and industrial customers, including: (i) hybrid power generation systems, (ii) smart power subsystems for military vehicles and dismounted applications, and (iii) aircraft and missile systems support for cutting-edge weapons and communications technologies;
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● |
We develop and sell rechargeable and primary batteries and smart chargers to the military and medical markets and to private defense industry in the Middle East, Europe and Asia under our Epsilor nameplate;
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● |
We develop, manufacture and market primary batteries, rechargeable batteries and battery chargers for the military, focusing on soldier system applications that demand high energy and light weight batteries with intelligent power management and distribution; and
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● |
We produce water-activated lifejacket lights for commercial aviation and marine applications under our Electric Fuel nameplate.
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☐ |
FAAC Incorporated (“FAAC”), a Michigan corporation located in Ann Arbor, Michigan (Training and Simulation Division);
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☐ |
Epsilor-Electric Fuel Ltd. (“Epsilor-EFL”), an Israeli corporation with facilities located in Beit Shemesh, Israel (between Jerusalem and Tel-Aviv), Dimona, Israel (in Israel’s Negev desert area), and in Sderot, Israel (near the Gaza Strip) (Power Systems Division);
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☐ |
UEC Electronics, LLC (“UEC”), a South Carolina limited liability company located in Hanahan, South Carolina (Power Systems Division); and
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☐ |
Electric Fuel Battery Corporation (“EFB”), a Delaware corporation located in Hanahan, South Carolina (Power Systems Division).
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☐ |
Our
Vehicle Simulation
group provides high fidelity vehicle simulators for use in operator/crew training and research applications;
|
☐ |
Our
Air Warfare Simulations
group provides weapon simulations used to train military pilots, weapon employment information used in the effective use of air launched weapons, and part-task simulators to train aircrew; and
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☐ |
Our
Use of Force
group provides training products focused on developing judgement skills necessary for the proper employment of various lethal and non-lethal options for public safety and military personnel.
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● |
We supply the United States Marine Corps (“USMC”) with its program of record Ground Renewable Expeditionary Energy Network Systems (“GREENS”), a renewable power generation, intelligent energy storage and distribution system for troops serving in austere environments. GREENS is the only DoD Program of Record for renewable power generation. We also offer a commercial (not-ITAR restricted) version of this product, targeting both domestic and international markets where clean, reliable power in austere, rugged environments is a critical need.
|
● |
We have supplied the USMC with Mobile Hybrid Expeditionary Energy System (“MHEES”), a product that incorporates both solar collection and high density battery technologies to intelligently reduce run time and optimize efficiency of tactical generators. This single system is scalable to 3.5kW, 7kW and 10.5kW output, making it an ideal solution for multiple military missions. We are currently under contract with Marine Corps Systems Command to develop and deliver the next-generation of MHHES, known as Mobile Electric Hybrid Power Sources (“MEHPS”). MEHPS is a modular, scalable system capable of delivering clean, reliable three-phase power in a 5kW dismounted configuration as well as 10kW and 15kW trailer mounted configurations.
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● |
We have designed and continue to refine a proprietary Distributed Power Control and Management System (DPCMS) that replaces electrical systems on aging tactical vehicles such at the Light Armored Vehicle (LAV) and Amphibious Assault Vehicle (AAV). This power management and distribution system enables vehicles that have already exceeded the OEM’s recommended life to be refurbished and to take advantage of new automotive communication protocols J-1939. These refurbishments permit aging tactical vehicle fleets to function as a new vehicle, without the cost implications of replacing it with a new vehicle. This system has been successfully tested on LAVs by the USMC and UEC is currently under contract with the USMC to design and integrate the DPCMS system into multiple variants of the AAV.
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● |
We have developed significant expertise and past performance qualifications in the area of solutions for Command, Control, Communications, Computers Intelligence, Surveillance and Reconnaissance (C4ISR), providing these solutions to, among others, SPAWAR and Raytheon.
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Division
|
2016
|
2015
|
2014
|
|||||||||
Training and Simulation Division
|
$
|
18,790,000
|
$
|
29,772,000
|
$
|
45,731,000
|
||||||
Power Systems Division
|
36,584,000
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33,248,000
|
24,175,000
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|||||||||
TOTAL:
|
$
|
55,374,000
|
$
|
63,020,000
|
$
|
69,906,000
|
● |
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
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● |
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.
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● |
the U.S. Federal Acquisition Regulations, which regulate the formation, administration and performance of government contracts;
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● |
the U.S. Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with contract negotiations; and
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● |
the U.S. Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based government contracts.
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● |
announcements by us, our competitors, or our customers;
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● |
the introduction of new or enhanced products and services by us or our competitors;
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● |
changes in the perceived ability to commercialize our technology compared to that of our competitors;
|
● |
rumors relating to our competitors or us;
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● |
actual or anticipated fluctuations in our operating results;
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● |
the issuance of our securities, including warrants, in connection with financings and acquisitions; and
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● |
general market or economic conditions.
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● |
divide our board of directors into three classes serving staggered three-year terms;
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● |
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
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● |
allow us to issue preferred stock without any vote or further action by the stockholders.
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Year Ended December 31, 2016
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High
|
Low
|
||||||
Fourth Quarter
|
$
|
4.35
|
$
|
2.25
|
||||
Third Quarter
|
$
|
3.35
|
$
|
2.55
|
||||
Second Quarter
|
$
|
4.13
|
$
|
2.35
|
||||
First Quarter
|
$
|
2.88
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$
|
1.92
|
Year Ended December 31, 2015
|
High
|
Low
|
||||||
Fourth Quarter
|
$
|
2.31
|
$
|
1.27
|
||||
Third Quarter
|
$
|
2.48
|
$
|
1.11
|
||||
Second Quarter
|
$
|
3.26
|
$
|
2.39
|
||||
First Quarter
|
$
|
3.74
|
$
|
2.18
|
|
12/11
|
12/12
|
12/13
|
12/14
|
12/15
|
12/16
|
||||||||||||||||||
Arotech Corporation
|
100.00
|
85.83
|
290.83
|
193.33
|
170.00
|
291.67
|
||||||||||||||||||
Russell MicroCap
|
100.00
|
119.75
|
174.37
|
180.73
|
171.41
|
206.32
|
||||||||||||||||||
Peer Group
|
100.00
|
115.55
|
151.21
|
126.50
|
97.75
|
149.24
|
(1) |
The Peer Group Index is comprised of the following companies: Kratos Defense & Security Solutions, Inc., VirTra Systems, Inc., Highpower International, Inc., and KVH Industries, Inc. The returns of each company have been weighted according to their respective stock market capitalization for purposes of arriving at a peer group average.
|
|
Year Ended December 31,
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||||||||||||||||||
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2016
|
2015
|
2014
|
2013
|
2012
|
||||||||||||||
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(dollars in thousands, except per share data)
|
||||||||||||||||||
Statement of Comprehensive Income Data:
|
|||||||||||||||||||
|
|||||||||||||||||||
Revenues
|
$
|
92,975
|
$
|
96,574
|
$
|
103,562
|
$
|
88,571
|
$
|
80,050
|
|||||||||
|
|||||||||||||||||||
Cost of revenues
|
$
|
64,825
|
$
|
68,457
|
$
|
70,855
|
$
|
64,479
|
$
|
62,140
|
|||||||||
Research and development expenses
|
$
|
2,723
|
$
|
3,075
|
$
|
2,926
|
$
|
2,956
|
$
|
2,044
|
|||||||||
Selling and marketing expenses
|
$
|
7,029
|
$
|
5,373
|
$
|
5,921
|
$
|
5,618
|
$
|
5,488
|
|||||||||
General and administrative expenses
|
$
|
15,308
|
$
|
16,339
|
$
|
17,261
|
$
|
10,887
|
$
|
10,053
|
|||||||||
Amortization of intangible assets
|
$
|
2,876
|
$
|
3,044
|
$
|
2,697
|
$
|
1,091
|
$
|
1,186
|
|||||||||
Total operating costs and expenses
|
$
|
92,761
|
$
|
96,288
|
$
|
99,660
|
$
|
85,031
|
$
|
80,911
|
|||||||||
|
|||||||||||||||||||
Operating income (loss)
|
$
|
214
|
$
|
286
|
$
|
3,902
|
$
|
3,540
|
$
|
(861
|
)
|
||||||||
|
|||||||||||||||||||
Other income (expense)
|
$
|
65
|
$
|
(24
|
)
|
$
|
2,512
|
$
|
270
|
$
|
8
|
||||||||
Financial expense, net
|
$
|
(975
|
)
|
$
|
(1,152
|
)
|
$
|
(1,507
|
)
|
$
|
(483
|
)
|
$
|
(547
|
)
|
||||
