Arotech's Batteries and Power Systems Division to Develop Zinc-Air Batteries for UAVs for Major US Agency

January 20, 2005 - Arotech Corporation (NasdaqNM: ARTX) announced today that its Batteries and Power Systems Division has received a second development contract from a major US agency. Under the contract, Arotech's Electric Fuel Battery Corporation subsidiary will develop prototype zinc-air batteries for small unmanned aerial vehicles (UAVs) to achieve extended flight times. The funding is expected to cover development costs.

Arotech has previously announced contracts with an Israeli Defense Agency to develop prototype zinc-air batteries for Micro Aerial Vehicles (MAVs) and has demonstrated that its 4th generation zinc-air batteries achieve longer mission durations than that of high performance Lithium batteries.

In addition, this novel technology is being funded separately by BAA and Plus Up frameworks.

"We have developed very high-power, lightweight batteries from our most advanced zinc-air cells, to extend the flight time of small UAVs and MAVs," said Robert S. Ehrlich, Arotech Chairman and CEO. "The Unmanned Aerial Vehicle market is growing and we are excited by the success of our 4th generation technology to extend flight times of these vehicles.”

About Arotech Corporation

Arotech Corporation provides quality defense and security products for the military, law enforcement and homeland security markets, including advanced zinc-air and lithium batteries and chargers, multimedia interactive simulators/trainers and lightweight armoring. Arotech operates through three major business divisions: Armoring, Simulation and Security and Batteries and Power Systems.

Arotech is incorporated in Delaware, with corporate offices in New York, and research, development and production subsidiaries in Alabama, Colorado, Michigan, California 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; and other risk factors detailed in Arotech’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2003 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.