Arotech Corporation is a defense and security company engaged in two business areas: interactive simulation and mobile power systems.

The original Complaint alleges that Defendants, Arotech and certain of its officers and/or directors, published a series of materially false and misleading statements that Defendants knew and/or recklessly disregarded were materially false and misleading at the time of such publication, and that omitted to reveal material information necessary to make Defendants' statements, in light of such material omissions, not materially false and misleading.

Throughout the Class Period, Arotech presented itself as a company that was adept at managing and integrating acquired assets (such as Armour of America, which it acquired in August 2004 at a cost of approximately $22 million), and a company that was achieving organic growth. Moreover, throughout that time, Defendants repeatedly stated that Arotech maintained systems, procedures and controls that foreseeably would allow it to achieve remarkable year-over-year "record" quarterly revenue growth as high as 40%.

Defendants' representations concerning Arotech's business, management capabilities, systems and controls, and strength and profitability were either knowingly false when made or Defendants recklessly disregarded known, material adverse facts at the time the statements were made. In reality, throughout the Class Period, the Company was suffering from a host of undisclosed adverse factors that were negatively impacting Arotech's business and that would foreseeably cause it to report declining financial results - - materially less than the market expectations Defendants had caused and cultivated.

It was only at the end of the Class Period that investors ultimately learned the truth - - that the Company was operating far below expectations and that Arotech had significantly under-reserved for its impaired assets. These sudden and shocking disclosures, first reported on November 14, 2005, had an immediate impact on the price of Arotech stock. Accordingly, the following day, on November 15, 2005, shares of the Company declined almost 27% in the single trading day.

The Complaint alleges that Defendants were motivated to and did conceal the true operational and financial condition of Arotech, and materially misrepresented and failed to disclose the conditions that were adversely affecting Arotech throughout the Class Period, because this allowed Defendants to. (i) deceive the investing public regarding Arotech's business, operations, management and the intrinsic value of Arotech common stock; (ii) register for sale with the SEC millions of shares of Company stock and to arrange for financing upon preferential terms not otherwise available; and (iii) cause Plaintiff and other members of the Class to purchase Arotech common stock at artificially inflated prices.

Two similar securities class action Complaints were filed in the US District Court for the Eastern District Of New York.

On June 4, 2007, the Plaintiff filed a Notice of Voluntary Dismissal. The case first filed in the U.S. District Court for the Eastern District of Michigan is closed. The action is continuing in the U.S. District Court for the Eastern District of New York, Morris Akerman, et al. v. Arotech Corporation, et al. On July 3, 2007, the Court entered an Order granting the motion to consolidate two related actions, to appoint lead Plaintiffs and to approve selection of co-lead Counsel.

The lead Plaintiffs filed a Consolidated Complaint on September 28, 2007. Defendants filed a motion to dismiss on February 28, 2008. On March 30, 2009, Chief Judge Raymond J. Dearie signed the Memorandum and Order denying the Defendants’ motion to dismiss the Complaint. The parties soon after engaged in discovery proceedings.

According to a press release dated January 13, 2010, Arotech Corporation announced that it has reached an agreement with lead Plaintiffs to settle the consolidated putative securities class-action lawsuit originally filed in March 2007 in the United States District Court for the Eastern District of Michigan. Under the terms of the proposed settlement, the lawsuit will be dismissed with prejudice, and Arotech and all current and former officers and directors named in the Complaint will receive a full and complete release of all claims asserted against them in the litigation, as well as any related claims that could have been asserted. The claims will be settled for $2.9 million. The monetary payment to be made on behalf of Arotech and the individual Defendants will be funded entirely from insurance proceeds. As a result, there will be no additional financial contribution by Arotech. The agreement is subject to court approval.

On January 22, 2010, the Court entered the Preliminary Order approving the proposed settlement, certifying the action as a class action and setting the Settlement Fairness Hearing. On June 23, 2010, Judge Raymond J. Dearie signed the Order and Final Judgment approving the settlement as fair, reasonable and adequate. The action is now dismissed with prejudice.