Total other income (expense)
|
$
|
(910
|
)
|
$
|
(1,176
|
)
|
$
|
1,005
|
$
|
(213
|
)
|
$
|
(539
|
)
|
|||||
Income (loss) before income tax expense
|
$
|
(696
|
)
|
$
|
(890
|
)
|
$
|
4,907
|
$
|
3,327
|
$
|
(1,400
|
)
|
||||||
|
|||||||||||||||||||
Income tax expense
|
$
|
784
|
$
|
1,161
|
$
|
1,024
|
$
|
1,053
|
$
|
628
|
|||||||||
Income (loss) from continuing operations
|
$
|
(1,480
|
)
|
$
|
(2,051
|
)
|
$
|
3,883
|
$
|
2,274
|
$
|
(2,028
|
)
|
||||||
|
|||||||||||||||||||
Basic income (loss) per share – continuing operations
|
$
|
(0.06
|
)
|
$
|
(0.08
|
)
|
$
|
0.18
|
$
|
0.13
|
$
|
(0.21
|
)
|
||||||
|
|||||||||||||||||||
Diluted net income (loss) per share – continuing operations
|
$
|
(0.06
|
)
|
$
|
(0.08
|
)
|
$
|
0.17
|
$
|
0.12
|
$
|
(0.21
|
)
|
||||||
Weighted average number of shares used in computing basic net income (loss) per share
|
25,494,097
|
23,687,733
|
21,934,532
|
16,507,848
|
14,713,583
|
||||||||||||||
Weighted average number of shares used in computing diluted net income (loss) per share
|
25,494,097
|
23,687,733
|
22,537,272
|
17,110,588
|
14,713,583
|
|
As At December 31,
|
||||||||||||||||||
|
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|||||||||||||||||||
Cash, cash equivalents, and restricted collateral deposits
|
$
|
7,400
|
$
|
10,698
|
$
|
11,528
|
$
|
6,320
|
$
|
1,767
|
|||||||||
Receivables and other assets
|
$
|
43,782
|
$
|
45,612
|
$
|
49,485
|
$
|
37,324
|
$
|
38,847
|
|||||||||
Property and equipment, net of depreciation
|
$
|
5,915
|
$
|
6,385
|
$
|
6,463
|
$
|
4,927
|
$
|
4,465
|
|||||||||
Goodwill and other intangible assets, net
|
$
|
52,313
|
$
|
54,798
|
$
|
57,263
|
$
|
32,084
|
$
|
32,801
|
|||||||||
Total assets
|
$
|
109,410
|
$
|
117,493
|
$
|
124,739
|
$
|
80,655
|
$
|
77,880
|
|||||||||
Current liabilities
|
$
|
23,761
|
$
|
26,777
|
$
|
28,117
|
$
|
18,235
|
$
|
26,473
|
|||||||||
Long-term liabilities
|
$
|
20,564
|
$
|
26,669
|
$
|
30,267
|
$
|
14,443
|
$
|
12,986
|
|||||||||
Stockholders’ equity
|
$
|
65,085
|
$
|
64,047
|
$
|
66,355
|
$
|
47,977
|
$
|
38,421
|
|||||||||
Total liabilities and stockholders’ equity
|
$
|
109,410
|
$
|
117,493
|
$
|
124,739
|
$
|
80,655
|
$
|
77,880
|
|
Year Ended December 31,
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Revenues:
|
||||||||||||
Training and Simulation Division
|
$
|
46,358,794
|
$
|
54,617,611
|
$
|
56,404,498
|
||||||
Power Systems Division
|
46,616,958
|
41,956,336
|
47,157,851
|
|||||||||
|
$
|
92,975,752
|
$
|
96,573,947
|
$
|
103,562,349
|
||||||
Cost of revenues:
|
||||||||||||
Training and Simulation Division
|
$
|
26,193,216
|
$
|
34,238,306
|
$
|
35,322,870
|
||||||
Power Systems Division
|
38,632,200
|
34,218,016
|
35,531,867
|
|||||||||
|
$
|
64,825,416
|
$
|
68,456,322
|
$
|
70,854,737
|
||||||
Research and development expenses:
|
||||||||||||
Training and Simulation Division
|
$
|
2,030,485
|
$
|
1,766,667
|
$
|
1,571,295
|
||||||
Power Systems Division
|
692,480
|
1,308,695
|
1,354,933
|
|||||||||
|
$
|
2,722,965
|
$
|
3,075,362
|
$
|
2,926,228
|
||||||
Selling and marketing expenses:
|
||||||||||||
Training and Simulation Division
|
$
|
5,517,682
|
$
|
4,796,288
|
$
|
4,800,580
|
||||||
Power Systems Division
|
1,511,408
|
577,133
|
1,120,758
|
|||||||||
|
$
|
7,029,090
|
$
|
5,373,421
|
$
|
5,921,338
|
||||||
General and administrative expenses:
|
||||||||||||
Training and Simulation Division
|
$
|
4,556,990
|
$
|
4,610,586
|
$
|
4,340,145
|
||||||
Power Systems Division
|
4,011,769
|
6,859,143
|
3,941,568
|
|||||||||
Corporate
|
6,739,702
|
4,869,298
|
8,979,645
|
|||||||||
|
$
|
15,308,461
|
$
|
16,339,027
|
$
|
17,261,358
|
||||||
Amortization of intangible assets:
|
||||||||||||
Training and Simulation Division
|
$
|
461,168
|
$
|
264,411
|
$
|
263,365
|
||||||
Power Systems Division
|
2,414,375
|
2,779,125
|
2,433,375
|
|||||||||
|
$
|
2,875,543
|
$
|
3,043,536
|
$
|
2,696,740
|
||||||
Operating income (loss):
|
||||||||||||
Training and Simulation Division
|
$
|
7,599,253
|
$
|
8,941,353
|
$
|
10,106,243
|
||||||
Power Systems Division
|
(645,274
|
)
|
(3,785,776
|
)
|
2,775,350
|
|||||||
Corporate
|
(6,739,702
|
)
|
(4,869,298
|
)
|
(8,979,645
|
)
|
||||||
|
$
|
214,277
|
$
|
286,279
|
$
|
3,901,948
|
||||||
Other income (loss):
|
||||||||||||
Training and Simulation Division
|
$
|
9,430
|
$
|
51,349
|
$
|
227,360
|
||||||
Power Systems Division
|
47,673
|
(79,030
|
)
|
200,125
|
||||||||
Corporate
|
7,729
|
3,500
|
2,085,075
|
|||||||||
|
$
|
64,832
|
$
|
(24,181
|
)
|
$
|
2,512,560
|
|||||
Financial (expense) income:
|
||||||||||||
Training and Simulation Division
|
$
|
(41,397
|
)
|
$
|
(59,791
|
)
|
$
|
(50,975
|
)
|
|||
Power Systems Division
|
(87,371
|
)
|
21,432
|
(203,902
|
)
|
|||||||
Corporate
|
(846,495
|
)
|
(1,113,762
|
)
|
(1,252,612
|
)
|
||||||
|
$
|
(975,263
|
)
|
$
|
(1,152,121
|
)
|
$
|
(1,507,489
|
)
|
|||
Income tax expense (benefit):
|
||||||||||||
Training and Simulation Division
|
$
|
(24,634
|
)
|
$
|
233,106
|
$
|
133,692
|
|||||
Power Systems Division
|
(28,507
|
)
|
–
|
(61,777
|
)
|
|||||||
Corporate
|
836,561
|
927,840
|
951,922
|
|||||||||
|
$
|
783,420
|
$
|
1,160,946
|
$
|
1,023,837
|
||||||
Net income (loss) – continuing operations:
|
||||||||||||
Training and Simulation Division
|
$
|
7,591,920
|
$
|
8,699,805
|
$
|
10,148,936
|
||||||
Power Systems Division
|
(656,465
|
)
|
(3,843,374
|
)
|
2,833,350
|
|||||||
Corporate
|
(8,415,029
|
)
|
(6,907,400
|
)
|
(9,099,104
|
)
|
||||||
|
$
|
(1,479,574
|
)
|
$
|
(2,050,969
|
)
|
$
|
3,883,182
|
|
Year Ended December 31,
|
|||||||
Type of Revenue
|
2016
|
2015
|
||||||
Sale of products
|
95.3
|
%
|
94.1
|
%
|
||||
Maintenance and support agreements
|
4.3
|
%
|
5.5
|
%
|
||||
Long term research and development contracts
|
0.4
|
%
|
0.4
|
%
|
||||
Total
|
100.0
|
%
|
100.0
|
%
|
|
Year Ended December 31,
|
|||||||
Type of Revenue
|
2015
|
2014
|
||||||
Sale of products
|
94.1
|
%
|
94.7
|
%
|
||||
Maintenance and support agreements
|
5.5
|
%
|
3.8
|
%
|
||||
Long term research and development contracts
|
0.4
|
%
|
1.5
|
%
|
||||
Total
|
100.0
|
%
|
100.0
|
%
|
|
Payment Due by Period
|
|||||||||||||||||||
Contractual Obligations
|
Total
|
Less Than 1 Year
|
1-3 Years
|
3-5 Years
|
More than 5 Years
|
|||||||||||||||
Bank obligations
|
$
|
13,506,000
|
$
|
4,802,000
|
$
|
4,267,000
|
$
|
3,804,000
|
$
|
633,000
|
||||||||||
Operating lease obligations
|
$
|
2,091,000
|
$
|
1,061,000
|
$
|
1,030,000
|
$
|
–
|
$
|
–
|
||||||||||
Severance obligations
|
$
|
6,469,000
|
$
|
2,577,000
|
$
|
–
|
$
|
–
|
$
|
3,892,000
|
Consolidated Financial Statements
|
Page
|
|
F-1
|
||
F-2
|
||
F-4
|
||
F-5
|
||
F-8
|
||
F-10
|
Name
|
Age
|
Position
|
||
Jon B. Kutler
|
60
|
Chairman of the Board
|
||
Michael E. Marrus
|
53
|
Director
|
||
Richard Rudy
|
58
|
Director
|
||
Kenneth W. Cappell
|
64
|
Director
|
||
Carol J. Battershell
|
55
|
Director
|
||
Lawrence F. Hagenbuch
|
50
|
Director
|
||
Adm. James J. Quinn (Ret.)
|
64
|
Director
|
||
Dean M. Krutty
|
52
|
Executive Vice President, Operations – North America and Acting Chief Executive Officer
|
||
Thomas J. Paup
|
68
|
Senior Vice President – Finance and Chief Financial Officer
|
Audit Committee
|
Compensation Committee
|
Nominating Committee
|
Executive and Finance Committee
|
|||
Kenneth W. Cappell
Richard I. Rudy
Carol J. Battershell
|
Michael E. Marrus
Richard I. Rudy
Lawrence F. Hagenbuch
|
Carol J. Battershell
James J. Quinn
Lawrence F. Hagenbuch
|
Jon B. Kutler
Michael E. Marrus
Lawrence F. Hagenbuch
|
Name
|
Fees
Earned or
Paid in
Cash
|
Stock
Awards
Granted
2016(1)
|
Total
|
||||||||||
Jon B. Kutler
|
$
|
27,000
|
$
|
60,000
|
$
|
87,000
|
(2
|
)
|
|||||
Michael E. Marrus
|
$
|
41,000
|
$
|
35,000
|
$
|
76,000
|
(3
|
)
|
|||||
Richard I. Rudy
|
$
|
37,000
|
$
|
35,000
|
$
|
72,000
|
(4
|
)
|
|||||
Kenneth W. Cappell
|
$
|
38,500
|
$
|
35,000
|
$
|
73,500
|
(5
|
)
|
|||||
Carol J. Battershell
|
$
|
26,500
|
$
|
60,000
|
$
|
86,500
|
(6
|
)
|
|||||
Lawrence F. Hagenbuch
|
$
|
20,000
|
$
|
60,000
|
$
|
80,000
|
(7
|
)
|
|||||
James J. Quinn
|
$
|
17,000
|
$
|
25,000
|
$
|
42,000
|
(8
|
)
|
|||||
Seymour Jones*
|
$
|
25,500
|
$
|
–
|
$
|
25,500
|
|||||||
Dr. Jay M. Eastman**
|
$
|
30,000
|
$
|
–
|
$
|
30,000
|
(1)
|
This amount reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
|
||
(2)
|
As of December 31, 2016, Mr. Kutler held 24,907 unvested restricted shares of our common stock.
|
||
(3)
|
As of December 31, 2016, Mr. Marrus held 24,148 unvested restricted shares of our common stock.
|
||
(4)
|
As of December 31, 2016, Mr. Rudy held 24,740 unvested restricted shares of our common stock.
|
||
(5)
|
As of December 31, 2016, Mr. Cappell held 20,376 unvested restricted shares of our common stock.
|
||
(6)
|
As of December 31, 2016, Ms. Battershell held 24,907 unvested restricted shares of our common stock.
|
||
(7)
|
As of December 31, 2016, Mr. Hagenbuch held 24,363 unvested restricted shares of our common stock.
|
||
(8)
|
As of December 31, 2016, Adm. Quinn held 6,649 unvested restricted shares of our common stock.
|
||
*
|
This individual retired as a director effective February 24, 2016.
|
||
**
|
This individual retired as a director effective March 25, 2016.
|
Name
|
Age
|
Position
|
||
Kurt Flosky
|
48
|
President, Training and Simulation Division
|
||
Ronen Badichi
|
51
|
General Manager, Power Systems Division – Europe and Asia
|
||
David Modeen
|
49
|
President, Power Systems Division – United States
|
||
Yaakov Har-Oz
|
59
|
Senior Vice President, General Counsel and Secretary
|
||
Colin Gallagher
|
43
|
Corporate Controller, Chief Accounting Officer
|
(i)
|
Mr. Kutler was required to file a Form 4 on or prior to June 3, 2016 in connection with the purchase by entities affiliated with him of 37,641 shares of our stock. He reported these transactions in a Form 4 filed on June 6, 2016.
|
Ø |
Steven Esses, our former President and Chief Executive Officer, who ceased to be employed by us on December 31, 2016;
|
Ø |
Robert S. Ehrlich, our former Executive Chairman, who ceased to be employed by us on August 31, 2016; and
|
Ø |
Thomas J. Paup, our Senior Vice President – Finance and Chief Financial Officer.
