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 September 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 oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ




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ORBIT/FR, Inc.
 Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial StatementsConsolidated Balance SheetsSeptember 30, 2008 (Unaudited) and December 31, 2007
    
    
    3Consolidated Statements of OperationsThree and nine months ended September 30, 2008 and 2007 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows Nine months ended September 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
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosure of Market Risk
    
    
    16Item 4
    
    Controls and procedures
    
    
    16PART II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    18Item 1A.
    
    Risk Factors
    
    
    18Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3.
    
    Defaults upon Senior Securities
    
    
    18Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18Item 5.
    
    Other Information
    
    
    18Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    18Signatures
    
    
    19
 2




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ORBIT/FR, Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
 September 30,
    
    
    December 31,2008
    
    
    2007UnauditedASSETSCurrent assets:Cash and cash equivalents
    
    $
    935
    
    
    $
    2,214Accounts receivable, less allowance of $193
and $215 in 2008 and 2007, respectively
    
    
    4,670
    
    
    
    6,790Accounts Receivable-Parent
    
    
    11
    
    
    
    Inventory
    
    
    2,398
    
    
    
    2,437Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    4,218
    
    
    
    2,092Income tax refunds receivable
    
    
    367
    
    
    
    263Deferred income taxes
    
    
    312
    
    
    
    670Other
    
    
    341
    
    
    
    275Total current assets
    
    
    13,252
    
    
    
    14,741Property and equipment, net
    
    
    1,393
    
    
    
    1,541Deferred income taxes
    
    
    1,972
    
    
    
    787Cost in excess of net assets acquired
    
    
    301
    
    
    
    301Total assets
    
    $
    16,918
    
    
    $
    17,370LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,693
    
    
    $
    2,555Accounts payable Former Parent
    
    
    89
    
    
    
    717Accrued expenses
    
    
    2,888
    
    
    
    3,062Short term bank financing
    
    
    2,018
    
    
    
    260Customer advances
    
    
    
    
    
    
    495Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    1,081
    
    
    
    964Deferred income taxes
    
    
    996
    
    
    
    244Total liabilities, all current
    
    
    9,765
    
    
    
    8,297Stockholders 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
    
    
    
    61Additional paid-in capital
    
    
    16,355
    
    
    
    15,275Accumulated deficit
    
    
    (9,020
    )
    
    
    (6,020
    )Treasury stock82,900 shares
    
    
    (243
    )
    
    
    (243
    )Total stockholders equity
    
    
    7,153
    
    
    
    9,073Total liabilities and stockholders equity
    
    $
    16,918
    
    
    $
    17,370
  3




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ORBIT/FR, Inc.
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Contract revenues
    
    $
    5,973
    
    
    $
    8,302
    
    
    $
    17,314
    
    
    $
    22,020Cost of revenues
    
    
    4,035
    
    
    
    5,867
    
    
    
    12,878
    
    
    
    15,089Gross profit
    
    
    1,938
    
    
    
    2,435
    
    
    
    4,436
    
    
    
    6,931Operating expenses:General and administrative
    
    
    625
    
    
    
    778
    
    
    
    2092
    
    
    
    2,507Sales and marketing
    
    
    868
    
    
    
    928
    
    
    
    2646
    
    
    
    2,610Research and development
    
    
    584
    
    
    
    433
    
    
    
    1,586
    
    
    
    1,171Total operating expenses
    
    
    2,077
    
    
    
    2,139
    
    
    
    6,324
    
    
    
    6,288Operating (loss) income
    
    
    (139
    )
    
    
    296
    
    
    
    (1,888
    )
    
    
    643Compensation charge coincident
to change in control
    
    
    
    
    
    
    
    
    
    
    (969
    )
    
    
    Other (expense) income, net
    
    
    (91
    )
    
    
    99
    
    
    
    (209
    )
    
    
    207(Loss) income before income tax
expense
    
    
    (230
    )
    
    
    395
    
    
    
    (3,066
    )
    
    
    850Income tax expense (benefit)
    
    
    
    
    
    
    73
    
    
    
    (66
    )
    
    
    235Net (loss) income
    
    $
    (230
    )
    
    $
    322
    
    
    $
    (3,000
    )
    
    $
    615Basic and diluted (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.05
    
    
    $
    (0.50
    )
    
    $
    0.10Weighted average number
basic common shares
    
    
    6,001,573
    
    
    
    6,001,573
    
    
    
    6,001,573
    
    
    
