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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, 2007
 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
  o o þ
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ORBIT/FR, Inc.
 Index
  
 Page No.PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial StatementsConsolidated Balance SheetsMarch 31, 2007 (Unaudited) and December 31, 2006
    
    
    3Consolidated Statements of Operations Three months ended March 31, 2007 and 2006 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows Three months ended March 31, 2007 and 2006 (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
    
    
    13Item 4
    
    Controls and procedures
    
    
    13PART II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    14Item 1A.
    
    Risk Factors
    
    
    14Item 2.
    
    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    14Item 3.
    
    Defaults upon Senior Securities
    
    
    14Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    14Item 5.
    
    Other Information
    
    
    14Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    14Signatures
    
    
    
    
    
    
    15CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906
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ORBIT/FR, Inc.
 
 CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
 March 31,
    
    
    December 31,2007
    
    
    2006UnauditedASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,483
    
    
    $
    3,901Accounts receivable, less allowance of $215
and $269 in 2007 and 2006, respectively
    
    
    2,671
    
    
    
    5,769Inventory
    
    
    3,241
    
    
    
    3,156Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    2,457
    
    
    
    1,480Income tax refunds receivable
    
    
    336
    
    
    
    336Deferred income taxes
    
    
    818
    
    
    
    721Other
    
    
    222
    
    
    
    151Total current assets
    
    
    13,228
    
    
    
    15,514Property and equipment, net
    
    
    1,253
    
    
    
    1,169Deferred income taxes
    
    
    822
    
    
    
    463Cost in excess of net assets acquired
    
    
    381
    
    
    
    381Total assets
    
    $
    15,684
    
    
    $
    17,527LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,282
    
    
    $
    2,235Accounts payableParent
    
    
    903
    
    
    
    833Accrued expenses
    
    
    2,634
    
    
    
    2,789Short term bank financing
    
    
    
    
    
    
    400Customer advances
    
    
    1,203
    
    
    
    2,232Income taxes payable
    
    
    28
    
    
    
    47Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    972
    
    
    
    935Deferred income taxes
    
    
    641
    
    
    
    177Total liabilities, all current
    
    
    7,663
    
    
    
    9,648Stockholders 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
    
    
    15,173
    
    
    
    15,173Accumulated deficit
    
    
    (6,970
    )
    
    
    (7,112
    )Treasury stock82,900 shares
    
    
    (243
    )
    
    
    (243
    )Total stockholders equity
    
    
    8,021
    
    
    
    7,879Total liabilities and stockholders equity
    
    $
    15,684
    
    
    $
    17,527
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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 31,2007
    
    
    2006Contract revenues
    
    $
    6,514
    
    
    $
    7,529Cost of revenues
    
    
    4,293
    
    
    
    5,218Gross profit
    
    
    2,221
    
    
    
    2,311Operating expenses:General and administrative
    
    
    897
    
    
    
    773Sales and marketing
    
    
    817
    
    
    
    771Research and development
    
    
    377
    
    
    
    410Total operating expenses
    
    
    2,091
    
    
    
    1,954Operating income
    
    
    130
    
    
    
    357Other income, net
    
    
    85
    
    
    
    45Income before income taxes
    
    
    215
    
    
    
    402Income tax expense
    
    
    73
    
    
    
    113Net income
    
    $
    142
    
    
    $
    289Basic and diluted net income per share
    
    $
    0.02
    
    
    $
    0.05Weighted average number common shares  basic
    
    
    6,001,573
    
    
    
    6,001,573Weighted average number common shares  diluted
    
    
    6,027,691
    
    
    
    6,012,673
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ORBIT/FR, Inc.
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
 Three months endedMarch 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    142
    
    
    $
    289Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    93
    
    
    
    83Deferred income tax benefit
    
    
    8
    
    
    
    36Changes in operating assets and liabilities:Accounts receivable
    
    
    3,098
    
    
    
    (203
    )Inventory
    
    
    (85
    )
    
    
    (25
    )Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    
    (977
    )
    
    
    72Income tax refunds receivable
    
    
    
    
    
    
    (59
    )Other assets
    
    
    (71
    )
    
    
    240Accounts payable and accrued expenses
    
    
    (1,108
    )
    
    
    591Accounts payableParent
    
    
    70
    
    
    
    81Income taxes payable
    
    
    (19
    )
    
    
    42Customer advances
    
    
    (1,029
    )
    
    
    876Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    37
    
    
    
    (1,304
    )Net cash provided by operating activities
    
    
    159
    
    
    
    719Cash flows from investing activities:Purchase of property and equipment
    
    
    (177
    )
    
    
    (203
    )Net cash used in investing activities
    
    
    (177
    )
    
    
    (203
    )Cash flows from financing activities:Repayment of short term notes payable
    
    
    (400
    )
    
