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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 March 31, 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
    
    23-2874370(State or other jurisdiction
    
    (I.R.S. Employerof 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)
 þ o
  Large accelerated filer o
    

Accelerated filer o
    

Non-accelerated filer o
    

Smaller
reporting company þ(Do not check if a smaller reporting company)
 o þ




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ORBIT/FR, Inc.
  
 Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial StatementsConsolidated Balance SheetsMarch 31, 2008
(Unaudited) and December 31, 2007
    
    
    4Consolidated Statements of Operations Three months
ended March 31, 2008 and 2007 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows Three months
ended March 31, 2008 and 2007 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements
(Unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosure of Market Risk
    
    
    14Item 4
    
    Controls and procedures
    
    
    14PART 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, Israel Adan, President and Chief Executive Officer.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.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.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.
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ORBIT/FR, Inc.
 
 CONSOLIDATED BALANCE SHEETS
 (Amounts in thousands, except share data)
 March 31,
    
    
    December 31,2008
    
    
    2007UnauditedASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,606
    
    
    $
    2,214Accounts receivable, less allowance of $188
and $215 in 2008 and 2007, respectively
    
    
    3,728
    
    
    
    6,790Inventory
    
    
    1,933
    
    
    
    2,437Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    4,049
    
    
    
    2,092Income tax refunds receivable
    
    
    226
    
    
    
    263Deferred income taxes
    
    
    424
    
    
    
    670Other
    
    
    331
    
    
    
    275Total current assets
    
    
    12,297
    
    
    
    14,741Property and equipment, net
    
    
    1,556
    
    
    
    1,541Deferred income taxes
    
    
    1,673
    
    
    
    787Cost in excess of net assets acquired
    
    
    301
    
    
    
    301Total assets
    
    $
    15,827
    
    
    $
    17,370LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,873
    
    
    $
    2,555Accounts payableParent
    
    
    1,167
    
    
    
    717Accrued expenses
    
    
    3,053
    
    
    
    3,062Short term bank financing
    
    
    
    
    
    
    260Customer advances
    
    
    188
    
    
    
    495Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    728
    
    
    
    964Deferred income taxes
    
    
    784
    
    
    
    244Total liabilities, all current
    
    
    7,793
    
    
    
    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
    
    
    15,329
    
    
    
    15,275Accumulated deficit
    
    
    (7,113
    )
    
    
    (6,020
    )Treasury stock82,900 shares
    
    
    (243
    )
    
    
    (243
    )Total stockholders equity
    
    
    8,034
    
    
    
    9,073Total liabilities and stockholders equity
    
    $
    15,827
    
    
    $
    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 March 31,2008
    
    
    2007Contract revenues
    
    $
    6,049
    
    
    $
    6,514Cost of revenues
    
    
    5,077
    
    
    
    4,293Gross profit
    
    
    972
    
    
    
    2,221Operating expenses:General and administrative
    
    
    814
    
    
    
    897Sales and marketing
    
    
    829
    
    
    
    817Research and development
    
    
    474
    
    
    
    377Total operating expenses
    
    
    2,117
    
    
    
    2,091Operating (loss) income
    
    
    (1,145
    )
    
    
    130Other (loss) income, net
    
    
    (46
    )
    
    
    85(Loss) income before income taxes
    
    
    (1,191
    )
    
    
    215Income tax (benefit) expense
    
    
    (98
    )
    
    
    73Net (loss) income
    
    $
    (1,093
    )
    
    $
    142Basic net (loss) income per share
    
    $
    (0.18
    )
    
    $
    0.02Diluted net (loss) income per share
    
    $
    (0.18
    )
    
    $
    0.02Weighted average number common shares  basic
    
    
    6,001,573
    
    
    
    6,001,573Weighted average number common shares  diluted
    
    
    6,090,265
    
    
    
    6,027,691
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ORBIT/FR, Inc.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts in thousands)
 Three months endedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (1,093
    )
    
    $
    142Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:Depreciation
    
    
    99
    
    
    
    93Deferred income tax (benefit) expense
    
    
    (98
    )
    
    
    8Stock based compensation
    
    
    53
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    3,062
    
    
    
    3,098Inventory
    
    
    504
    
    
    
    (85
    )Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    
    (1,957
    )
    
    
    (977
    )Income tax refunds receivable
    
    
    37
    
    
    
    Other assets
    
    
    (56
    )
    
    
    (71
    )Accounts payable and accrued expenses
    
    
    (690
    )
    
    
    (1,108
    )Accounts payableParent
    
    
    450
    
    
    
    70Income taxes payable
    
    
    (2
    )
    
    
    (19
    )Customer advances
    
    
    (307
    )
    
    
    (1,029
    )Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    (236
    )
    
    
    37Net cash (used in) provided by operating activities
    
    
    (234
    )
    
    
    159Cash flows from investing activities:Purchase of property and equipment
    
    
    (114
    )
    
    
    (177
    )Net cash used in investing activities
    
    
    (114
    )
    
    
    (177
    )Cash flows from financing activities:Repayment of short term notes payable
    
    
    (260
    )
    
    
    (400
    )Net cash used in financing activities
    
    
    (260
    )
    
