<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                  FOR THE TRANSITION PERIOD FROM       TO

                         COMMISSION FILE NUMBER 0-22583

                                 ORBIT/FR, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                     DELAWARE                             23-2874370
           (STATE OR OTHER JURISDICTION                (I.R.S. EMPLOYER
         OF INCORPORATION OR ORGANIZATION)            IDENTIFICATION NO.)

          506 PRUDENTIAL ROAD, HORSHAM, PA                   19044
      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)             (ZIP CODE)

                                 (215) 674-5100
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 NOT APPLICABLE
   (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
                                     REPORT)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.         Yes [X]     No

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).       Yes [ ]     No [X]

      There were 6,084,473 shares of common stock, $.01 par value, outstanding
as of August 13, 2004.

================================================================================

                                       1
<PAGE>

                                 ORBIT/FR, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                               PAGE NO.
                                                                                                               --------
<S>                                                                                                            <C>
PART I.     FINANCIAL INFORMATION

            Item 1.   Consolidated Financial Statements

                      Consolidated Balance Sheets--June 30, 2004
                        (Unaudited) and December 31, 2003....................................................      3

                      Consolidated Statements of Operations-- Three  and six months
                        ended June 30, 2004 and 2003(Unaudited)..............................................      4

                      Consolidated Statements of Cash Flows-- Six months
                       ended June 30, 2004 and 2003(Unaudited)...............................................      5

                      Notes to Consolidated Financial Statements
                        (Unaudited)..........................................................................      6

            Item 2.   Management's Discussion and Analysis of Financial
                        Condition and Results of Operations..................................................     10

            Item 3.   Quantitative and Qualitative Disclosure of Market Risk.................................     13

            Item 4.   Controls and procedures................................................................     13

PART II.    Other Information

            Item 1.   Legal Proceedings......................................................................     14

            Item 2.   Changes in Securities, Use of  Proceeds and Issuer Purchases of Equity Securities.....      14

            Item 3.   Defaults upon Senior Securities........................................................     14

            Item 4.   Submission of Matters to a Vote of Security Holders....................................     14

            Item 5.   Other Information......................................................................     14

            Item 6.   Exhibits and Reports on Form 8-K.......................................................     14

Signatures...................................................................................................     15
</TABLE>

                                       2
<PAGE>

                                 ORBIT/FR, INC.
                           CONSOLIDATED BALANCE SHEETS
                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                               JUNE 30,           DECEMBER 31,
                                                                                2004                 2003
                                                                              ---------           ------------
                                                                              UNAUDITED
<S>                                                                           <C>                 <C>
                                     ASSETS

Current assets:
   Cash and cash equivalents                                                    $ 1,598             $ 2,413
   Accounts receivable, less allowance of $181 and $187
     in 2004 and 2003, respectively                                               3,096               4,026
   Inventory                                                                      2,348               1,549
   Costs and estimated earnings in excess of billings
     on uncompleted contracts                                                     2,380                 605
   Deferred income taxes                                                            274                 275
   Other                                                                            703                 465
                                                                                -------             -------
Total current assets                                                             10,399               9,333

Property and equipment, net                                                       1,275               1,401
Deferred income taxes                                                               147                 145
Cost in excess of net assets acquired                                               381                 381
                                                                                -------             -------

Total assets                                                                    $12,202             $11,260
                                                                                =======             =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                             $ 1,627             $ 1,578
   Accounts payable--Parent                                                         931                 197
   Accrued expenses                                                               2,133               1,880
   Customer advances                                                                505                 456
   Income taxes payable                                                              34                  19
   Billings in excess of costs and estimated earnings
     on uncompleted contracts                                                     1,279               1,857
   Deferred income taxes                                                            125                 125
                                                                                -------             -------
Total liabilities, all current                                                    6,634               6,112
                                                                                -------             -------

Stockholders' equity:
  Preferred stock: $.01 par value:
     Authorized shares--2,000,000
     Issued and outstanding shares--none                                             --                  --
  Common stock: $.01 par value:
     Authorized shares--10,000,000
     Issued shares--6,084,473                                                        61                  61
  Additional paid-in capital                                                     15,173              15,173
  Accumulated deficit                                                            (9,423)             (9,843)
  Treasury stock--82,900 shares                                                    (243)               (243)
                                                                                -------             -------
Total stockholders' equity                                                        5,568               5,148
                                                                                -------             -------

Total liabilities and stockholders' equity                                      $12,202             $11,260
                                                                                =======             =======
</TABLE>

                             See accompanying notes.