    6,001,573Weighted average number
diluted common shares
    
    
    6,001,573
    
    
    
    6,023,589
    
    
    
    6,001,573
    
    
    
    6,019,582
  4




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ORBIT/FR, Inc.
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
 Nine months endedSeptember 30,2008
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (3,000
    )
    
    $
    615Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation
    
    
    269
    
    
    
    286Deferred income tax benefit
    
    
    (75
    )
    
    
    51Non-cash compensation
    
    
    969
    
    
    
    Stock based compensation
    
    
    111
    
    
    
    49Changes in operating assets and liabilitiesAccounts receivable
    
    
    2,120
    
    
    
    2,004Accounts ReceivableParent
    
    
    (11
    )
    
    
    Inventory
    
    
    39
    
    
    
    (346
    )Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    (2,126
    )
    
    
    (2,042
    )Income tax refunds receivable
    
    
    (104
    )
    
    
    324Other assets
    
    
    (66
    )
    
    
    (201
    )Accounts payable and accrued expenses
    
    
    (36
    )
    
    
    87Accounts payableFormer Parent
    
    
    (628
    )
    
    
    549Income taxes payable
    
    
    
    
    
    
    4Customer advances
    
    
    (495
    )
    
    
    (2,218
    )Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    117
    
    
    
    481Net cash used in operating activities
    
    
    (2,916
    )
    
    
    (357
    )Cash flows from investing activities:Purchase of equipment
    
    
    (192
    )
    
    
    (694
    )Proceeds from sale of property and equipment
    
    
    71
    
    
    
    Net cash used in investing activities
    
    
    (121
    )
    
    
    (694
    )Cash flows from financing activities:Short-term bank loan
    
    
    1,758
    
    
    
    200Repayment of short-term bank loan
    
    
    
    
    
    
    (600
    )Net cash provided by (used in) financing activities
    
    
    1,758
    
    
    
    (400
    )Net decrease in cash and cash equivalents
    
    
    (1,279
    )
    
    
    (1,451
    )Cash and cash equivalents at beginning of year
    
    
    2,214
    
    
    
    3,901Cash and cash equivalents at end of period
    
    $
    935
    
    
    $
    2,450Supplemental disclosures of cash flow information:Cash paid during the period for income taxes
    
    $
    342
    
    
    $
    211Net cash received (paid) during the period for interest
    
    $
    (37
    )
    
    $
    29
  5




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 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
  6




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2008
(Amounts in thousands, except share and per share data)
 Cash and Cash Equivalents
  Accounts Receivable
  Inventory
  Property and Equipment
  Cost in Excess of Net Assets Acquired
  Revenue and Cost Recognition
  7




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2008
(Amounts in thousands, except share and per share data)
 Income Taxes
   Foreign Currency Translation
  Net Income Per Share
  3. Inventory
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Work-in-process
    
    $
    117
    
    
    $
    637Parts and components
    
    
    2,281
    
    
    
    1,800Total
    
    $
    2,398
    
    
    $
    2,437
 8




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2008
(Amounts in thousands, except share and per share data)
 4. Property and Equipment
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Lab and computer equipment
    
    $
    2,715
    
    
    $
    2,642Office equipment
    
    
    885
    
    
    
    808Transportation equipment
    
    
    45
    
    
    
    130Furniture and fixtures
    
    
    10
    
    
    
    10Fixed Assets in Progress
    
    
    64
    
    
    
    14Leasehold improvements
    
    
    144
    
    
    
    1383,863
    
    
    
    3,742Less accumulated depreciation
    
    
    2,470
    
    
    
    2,201Property and equipment, net
    
    $
    1,393
    
    
    $
    1,541
 5. Accrued Expenses
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Contract costs
    
    $
    98
    
    
    $
    152Compensation
    
    
    1,410
    
    
    
    1,665Commissions
    
    
    376
    
    
    
    299Royalties
    
    
    58
    
    
    
    56Warranty
    
    
    337
    
    
    
    384Other
    
    
    609
    
    
    
    506Total
    
    $
    2,888
    
    
    $
    3,062
 9




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2008
(Amounts in thousands, except share and per share data)
 6. Long-Term Contracts
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Accumulated expenditures on uncompleted contracts
    
    $
    31,671
    
    
    $
    33,949Estimated earnings thereon
    
    
    7,856
    
    
    
    8,99239,527
    
    
    
    42,941Less: applicable progress billings
    
    
    36,390
    
    
    