    
    (400
    )Net decrease in cash and cash equivalents
    
    
    (608
    )
    
    
    (418
    )Cash and cash equivalents at beginning of year
    
    
    2,214
    
    
    
    3,901Cash and cash equivalents at end of period
    
    $
    1,606
    
    
    $
    3,483Supplemental disclosures of cash flow information:Net cash paid during the period for income taxes
    
    $
    103
    
    
    $
    92Net cash paid during the period for interest
    
    $
    5
    
    
    $
    20
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ORBIT/FR, Inc.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 March 31, 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
  6




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2008
(Amounts in thousands, except share and per share data)
 Net
(Loss) Income Per Share
  3. Inventory
  March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)Work-in-process
    
    $
    108
    
    
    $
    637Parts and components
    
    
    1,825
    
    
    
    1,800$
    1,933
    
    
    $
    2,437
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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2008
(Amounts in thousands, except share and per share data)
 4. Property and Equipment
  March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)Lab and computer equipment
    
    $
    2,685
    
    
    $
    2,642Office equipment
    
    
    867
    
    
    
    808Transportation equipment
    
    
    130
    
    
    
    130Furniture and fixtures
    
    
    10
    
    
    
    10Fixed assets in process
    
    
    24
    
    
    
    14Leasehold improvements
    
    
    140
    
    
    
    1383,856
    
    
    
    3,742Less accumulated depreciation
    
    
    2,300
    
    
    
    2,201Property and equipment, net
    
    $
    1,556
    
    
    $
    1,541
 5. Accrued Expenses
  March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)Accrued contract costs
    
    $
    163
    
    
    $
    152Accrued compensation
    
    
    1,702
    
    
    
    1,665Accrued commissions
    
    
    335
    
    
    
    299Accrued royalties
    
    
    57
    
    
    
    56Accrued warranty
    
    
    341
    
    
    
    384Other accruals
    
    
    455
    
    
    
    506$
    3,053
    
    
    $
    3,062
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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2008
(Amounts in thousands, except share and per share data)
 6. Long-Term Contracts
 March 31,
    
    

December
31,2008
    
    
    2007(Unaudited)Accumulated expenditures on uncompleted contracts
    
    $
    29,550
    
    
    $
    33,949Estimated earnings thereon
    
    
    7,454
    
    
    
    8,99237,004
    
    
    
    42,941Less: applicable progress billings
    
    
    33,683
    
    
    
    41,813Total
    
    $
    3,321
    
    
    $
    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
    
    $
    4,049
    
    
    $
    2,092Billings on uncompleted contracts in excess of
costs and estimated earnings
    
    
    (728
    )
    
    
    (964
    )$
    3,321
    
    
    $
    1,128
 7. Related Party Transactions
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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2008
(Amounts in thousands, except share and per share data)
 8. Segment and Geographic Information
  Three months ended March 31, 2008
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    2,969
    
    
    $
    1,236
    
    
    $
    1,844
    
    
    $
    6,049Cost of sales to unaffiliated customers
    
    
    2,173
    
    
    
    1,114
    
    
    
    1,790
    
    
    
    5,077Gross profit from unaffiliated customers
    
    $
    796
    
    
    $
    122
    
    
    $
    54
    
    
    $
    972
 Three months ended March 31, 2007
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    2,869
    
    
    $
    1,486
    
    
    $
    2,159
    
    
    $
    6,514Cost of sales to unaffiliated customers
    
    
    1,618
    
    
    
    1,169
    
    
    
    1,506
    
    
    
    4,293Gross profit from unaffiliated customers
    
    $
    1,251
    
    
    $
    317
    
    
    $
    653
    
    
    $
    2,221
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
  Subsequent Event
  Results of Operations
  Three-months ended March 31,2008
    
    
    2007(Unaudited)Revenues
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    16.1
    
    
    
    34.1General and administrative
    
    
    13.5
    
    
    
    13.8Sales and marketing
    
    
    13.7
    
    
    
    12.5Research and development
    
    
    7.9
    
    
    
    5.8Operating (loss) income
    
    
    (18.9
    )
    
    
    2.0(Loss)
income before tax expense
    
    
    (19.7
    )
    
    
    3.3Net (loss) income
    
    
    (18.1
    )
    
    
    2.2
 Three months ended March 31, 2008 compared to three months ended March 31, 2007.
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Revenues.
 Cost of revenues.
 General and administrative expenses.
 Sales and marketing expenses.
 Research and development expenses.
 Other (loss)/income, net.
 12




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Income taxes.
 Liquidity and Capital Resources
     Inflation and Seasonality
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
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(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
March 31, 2008. Based on this evaluation, the Companys Chief Executive Officer and Chief
Financial Officer previously concluded that as of March 31, 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 March 31, 2008 that have materially affected, or
are reasonably likely to materially affect, the Companys internal control over financial
reporting.
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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, 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, 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, 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, Relland Winand, Chief
Financial Officer.
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ORBIT/FR, Inc.
 
 SIGNATURES
  Orbit/FR, Inc.RegistrantDate:      May 20, 2008/s/ Israel AdanPresident and Chief Executive OfficerDate:     May 20, 2008
    
    /s/ Relland WinandChief Financial Officer
 16