                                       3
<PAGE>

                                 ORBIT/FR, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED JUNE 30,   SIX MONTHS ENDED JUNE 30,
                                                2004           2003           2004          2003
                                            ---------------------------   --------------------------
<S>                                         <C>            <C>            <C>            <C>
Contract revenues                           $     5,468    $     3,281    $    10,092    $     7,865
Cost of revenues                                  3,429          2,417          6,489          5,549
                                            -----------    -----------    -----------    -----------
Gross profit                                      2,039            864          3,603          2,316
                                            -----------    -----------    -----------    -----------

Operating expenses:
   General and administrative                       740            609          1,329          1,204
   Sales and marketing                              611            550          1,211          1,181
   Research and development                         255            303            489            593
                                            -----------    -----------    -----------    -----------
Total operating expenses                          1,606          1,462          3,029          2,978
                                            -----------    -----------    -----------    -----------
Operating income (loss)                             433           (598)           574           (662)

Other expense, net                                   (5)           (36)           (30)           (69)
                                            -----------    -----------    -----------    -----------
Income (loss) before income taxes                   428           (634)           544           (731)
Income tax expense                                   21             49            124            125
                                            -----------    -----------    -----------    -----------
Net income (loss)                           $       407    $      (683)   $       420    $      (856)
                                            ===========    ===========    ===========    ===========
Basic and diluted income (loss) per share   $       .07    $      (.11)   $       .07    $      (.14)
                                            ===========    ===========    ===========    ===========

Weighted average number
  common shares - basic and diluted           6,001,573      6,001,573      6,001,573      6,001,573
                                            ===========    ===========    ===========    ===========
</TABLE>

                             See accompanying notes.

                                       4
<PAGE>

                                 ORBIT/FR, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                         JUNE 30,
                                                                     ----------------
                                                                      2004      2003
                                                                    -------    -------
<S>                                                                 <C>        <C>
Cash flows from operating activities:
Net income (loss)                                                   $   420    $  (856)
Adjustments to reconcile net income (loss) to net cash
   used in operating activities:
      Depreciation and amortization                                     206        211
      Deferred income tax provision                                      (1)       (70)
      Changes in operating assets and liabilities:
         Accounts receivable                                            930      1,824
         Inventory                                                     (799)       225
         Costs and estimated earnings in excess of billings
           on uncompleted contracts                                  (1,775)      (283)
         Other current assets                                          (238)      (216)
         Accounts payable and accrued expenses                          302        (55)
         Accounts payable--Parent                                       734       (346)
         Customer advances                                               49        191
         Income taxes payable                                            15        (26)
         Billings in excess of costs and estimated earnings
            on uncompleted contracts                                   (578)      (983)
                                                                    -------    -------

Net cash used in operating activities                                  (735)      (384)
                                                                    -------    -------

Cash flows from investing activities:
Purchase of property and equipment                                      (80)      (382)
                                                                    -------    -------

Net cash used in investing activities                                   (80)      (382)
                                                                    -------    -------

Cash flows from financing activities:
      Repayment of note receivable                                       --         28
                                                                    -------    -------

Net cash provided by financing activities                                --         28
                                                                    -------    -------

Net decrease in cash and cash equivalents                              (815)      (738)
Cash and cash equivalents at beginning of period                      2,413      3,030
                                                                    -------    -------
Cash and cash equivalents at end of period                          $ 1,598    $ 2,292
                                                                    =======    =======

Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes                        $    80    $    71
                                                                    =======    =======
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>

                                 ORBIT/FR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  JUNE 30, 2004
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1. OWNERSHIP AND BASIS OF PRESENTATION

