Arotech Corporation Finds Lawsuit Brought By IES in
Israel to be Without Merit

The Company believes it has met all its contractual obligations

October 29, 2003 - Arotech Corporation (NasdaqNM: ARTX) announced today that it has been informed that the I.E.S. Group (TASE:IES) filed a nearly $3 million lawsuit in the Tel Aviv District Court, Israel, against the Company and Robert S. Ehrlich, Arotech's Chairman and CEO. The Company has not yet received a copy of the complaint. The Company believes that it has satisfied all of its contractual obligations under its agreements with the I.E.S. Group. However, based on claims made in a press release issued by the I.E.S. Group, the Company believes that the lawsuit is without merit and the Company intends to fully and completely defend the claims vigorously.

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, MDT Armor, which provides vehicle armoring for the military, industrial and private sectors, and Arocon Security, which provides homeland security consulting and other services.

Arotech is incorporated in Delaware 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; the outcome of the claims made by the I.E.S Group 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 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.