|
Ø |
base salary;
|
Ø |
bonus, some of which is paid in cash in the year in which it is earned and some of which is accrued in the year in which it is earned but is paid in cash in a subsequent year; and
|
Ø |
grants of restricted stock or restricted stock units, where (i) the stock vests over a period of time or pursuant to the attainment of set performance goals, (ii) sale or other transfer of such stock is prohibited while unvested, and (iii) unvested stock is forfeited to us should the executive officer’s employment be terminated, provided that certain grants of restricted stock provide for accelerated vesting under certain circumstances.
|
|
accruals (but not cash payments) in respect of pension plans, which consist of a savings plan, life insurance and statutory severance pay benefits, and a continuing education fund;
|
|
accruals (but not cash payments) in respect of contractual termination compensation in excess of the Israeli statutory minimum;
|
|
annual statutory holiday pay; and
|
|
redemption of all unused vacation days and up to a maximum of 30 unused sick days.
|
Name of Named Executive Officer
|
Title
|
Minimum Bonus
|
Maximum Bonus
|
|||
Steven Esses
|
Former President and Chief Executive Officer
|
None
|
75% of annual base salary
|
|||
Robert S. Ehrlich
|
Former Executive Chairman of the Board
|
None
|
50% of annual base salary
|
|||
Thomas J. Paup
|
Senior Vice President – Finance and Chief Financial Officer
|
None
|
50% of annual base salary
|
Name and Principal Position
|
Year
|
Salary
|
Bonus(2)
|
Stock Awards (3)
|
All Other Compensation
|
Total
|
||||||||||||||||
Steven Esses (4)
|
2016
|
$
|
414,288
|
(5)
|
$
|
–
|
$
|
164,335
|
$
|
823,004
|
(6)
|
$
|
1,401,627
|
|||||||||
Former President, Chief
|
2015
|
$
|
324,060
|
(7)
|
$
|
160,496
|
$
|
–
|
$
|
444,617
|
(8)
|
$
|
929,173
|
|||||||||
Executive Officer and director
|
2014
|
$
|
330,946
|
(9)
|
$
|
374,600
|
$
|
560,500
|
$
|
516,356
|
(10)
|
$
|
1,782,402
|
|||||||||
Robert S. Ehrlich (11)
|
2016
|
$
|
330,205
|
$
|
–
|
$
|
37,167
|
$
|
256,757
|
(12)
|
$
|
624,129
|
||||||||||
Former Executive Chairman
|
2015
|
$
|
304,993
|
$
|
104,162
|
$
|
–
|
$
|
8,179
|
(13)
|
$
|
417,334
|
||||||||||
of the Board and director
|
2014
|
$
|
482,808
|
$
|
361,250
|
$
|
111,500
|
$
|
64,385
|
(14)
|
$
|
1,019,943
|
||||||||||
Thomas J. Paup
|
2016
|
$
|
250,000
|
$
|
–
|
$
|
44,600
|
$
|
–
|
$
|
294,600
|
|||||||||||
Senior Vice President –
|
2015
|
$
|
250,000
|
$
|
112,500
|
$
|
–
|
$
|
–
|
$
|
362,500
|
|||||||||||
Finance and Chief Financial Officer
|
2014
|
$
|
225,000
|
$
|
187,250
|
$
|
133,800
|
$
|
–
|
$
|
546,050
|
(1)
|
We paid the amounts reported for each named executive officer in U.S. dollars and/or New Israeli Shekels (NIS). We have translated amounts paid in NIS into U.S. dollars at the exchange rate of NIS into U.S. dollars at the time of payment or accrual, except that certain items are pursuant to corporate policy paid at a set exchange rate that may be higher than the actual exchange rate on the date of payment. The difference, which was a positive number in 2014, has been reported under “Salary.” The exchange rate difference for Mr. Ehrlich was $97,330 for 2014. The exchange rate difference for Mr. Esses was $66,716 for 2014.
|
|
(2)
|
Bonuses are performance-based, against criteria established by the Compensation Committee of the Board of Directors and approved by the full Board of Directors and represent cash awards for prior year company performance. See “Employment Contracts,” below.
|
|
(3)
|
Reflects the value of awards of restricted stock or restricted stock units granted to our named executive officers based on the compensation cost of their stock-based awards (the aggregate grant date fair value computed in accordance with FASB ASC Topic 718); see Note 12.b. of the Notes to Consolidated Financial Statements. The number of shares of restricted stock or restricted stock units received by our named executive officers pursuant to such awards in 2016, vesting entirely after one year (dependent 33% on tenure and 67% on performance), was as follows: Mr. Esses, 100,000; Mr. Ehrlich, 36,000; and Mr. Paup, 60,000. One-third of Mr. Esses’s, Mr. Ehrlich’s, and Mr. Paup’s shares vested in 2016. No shares of restricted stock or restricted stock units were issued in 2015. Mr. Esses was also awarded 33,333 shares in 2016 pursuant to a restricted stock grant in 2014. The number of shares of restricted stock or restricted stock units received by our named executive officers pursuant to such awards in 2014, vesting entirely after one year (dependent 33% on tenure and 67% on performance), was as follows: Mr. Esses, 225,000; Mr. Ehrlich, 50,000; and Mr. Paup, 60,000. 33% of these shares vested in 2014.
|
|
(4)
|
Mr. Esses ceased to be our President and Chief Executive Officer and a director on December 31, 2016, and his employment with us terminated on that date.
|
|
(5)
|
Does not include approximately $62,361 that we paid in consulting fees to Sampen Corporation (“Sampen”), a New York corporation owned by members of Steven Esses’s immediate family, from which Mr. Esses received a salary, prior to the termination of our agreement with Sampen on June 30, 2016. See “Item 13. Certain Relationships and Related Transactions – Consulting Agreement with Sampen Corporation,” below.
|
(6)
|
Of this amount, $105,192 represents payments to Israeli pension and education funds; ($1,317,932) represents the change in our accrual for severance pay that would have been payable to Mr. Esses upon his leaving our employ other than if he is terminated for cause, such as a breach of trust; $131,388 represents sick pay redemption; ($202,192) represents the change in sick pay accruals; $52,814 represents vacation days redemption; ($5,815) represents the change of our accrual for vacation pay; $584 represents tax reimbursements; and $8,965 represents other normal or mandated Israeli benefits. The remaining $2,050,000 represents the payment made pursuant to the separation agreement with Mr. Esses described under “Separation Agreements – Steven Esses,” below, which payments were in lieu of the severance and other amounts that would otherwise have been payable to Mr. Esses under the terms of his employment agreement with us.
|
(7)
|
Does not include approximately $124,720 that we paid in consulting fees to Sampen Corporation, a New York corporation owned by members of Steven Esses’s immediate family, from which Mr. Esses received a salary. See “Item 13. Certain Relationships and Related Transactions – Consulting Agreement with Sampen Corporation,” below.
|
(8)
|
Of this amount, $109,493 represents payments to Israeli pension and education funds; $319,867 represents the change in our accrual for severance pay that would have been payable to Mr. Esses upon his leaving our employ other than if he is terminated for cause, such as a breach of trust; $37,425 represents sick pay redemption; ($16,005) represents the change in sick pay accruals; $62,376 represents vacation days redemption; ($72,626) represents the change of our accrual for vacation pay; $503 represents tax reimbursements; and $3,588 represents other normal or mandated Israeli benefits.
|
(9)
|
Does not include approximately $124,723 that we paid in consulting fees to Sampen Corporation, a New York corporation owned by members of Steven Esses’s immediate family, from which Mr. Esses received a salary. See “Item 13. Certain Relationships and Related Transactions – Consulting Agreement with Sampen Corporation,” below.
|
(10)
|
Of this amount, $119,570 represents payments to Israeli pension and education funds; $378,207 represents the change in our accrual for severance pay that would have been payable to Mr. Esses upon his leaving our employ other than if he is terminated for cause, such as a breach of trust; $37,460 represents sick pay redemption; $4,544 represents the change in sick pay accruals; $(18,460) represents the change of our accrual for vacation pay; $825 represents tax reimbursements; and $3,298 represents other normal or mandated Israeli benefits.
|
(11)
|
Mr. Ehrlich ceased to be our Executive Chairman of the Board and a director in May 2016, and his employment with us terminated on August 31, 2016.
|
(12)
|
Of this amount, ($185,615) represents the change in our accrual for severance pay that will be payable to Mr. Ehrlich upon his leaving our employ other than if he is terminated for cause, such as a breach of trust; ($88,240) represents the change of our accrual for vacation pay; $427 represents tax reimbursements, and $6,133 represents other normal or mandated Israeli benefits. The remaining $524,052 represents the payment made pursuant to the separation agreement with Mr. Ehrlich described under “Separation Agreements – Robert S. Ehrlich,” below, which payments were in lieu of the severance and other amounts that would otherwise have been payable to Mr. Ehrlich under the terms of his employment agreement with us.
|
(13)
|
Of this amount, $25,406 represents the change in our accrual for severance pay that will be payable to Mr. Ehrlich upon his leaving our employ other than if he is terminated for cause, such as a breach of trust; $(24,735) represents the change of our accrual for vacation pay; $682 represents tax reimbursements, and $6,826 represents other normal or mandated Israeli benefits.
|
(14)
|
Of this amount, $31,013 represents the change in our accrual for severance pay that will be payable to Mr. Ehrlich upon his leaving our employ other than if he is terminated for cause, such as a breach of trust; $29,112 represents the change of our accrual for vacation pay; $857 represents tax reimbursements, $44,609 represents vacation days redemption and $17,018 represents other normal or mandated Israeli benefits.
|
Name of Borrower
|
Date of Loan
|
Original
Principal
Amount of Loan
|
Amount
Outstanding
as of
12/31/2016
|
Terms of Loan
|
|||||||
Robert S. Ehrlich
|
02/09/2000
|
$
|
329,163
|
$
|
452,995
|
Twenty-five-year non-recourse loan to purchase our stock, secured by the shares of stock purchased; interest rate imputed until 2008 at 1% above the then federal funds rate
|
Name
|
Grant Date
|
All Other Stock
Awards: Number of
Shares of Stocks
|
Grant Date Fair Value of
Stock Awards (1)
|
|||||||
Steven Esses(2)
|
02/4/2016
|
|
100,000
|
$
|
231,000
|
|||||
Robert S. Ehrlich(2)
|
02/4/2016
|
36,000
|
$
|
83,160
|
||||||
Thomas J. Paup(2)
|
02/4/2016
|
60,000
|
$
|
138,600
|
(1)
|
Reflects the aggregate market value of the shares of restricted stock or restricted stock units determined based on a per share price at vesting based on the closing price of our common stock on the date of grant.
|
||
(2)
|
The restricted shares or restricted stock units vest on December 31, 2016 (dependent 33% on tenure and 67% on performance).
|
Name
|
Number of Shares
Acquired on Vesting
(#)
|
Value Realized
on Vesting(1)
($)
|
||||||
Steven Esses
|
75,000
|
$
|
262,500
|
|||||
Robert S. Ehrlich
|
16,667
|
$
|
58,335
|
|||||
Thomas J. Paup
|
20,000
|
$
|
70,000
|
(1)
|
Reflects the aggregate market value of the shares of restricted stock or restricted stock units determined based on a per share price at vesting based on the closing price of our common stock on the Nasdaq Global Market on December 30, 2016 ($3.50), which was the last trading day of 2016.
