##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2008
 OR
 o
    
    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
(State or other jurisdiction 
of incorporation or organization)
    
    23-2874370
(I.R.S. Employer
Identification No.)
 506 Prudential Road, Horsham, PA
(Address of principal executive offices)
    
    19044
(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)
 þ o
  Large accelerated filer  o
    
    Accelerated filer  oNon-accelerated filer  o
    
    Smaller Reporting Company  þ
 o þ
    1




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##### 



ORBIT/FR, Inc.
 Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial StatementsConsolidated Balance SheetsJune 30, 2008
(Unaudited) and December 31, 2007
    
    
    3Consolidated Statements of OperationsThree and six months
ended June 30, 2008 and 2007 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows Six months
ended June 30, 2008 and 2007 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements
(Unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosure of Market Risk
    
    
    14Item 4.
    
    Controls and procedures
    
    
    15PART II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    16Item 1A.
    
    Risk Factors
    
    
    16Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 3.
    
    Defaults upon Senior Securities
    
    
    16Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    16Item 5.
    
    Other Information
    
    
    16Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    16Signatures
    
    
    17Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Per Iversen, President and Chief Executive OfficerCertification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Relland Winand, Chief Financial OfficerCertification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Per Iversen, President and Chief Executive OfficerCertification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Relland Winand, Chief Financial Officer
  2




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ORBIT/FR, Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
 June 30,
    
    
    December 31,2008
    
    
    2007UnauditedASSETSCurrent assets:Cash and cash equivalents
    
    $
    740
    
    
    $
    2,214Accounts receivable, less allowance of
$188 and $215 in 2008 and 2007, respectively
    
    
    3,311
    
    
    
    6,790Inventory
    
    
    2,702
    
    
    
    2,437Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    4,860
    
    
    
    2,092Income tax refunds receivable
    
    
    308
    
    
    
    263Deferred income taxes
    
    
    289
    
    
    
    670Other
    
    
    310
    
    
    
    275Total current assets
    
    
    12,520
    
    
    
    14,741Property and equipment, net
    
    
    1,482
    
    
    
    1,541Deferred income taxes
    
    
    2,025
    
    
    
    787Cost in excess of net assets acquired
    
    
    301
    
    
    
    301Total assets
    
    $
    16,328
    
    
    $
    17,370LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,439
    
    
    $
    2,555Accounts payableParent
    
    
    1,176
    
    
    
    717Accrued expenses
    
    
    2,915
    
    
    
    3,062Short term bank financing
    
    
    1,541
    
    
    
    260Customer advances
    
    
    130
    
    
    
    495Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    746
    
    
    
    964Deferred income taxes
    
    
    1,026
    
    
    
    244Total liabilities, all current
    
    
    8,973
    
    
    
    8,297Stockholders equity:Preferred stock: $.01 par value:Authorized shares2,000,000Issued and outstanding sharesnone
    
    
    
    
    
    
    Common stock: $.01 par value:Authorized shares10,000,000Issued shares6,084,473
    
    
    61
    
    
    
    61Additional paid-in capital
    
    
    16,327
    
    
    
    15,275Accumulated deficit
    
    
    (8,790
    )
    
    
    (6,020
    )Treasury stock82,900 shares
    
    
    (243
    )
    
    
    (243
    )Total stockholders equity
    
    
    7,355
    
    
    
    9,073Total liabilities and stockholders equity
    
    $
    16,328
    
    
    $
    17,370
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ORBIT/FR, Inc.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Contract revenues
    
    $
    5,292
    
    
    $
    7,204
    
    
    $
    11,341
    
    
    $
    13,718Cost of revenues
    
    
    3,766
    
    
    
    4,929
    
    
    
    8,843
    
    
    
    9,222Gross profit
    
    
    1,526
    
    
    
    2,275
    
    
    
    2,498
    
    
    
    4,496Operating expenses:General and administrative
    
    
    653
    
    
    
    832
    
    
    
    1,467
    
    
    
    1,729Sales and marketing
    
    
    949
    
    
    
    865
    
    
    
    1,778
    
    
    
    1,682Research and development
    
    
    529
    
    
    
    361
    
    
    
    1,003
    
    
    
    738Total operating expenses
    
    
    2,131
    
    
    
    2,058
    
    
    
    4,248
    
    
    
    4,149Operating (loss) income
    
    
    (605
    )
    
    
    217
    
    
    
    (1,750
    )
    
    
    347Compensation charge coincident
to change in control
    
    
    (969
    )
    
    
    
    
    
    
    (969
    )
    
    
    Other (loss) income, net
    
    
    (71
    )
    
    
    23
    
    
    
    (117
    )
    
    
    108(Loss) income before income taxes
    
    
    (1,645
    )
    
    
    240
    
    
    
    (2,836
    )
    
    
    455Income tax expense (benefit)
    
    
    32
    
    
    
    89
    
    
    
    (66
    )
    
    
    162Net (loss) income
    
    $
    (1,677
    )
    
    $
    151
    
    
    $
    (2,770
    )
    
    $
    293Basic (loss) income per share
    
    $
    (0.28
    )
    
    $
    0.03
    
    
    $
    (0.46
    )
    
    $
    0.05Diluted (loss) income per share
    
    $
    (0.28
    )
    
    $
    0.03
    
    
    $
    (0.46
    )
    
    $
    0.05Weighted average number
basic common shares
    
    
    6,001,573
    
    
    
    6,001,573
    
    
    
    6,001,573
    
    
    
    6,001,573Weighted average number
diluted common shares
    
    
    6,027,502
    
    
    
    6,025,530
    
    
    
    6,052,175
    
    
    
    6,023,158
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ORBIT/FR, Inc.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
 Six months endedJune 30,2008
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (2,770
    )
    
    $
    293Adjustments to reconcile net (loss) income to net cash
used in operating activities:Depreciation and amortization
    
    
    188
    
    
    
    191Deferred income tax (benefit) provision
    
    
    (75
    )
    
    
    20Non-cash compensation
    
    
    969
    
    
    
    Stock based compensation
    
    
    83
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    3,479
    
    
    
    899Inventory
    
    
    (265
    )
    
    
    (408
    )Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    (2,768
    )
    
    
    (2,139
    )Income tax refunds receivable
    
    
    (45
    )
    
    
    125Other current assets
    
    
    (35
    )
    
    
    (15
    )Accounts payable and accrued expenses
    
    
    (1,263
    )
    
    
    (139
    )Accounts payableFormer Parent
    
    
    459
    
    
    
    374Customer advances
    
    
    (365
    )
    
    
    (1,655
    )Income taxes payable
    
    
    
    
    
    
    (33
    )Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    (218
    )
    
    
    976Net cash used in operating activities
    
    
    (2,626
    )
    
    
    (1,511
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (200
    )
    
    
    (468
    )Proceeds from sale of property and equipment
    
    
    71
    
    
    
    Net cash used in investing activities
    
    
    (129
    )
    
    
    (468
    )Cash flows from financing activities:Proceeds from short term notes payable
    
    
    1,281
    
    
    
    200Repayment of short term notes payable
    
    
    
    
    
    
    (400
    )Net cash provided by (used in) financing activities
    
    
    1,281
    
    
    
    (200
    )Net decrease in cash and cash equivalents
    
    
    (1,474
    )
    
    
    (2,179
    )Cash and cash equivalents at beginning of period
    
    
    2,214
    
    
    
    3,901Cash and cash equivalents at end of period
    
    $
    740
    
    
    $
    1,722Supplemental disclosures of cash flow information:Cash paid during the period for income taxes
    
    $
    169
    
    
    $
    190Cash (paid) received during the period for interest
    
    $
    (22
    )
    
    $
    31
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ORBIT/FR, Inc.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008
(Amounts in thousands, except share and per share data)
 1. Ownership and Basis of Presentation
  2. Summary of Significant Accounting Policies
 Interim Financial Information
  Principles of Consolidation
  Use of Estimates
  Net (Loss) Income Per Share
 6




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008
(Amounts in thousands, except share and per share data)
  3. Inventory
  June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Work-in-process
    
    $
    406
    
    
    $
    637Parts and components
    
    
    2,296
    
    
    
    1,800$
    2,702
    
    
    $
    2,437
 7




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008
(Amounts in thousands, except share and per share data)
 4. Property and Equipment
  June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Lab and computer equipment
    
    $
    2,739
    
    
    $
    2,642Office equipment
    
    
    878
    
    
    
    808Transportation equipment
    
    
    45
    
    
    
    130Furniture and fixtures
    
    
    10
    
    
    
    10Fixed assets in progress
    
    
    59
    
    
    
    14Leasehold improvements
    
    
    140
    
    
    
    1383,871
    
    
    
    3,742Less accumulated depreciation
    
    
    2,389
    
    
    
    2,201Property and equipment, net
    
    $
    1,482
    
    
    $
    1,541
 5. Accrued Expenses
  June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Accrued contract costs
    
    $
    31
    
    
    $
    152Accrued compensation
    
    
    1,662
    
    
    
    1,665Accrued commissions
    
    
    49
    
    
    
    299Accrued royalties
    
    
    58
    
    
    
    56Accrued warranty
    
    
    345
    
    
    
    384Other accruals
    
    
    770
    
    
    
    506$
    2,915
    
    
    $
    3,062
 8




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008
(Amounts in thousands, except share and per share data)
 6. Long-Term Contracts
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Accumulated expenditures on uncompleted contracts
    
    $
    29,764
    
    
    $
    33,949Estimated earnings thereon
    
    
    6,871
    
    
    
    8,99236,635
    
    
    
    42,941Less: applicable progress billings
    
    
    32,521
    
    
    
    41,813Total
    
    $
    4,114
    
    
    $
    1,128The long-term contracts are shown in the accompanying balance sheets as follows:Costs and estimated earnings on uncompleted
contracts in excess of billings
    
    $
    4,860
    
    
    $
    2,092Billings on uncompleted contracts in excess of
costs and estimated earnings
    
    
    (746
    )
    
    
    (964
    )$
    4,114
    
    
    $
    1,128
 7. Related Party Transactions
    9




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008
(Amounts in thousands, except share and per share data)
 8. Segment and Geographic Information
  Three months ended June 30, 2008
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    3,449
    
    
    $
    1,122
    
    
    $
    721
    
    
    $
    5,292Cost of sales to unaffiliated customers
    
    
    2,323
    
    
    
    720
    
    
    
    723
    
    
    
    3,766Gross profit (loss) unaffiliated customers
    
    $
    1,126
    
    
    $
    402
    
    
    $
    (2
    )
    
    $
    1,526
 Three months ended June 30, 2007
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    2,457
    
    
    $
    1,125
    
    
    $
    3,622
    
    
    $
    7,204Cost of sales to unaffiliated customers
    
    
    1,384
    
    
    
    1,050
    
    
    
    2,495
    
    
    
    4,929Gross profit unaffiliated customers
    
    $
    1,073
    
    
    $
    75
    
    
    $
    1,127
    
    
    $
    2,275
 Six months ended June 30, 2008
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    6,418
    
    
    $
    2,358
    
    
    $
    2,565
    
    
    $
    11,341Cost of sales to unaffiliated customers
    
    
    4,496
    
    
    
    1,834
    
    
    
    2,513
    
    
    
    8,843Gross profit unaffiliated customers
    
    $
    1,922
    
    
    $
    524
    
    
    $
    52
    
    
    $
    2,498
 Six months ended June 30, 2007
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    5,326
    
    
    $
    2,611
    
    
    $
    5,781
    
    
    $
    13,718Cost of sales to unaffiliated customers
    
    
    3,002
    
    
    
    2,219
    
    
    
    4,001
    
    
    
    9,222Gross profit unaffiliated customers
    
    $
    2,324
    
    
    $
    392
    
    
    $
    1,780
    
    
    $
    4,496
  10




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
  Recent Events
  Results of Operations
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    28.8
    
    
    
    31.6
    
    
    
    22.0
    
    
    
    32.8General and administrative
    
    
    12.3
    
    
    
    11.6
    
    
    
    12.9
    
    
    
    12.6Sales and marketing
    
    
    17.9
    
    
    
    12.0
    
    
    
    15.7
    
    
    
    12.3Research and development
    
    
    10.0
    
    
    
    5.0
    
    
    
    8.8
    
    
    
    5.4Operating (loss) income
    
    
    (11.4
    )
    
    
    3.0
    
    
    
    (15.4
    )
    
    
    2.5Compensation charge
    
    
    (18.3
    )
    
    
    
    
    
    
    (8.5
    )
    
    
    (Loss)income before
income taxes
    
    
    (31.1
    )
    
    
    3.3
    
    
    
    (25.0
    )
    
    
    3.3Net (loss) income
    
    
    (31.7
    )
    
    
    1.1
    
    
    
    (24.4
    )
    
    
    2.1
 11




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Three months ended June 30, 2008 compared to three months ended June 30, 2007.
 Revenues.
 Cost of revenues.
 General and administrative expenses.
 Sales and marketing expenses.
 Research and development expenses.
 Compensation charge
 12




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Other (loss)/income, net.
 Income taxes.
 Six months ended June 30, 2008 compared to six months ended June 30, 2007.
 Revenues.
 Cost of revenues.
 General and administrative expenses.
 Sales and marketing expenses.
 Research and development expenses.
 Compensation charge
 13




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Other (loss)/income net,
 Income taxes.
 Liquidity and Capital Resources
     Inflation and Seasonality
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  14




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Item 4.
    
    Controls and Procedures
 (a)
    
    Evaluation of disclosure controls and procedures. The Companys disclosure controls and
procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) are
designed to ensure that information required to be disclosed by us in the reports that are
filed or submitted under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms. These disclosure controls and procedures include controls and
procedures designed to ensure that information required to be disclosed under the
Securities Exchange Act of 1934 is accumulated and communicated to our management on a
timely basis to allow decisions regarding required disclosure. The Company evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as of
June 30, 2008. Based on this evaluation, the Companys Chief Executive Officer and Chief
Financial Officer previously concluded that as of June 30, 2008, these controls and
procedures were effective.(b)
    
    Change in Internal Control. There have been no changes in internal control over
financial reporting identified in connection with the foregoing evaluation that occurred
during the Companys fiscal quarter ended June 30, 2008 that have materially affected, or
are reasonably likely to materially affect, the Companys internal control over financial
reporting.
 15




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PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceed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
 31.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Per Iversen,
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, Relland Winand, 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, Per Iversen,
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, Relland Winand, Chief
Financial Officer.
 16




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ORBIT/FR, Inc.
 
 SIGNATURES
  Orbit/FR, Inc.RegistrantDate:
August 19, 2008/s/ Per IversenPresident and Chief Executive OfficerDate:
August 19, 2008
    
    /s/ Relland WinandChief Financial Officer
 17