      ORBIT/FR, Inc. (the "Company"), was incorporated in Delaware on December
9, 1996, as a wholly owned subsidiary of Orbit-Alchut Technologies, Ltd., an
Israeli publicly traded corporation (hereinafter referred to as the "Parent").
The Company develops, markets, and supports sophisticated automated microwave
test and measurement systems for the wireless communications, satellite,
automotive, aerospace/defense and electromagnetic compatibility (EMC)
industries, and manufactures anechoic foam, a microwave absorbing material that
is an integral component of microwave test and measurement systems. ORBIT/FR,
Inc., a holding company, supports its world wide customers through its
subsidiaries ORBIT/FR Engineering, LTD (hereinafter referred to as
"Engineering", Israel), ORBIT/FR Europe, (Germany), Advanced Electromagnetics,
Inc. ("AEMI", San Diego, CA), and Orbit Advanced Technologies, Inc. and its
wholly-owned subsidiary, Flam and Russell, Inc, (Horsham, PA). The Company sells
its products to customers throughout Asia, Europe, Israel, and North and South
America.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Interim Financial Information

      The accompanying unaudited consolidated financial statements for the three
and six months ended June 30, 2004 and 2003 have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the consolidated
financial statements have been included. The results of interim periods are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2004. The consolidated financial statements and footnotes should be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in this Form 10-Q and in the
Company's Form 10-K for the year ended December 31, 2003, filed on March 30,
2004 with the Securities and Exchange Commission, which included the
consolidated financial statements and footnotes for the year ended December 31,
2003.

 Principles of Consolidation

      The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions of the Company and its wholly-owned subsidiaries have been
eliminated in consolidation.

 Use of Estimates

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts in the financial statements
and accompanying notes. Actual results could differ from those estimates.

                                       6
<PAGE>

                                 ORBIT/FR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  JUNE 30, 2004
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 Net  Income (Loss) Per Share

      Basic income (loss) per share is calculated by dividing net income (loss)
by the weighted average common shares outstanding for the period. Diluted income
(loss) per share is calculated by dividing net income (loss) by the weighted
average common shares outstanding for the period plus the dilutive effect of
stock options. The dilutive effect of stock options was not assumed for the
three and six months ended June 30, 2004 and 2003 because the effect of these
securities is antidilutive.

3. INVENTORY

      Inventory consists of the following:

<TABLE>
<CAPTION>
                                                             JUNE 30,        DECEMBER 31,
                                                               2004              2003
                                                           -----------       ------------
                                                           (UNAUDITED)
<S>                                                        <C>               <C>
Work-in-process                                               $1,599           $    991
Parts and components                                             749                558
                                                              ------           --------
                                                              $2,348           $  1,549
                                                              ======           ========
</TABLE>

4. PROPERTY AND EQUIPMENT

      Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                             JUNE 30,         DECEMBER 31,
                                                               2004               2003
                                                           -----------        ------------
                                                           (UNAUDITED)
<S>                                                        <C>                <C>
Lab and computer equipment                                    $2,168             $2,536
Office equipment                                                 823                908
Transportation equipment                                         395                376
Furniture and fixtures                                            17                 38
Leasehold improvements                                           281                288
                                                              ------             -----
                                                               3,684              4,146
Less accumulated depreciation                                  2,409              2,745
                                                              ------             ------

Property and equipment, net                                   $1,275             $1,401
                                                              ======             ======
</TABLE>

                                       7
<PAGE>

                                 ORBIT/FR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  JUNE 30, 2004
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

5. ACCRUED EXPENSES

      Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                       JUNE 30,        DECEMBER 31,
                                                         2004             2003
                                                     -----------       -----------
                                                     (UNAUDITED)
<S>                                                  <C>               <C>
Accrued contract costs                                 $  384             $  338
Accrued compensation                                      982                797
Accrued commissions                                       116                 65
Accrued royalties                                         118                117
Accrued warranty                                          331                411
Other accruals                                            202                152
                                                       ------             ------

                                                       $2,133             $1,880
                                                       ======             ======
</TABLE>

6. LONG-TERM CONTRACTS

<TABLE>
<CAPTION>
                                                     JUNE 30,          DECEMBER 31,
                                                       2004               2003
                                                    ----------         ------------
                                                    (UNAUDITED)
<S>                                                 <C>                <C>
Accumulated expenditures on uncompleted contracts    $ 10,110            $ 7,856
Estimated earnings thereon                              1,809                560
                                                     --------            -------
                                                       11,919              8,416
Less: applicable progress billings                     10,818              9,668
                                                     --------            -------
   Total                                             $  1,101            $(1,252)
                                                     ========            =======