|
THOMAS J. PAUP
|
||||||||||||||||
Payments and Benefits
|
Death or
Disability(1)
|
Cause(2)
|
Non-Renewal(3)
|
Termination
at Will(4)
|
||||||||||||
Accrued but unpaid:
|
||||||||||||||||
Base salary
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
||||||||
Contractual severance
|
250,000
|
–
|
250,000
|
250,000
|
||||||||||||
TOTAL:
|
$
|
250,000
|
$
|
–
|
$
|
250,000
|
$
|
250,000
|
(1)
|
“Disability” is defined in Mr. Paup’s employment agreement as a physical or mental infirmity which impairs Mr. Paup’s ability to substantially perform his duties and which continues for a period of at least 180 consecutive days.
|
|
(2)
|
“Cause” is defined in Mr. Paup’s employment agreement as (i) a breach of trust by Mr. Paup, including, for example, but without limitation, commission of an act of moral turpitude, theft, embezzlement, self-dealing or insider trading; (ii) the unauthorized disclosure by Mr. Paup of confidential information of or relating to us; (iii) a material breach by Mr. Paup of his employment agreement; or (iv) any act of, or omission by, Mr. Paup which, in our reasonable judgment, amounts to a serious failure by Mr. Paup to perform his responsibilities or functions or in the exercise of his authority, which failure, in our reasonable judgment, rises to a level of gross nonfeasance, misfeasance or malfeasance.
|
|
(3)
|
“Non-Renewal” is defined in Mr. Paup’s employment agreement as the agreement coming to the end of the Term and not being extended or immediately succeeded by a new substantially similar employment agreement.
|
|
(4)
|
“Termination at Will” is defined in Mr. Paup’s employment agreement as Mr. Paup terminating his employment with us.
|
Name and Address of Beneficial Owner(1)
|
Shares Beneficially
Owned(2)(3)
|
Percentage of Total Shares Outstanding(3)
|
|||||||
Admiralty Partners, Inc.(4)
|
1,709,879
|
(5)(6)
|
6.5
|
%
|
|||||
Jon B. Kutler
|
1,734,786
|
(5)(6)
|
6.6
|
%
|
|||||
Dean M. Krutty
|
102,447
|
(7)
|
*
|
||||||
Thomas J. Paup
|
330,726
|
(8)
|
1.3
|
%
|
|||||
Michael E. Marrus
|
109,039
|
(9)
|
*
|
||||||
Richard I. Rudy
|
33,403
|
(10)
|
*
|
||||||
Kenneth W. Cappell
|
61,363
|
(11)
|
*
|
||||||
Carol J. Battershell
|
24,907
|
(12)
|
*
|
||||||
Lawrence F. Hagenbuch
|
28,463
|
(13)
|
*
|
||||||
James J. Quinn
|
6,649
|
(14)
|
*
|
||||||
Robert S. Ehrlich
|
12,000
|
(15)(6)
|
*
|
||||||
All of our current directors and executive officers as a group (9 persons)
|
2,431,783
|
(16)
|
9.2
|
%
|
*
|
Less than one percent.
|
|
(1)
|
Unless otherwise indicated in these footnotes, the address of each named beneficial owner is in care of Arotech Corporation, 1229 Oak Valley Drive, Ann Arbor, Michigan 48108.
|
|
(2)
|
Unless otherwise indicated in these footnotes, each of the persons or entities named in the table has sole voting and sole investment power with respect to all shares shown as beneficially owned by that person, subject to applicable community property laws.
|
|
(3)
|
Based on 26,407,599 shares of common stock outstanding as of February 28, 2017. For purposes of determining beneficial ownership of our common stock, owners of options exercisable or restricted stock that vests within 60 days of February 28, 2017 are considered to be the beneficial owners of the shares of common stock for which such securities are exercisable. The percentage ownership of the outstanding common stock reported herein is based on the assumption (expressly required by the applicable rules of the Securities and Exchange Commission) that only the person whose ownership is being reported has exercised his options for shares of common stock.
|
|
(4)
|
The principal place of business for API is 68-1052 Honoka’ope Way, Kamuela, Hawaii 96743. All information in this footnote and in the text to which this footnote relates is based on a Schedule 13D filed by API and certain of its related entities and persons, including our Chairman Jon B. Kutler, with the Securities and Exchange Commission on February 3, 2016, as amended on February 26, 2016, and Forms 3, 4, and 5 filed by Mr. Kutler.
|
|
(5)
|
Jon B. Kutler and his wife are directors of API, which owns 1,550,000 shares of our common stock. They are also settlors and trustees of two trusts that between them own an additional 159,879 shares. Accordingly, Mr. and Ms. Kutler have shared voting and dispositive power with respect to 1,709,879 shares. Mr. and Mrs. Kutler disclaim beneficial ownership of these shares except to the extent of their respective voting and/or dispositive power. Mr. Kutler also holds 3,502 shares directly, 4,801 shares of unvested restricted stock that vest within 60 days of February 28, 2017, and 16,604 unvested restricted shares. All information in this footnote and in the text to which this footnote relates other than information relating directly to Mr. Kutler is based on a Schedule 13D filed by API and certain of its related entities and persons, including our director Jon B. Kutler, with the Securities and Exchange Commission on February 3, 2016, as amended on February 26, 2016, and Forms 3 and 4 filed by Mr. Kutler.
|
|
(6)
|
API and Mr. Ehrlich and the Estate of Steven Esses (as successor to Mr. Esses) are parties to a Voting Agreement pursuant to which each of Mr. Ehrlich and the Estate of Steven Esses agrees to vote the shares of our common stock held by him in favor of the election of a director nominee designated by API. This obligation shall remain in effect for so long as API and its affiliates continue to beneficially own at least 750,000 shares of our common stock.
|
|
(7)
|
Consists of 102,447 shares held directly by Mr. Krutty. Does not include 75,000 restricted stock units, the vesting of 50,000 of which is subject to performance criteria.
|
(8)
|
Consists of 330,726 shares held directly by Mr. Paup. Does not include 60,000 restricted stock units, the vesting of 40,000 of which is subject to performance criteria.
|
(9)
|
Consists of 84,891 shares owned directly by Mr. Marrus, 9,610 shares of unvested restricted stock that vest within 60 days of February 28, 2017, and 14,538 unvested restricted shares.
|
(10)
|
Consists of 8,663 shares owned directly by Mr. Rudy, 8,806 shares of unvested restricted stock that vest within 60 days of February 28, 2017, and 15,934 unvested restricted shares.
|
(11)
|
Consists of 40,987 shares owned directly by Mr. Cappell, 4,801 shares of unvested restricted stock that vest within 60 days of February 28, 2017, and 15,575 unvested restricted shares.
|
(12)
|
Consists of 3,502 shares owned directly by Ms. Battershell, 4,801 shares of unvested restricted stock that vest within 60 days of February 28, 2017, and 16,604 unvested restricted shares.
|
(13)
|
Consists of 4,100 shares owned directly by Mr. Hagenbuch, 8,121 shares of unvested restricted stock that vest within 60 days of February 28, 2017, and 16,242 unvested restricted shares.
|
(14)
|
Consists of 6,649 unvested restricted shares.
|
(15)
|
Consists of 12,000 shares held directly by Mr. Ehrlich.
|
(16)
|
Includes 40,940 shares of unvested restricted stock that vest within 60 days of February 28, 2017 and 102,146 shares of unvested restricted stock. Does not include 135,000 unvested restricted stock units.
|
Plan Category
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
|
|||||||||
Equity compensation plans approved by security holders
|
|
-
|
|
-
|
|
2,589,259
|
☐ |
Audit Fees.
Audit fees billed or expected to be billed to us by BDO for the audit of the financial statements included in our Annual Report on Form 10-K, and reviews of the financial statements included in our Quarterly Reports on Form 10-Q, for the years ended December 31, 2016 and 2015 totaled approximately $535,000 and $525,000, respectively.
|
☐ |
Audit-Related Fees
. BDO billed or expected to bill us $0 and $120,000 for the fiscal years ended December 31, 2016 and 2015, respectively, for other assurance and related services that are not directly related to the performance of the annual audit or review of our financial statements.
|
☐ |
Tax Fees.
BDO billed or expected to bill us $90,000 (including consultation related to mergers and acquisitions) and $235,000 for the fiscal years ended December 31, 2016 and 2015, respectively, for tax services.
|
☐ |
All Other Fees.
BDO billed or expected to bill us an aggregate of zero for both fiscal years ended December 31, 2016 and 2015 for permitted non-audit services.
|
(1)
|
Financial Statements. See Index to Financial Statements on page 36 above and the financial pages following page 59 below.
|
(2)
|
Financial Statements Schedules. All schedules are omitted because of the absence of conditions under which they are required or because the required information is presented in the financial statements or related notes thereto.
|
(3)
|
Exhibits. The following Exhibits are either filed herewith or have previously been filed with the Securities and Exchange Commission and are referred to and incorporated herein by reference to such filings:
|
Exhibit No.
|
Description
|
||
(1)
|
3.1
|
Amended and Restated Certificate of Incorporation
|
|
(2)
|
3.1.1
|
Amendment to Amended and Restated Certificate of Incorporation
|
|
(3)
|
3.1.2
|
Amendment to Amended and Restated Certificate of Incorporation
|
|
(4)
|
3.1.3
|
Amendment to Amended and Restated Certificate of Incorporation
|
|
(5)
|
3.1.4
|
Amendment to Amended and Restated Certificate of Incorporation
|
|
(6)
|
3.2
|
Amended and Restated By-Laws
|
|
(7)
|
4.1
|
Specimen Certificate for shares of common stock, $0.01 par value
|
|
(2)
|
10.1
|
Promissory Note dated February 9, 2000, from Robert S. Ehrlich to Arotech Corporation
|
|
(3)
|
10.2
|
Lease dated April 8, 1997, between AMR Holdings, L.L.C. and FAAC Incorporated
|
|
(4)
|
10.3
|
Lease dated February 10, 2006 between Arbor Development Company LLC and FAAC Incorporated
|
|
(8)
|
10.4
|
Lease dated October 31, 2014 between UEC Properties, LLC and UEC Electronics, LLC
|
|
(8)
|
10.5
|
Membership Interest Purchase Agreement among, inter alia, Arotech Corporation, UEC Electronics, LLC and Ufkes Holdings, LLC dated April 1, 2014
|
|
(8)
|
10.6
|
Amended and Restated Credit Agreement among Arotech Corporation, FAAC Incorporated and Fifth Third Bank dated March 31, 2014
|
|
(8)
|
10.7
|
Joinder Agreement between UEC Electronics, LLC and Fifth Third Bank dated April 1, 2014
|
|
(8)
|
10.8
|
Security Agreement between UEC Electronics, LLC and Fifth Third Bank dated April 1, 2014
|
|
(8)
|
10.9
|
Guaranty from UEC Electronics, LLC to Fifth Third Bank dated April 1, 2014
|
|
(8)
|
10.10
|
Patent and Trademark Security Agreement among Arotech Corporation, FAAC Incorporated, Electric Fuel Battery Corporation and Fifth Third Bank dated March 31, 2014 [a substantially identical agreement was executed by UEC Electronics, LLC]
|
|
† (9)
|
10.11
|
Fifth Amended and Restated Employment Agreement, dated February 16, 2016 and effective as of July 1, 2016, among Arotech Corporation, Epsilor-EFL and Steven Esses
|
|
† (10)
|
10.11.1
|
Separation and General Release Agreement dated December 29, 2016 among Arotech Corporation, Epsilor-EFL and Steven Esses
|
|
† (11)
|
10.12
|
Second Amended and Restated Consulting Agreement, dated November 14, 2014 and effective as of October 1, 2014, between Arotech Corporation and Sampen Corporation
|
|
† (12)
|
10.13
|
Sixth Amended and Restated Employment Agreement, dated May 13, 2013 and effective as of May 1, 2013, among Arotech Corporation, Epsilor-EFL and Robert S. Ehrlich
|
|
† (13)
|
10.13.1
|
Termination Agreement and Release dated August 22, 2016 among Arotech Corporation, Epsilor-EFL and Robert S. Ehrlich
|
|
† (14)
|
10.14
|
Third Amended and Restated Employment Agreement between Arotech Corporation and Thomas J. Paup dated May 13, 2013 and effective as of May 1, 2013
|
|
† (15)
|
10.14.1
|
Amendment dated January 13, 2015 to Third Amended and Restated Employment Agreement, dated May 13, 2013 and effective as of May 1, 2013, between Arotech Corporation and Thomas J. Paup
|
|
† (16)
|
10.14.2
|
Amendment dated January 26, 2017 to Third Amended and Restated Employment Agreement, dated May 13, 2013 and effective as of May 1, 2013, between Arotech Corporation and Thomas J. Paup
|
|
† (17)
|
10.15
|
Arotech Corporation 2007 Non-Employee Director Equity Compensation Plan
|
|
† (18)
|
10.16
|
Arotech Corporation 2009 Equity Incentive Plan
|
|
(19)
|
10.17
|
Stock Purchase Agreement dated as of February 2, 2016 between Arotech Corporation and Admiralty Partners, Inc.
|
|
(20)
|
10.17.1
|
Amendment dated February 23, 2016 to Stock Purchase Agreement dated as of February 2, 2016 between Arotech Corporation and Admiralty Partners, Inc.
|
|
(21)
|
10.17.2
|
Amendment dated March 25, 2016 to Stock Purchase Agreement dated as of February 2, 2016 between Arotech Corporation and Admiralty Partners, Inc.
|
|
(19)
|
10.18
|
Consulting Agreement dated February 2, 2016 between Arotech Corporation and Admiralty Partners, Inc.
|
*
|
Filed herewith
|
||
†
|
Includes management contracts and compensation plans and arrangements
|
||
(1)
|
Incorporated by reference to our Registration Statement on Form S-1 (Registration No. 33-73256), which became effective on February 23, 1994
|
||
(2)
|
Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2000
|
||
(3)
|
Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2003
|
||
(4)
|
Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
|
||
(5)
|
Incorporated by reference to our Current Report on Form 8-K filed June 9, 2009
|
||
(6)
|
Incorporated by reference to our Registration Statement on Form S-1 (Registration No. 33-97944), which became effective on February 5, 1996
|
||
(7)
|
Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2004
|
||
(8)
|
Incorporated by reference to our Current Report on Form 8-K filed April 1, 2014
|
||
(9)
|
Incorporated by reference to our Current Report on Form 8-K filed February 19, 2016
|
||
(10)
|
Incorporated by reference to our Current Report on Form 8-K filed January 3, 2017
|
||
(11)
|
Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2014
|
||
(12)
|
Incorporated by reference to our Current Report on Form 8-K filed December 24, 2014
|
||
(13)
|
Incorporated by reference to our Current Report on Form 8-K filed August 22, 2016
|
||
(14)
|
Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013
|
||
(15)
|
Incorporated by reference to our Current Report on Form 8-K filed January 14, 2015
|
||
(16)
|
Incorporated by reference to our Current Report on Form 8-K filed January 30, 2017
|
||
(17)
|
Incorporated by reference to our Registration Statement on Form S-8 (Registration No. 333-146752), which became effective on October 17, 2007
|
||
(18)
|
Incorporated by reference to our Registration Statement on Form S-8 (Registration No. 333-160717), which became effective on July 21, 2009
|
||
(19)
|
Incorporated by reference to our Current Report on Form 8-K filed February 3, 2016
|
||
(20)
|
Incorporated by reference to our Current Report on Form 8-K filed February 25, 2016
|
||
(21)
|
Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016
|
||
(22)
|
Incorporated by reference to our Current Report on Form 8-K filed March 14, 2016
|
||
(23)
|
Incorporated by reference to our Current Report on Form 8-K filed March 28, 2016
|
||
(24)
|
Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2014
|
AROTECH CORPORATION
|
||
By:
|
/s/ Dean M. Krutty
|
|
Name:
Dean M. Krutty
|
||
Title:
Executive Vice President, Operations – North America
and Acting Chief Executive Officer |
||
Date:
|
March 16, 2017
|
Signature
|
Title
|
Date
|
/s/ Dean M. Krutty
|
Executive Vice President, Operations – North America
and Acting Chief Executive Officer |
March 16, 2017
|
Dean M. Krutty
|
(Principal Executive Officer)
|
|
/s/ Thomas J. Paup
|
Senior Vice President – Finance and Chief Financial Officer
|
March 16, 2017
|
Thomas J. Paup
|
(Principal Financial Officer)
|
|
/s/ Colin Gallagher
|
Controller
|
March 16, 2017
|
Colin Gallagher
|
(Principal Accounting Officer)
|
|
/s/ Jon B. Kutler
|
Chairman of the Board and Director
|
March 16, 2017
|
Jon B. Kutler
|
||
/s/ Michael E. Marrus
|
Director
|
March 16, 2017
|
Michael E. Marrus
|
||
/s/ Richard I. Rudy
|
Director
|
March 16, 2017
|
Richard I. Rudy
|
||
/s/ Kenneth W. Cappell
|
Director
|
March 16, 2017
|
Kenneth W. Cappell
|
||
/s/ Carol J. Battershell
|
Director
|
March 16, 2017
|
Carol J. Battershell
|
||
/s/ Lawrence F. Hagenbuch
|
Director
|
March 16, 2017
|
Lawrence F. Hagenbuch
|
||
/s/ James J. Quinn
|
Director
|
March 16, 2017
|
James J. Quinn
|
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
7,130,983
|
$
|
10,608,420
|
||||
Restricted collateral deposits
|
268,980
|
89,985
|
||||||
Trade receivables
|
16,821,737
|
17,401,479
|
||||||
Unbilled receivables
|
10,981,577
|
12,132,484
|
||||||
Other accounts receivable and prepaid expenses
|
2,156,896
|
1,007,358
|
||||||
Inventories
|
10,318,021
|
9,607,836
|
||||||
Total
current assets
|
47,678,194
|
50,847,562
|
||||||
LONG TERM ASSETS:
|
||||||||
Contractual and Israeli statutory severance pay fund
|
3,177,238
|
5,370,755
|
||||||
Other long term receivables
|
56,662
|
23,403
|
||||||
Property and equipment, net
|
5,915,240
|
6,385,238
|
||||||
Other intangible assets, net
|
6,823,346
|
9,334,730
|
||||||
Goodwill
|
45,489,517
|
45,463,027
|
||||||
Discontinued operations
|
270,139
|
68,301
|
||||||
Total long term assets
|
61,732,142
|
66,645,454
|
||||||
Total assets
|
$
|
109,410,336
|
$
|
117,493,016
|
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Trade payables
|
$
|
4,362,804
|
$
|
5,914,042
|
||||
Other accounts payable and accrued expenses
|
5,597,558
|
5,560,040
|
||||||
Current portion of long term debt
|
1,828,840
|
4,362,438
|
||||||
Short term bank credit
|
2,973,032
|
4,060,000
|
||||||
Severance payable
|
2,577,472
|
–
|
||||||
Deferred revenues
|
6,421,271
|
6,879,815
|
||||||
Total current liabilities
|
23,760,977
|
26,776,335
|
||||||
LONG TERM LIABILITIES:
|
||||||||
Contractual and accrued Israeli statutory severance pay
|
3,891,710
|
7,497,685
|
||||||
Long term portion of debt
|
8,703,736
|
11,856,522
|
||||||
Deferred income tax liability
|
7,868,125
|
7,031,564
|
||||||
Other long term liabilities
|
100,742
|
264,244
|
||||||
Discontinued operations
|
–
|
19,295
|
||||||
Total long-term liabilities
|
20,564,313
|
26,669,310
|
||||||
Total liabilities
|
44,325,290
|
53,445,645
|
||||||
STOCKHOLDERS’ EQUITY:
|
||||||||
Share capital –
|
||||||||
Common stock – $0.01 par value each;
Authorized: 50,000,000 shares as of December 31, 2016 and 2015;
Issued and outstanding: 26,438,234 and 24,697,335 shares as of
December 31, 2016 and 2015, respectively
|
264,382
|
246,973
|
||||||
Preferred shares – $0.01 par value each;
Authorized: 1,000,000 shares as of December 31, 2016 and 2015;
No shares issued or outstanding as of December 31, 2016 and 2015
|
–
|
–
|
||||||
Additional paid-in capital
|
250,405,012
|
246,591,415
|
||||||
Accumulated deficit
|
(185,402,893
|
)
|
(182,554,637
|
)
|
||||
Notes receivable from stockholders
|
(908,054
|
)
|
(908,054
|
)
|
||||
Accumulated other comprehensive income
|
726,599
|
671,674
|
||||||
Total stockholders’ equity
|
65,085,046
|
64,047,371
|
||||||
Total liabilities and stockholders’ equity
|
$
|
109,410,336
|
$
|
117,493,016
|
|
December 31,
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Revenues
|
$
|
92,975,752
|
$
|
96,573,947
|
$
|
103,562,349
|
||||||
|
||||||||||||
Cost of revenues
|
64,825,416
|
68,456,322
|
70,854,737
|
|||||||||
Research and development expenses
|
2,722,965
|
3,075,362
|
2,926,228
|
|||||||||
Selling and marketing expenses
|
7,029,090
|
5,373,421
|
5,921,338
|
|||||||||
General and administrative expenses
|
15,308,461
|
16,339,027
|
17,261,358
|
|||||||||
Amortization of intangible assets
|
2,875,543
|
3,043,536
|
2,696,740
|
|||||||||
Total operating costs and expenses
|
92,761,475
|
96,287,668
|
99,660,401
|
|||||||||
|
||||||||||||
Operating income
|
214,277
|
286,279
|
3,901,948
|
|||||||||
|
||||||||||||
Other income (expense), net
|
64,832
|
(24,181
|
)
|
2,512,560
|
||||||||
Financial expense, net
|
(975,263
|
)
|
(1,152,121
|
)
|
(1,507,489
|
)
|
||||||
Total other income (expense)
|
(910,431
|
)
|
(1,176,302
|
)
|
1,005,071
|
|||||||
Income (loss) from continuing operations before income tax expense
|
(696,154
|
)
|
(890,023
|
)
|
4,907,019
|
|||||||
|
||||||||||||
Income tax expense
|
783,420
|
1,160,946
|
1,023,837
|
|||||||||
Income (loss) from continuing operations
|
(1,479,574
|
)
|
(2,050,969
|
)
|
3,883,182
|
|||||||
Loss from discontinued operations
|
(1,368,682
|
)
|
(894,057
|
)
|
(396,221
|
)
|
||||||
Net income (loss)
|
(2,848,256
|
)
|
(2,945,026
|
)
|
3,486,961
|
|||||||
Other comprehensive income (loss), net of $0 income tax
|
||||||||||||