    41,813Total
    
    $
    3,137
    
    
    $
    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
    
    $
    4,218
    
    
    $
    2,092Billings on uncompleted contracts in excess of
costs and estimated earnings
    
    
    (1,081
    )
    
    
    (964
    )Total
    
    $
    3,137
    
    
    $
    1,128
 7. Related Party Transactions
    10




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ORBIT/FR, Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2008
(Amounts in thousands, except share and per share data)
 8. Segment and Geographic Information
  Three months ended September 30, 2008
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    2,699
    
    
    $
    1,312
    
    
    $
    1,962
    
    
    $
    5,973Cost of sales to unaffiliated customers
    
    
    1,676
    
    
    
    952
    
    
    
    1,407
    
    
    
    4,035Gross profit unaffiliated customers
    
    $
    1,023
    
    
    $
    360
    
    
    $
    555
    
    
    $
    1,938
 Three months ended September 30, 2007
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    2,287
    
    
    $
    2,693
    
    
    $
    3,322
    
    
    $
    8,302Cost of sales to unaffiliated customers
    
    
    1,396
    
    
    
    2,040
    
    
    
    2,431
    
    
    
    5,867Gross profit unaffiliated customers
    
    $
    891
    
    
    $
    653
    
    
    $
    891
    
    
    $
    2,435
 Nine months ended September 30, 2008
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    9,112
    
    
    $
    3,676
    
    
    $
    4,526
    
    
    $
    17,314Cost of sales to unaffiliated customers
    
    
    6,167
    
    
    
    2,790
    
    
    
    3,921
    
    
    
    12,878Gross profit unaffiliated customers
    
    $
    2,945
    
    
    $
    886
    
    
    $
    605
    
    
    $
    4,436
 Nine months ended September 30, 2007
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalSales to unaffiliated customers
    
    $
    7,613
    
    
    $
    5,303
    
    
    $
    9,104
    
    
    $
    22,020Cost of sales to unaffiliated customers
    
    
    4,398
    
    
    
    4,258
    
    
    
    6,433
    
    
    
    15,089Gross profit unaffiliated customers
    
    $
    3,215
    
    
    $
    1,045
    
    
    $
    2,671
    
    
    $
    6,931
  11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
  Recent Events
  Critical Accounting Policies
 Revenue and Cost Recognition
  12




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Results of Operations
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    2008
    
    2007(Unaudited)
    
    (Unaudited)Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    32.5
    
    
    
    29.3
    
    
    
    25.7
    
    
    
    31.5General and
administrative
    
    
    10.5
    
    
    
    9.4
    
    
    
    12.1
    
    
    
    11.4Sales and marketing
    
    
    14.5
    
    
    
    11.2
    
    
    
    15.3
    
    
    
    11.9Research and development
    
    
    9.8
    
    
    
    5.2
    
    
    
    9.2
    
    
    
    5.3Operating (loss) income
    
    
    (2.3
    )
    
    
    3.6
    
    
    
    (10.9
    )
    
    
    2.9(Loss) income before
income tax (benefit) expense
    
    
    (3.9
    )
    
    
    4.8
    
    
    
    (17.7
    )
    
    
    3.9Net (loss) income
    
    
    (3.9
    )
    
    
    3.9
    
    
    
    (17.3
    )
    
    
    2.8
 Three months ended September 30, 2008 compared to three months ended September 30, 2007.
 Revenues.
 Cost of revenues.
 General and administrative expenses.
 13




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Sales and marketing expenses.
 Research and development expenses.
 Other income (expense), net.
 Income taxes.
 Nine months ended September 30, 2008 compared to nine months ended September 30, 2007.
 Revenues.
 Cost of revenues.
 General and administrative expenses.
 14




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Sales and marketing expenses.
 Research and development expenses.
 Compensation charge
 Other (expense) income net.
 Income taxes.
 Liquidity and Capital Resources
   15




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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
 16




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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 September 30, 2008. Based on this
evaluation, the Companys Chief Executive Officer and Chief Financial Officer previously
concluded that as of September 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 September 30, 2008 that have materially affected,
or are reasonably likely to materially affect, the Companys internal control over
financial reporting.
 17




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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    None
 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.
 18




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ORBIT/FR, Inc.
 SIGNATURES
  Orbit/FR, Inc.
RegistrantDate: November 14, 2008
    /s/  Per IversenPresident and Chief Executive OfficerDate:      November 14, 2008
    /s/  Relland WinandChief Financial Officer 19