The long-term contracts are shown in the
   accompanying balance sheets as follows:

Costs and estimated earnings on uncompleted
  contracts in excess of billings                    $  2,380            $   605
Billings on uncompleted contracts in excess of
  costs and estimated earnings                         (1,279)            (1,857)
                                                     --------            -------
                                                     $  1,101            $(1,252)
                                                     ========            =======
</TABLE>

7. RELATED PARTY TRANSACTIONS

      Engineering and the Parent have an agreement, whereby Engineering
purchases from the Parent electrical and mechanical production services. In
addition, the Parent provides other administrative services, including, but not
limited to, bookkeeping, computer, legal, accounting, cost management,
information systems, and production support. Engineering pays the Parent for
these services based upon a rate of cost of production services plus 21%.
Engineering is leasing office space from the Parent on an annual basis, for a
rental of $61 per year. These agreements are to be evaluated on an annual basis.

                                       8
<PAGE>

                                 ORBIT/FR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  JUNE 30, 2004
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

8. SEGMENT AND GEOGRAPHIC INFORMATION

      The Company operates exclusively in one industry segment, the business of
developing, marketing and supporting sophisticated automated microwave test and
measurement systems. In addition to its principal operations and markets in the
United States, the Company conducts sales, customer support and service
operations out of other geographic locations in Europe, Asia, and North America.
The following table represents financial information by geographic region for
the three and six months ended June 30, 2004 and 2003.

<TABLE>
<CAPTION>
      Three months ended June 30, 2004             North America         Europe           Asia              Total
-----------------------------------------          -------------        -------           ----              -----
<S>                                                <C>                  <C>              <C>               <C>
Sales to unaffiliated customers                       $ 3,439           $ 1,246          $   783           $ 5,468
Cost of sales to unaffiliated customers                 2,504               565              360             3,429
                                                      -------           -------          -------           -------
Gross profit unaffiliated customers                   $   935           $   681          $   423           $ 2,039
                                                      =======           =======          =======           =======
</TABLE>

<TABLE>
<CAPTION>
   Three months ended June 30, 2003                North America         Europe           Asia              Total
   --------------------------------                -------------        -------           ----              -----
<S>                                                <C>                  <C>              <C>               <C>
Sales to unaffiliated customers                       $ 1,736           $   338          $ 1,207           $ 3,281
Cost of sales to unaffiliated customers                 1,273               401              743             2,417
                                                      -------           -------          -------           -------
Gross profit unaffiliated customers                   $   463           $   (63)         $   464           $   864
                                                      =======           =======          =======           =======
</TABLE>

<TABLE>
<CAPTION>
  Six months ended June 30, 2004                   North America         Europe           Asia              Total
  ------------------------------                   -------------        -------           ----              -----
<S>                                                <C>                  <C>              <C>               <C>
Sales to unaffiliated customers                       $ 5,703           $ 2,024          $ 2,365           $10,092
Cost of sales to unaffiliated customers                 3,943             1,073            1,473             6,489
                                                      -------           -------          -------           -------
Gross profit unaffiliated customers                   $ 1,760           $   951          $   892           $ 3,603
                                                      =======           =======          =======           =======
</TABLE>

<TABLE>
<CAPTION>
   Six months ended June 30, 2003                  North America         Europe           Asia              Total
   ------------------------------                  -------------        -------           ----              -----
<S>                                                <C>                  <C>              <C>               <C>
Sales to unaffiliated customers                       $ 4,384           $   897          $ 2,584           $ 7,865
Cost of sales to unaffiliated customers                 3,166               878            1,505             5,549
                                                      -------           -------          -------           -------
Gross profit unaffiliated customers                   $ 1,218           $    19          $ 1,079           $ 2,316
                                                      =======           =======          =======           =======
</TABLE>

      In the table above, "North America" includes all United States operations,
and "Europe" includes subsidiaries in Germany and Israel.

9. INCOME TAXES

      Income tax expense was not recorded during the three and six months ended
June 30, 2004 on the Company's profitable domestic operations as previous income
tax benefits on losses were reserved for in prior periods. The Company has
reflected income tax expense on profitable foreign operations during the three
and six months ended June 30, 2004 and 2003.

                                       9
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING STATEMENTS

      Certain information contained in this Form 10-Q contains forward looking
statements (as such term is defined in the Securities Exchange Act of 1934 and
the regulations thereunder), including without limitation, statements as to the
Company's financial condition, results of operations and liquidity and capital
resources and statements as to management's beliefs, expectations or options.
Such forward looking statements are subject to risks and uncertainties and may
be affected by various factors which may cause actual results to differ
materially from those in the forward looking statements. Certain of these risks,
uncertainties and other factors, as and when applicable, are discussed in the
Company's filings with the Securities and Exchange Commission including its most
recent Registration Statement on Form S-1, and in its most recent Annual Report
on Form 10-K, as amended, a copy of which may be obtained from the Company upon
request and without charge (except for the exhibits thereto).

RESULTS OF OPERATIONS

      The following table sets forth certain financial data as a percentage of
revenues for the periods indicated:

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED JUNE 30,           SIX MONTHS ENDED JUNE 30,
                                     ---------------------------           -------------------------
                                        2004             2003                2004             2003
                                        ----             ----                ----             ----
<S>                                    <C>              <C>                 <C>              <C>
Revenues                               100.0%           100.0%              100.0%           100.0%
Gross profit                            37.3             26.3                35.7             29.4
General and
     administrative                     13.5             18.6                13.2             15.3
Sales and marketing                     11.2             16.8                12.0             15.0
Research and development                 4.7              9.2                 4.8              7.5
Operating income (loss)                  7.9            (18.2)                5.7             (8.4)
Income (loss) before
  income taxes                           7.8            (19.3)                5.4             (9.3)
Net income (loss)                        7.4            (20.8)                4.2            (10.9)
</TABLE>

THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO THREE MONTHS ENDED JUNE 30, 2003.

      Revenues. Revenues for the three months ended June 30, 2004 were
approximately $5.5 million compared to $3.3 million for the three months ended
June 30, 2003, an increase of approximately $2.2 million or 67%. Revenues from
the defense, satellite, automotive, EMC and University markets increased
approximately $1.9 million, $210,000, $204,000, $63,000, and $44,000,
respectively, while revenues from the wireless market decreased approximately
$234,000. Geographically, revenues from North America and Europe increased
approximately $1.7 million and 908,000, respectively, while revenues from Asia
decreased approximately $424,000 from prior year levels. The increased sales are
largely a result of significant completion of large U.S. defense contracts.

      Cost of revenues. Cost of revenues for the three months ended June 30,
2004 were approximately $3.4 million compared to approximately $2.4 million for
the three months ended June 30, 2003, an increase

                                       10
<PAGE>

of approximately $1.0 million or 42%. Gross margins increased to 37% for the
three months ended June 30, 2004 from 26% for the three months ended June 30,
2003. The increase in gross margins in the quarter is primarily a result of
improvements in the contract bid and program management processes, and increased
revenues resulting in a greater utilization of existing resources.

      General and administrative expenses. General and administrative expenses
for the three months ended June 30, 2004 were $740,000 compared to $609,000 for
the three months ended June 30, 2003, an increase of approximately $131,000 or
21%. As a percentage of revenues, general and administrative expenses decreased
to 13.5% for the three months ended June 30, 2004 from 18.6% for the three
months ended June 30, 2003. The increased costs were mostly the result of
investments made in the Company's compliance programs.

      Sales and marketing expenses. Sales and marketing expenses for the three
months ended June 30, 2004 were $611,000 compared to $550,000 for the three
months ended June 30, 2003, an increase of approximately $61,000 or 11%. As a
percentage of revenues, sales and marketing expenses decreased to 11.2% for the
three months ended June 30, 2004, from 16.8% for the three months ended June 30,
2003.

      Research and development expenses. Research and development expenses for
the three months ended June 30, 2004 were $255,000 compared to $303,000 for the
three months ended June 30, 2003, a decrease of approximately $48,000 or 16%,
The decrease is largely due both to significant research and development efforts
expended during the three months ended June 30, 2003 on the Company's 959
Spectrum software product, and to the Company's ability to utilize its existing
resources to meet contract deadlines in 2004. As a percentage of revenues,
research and development expenses decreased to 4.7% for the three months ended
June 30, 2004, from 9.2% for the three months ended June 30, 2003.

      Other expense, net. Other expense, net for the three months ended June 30,
2004 was approximately $5,000 compared to $36,000 for the three months ended
June 30, 2003, a decrease of approximately $31,000. The Company recognizes
interest income and expense and foreign currency translation gains and losses as
other income (expense). Favorable foreign currency translation rates reduced the
Company's other loss in 2004.

      Income taxes. Income tax expense for the three months ended June 30, 2004
was $21,000 compared to $49,000 for the three months ended June 30, 2003, a
decrease in expense of $28,000. Income tax expense was not recorded during the
three months ended June 30, 2004 on the Company's profitable domestic operations
as previously recorded income tax benefits on losses were reserved for. The
Company has reflected income tax expense on its profitable foreign operations
during the three months ended June 30, 2004 and 2003.

SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO SIX MONTHS ENDED JUNE 30, 2003.

      Revenues. Revenues for the six months ended June 30, 2004 were
approximately $10.1 million, compared to approximately $7.9 million for the six
months ended June 30, 2003, an increase of approximately $2.2 million or 28%.
Revenues from the defense, satellite, automotive, EMC and University markets
increased approximately $1.7 million, $394,000, $214,000, $208,000, and $53,000,
respectively, while revenues from the wireless market decreased approximately
$322,000. Geographically, revenues from North America and Europe increased
approximately $1.7 million and $908,000, respectively while revenues from Asia
decreased approximately $424,000 from prior year levels. The increased sales are
largely a result of significant completion of large U.S. defense contracts.

      Cost of revenues. Cost of revenues for the six months ended June 30, 2004
were approximately $6.5 million compared to approximately $5.5 million for the
six months ended June 30, 2003, an increase of approximately $1.0 million or
18%. Gross margins increased to 36% for the six months ended June 30,

                                       11
<PAGE>

2004 from 29% for the six months ended June 30, 2003. The increase in gross
margins in the period are largely the result of improvements in contract bid and
program management processes, and i a greater utilization of existing resources.

      General and administrative expenses. General and administrative expenses
for the six months ended June 30, 2004 were $1.3 million compared to $1.2
million for the six months ended June 30, 2003,an increase of approximately
$100,000 or 8%. As a percentage of revenues, general and administrative expenses
decreased to 13.2% for the six months ended June 30, 2004 from 15.3 % for the
six months ended June 30, 2003. The increased costs are largely a result of
investments made in the Company's compliance program.

      Sales and marketing expenses. Sales and marketing expenses for the six
months ended June 30, 2004 and 2003 were approximately $1.2 million. As a
percentage of revenues, sales and marketing expenses decreased to 12.0% for the
six months ended June 30, 2004, from 15.0% for the six months ended June 30,
2003.

      Research and development expenses. Research and development expenses for
the six months ended June 30, 2004 were $489,000 compared to $593,000 for the
six months ended June 30, 2003, a decrease of approximately $104,000 or 18%. The
decrease is due both to significant research and development efforts expended
during the six months ended June 30, 2003 on the Company's 959 Spectrum software
product, and to the Company utilization of its resources to meet contract
deadlines in 2004. As a percentage of revenues, research and development
expenses decreased to 4.8% for the six months ended June 30, 2004, from 7.5% for
the six months ended June 30, 2003.

      Other expense, net. Other expense, net for the six months ended June 30,
2004 was approximately $30,000 compared to $69,000 for the six months ended June
30, 2003, a decrease of approximately $39,000. The Company recognizes interest
income and expense and foreign currency translation gains and losses as other
income (expense). Favorable foreign currency translation rates reduced the
Company's other loss in 2004.

      Income taxes. Income tax expense for the six months ended June 30, 2004
was $124,000 compared to $125,000 of income tax expense for the six months ended
June 30, 2003. Income tax expense was not recorded during the six months ended
June 30, 2004 on the Company's profitable domestic operations as previously
recorded income tax benefits on losses were reserved for. The Company has
reflected income tax expense on its profitable foreign operations during the six
months ended June 30, 2004 and 2003.

LIQUIDITY AND CAPITAL RESOURCES

      Net cash used in operating activities during the six months ended June 30,
2004 was $735,000 compared to $384,000 used during the six months ended June 30,
2003. The Company's net income, adjusted for non cash items, provided $625,000
of operating cash during the six months ended June 30, 2004, compared to
$715,000 used in operating activities during the six months ended June 30, 2003.
Changes in the Company's operating assets and liabilities during the six months
ended June 30, 2004 used an additional $1.4 million in operating cash compared
to $331,000 provided during the six months ended June 30, 2003.

      Net cash used in investing activities during the six months ended June 30,
2004 for the purchase of property and equipment was $80,000. During the six
months ended June 30, 2003, the Company purchased $382,000 in property and
equipment.

      The Company has exposure to currency fluctuations as a result of billing
certain of its contracts in foreign currency. When selling to customers in
countries with less stable currencies, the Company bills in

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<PAGE>

U.S. dollars. For the six months ended June 30, 2004, approximately 23% of the
Company's revenues were billed in U.S. dollars. Substantially all of the costs
of the Company's contracts, including costs subcontracted to the Parent, have
been, and will continue to be, U.S. dollar-denominated except for wages for
employees of the Company's Israeli and German subsidiaries, which are
denominated in local currency. The Company intends to continue to enter into
U.S. dollar-denominated contracts.

INFLATION AND SEASONALITY

      The Company does not believe that inflation or seasonality has had a
significant effect on the Company's operations to date.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We are exposed to market risk from fluctuations in foreign currency
exchange rates. We manage exposure to variability in foreign currency exchange
rates primarily through the use of natural hedges, as both liabilities and
assets are denominated in the local currency. However, different durations in
our funding obligations and assets may expose us to the risk of foreign exchange
rate fluctuations. We have not entered into any derivative instrument
transactions to manage this risk. Based on our overall foreign currency rate
exposure at June 30, 2004, we do not believe that a hypothetical 10% change in
foreign currency rates would materially adversely affect our financial position.

ITEM 4. CONTROLS AND PROCEDURES

      The Company's Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of the Company's disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of the end of the
period covered by this quarterly report (the "Evaluation Date"), have concluded
that as of the Evaluation Date, the Company's disclosure controls and procedures
were adequate and effective to ensure that material information relating to the
Company would be made known to them by others within the Company, particularly
during the period in which this quarterly report was being prepared. There were
no significant changes in the Company's internal controls over financial
reporting or in other factors that could significantly affect the Company's
internal controls and procedures subsequent to the Evaluation Date, nor any
significant deficiencies or material weaknesses in such internal controls and
procedures requiring corrective actions.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      The Company is not currently subject to any material legal proceedings and
is not aware of any threatened litigation, unasserted claims or assessments that
could have a material adverse effect on the Company's business, operating
results, or financial condition.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES

            NOT APPLICABLE

ITEM 3. DEFAULTS UPON SENIOR SECURITIES--NOT APPLICABLE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NOT APPLICABLE

ITEM 5. OTHER INFORMATION--NOT APPLICABLE

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      a.    EXHIBITS

            31.1  Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
                  Israel Adan, President and Chief Executive Officer.

            31.2  Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
                  Dave Lubbe, Chief Financial Officer.

            32.1  Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                  Israel Adan, President and Chief Executive Officer.

            32.2  Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                  Dave Lubbe, Chief Financial Officer.

      b.    REPORTS ON FORM 8-K

            None.

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ORBIT/FR, INC.

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                               ORBIT/FR, INC.
                                         ------------------------------------
                                                      Registrant

Date: August 13, 2004
                                                  /s/  Israel Adan
                                         -------------------------------------
                                         President and Chief Executive Officer

Date: August 13, 2004
                                                  /s/  Dave Lubbe
                                         ------------------------------------
                                                Chief Financial Officer

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