Foreign currency translation adjustment
|
54,925
|
14,634
|
(1,205,589
|
)
|
||||||||
Comprehensive income (loss)
|
$
|
(2,793,331
|
)
|
$
|
(2,930,392
|
)
|
$
|
2,281,372
|
||||
|
||||||||||||
Income (loss) per share of common stock:
|
||||||||||||
Basic – continuing operations
|
$
|
(0.06
|
)
|
$
|
(0.08
|
)
|
$
|
0.18
|
||||
Basic – discontinued operations
|
$
|
(0.05
|
)
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
|||
Basic net income (loss) per share
|
$
|
(0.11
|
)
|
$
|
(0.12
|
)
|
$
|
0.16
|
||||
|
||||||||||||
Diluted – continuing operations
|
$
|
(0.06
|
)
|
$
|
(0.08
|
)
|
$
|
0.17
|
||||
Diluted – discontinued operations
|
$
|
(0.05
|
)
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
|||
Diluted net income (loss) per share
|
$
|
(0.11
|
)
|
$
|
(0.12
|
)
|
$
|
0.15
|
||||
|
||||||||||||
Weighted average number of shares used in computing basic net income (loss) per share
|
25,494,097
|
23,687,733
|
21,934,532
|
|||||||||
|
||||||||||||
Weighted average number of shares used in computing diluted net income (loss) per share
|
25,494,097
|
23,687,733
|
22,537,272
|
|
Notes
|
Accumulated
|
||||||||||||||||||||||||||
|
Additional
|
receivable
|
other
|
Total
|
||||||||||||||||||||||||
|
Common stock
|
paid-in
|
Accumulated
|
From
|
comprehensive
|
stockholders’
|
||||||||||||||||||||||
|
Shares
|
Amount
|
capital
|
deficit
|
stockholders
|
income
|
equity
|
|||||||||||||||||||||
Balance as of January 1, 2016
|
24,697,335
|
$
|
246,973
|
$
|
246,591,415
|
$
|
(182,554,637
|
)
|
$
|
(908,054
|
)
|
$
|
671,674
|
$
|
64,047,371
|
|||||||||||||
Stock based compensation
|
–
|
–
|
878,007
|
–
|
–
|
–
|
878,007
|
|||||||||||||||||||||
Restricted stock issued
|
310,735
|
3,107
|
(3,107
|
)
|
–
|
–
|
–
|
–
|
||||||||||||||||||||
Sales of stock, net of offering costs
|
1,500,000
|
15,000
|
2,937,999
|
2,952,999
|
||||||||||||||||||||||||
Restricted stock units vested
|
56,202
|
562
|
(562
|
)
|
–
|
–
|
–
|
–
|
||||||||||||||||||||
Restricted stock forfeitures
|
(126,038
|
)
|
(1,260
|
)
|
1,260
|
–
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
–
|
–
|
–
|
–
|
–
|
54,925
|
54,925
|
|||||||||||||||||||||
Net loss
|
–
|
–
|
–
|
(2,848,256
|
)
|
–
|
–
|
(2,848,256
|
)
|
|||||||||||||||||||
Balance as of December 31, 2016
|
26,438,234
|
$
|
264,382
|
$
|
250,405,012
|
$
|
(185,402,893
|
)
|
$
|
(908,054
|
)
|
$
|
726,599
|
$
|
65,085,046
|
|
Notes
|
Accumulated
|
||||||||||||||||||||||||||
|
Additional
|
receivable
|
other
|
Total
|
||||||||||||||||||||||||
|
Common stock
|
paid-in
|
Accumulated
|
From
|
comprehensive
|
stockholders’
|
||||||||||||||||||||||
|
Shares
|
Amount
|
capital
|
deficit
|
stockholders
|
income
|
equity
|
|||||||||||||||||||||
Balance as of January 1, 2015
|
|
24,533,121
|
$
|
245,331
|
$
|
245,970,742
|
$
|
(179,609,611
|
)
|
$
|
(908,054
|
)
|
$
|
657,040
|
$
|
66,355,448
|
||||||||||||
Stock based compensation
|
–
|
–
|
622,315
|
–
|
–
|
–
|
622,315
|
|||||||||||||||||||||
Restricted stock issued
|
57,028
|
570
|
(570
|
)
|
–
|
–
|
–
|
–
|
||||||||||||||||||||
Restricted stock units vested
|
107,186
|
1,072
|
(1,072
|
)
|
–
|
–
|
–
|
–
|
||||||||||||||||||||
Foreign currency translation adjustment
|
–
|
–
|
–
|
–
|
–
|
14,634
|
14,634
|
|||||||||||||||||||||
Net loss
|
–
|
–
|
–
|
(2,945,026
|
)
|
–
|
–
|
(2,945,026
|
)
|
|||||||||||||||||||
Balance as of December 31, 2015
|
24,697,335
|
$
|
246,973
|
$
|
246,591,415
|
$
|
(182,554,637
|
)
|
$
|
(908,054
|
)
|
$
|
671,674
|
$
|
64,047,371
|
|
Notes
|
Accumulated
|
||||||||||||||||||||||||||
|
Additional
|
receivable
|
other
|
Total
|
||||||||||||||||||||||||
|
Common stock
|
paid-in
|
Accumulated
|
From
|
comprehensive
|
stockholders’
|
||||||||||||||||||||||
|
Shares
|
Amount
|
capital
|
deficit
|
stockholders
|
income (loss)
|
Equity
|
|||||||||||||||||||||
Balance as of January 1, 2014
|
20,163,163
|
$
|
201,632
|
$
|
229,917,341
|
$
|
(183,096,572
|
)
|
$
|
(908,054
|
)
|
$
|
1,862,629
|
$
|
47,976,976
|
|||||||||||||
Stock based compensation
|
–
|
–
|
1,411,970
|
–
|
–
|
–
|
1,411,970
|
|||||||||||||||||||||
Restricted stock issued
|
344,106
|
3,441
|
(3,441
|
)
|
–
|
–
|
–
|
–
|
||||||||||||||||||||
Sale of stock – public offering, net of offering costs
|
3,289,000
|
32,890
|
10,665,282
|
–
|
–
|
–
|
10,698,172
|
|||||||||||||||||||||
Purchase of treasury shares
|
(100,000
|
)
|
(1,000
|
)
|
(228,042
|
)
|
–
|
–
|
–
|
(229,042
|
)
|
|||||||||||||||||
Issuance of stock – acquisition
|
775,000
|
7,750
|
4,208,250
|
–
|
–
|
–
|
4,216,000
|
|||||||||||||||||||||
Restricted stock units vested
|
61,852
|
618
|
(618
|
)
|
–
|
–
|
–
|
–
|
||||||||||||||||||||
Foreign currency translation adjustment
|
–
|
–
|
–
|
–
|
–
|
(1,205,589
|
)
|
(1,205,589
|
)
|
|||||||||||||||||||
Net income
|
–
|
–
|
–
|
3,486,961
|
–
|
–
|
3,486,961
|
|||||||||||||||||||||
Balance as of December 31, 2014
|
24,533,121
|
$
|
245,331
|
$
|
245,970,742
|
$
|
(179,609,611
|
)
|
$
|
(908,054
|
)
|
$
|
657,040
|
$
|
66,355,448
|
|
2016
|
2015
|
2014
|
|||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net income (loss)
|
$
|
(2,848,256
|
)
|
$
|
(2,945,026
|
)
|
$
|
3,486,961
|
||||
Adjustments required to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||||||
Depreciation
|
1,789,041
|
1,851,982
|
1,558,506
|
|||||||||
Amortization of intangible assets
|
2,875,543
|
3,043,536
|
2,696,740
|
|||||||||
Stock based compensation
|
878,007
|
622,315
|
1,411,970
|
|||||||||
Change in fair value of acquisition earn out liabilities
|
–
|
–
|
(2,000,000
|
)
|
||||||||
(Gain) loss from sale of property and equipment
|
8,680
|
(781,023
|
)
|
12,809
|
||||||||
Deferred tax expense
|
836,561
|
914,543
|
598,500
|
|||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Trade receivables
|
659,468
|
194,332
|
(2,529,966
|
)
|
||||||||
Unbilled receivables
|
1,155,454
|
3,804,576
|
2,337,691
|
|||||||||
Other accounts receivable and prepaid expenses
|
(1,176,895
|
)
|
148,269
|
582,502
|
||||||||
Inventories
|
(652,391
|
)
|
203,947
|
809,827
|
||||||||
Severance pay, net
|
1,210,662
|
43,244
|
38,463
|
|||||||||
Trade payables
|
(1,532,471
|
)
|
(858,040
|
)
|
(1,143,632
|
)
|
||||||
Other accounts payable and accrued expenses
|
(103,186
|
)
|
(944,376
|
)
|
6,480
|
|||||||
Deferred revenues
|
(458,544
|
)
|
(946,363
|
)
|
(464,211
|
)
|
||||||
Net cash provided by operating activities
|
2,641,673
|
4,351,916
|
7,402,640
|
|||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Acquisition of UEC
(1)
|
–
|
–
|
(29,113,655
|
)
|
||||||||
Changes in restricted collateral deposits
|
(176,354
|
)
|
146,443
|
262,067
|
||||||||
Purchase of property and equipment
|
(1,555,788
|
)
|
(2,002,104
|
)
|
(2,122,886
|
)
|
||||||
Additions to capitalized software development
|
(364,159
|
)
|
(537,901
|
)
|
(377,954
|
)
|
||||||
Proceeds from sale of property and equipment
|
31,343
|
953,824
|
25,892
|
|||||||||
Net cash used in investing activities
|
$
|
(2,064,958
|
)
|
$
|
(1,439,738
|
)
|
$
|
(31,326,536
|
)
|
|
2016
|
2015
|
2014
|
|||||||||
|
||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Repayment of long term debt
|
$
|
(16,682,823
|
)
|
$
|
(5,096,130
|
)
|
$
|
(3,110,640
|
)
|
|||
Proceeds from long term debt
|
11,000,000
|
–
|
22,500,000
|
|||||||||
Change in short term bank credit
|
(1,086,968
|
)
|
4,026,762
|
33,238
|
||||||||
Purchase of treasury stock
|
–
|
–
|
(229,042
|
)
|
||||||||
Payment of acquisition related earnout
|
–
|
(2,500,000
|
)
|
–
|
||||||||
Proceeds from sale of common stock, net of offering costs
|
2,952,999
|
–
|
10,698,173
|
|||||||||
Net cash provided by (used in) financing activities
|
(3,816,792
|
)
|
(3,569,368
|
)
|
29,891,729
|
|||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(3,240,077
|
)
|
(657,190
|
)
|
5,967,833
|
|||||||
CASH DIFFERENCES DUE TO EXCHANGE RATE CHANGES
|
(237,360
|
)
|
(26,174
|
)
|
(497,374
|
)
|
||||||
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR
|
10,608,420
|
11,291,784
|
5,821,325
|
|||||||||
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
|
$
|
7,130,983
|
$
|
10,608,420
|
$
|
11,291,784
|
||||||
SUPPLEMENTARY CASH FLOW INFORMATION:
|
||||||||||||
Interest paid during the year
|
$
|
712,558
|
$
|
1,084,710
|
$
|
1,004,052
|
||||||
Taxes on income paid during the year
|
221,654
|
679,055
|
256,246
|
|||||||||
