|9 Months Ended|
Sep. 30, 2019
|Subsequent Events [Abstract]|
On October 24, 2019, Shiva Stein, a purported stockholder of the Company, filed a complaint against the Company and the members of the board in the United States District Court for the District of Delaware, styled Stein v. Arotech Corporation, C.A. No. 1:19-cv-02016-RGA (the “Stein Action”). Stein alleges that the Company and the board violated the Securities Exchange Act of 1934 (the “Exchange Act”) by failing to disclose material information in connection with financial projections and inputs relied upon by B. Riley in its analyses, including (i) certain non-GAAP financial information and a reconciliation to GAAP, (ii) certain inputs or analyses relating to B. Riley’s Discounted Cash Flow Analysis, and (iii) the premiums paid in the transactions observed in B. Riley’s Premiums Paid Analysis. Stein seeks to, among other things, enjoin the consummation of the merger until such disclosures are made, rescind, to the extent already implemented, the merger agreement, or obtain damages.
On October 28, 2019, Eric Sabatini filed a purported stockholder class action against the Company and the members of the board in the United States District Court for the District of Delaware, styled Sabatini v. Arotech Corporation, C.A. No. 1:19-cv-02028-RGA (the “Sabatini Action”). On October 30, 2019, Jacqueline D. Creeks, a purported stockholder of the Company, filed a complaint against the Company, the members of the board, Dean M. Krutty, and Kelli L. Kellar in the United States District Court for the Southern District of New York, styled Creeks v. Arotech Corporation, C.A. No. 1:19-cv-10044 (the “Creeks Action”). Sabatini and Creeks assert similar allegations to those in the Stein Action and seek similar relief.
On October 31, 2019, David Hill filed a purported stockholder class action against the Company and the members of the board in the Circuit Court for Washtenaw County in the State of Michigan, styled Hill v. Arotech, Inc., Case No 19-001185-CB (the “Hill Action”). Hill alleges that the members of the board breached their fiduciary duties by failing to disclose purportedly material information, including the information sought in the Stein Action, Sabatini Action, and Creeks Action, and information relating to the sales process, such as details regarding certain confidentiality agreements, the reason for forming the special committee, and the scope of the special committee’s authority. Hill also alleges that the members of the board breached their fiduciary duties by engaging in a purportedly deficient sales process resulting in a purportedly unfair price. Hill further alleges that the members of the board labored under a conflict of interest as a result of the accelerated vesting of certain equity. Finally, Hill claims that the Company aided and abetted those purported breaches. Hill seeks similar relief to the relief sought in the Stein Action, Sabatini Action, and Creeks Action.
The outcome of this litigation cannot be predicted with certainty; however, we and our board believe that the allegations and claims asserted in the Stein Action, Sabatini Action, Creeks Action, and Hill Action are without merit. A negative outcome in the actions could adversely affect us if it results in preliminary or permanent injunctive relief. If additional similar complaints are filed, absent new or different allegations that are material, we may not necessarily announce such additional filings.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef