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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, 2011
 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
 o 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 StatementsCondensed Consolidated Balance SheetsMarch 31, 2011 (Unaudited) and December 31, 2010
    
    
    3Condensed Consolidated Statements of OperationsThree months ended March 31, 2011 and 2010 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows Three months ended March 31, 2011 and 2010 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 4. Controls and procedures
    
    
    14PART II. Other InformationItem 1. Legal Proceedings
    
    
    15Item 1A. Risk Factors
    
    
    15Item 6. Exhibits
    
    
    15Signatures
    
    
    16Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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ORBIT/FR, Inc.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Amounts in thousands, except share data)
 March 31,
    
    
    December 31,2011
    
    
    2010UnauditedASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,388
    
    
    $
    2,400Accounts receivable, less allowance of $91 and $90
    
    
    3,646
    
    
    
    5,693Inventory
    
    
    3,126
    
    
    
    2,776Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    4,476
    
    
    
    4,941Income tax refunds receivable
    
    
    353
    
    
    
    655Deferred income taxes
    
    
    1,277
    
    
    
    1,437Other
    
    
    793
    
    
    
    745Total current assets
    
    
    18,059
    
    
    
    18,647Property and equipment, net
    
    
    2,487
    
    
    
    2,296Deferred income taxes
    
    
    649
    
    
    
    688Cost in excess of net assets acquired
    
    
    301
    
    
    
    301Total assets
    
    $
    21,496
    
    
    $
    21,932LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,849
    
    
    $
    3,781Accounts payableparent company
    
    
    1,942
    
    
    
    1,697Accrued expenses
    
    
    3,677
    
    
    
    3,728Customer advances
    
    
    4
    
    
    
    75Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    2,935
    
    
    
    2,117Total liabilities, all current
    
    
    11,407
    
    
    
    11,398Stockholders 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
    
    
    16,507
    
    
    
    16,500Accumulated deficit
    
    
    (6,243
    )
    
    
    (5,727
    )Accumulated other comprehensive income (loss) 
foreign currency translation adjustment
    
    
    7
    
    
    
    (57
    )Treasury stock82,700 shares
    
    
    (243
    )
    
    
    (243
    )Total stockholders equity
    
    
    10,089
    
    
    
    10,534Total liabilities and stockholders equity
    
    $
    21,496
    
    
    $
    21,932
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ORBIT/FR, Inc.
 
 UNAUDITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts in thousands, except share and per share data)
 Three Months EndedMarch 31,2011
    
    
    2010Contract revenues
    
    $
    7,317
    
    
    $
    7,322Cost of revenues
    
    
    5,976
    
    
    
    4,874Gross profit
    
    
    1,341
    
    
    
    2,448Operating expenses:General and administrative:
    
    
    746
    
    
    
    752Sales and marketing:
    
    
    720
    
    
    
    733Sales, marketing,
general and administrative  MVG
    
    
    250
    
    
    
    400Research and development
    
    
    269
    
    
    
    253Total operating expenses
    
    
    1,985
    
    
    
    2,138Operating (loss) income
    
    
    (644
    )
    
    
    310Other (loss) income, net
    
    
    (42
    )
    
    
    4Income (loss) before income taxes
    
    
    (686
    )
    
    
    314Income tax (benefit)
    
    
    (170
    )
    
    
    Net (loss) income
    
    
    (516
    )
    
    
    314Other comprehensive income (loss) 
foreign currency translation adjustment
    
    
    64
    
    
    
    (76
    )Total comprehensive (loss) income
    
    $
    (452
    )
    
    $
    238Basic net (loss) income per share
    
    $
    (0.09
    )
    
    $
    0.05Diluted net (loss) income per share
    
    $
    (0.09
    )
    
    $
    0.05Weighted average number
basic common shares
    
    
    6,001,773
    
    
    
    6,001,773Weighted average number
diluted common shares
    
    
    6,001,773
    
    
    
    6,001,773
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ORBIT/FR, Inc.
 
 UNAUDITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts in thousands)
 Three Months EndedMarch 31,2011
    
    
    2010Cash flows from operating activities:Net (loss) income
    
    $
    (516
    )
    
    $
    314Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    144
    
    
    
    113Stock based compensation
    
    
    7
    
    
    
    10Deferred income taxes
    
    
    199
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    2,070
    
    
    
    2,894Inventory
    
    
    (343
    )
    
    
    (374
    )Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    510
    
    
    
    (479
    )Income tax refunds receivable
    
    
    301
    
    
    
    100Other current assets
    
    
    269
    
    
    
    (120
    )Accounts payable and accrued expenses
    
    
    (1,030
    )
    
    
    (1,854
    )Accounts payableparent company
    
    
    (48
    )
    
    
    116Customer advances
    
    
    (71
    )
    
    
    6Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    789
    
    
    
    1,866Net cash provided by operating activities
    
    
    2,281
    
    
    
    2,592Cash flows from investing activities:Purchase of property and equipment
    
    
    (322
    )
    
    
    (98
    )Net cash (used in) investing activities
    
    
    (322
    )
    
    
    (98
    )Cash flows from financing activities:Proceeds from short term notes payable
    
    
    200
    
    
    
    Repayment of short term notes payable
    
    
    (200
    )
    
    
    (250
    )Net cash (used in) financing activities
    
    
    
    
    
    
    (250
    )Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    29
    
    
    
    (22
    )Net increase in cash and cash equivalents
    
    
    1,988
    
    
    
    2,222Cash and cash equivalents at beginning of period
    
    
    2,400
    
    
    
    1,622Cash and cash equivalents at end of period
    
    $
    4,388
    
    
    $
    3,844Supplemental disclosures of cash flow information:Cash (received) paid during the period for income taxes
    
    $
    (333
    )
    
    $
    103Cash paid during the period for interest
    
    $
    6
    
    
    $
    
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ORBIT/FR, Inc.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 March 31, 2011
 (Amounts in thousands, except share and per share data)
 1. Ownership and Business
  2. Basis of Presentation
 Interim Financial Information
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ORBIT/FR, Inc.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 March 31, 2011
 (Amounts in thousands, except share and per share data)
 3. Inventory
  Parts and components
    
    $
    2,758Work-in-process
    
    
    368Total
    
    $
    3,126
 4. Property and Equipment
  Lab and computer equipment
    
    $
    3,113Office equipment
    
    
    898Transportation equipment
    
    
    61Furniture and fixtures
    
    
    65Fixed assets in progress
    
    
    130Leasehold improvements
    
    
    661Total
    
    
    4,928Less accumulated depreciation
    
    
    2,441Property and equipment, net
    
    $
    2,487
 5. Accrued Expenses
  Contract costs
    
    $
    112Compensation
    
    
    1,793Commissions
    
    
    464Royalties
    
    
    33Warranty
    
    
    521Deferred revenue
    
    
    220Other accruals
    
    
    534Total
    
    $
    3,677
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ORBIT/FR, Inc.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 March 31, 2011
 (Amounts in thousands, except share and per share data)
 6. Long-Term Contracts
  Accumulated expenditures on uncompleted contracts
    
    $
    46,817Estimated earnings thereon
    
    
    12,685Total
    
    
    59,502Less: Applicable progress billings
    
    
    (57,961
    )Balance
    
    $
    1,541
  Costs and estimated earnings on uncompleted
contracts in excess of billings
    
    $
    4,476Billings on uncompleted contracts in excess of
costs and estimated earnings
    
    
    (2,935
    )Total
    
    $
    1,541
 7. Income Taxes
  8. Related Party Transactions
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ORBIT/FR, Inc.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 March 31, 2011
 (Amounts in thousands, except share and per share data)
 9. Segment and Geographic Information
  Three months ended March 31, 2011
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalContract revenues
    
    $
    2,726
    
    
    $
    1,999
    
    
    $
    2,592
    
    
    $
    7,317Cost of revenues
    
    
    2,623
    
    
    
    1,526
    
    
    
    1,827
    
    
    
    5,976Gross profit
    
    $
    103
    
    
    $
    473
    
    
    $
    765
    
    
    $
    1,341
 Three months ended March 31, 2010
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalContract revenues
    
    $
    2,816
    
    
    $
    2,839
    
    
    $
    1,667
    
    
    $
    7,322Cost of revenues
    
    
    1,754
    
    
    
    1,939
    
    
    
    1,181
    
    
    
    4,874Gross profit
    
    $
    1,062
    
    
    $
    900
    
    
    $
    486
    
    
    $
    2,448
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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
  Critical Accounting Policies
 Revenue and Cost Recognition
  Accounts Receivable
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Results of Operations
  Three Months Ended March 31,2011
    
    
    2010(Unaudited)
    
    
    (Unaudited)Revenues
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    18.3
    
    
    
    33.4General and administrative
    
    
    10.2
    
    
    
    10.3Sales and marketing
    
    
    9.8
    
    
    
    10.0Research and development
    
    
    3.7
    
    
    
    3.5Microwave Vision Group
corporate expenses
    
    
    3.4
    
    
    
    5.5Operating (loss) income
    
    
    (8.8
    )
    
    
    4.2(Loss) income before income taxes
    
    
    (9.4
    )
    
    
    4.3Net (loss) income
    
    
    (7.1
    )
    
    
    4.3
 Three months ended March 31, 2011 compared to three months ended March 31, 2010.
 Revenues.
 Cost of revenues.
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General and administrative expense.
 Sales and marketing expense.
 Sales, marketing general and administrative-Microwave Vision Group.
 Research and development expenses.
 Other (loss) income, net.
 Income taxes.
 Other comprehensive income (loss)-foreign currency translation adjustment.
  12




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Liquidity and Capital Resources
     Inflation and Seasonality
   13




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Item 4.
    
    Controls and Procedures
 (a)
    
    Evaluation of disclosure controls and procedures.
  (b)
    
    Changes in Internal Control Over Financial Reporting
   14




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PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  
 Item 6.
    
    Exhibits
 31.1
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, Per Iversen, President and Chief Executive Officer.31.2
    
    
    Certification 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.
 
  15




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SIGNATURES
  Orbit/FR, Inc.Date: May 23, 2011
    /s/  Per IversenPresident and Chief Executive Officer  16