SUPPLEMENTARY INFORMATION ON NON-CASH TRANSACTIONS:
|
||||||||||||
Common stock issued in acquisition of UEC
|
$
|
–
|
$
|
–
|
$
|
4,216,000
|
(1)
|
On April 1, 2014, the Company acquired all of the outstanding membership interests of UEC Electronics, LLC (“UEC”). The cash portion of the transaction is summarized as follows:
|
Cash paid at closing
|
28,000,000
|
|||
Net working capital adjustment (paid in May 2014)
|
1,206,245
|
|||
Cash acquired
|
(92,590
|
)
|
||
Total
|
$
|
29,113,655
|
|
December 31, 2016
|
December 31, 2015
|
||||||
|
||||||||
ASSETS
|
||||||||
Property and equipment, net
|
$
|
270,139
|
$
|
55,032
|
||||
Long-term assets
|
–
|
13,269
|
||||||
Total assets
|
$
|
270,139
|
$
|
68,301
|
||||
LIABILITIES
|
||||||||
Long term liabilities
|
–
|
19,295
|
||||||
Total liabilities
|
$
|
–
|
$
|
19,295
|
|
Depreciable life (in years)
|
||
|
|||
Computers and related equipment
|
3 to 5
|
||
Motor vehicles
|
5 to7
|
||
Office furniture and equipment
|
3 to 5
|
||
Machinery, equipment and installations
|
5 to 10
|
||
Buildings
|
30
|
||
Land
|
Not depreciated
|
||
Leasehold improvements
|
Shorter of the term of the lease or the life of the asset
|
||
Demo inventory
|
3 to 5
|
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
|
||||||||
Deposits in connection with Epsilor/EFL projects
|
$
|
268,980
|
$
|
89,985
|
||||
Total restricted collateral deposits
|
$
|
268,980
|
$
|
89,985
|
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
|
||||||||
Government authorities
|
$
|
877,670
|
$
|
307,339
|
||||
Israeli statutory severance pay fund
|
455,172
|
–
|
||||||
Employees
|
60,296
|
65,990
|
||||||
Prepaid expenses
|
761,257
|
625,511
|
||||||
Other
|
2,501
|
8,518
|
||||||
Total
|
$
|
2,156,896
|
$
|
1,007,358
|
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
Raw and packaging materials
|
$
|
8,512,006
|
$
|
8,184,476
|
||||
Work in progress
|
917,582
|
760,585
|
||||||
Finished products
|
888,433
|
662,775
|
||||||
Total
|
$
|
10,318,021
|
$
|
9,607,836
|
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
Cost:
|
||||||||
Computers and related equipment
|
$
|
2,733,722
|
$
|
2,703,721
|
||||
Motor vehicles
|
717,543
|
831,925
|
||||||
Office furniture and equipment
|
1,571,364
|
1,512,663
|
||||||
Machinery, equipment and installations
|
7,760,341
|
7,221,351
|
||||||
Buildings
|
1,716,924
|
1,603,374
|
||||||
Land
|
300,000
|
300,000
|
||||||
Leasehold improvements
|
2,172,253
|
1,982,552
|
||||||
Demo inventory
|
1,791,751
|
2,288,031
|
||||||
|
18,763,898
|
18,443,617
|
||||||
Accumulated depreciation:
|
||||||||
Computers and related equipment
|
2,415,842
|
2,222,724
|
||||||
Motor vehicles
|
248,248
|
298,881
|
||||||
Office furniture and equipment
|
1,356,671
|
1,237,923
|
||||||
Machinery, equipment and installations
|
5,805,540
|
5,257,976
|
||||||
Buildings
|
408,194
|
300,196
|
||||||
Leasehold improvements
|
1,219,113
|
1,012,810
|
||||||
Demo inventory
|
1,395,050
|
1,727,869
|
||||||
|
12,848,658
|
12,058,379
|
||||||
Property and equipment, net
|
$
|
5,915,240
|
$
|
6,385,238
|
|
December 31,
2015
|
Additions
|
Adjustments
(currency)
|
December 31,
2016
|
||||||||||||
Training and Simulation Division
|
$
|
24,435,641
|
$
|
–
|
$
|
–
|
$
|
24,435,641
|
||||||||
Power Systems Division
|
21,027,386
|
–
|
26,490
|
21,053,876
|
||||||||||||
Total
|
$
|
45,463,027
|
$
|
–
|
$
|
26,490
|
$
|
45,489,517
|
|
|
December 31,
|
|||||||||||||||
|
|
2016
|
2015
|
||||||||||||||
Original Useful life
|
Cost
|
Net book value
|
Cost
|
Net book value
|
|||||||||||||
Technology
|
4 - 8 years
|
$
|
9,988,000
|
$
|
1,617,000
|
$
|
9,988,000
|
$
|
2,377,250
|
||||||||
Capitalized software costs
|
1 - 3 years
|
4,974,105
|
542,220
|
4,609,946
|
630,230
|
||||||||||||
Trademarks
|
10 years
|
28,000
|
2,800
|
28,000
|
5,600
|
||||||||||||
Backlog/customer relationship
|
1 - 10 years
|
2,844,000
|
8,826
|
2,844,000
|
38,650
|
||||||||||||
Covenant not to compete
|
6 years
|
400,000
|
172,000
|
400,000
|
304,000
|
||||||||||||
Customer list
|
2 - 10 years
|
14,173,645
|
3,681,500
|
14,173,645
|
5,180,000
|
||||||||||||
|
|
32,407,750
|
$
|
6,024,346
|
32,043,591
|
$
|
8,535,730
|
||||||||||
Less - accumulated amortization
|
|
(26,383,404
|
)
|
(23,507,861
|
)
|
||||||||||||
Amortized cost
|
|
6,024,346
|
8,535,730
|
||||||||||||||
Trademarks (indefinite lives)
|
|
799,000
|
799,000
|
||||||||||||||
Net book value
|
|
$
|
6,823,346
|
$
|
9,334,730
|
Year ending December 31,
|
||||
2017
|
$
|
2,210,624
|
||
2018
|
1,415,221
|
|||
2019
|
885,000
|
|||
2020
|
574,500
|
|||
2021
|
291,500
|
|||
Thereafter
|
647,501
|
|||
Total
|
$
|
6,024,346
|
Minimum loan payments
|
December 31,
|
|||
2017
|
$
|
1,828,840
|
||
2018
|
2,151,040
|
|||
2019
|
2,115,583
|
|||
2020
|
2,747,460
|
|||
2021
|
1,056,284
|
|||
Thereafter
|
633,369
|
|||
Total
|
$
|
10,532,576
|
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
Employees and payroll accruals
|
$
|
3,068,035
|
$
|
3,310,170
|
||||
Accrued vacation pay
|
958,160
|
1,073,348
|
||||||
Accrued expenses
|
808,284
|
829,240
|
||||||
Government authorities
|
763,079
|
347,282
|
||||||
Total
|
$
|
5,597,558
|
$
|
5,560,040
|
December 31
|
Minimum rental payments
|
|||
2017
|
$
|
1,060,954
|
||
2018
|
648,202
|
|||
2019
|
382,296
|
|||
2020
|
–
|
|||
2021
|
–
|
|||
Thereafter
|
–
|
|||
Total
|
$
|
2,091,452
|
|
Year ended December 31,
|
|||||||
|
2016
|
2015
|
||||||
Costs incurred on contracts
|
$
|
153,324,167
|
$
|
158,113,695
|
||||
Estimated earnings
|
20,754,754
|
26,759,019
|
||||||
|
174,078,921
|
184,872,714
|
||||||
Less billings to date
|
(166,017,018
|
)
|
(175,971,136
|
)
|
||||
Total
|
$
|
8,061,903
|
$
|
8,901,578
|
||||
|
||||||||
Costs and estimated earnings in excess of billings
|
$
|
10,981,577
|
$
|
12,132,484
|
||||
Billings in excess of costs and estimated earnings (included in deferred revenues)
|
(2,919,674
|
)
|
(3,230,906
|
)
|
||||
Total
|
$
|
8,061,903
|
$
|
8,901,578
|
|
2016
|
2015
|
2014
|
|||||||||||||||||||||
|
Shares
|
Weighted
average fair value at grant date
|
Shares
|
Weighted
average fair value at grant date
|
Shares
|
Weighted
average fair value at grant date
|
||||||||||||||||||
Non-vested at the beginning of the year
|
516,952
|
$
|
2.94
|
920,678
|
$
|
2.99
|
584,746
|
$
|
2.52
|
|||||||||||||||
Changes during year:
|
||||||||||||||||||||||||
Restricted stock granted
|
310,735
|
$
|
2.39
|
57,028
|
$
|
2.89
|
341,861
|
$
|
2.60
|
|||||||||||||||
Restricted units granted
|
150,500
|
$
|
2.31
|
–
|
$
|
–
|
163,175
|
$
|
2.48
|
|||||||||||||||
Vested
|
(220,630
|
)
|
$
|
2.86
|
(451,122
|
)
|
$
|
3.15
|
(166,110
|
)
|
$
|
2.23
|
||||||||||||
Forfeited
|
(275,259
|
)
|
$
|
2.96
|
(9,632
|
)
|
$
|
2.38
|
(2,994
|
)
|
$
|
3.65
|
||||||||||||
Non-vested at the end of the year
|
482,298
|
$
|
2.41
|
516,952
|
$
|
2.94
|
920,678
|
$
|
2.99
|
|||||||||||||||
Restricted shares vested at end of year
|
3,626,580
|
$
|
1.86
|
3,405,960
|
$
|
2.22
|
2,954,838
|
$
|
2.07
|
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
U.S. operating loss carryforward
|
$
|
16,869,205
|
$
|
14,814,390
|
||||
Foreign operating loss carryforward
|
19,696,756
|
20,228,547
|
||||||
Total operating loss carryforward
|
36,565,961
|
35,042,937
|
||||||
|
||||||||
Temporary differences:
|
||||||||
Compensation and benefits
|
2,417,056
|
2,417,056
|
||||||
Warranty reserves
|
1,263,499
|
1,394,672
|
||||||
Foreign temporary differences
|
1,112,113
|
735,948
|
||||||
All other temporary differences
|
1,704,555
|
2,327,485
|
||||||
Total temporary differences
|
6,497,223
|
6,875,161
|
||||||
|
||||||||
Deferred tax asset before valuation allowance
|
43,063,184
|
41,918,098
|
||||||
Valuation allowance
|
(43,063,184
|
)
|
(41,918,098
|
)
|
||||
|
||||||||
Total deferred tax asset
|
$
|
–
|
$
|
–
|
||||
|
||||||||
Deferred tax liability – intangible assets
|
$
|
7,868,123
|
$
|
7,031,564
|
|
Year ended December 31
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Domestic
|
$
|
(2,133,486
|
)
|
$
|
(3,071,694
|
)
|
$
|
4,455,370
|
||||
Foreign
|
1,437,332
|
2,181,671
|
451,649
|
|||||||||
|
$
|
(696,154
|
)
|
$
|
(890,023
|
)
|
$
|
4,907,019
|
|
Year ended December 31
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Current federal taxes
|
$
|
–
|
$
|
–
|
$
|
183,758
|
||||||
Current state and local taxes
|
(24,634
|
)
|
