Arotech Completes First Milestone of Phase III Electric Bus Program

July 2, 2003 - Arotech Corporation (NasdaqNM: ARTX) announced today that its Electric Fuel subsidiary’s Electric Vehicle Division has completed the first milestone in Phase III of the FTA-supported Electric Bus program. The program will continue with the bus performance tests during the summer.

Phase III improvements to the Electric Fuel Zinc-Air zero-emission bus include the design, installation and bench testing of a new ultracapacitor and controller. Electric Fuel has completed the preparation of zinc anodes for the test drives, scheduled to take place in upstate New York later this summer.

The United States Federal Transit Administration (FTA) funds at least half of the $2 million budget associated with Phase III of Electric Fuel’s Zinc-Air Electric Transit Bus Program, with remainder of the budget shared by the partners in the program. The Regional Transportation Commission of Southern Nevada (RTC) will continue its role in leading the project’s peer review committee, and supporting demonstration drives in Southern Nevada.

The Zinc-Air Electric Transit Bus Program was initiated in late 1998 to demonstrate the ability of Electric Fuel’s patented zinc-air fuel cell system to power a full-size, all-electric transit bus, providing a full day’s range for heavy-duty city and suburban routes, under all weather conditions. During 2001 and 2002, Electric Fuel announced that various performance tests and on road bus demonstrations had been successfully completed.

“We believe Zinc-Air is the only viable near term solution for zero emission mass transit,” said Arotech Chairman and CEO Robert S. Ehrlich. “With continued support we should be able to demonstrate our system’s ability to reduce national dependence on foreign oil while contributing in a serious way to the improvement of urban air quality.”

About the Zinc-Air Bus

The bus used in the program is a standard 40-foot (12 meter) transit bus manufactured by NovaBus Corporation. It has a capacity of 40 seated and 37 standing passengers and a gross vehicle weight of 39,500 lbs. (17,955 kg.). The bus utilizes a new all electric, battery/battery hybrid propulsion system jointly developed by Electric Fuel and General Electric Global Research with funding from the Federal Transit Administration of the Department of Transportation. The all-electric hybrid system consists of a main energy source; an Electric Fuel zinc-air battery; and an auxiliary power source, which in Phase II, consisted of an auxiliary battery. The vehicle draws cruising energy from the zinc-air battery and supplementary power for acceleration, merging into traffic and hill climbing from the auxiliary power source, which in Phase III, will incorporate advanced generation ultracapacitors.

About Arotech Corporation

Arotech's corporate mission is to provide quality defense and security products for the military, law enforcement and homeland security markets, including advanced zinc-air batteries, multimedia interactive simulators/trainers and lightweight armoring.
Arotech Corporation (www.arotech.com) operates two business divisions: Electric Fuel Batteries — developing and manufacturing zinc-air batteries for military and homeland security applications and developing electric vehicle batteries for zero emission public transportation; and Arotech Defense — consisting of IES Interactive, which provides advanced high-tech multimedia training systems for law enforcement and paramilitary organizations, and MDT Armor, which provides vehicle armoring for the military, industrial and private sectors.

Arotech is incorporated in Delaware under the name “Electric Fuel Corporation” and has corporate and sales offices in New York and Denver with research, development and production subsidiaries in Alabama, Colorado and Israel.

Except for the historical information herein, the matters discussed in this news release include forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties that may cause actual results to vary significantly. These risks and uncertainties include, but are not limited to, risks relating to: product and technology development; the uncertainty of the market for Arotech’s products; changing economic conditions; delay, cancellation or non-renewal, in whole or in part, of contracts or of purchase orders; significant future capital requirements; and other risk factors detailed in Arotech’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as amended, and other filings (under the name Electric Fuel Corporation) with the Securities and Exchange Commission. Arotech assumes no obligation to update the information in this release. Reference to the Company’s website above does not constitute incorporation of any of the information thereon into this press release.