    
    Net cash used in financing activities
    
    
    (400
    )
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (418
    )
    
    
    516Cash and cash equivalents at beginning of period
    
    
    3,901
    
    
    
    3,188Cash and cash equivalents at end of period
    
    $
    3,483
    
    
    $
    3,704Supplemental disclosures of cash flow information:Cash paid during the period for income taxes
    
    $
    92
    
    
    $
    93Cash received during the period for interest
    
    $
    20
    
    
    $
    
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ORBIT/FR, Inc.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2007
(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
  Adoption of New Standard
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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2007
(Amounts in thousands, except share and per share data)
 2. Summary of Significant Accounting Policies (continued)
   Net Income Per Share
  3. Inventory
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Work-in-process
    
    $
    737
    
    
    $
    1,885Parts and components
    
    
    2,504
    
    
    
    1,271$
    3,241
    
    
    $
    3,156
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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2007
(Amounts in thousands, except share and per share data)
 4. Property and Equipment
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Lab and computer equipment
    
    $
    2,531
    
    
    $
    2,582Office equipment
    
    
    948
    
    
    
    1,027Transportation equipment
    
    
    234
    
    
    
    156Furniture and fixtures
    
    
    6
    
    
    
    11Leasehold improvements
    
    
    185
    
    
    
    3413,904
    
    
    
    4,117Less accumulated depreciation
    
    
    2,651
    
    
    
    2,948Property and equipment, net
    
    $
    1,253
    
    
    $
    1,169
 5. Accrued Expenses
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Accrued contract costs
    
    $
    144
    
    
    $
    146Accrued compensation
    
    
    1,462
    
    
    
    1,434Accrued commissions
    
    
    215
    
    
    
    197Accrued royalties
    
    
    54
    
    
    
    54Accrued warranty
    
    
    401
    
    
    
    359Accrued DTC settlement costs
    
    
    33
    
    
    
    33Other accruals
    
    
    325
    
    
    
    566$
    2,634
    
    
    $
    2,789
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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2007
(Amounts in thousands, except share and per share data)
 6. Long-Term Contracts
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Accumulated expenditures on uncompleted contracts
    
    $
    14,275
    
    
    $
    16,869Estimated earnings thereon
    
    
    3,856
    
    
    
    3,67318,131
    
    
    
    20,542Less: applicable progress billings
    
    
    16,646
    
    
    
    19,997Total
    
    $
    1,485
    
    
    $
    545The long-term contracts are shown in the accompanying balance
sheets as follows:Costs and estimated earnings on uncompleted
contracts in excess of billings
    
    $
    2,457
    
    
    $
    1,480Billings on uncompleted contracts in excess of
costs and estimated earnings
    
    
    (972
    )
    
    
    (935
    )$
    1,485
    
    
    $
    545
 7. Related Party Transactions
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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2007
(Amounts in thousands, except share and per share data)
 8. Segment and Geographic Information
  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
 Three months ended March 31, 2006
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    4,001
    
    
    $
    1,541
    
    
    $
    1,987
    
    
    $
    7,529Cost of sales to unaffiliated customers
    
    
    2,512
    
    
    
    1,455
    
    
    
    1,251
    
    
    
    5,218Gross profit from unaffiliated customers
    
    $
    1,489
    
    
    $
    86
    
    
    $
    736
    
    
    $
    2,311
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
  Results of Operations
  Three-months ended March 31,2007
    
    2006(Unaudited)Revenues
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    34.1
    
    
    
    30.7General and administrative
    
    
    13.8
    
    
    
    10.3Sales and marketing
    
    
    12.5
    
    
    
    10.2Research and development
    
    
    5.8
    
    
    
    5.5Operating income
    
    
    2.0
    
    
    
    4.7Income before income
tax expense
    
    
    3.3
    
    
    
    5.3Net income
    
    
    2.2
    
    
    
    3.8
 Three months ended March 31, 2007 compared to three months ended March 31, 2006.
 Revenues.
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Cost of revenues.
 General and administrative expenses.
 Sales and marketing expenses.
 Research and development expenses.
 Other income, net.
 Income taxes.
 Liquidity and Capital Resources
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Inflation and Seasonality
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 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
March 31, 2007. Based on this evaluation, the Companys Chief Executive Officer and Chief
Financial Officer previously concluded that as of March 31, 2007, 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, 2007 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
 3.2
    
    Bylaws of Orbit/FR, Inc. (incorporated by reference to Exhibit
3.2 to the Registrants Current Report on Form 8-K files on March 26, 2007).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.
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ORBIT/FR, Inc.
 
 SIGNATURES
  Orbit/FR, Inc.RegistrantDate: May 15, 2007
    /s/ Israel AdanPresident and Chief Executive OfficerDate: May 15, 2007
    /s/  Dave LubbeChief Financial Officer 15