246,403
|
316,444
|
||||||||
Deferred taxes
|
836,561
|
914,543
|
598,500
|
|||||||||
Taxes in respect of prior years
|
(28,507
|
)
|
–
|
(74,865
|
)
|
|||||||
Expense
|
$
|
783,420
|
$
|
1,160,946
|
$
|
1,023,837
|
|
Year ended December 31,
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Income (loss) from continuing operations before taxes
|
$
|
(696,154
|
)
|
$
|
(890,023
|
)
|
$
|
4,907,019
|
||||
|
||||||||||||
Statutory tax rate
|
34
|
%
|
34
|
%
|
34
|
%
|
||||||
Theoretical income tax on the above amount at the U.S. statutory tax rate
|
$
|
(236,692
|
)
|
$
|
(302,608
|
)
|
$
|
1,668,386
|
||||
Deferred taxes for which valuation allowance was provided
|
589,912
|
1,413,567
|
(969,983
|
)
|
||||||||
Non-deductible expenses
|
22,746
|
31,841
|
66,720
|
|||||||||
State taxes, net of federal benefit
|
(16,258
|
)
|
181,771
|
269,508
|
||||||||
Foreign income in tax rates other than U.S. rate
|
452,219
|
(163,625
|
)
|
(119,687
|
)
|
|||||||
Taxes in respect of prior years
|
(28,507
|
)
|
–
|
(74,865
|
)
|
|||||||
Alternative minimum tax for which valuation allowance was not provided
|
–
|
–
|
183,758
|
|||||||||
|
||||||||||||
Actual tax expense
|
$
|
783,420
|
$
|
1,160,946
|
$
|
1,023,837
|
|
Year ended December 31,
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Financial expenses:
|
||||||||||||
Interest, bank charges and fees
|
$
|
(927,390
|
)
|
$
|
(1,202,224
|
)
|
$
|
(1,333,895
|
)
|
|||
Foreign currency transaction differences, net
|
(47,873
|
)
|
–
|
(173,594
|
)
|
|||||||
Total financial expenses
|
(975,263
|
)
|
(1,202,224
|
)
|
(1,507,489
|
)
|
||||||
|
||||||||||||
Financial income:
|
||||||||||||
Foreign currency transaction differences, net
|
–
|
50,103
|
–
|
|||||||||
Total financial income
|
–
|
50,103
|
–
|
|||||||||
|
||||||||||||
Financial expense, net
|
$
|
(975,263
|
)
|
$
|
(1,152,121
|
)
|
$
|
(1,507,489
|
)
|
|
Training and
Simulation
Division
|
Power Systems
Division
|
Corporate
|
Total
Company
|
||||||||||||
2016
|
||||||||||||||||
Revenues from outside customers
|
$
|
46,358,794
|
$
|
46,616,958
|
$
|
–
|
$
|
92,975,752
|
||||||||
Depreciation and amortization expenses (1)
|
(1,113,001
|
)
|
(3,531,851
|
)
|
(19,732
|
)
|
(4,664,584
|
)
|
||||||||
Direct expenses (2)
|
(37,637,110
|
)
|
(43,682,708
|
)
|
(6,712,241
|
)
|
(88,032,059
|
)
|
||||||||
Segment income (loss)
|
7,608,683
|
(597,601
|
)
|
(6,731,973
|
)
|
279,109
|
||||||||||
Financial expense
|
(41,397
|
)
|
(87,371
|
)
|
(846,495
|
)
|
(975,263
|
)
|
||||||||
Income tax (expense) benefit
|
24,634
|
28,507
|
(836,561
|
)
|
(783,420
|
)
|
||||||||||
Net income (loss)
|
$
|
7,591,920
|
$
|
(656,465
|
)
|
$
|
(8,415,029
|
)
|
$
|
(1,479,574
|
)
|
|||||
Segment assets (4)
|
$
|
43,740,316
|
$
|
58,955,828
|
$
|
6,444,053
|
$
|
109,140,197
|
||||||||
Additions to long-lived assets
|
$
|
586,068
|
$
|
1,081,815
|
$
|
–
|
$
|
1,667,883
|
|
Training and
Simulation
Division
|
Power Systems
Division
|
Corporate
|
Total
Company
|
||||||||||||
2015
|
||||||||||||||||
Revenues from outside customers
|
$
|
54,617,611
|
$
|
41,956,336
|
$
|
–
|
$
|
96,573,947
|
||||||||
Depreciation and amortization expenses (1)
|
(912,930
|
)
|
(3,957,368
|
)
|
(25,220
|
)
|
(4,895,518
|
)
|
||||||||
Direct expenses (2)
|
(44,711,979
|
)
|
(41,863,776
|
)
|
(4,840,578
|
)
|
(91,416,331
|
)
|
||||||||
Segment income (loss)
|
8,992,702
|
(3,864,808
|
)
|
(4,865,798
|
)
|
262,098
|
||||||||||
Financial expense
|
(59,791
|
)
|
21,432
|
(1,113,762
|
)
|
(1,152,121
|
)
|
|||||||||
Income tax expense
|
(233,106
|
)
|
–
|
(927,840
|
)
|
(1,160,946
|
)
|
|||||||||
Net income (loss)
|
$
|
8,699,805
|
$
|
(3,843,376
|
)
|
$
|
(6,907,400
|
)
|
$
|
(2,050,969
|
)
|
|||||
Segment assets
|
$
|
57,433,489
|
$
|
59,498,304
|
$
|
492,922
|
$
|
117,424,715
|
||||||||
Additions to long-lived assets
|
$
|
1,139,074
|
$
|
1,374,354
|
$
|
4,501
|
$
|
2,540,005
|
2014
|
Training and
Simulation
Division
|
Power Systems
Division
|
Corporate
|
Total
Company
|
||||||||||||
|
||||||||||||||||
Revenues from outside customers
|
$
|
56,404,498
|
$
|
47,157,851
|
$
|
–
|
$
|
103,562,349
|
||||||||
Depreciation and amortization expenses (1)
|
(756,939
|
)
|
(3,477,855
|
)
|
(20,452
|
)
|
(4,255,246
|
)
|
||||||||
Direct expenses (2)
|
(45,313,956
|
)
|
(40,704,521
|
)
|
(6,874,118
|
)
|
(92,892,595
|
)
|
||||||||
Segment income (loss)
|
10,333,603
|
2,975,475
|
(6,894,570
|
)
|
6,414,508
|
|||||||||||
Financial expense
|
(50,975
|
)
|
(203,902
|
)
|
(1,252,612
|
)
|
(1,507,489
|
)
|
||||||||
Income tax benefit (expense)
|
(133,692
|
)
|
61,777
|
(951,922
|
)
|
(1,023,837
|
)
|
|||||||||
Net income (loss)
|
$
|
10,148,936
|
$
|
2,833,350
|
$
|
(9,099,104
|
)
|
$
|
3,883,182
|
|||||||
Segment assets
|
$
|
58,090,953
|
$
|
65,781,686
|
$
|
866,708
|
$
|
124,739,347
|
||||||||
Additions to long-lived assets (3)
|
$
|
1,533,371
|
$
|
29,159,805
|
$
|
13,344
|
$
|
30,706,520
|
|
2016
|
2015
|
2014
|
|||||||||||||||||||||
|
Total
revenues
|
Long-lived
Assets
|
Total
revenues
|
Long-lived
Assets
|
Total
revenues
|
Long-lived
assets
|
||||||||||||||||||
U.S.A.
|
$
|
72,645,752
|
$
|
49,883,172
|
$
|
77,715,872
|
$
|
52,938,660
|
$
|
83,739,406
|
$
|
55,970,370
|
||||||||||||
Israel
|
13,944,078
|
8,308,931
|
14,114,688
|
8,299,367
|
11,428,427
|
7,755,163
|
||||||||||||||||||
Canada
|
2,435,134
|
–
|
587,516
|
–
|
651,846
|
–
|
||||||||||||||||||
Taiwan
|
690,080
|
–
|
–
|
–
|
–
|
–
|
||||||||||||||||||
Mexico
|
590,919
|
–
|
–
|
–
|
2,300
|
–
|
||||||||||||||||||
India
|
228,449
|
–
|
–
|
–
|
14,865
|
–
|
||||||||||||||||||
Japan
|
182,996
|
–
|
–
|
–
|
–
|
–
|
||||||||||||||||||
Germany
|
115,509
|
–
|
1,076,872
|
–
|
1,117,094
|
–
|
||||||||||||||||||
Australia
|
75,513
|
–
|
109,041
|
–
|
459,153
|
–
|
||||||||||||||||||
Korea
|
–
|
–
|
875,593
|
–
|
1,994,634
|
–
|
||||||||||||||||||
Saudi Arabia
|
–
|
–
|
548,837
|
–
|
2,469,988
|
–
|
||||||||||||||||||
China
|
–
|
–
|
154,803
|
–
|
305,800
|
–
|
||||||||||||||||||
U.A.E.
|
–
|
–
|
–
|
–
|
518,634
|
–
|
||||||||||||||||||
Hong Kong
|
–
|
–
|
–
|
–
|
48,331
|
–
|
||||||||||||||||||
Other
|
2,067,322
|
–
|
1,390,725
|
–
|
811,871
|
–
|
||||||||||||||||||
|
$
|
92,975,752
|
$
|
58,192,103
|
$
|
96,573,947
|
$
|
61,238,027
|
$
|
103,562,349
|
$
|
63,725,533
|
|
Year ended December 31,
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Simulators
|
$
|
46,358,794
|
$
|
54,617,611
|
$
|
56,404,498
|
||||||
Batteries and charging systems
|
42,574,102
|
37,331,372
|
42,930,497
|
|||||||||
Water activated batteries
|
4,042,856
|
4,624,964
|
4,227,354
|
|||||||||
Total
|
$
|
92,975,752
|
$
|
96,573,947
|
$
|
103,562,349
|
|
Year ended December 31,
|
|||||||
|
2016
|
2015
|
||||||
Balance at beginning of period
|
$
|
3,358,866
|
$
|
4,300,602
|
||||
Deferred revenue
|
3,344,498
|
4,323,821
|
||||||
Revenue recognized
|
(4,000,749
|
)
|
(5,265,557
|
)
|
||||
Balance at end of period
|
$
|
2,702,615
|
$
|
3,358,866
|
|
Year ended December 31,
|
|||||||
|
2016
|
2015
|
||||||
Balance at beginning of period
|
$
|
380,904
|
$
|
386,202
|
||||
New reserves
|
136,668
|
187,969
|
||||||
Costs incurred
|
(315,143
|
)
|
(193,267
|
)
|
||||
Balance at end of period
|
$
|
202,429
|
$
|
380,904
|
(in thousands, except per share data)
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
||||||||||||
Fiscal year ended December 31, 2016:
|
||||||||||||||||
Revenues
|
$
|
25,406
|
$
|
21,780
|
$
|
24,301
|
$
|
21,489
|
||||||||
Gross profit
|
7,694
|
6,995
|
7,864
|
5,597
|
||||||||||||
Net (loss) income
|
(382
|
)
|
(569
|
)
|
1,505
|
(2,034
|
)
|
|||||||||
Basic net income/(loss) per common share
|
$
|
(0.03
|
)
|
$
|
(0.03
|
)
|
$
|
0.02
|
$
|
(0.06
|
)
|
|||||
|
||||||||||||||||
Diluted net income/(loss) per common share
|
$
|
(0.03
|
)
|
$
|
(0.03
|
)
|
$
|
0.02
|
$
|
(0.06
|
)
|
/s/ Dean M. Krutty
Dean M. Krutty
|
Arotech Corporation
By: /s/ Thomas J. Paup Name and title: Senior VP and CFO |
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
|
(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles
|
(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and
|
(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
|
(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles
|
(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and
|
(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|