##### 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, 2010
 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)
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



ORBIT/FR, Inc.
 Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsCondensed
Consolidated Balance SheetsJune 30, 2010
(Unaudited) and December 31, 2009
    
    
    3Condensed
Consolidated Statements of OperationsThree and six months
ended June 30, 2010 and 2009 (Unaudited)
    
    
    4Condensed
Consolidated Statements of Cash Flows Six months
ended June 30, 2010 and 2009 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
(Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    10Item 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 6. Exhibits
    
    
    16Signatures
    
    
    17Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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ORBIT/FR, Inc.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Amounts in thousands, except share data)
 June 30,
    
    
    December 31,2010
    
    
    2009UnauditedASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,839
    
    
    $
    1,622Accounts receivable, less allowance of $58 and $67
    
    
    6,467
    
    
    
    9,207Inventory
    
    
    2,826
    
    
    
    2,681Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    4,292
    
    
    
    1,668Income tax refunds receivable
    
    
    292
    
    
    
    542Deferred income taxes
    
    
    979
    
    
    
    835Other
    
    
    545
    
    
    
    277Total current assets
    
    
    18,240
    
    
    
    16,832Property and equipment, net
    
    
    2,367
    
    
    
    2,093Deferred income taxes
    
    
    835
    
    
    
    887Cost in excess of net assets acquired
    
    
    301
    
    
    
    301Total assets
    
    $
    21,743
    
    
    $
    20,113LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,708
    
    
    $
    3,946Accounts payableparent company
    
    
    1,308
    
    
    
    1,482Accrued expenses
    
    
    3,422
    
    
    
    3,355Short term bank financing
    
    
    
    
    
    
    250Customer advances
    
    
    83
    
    
    
    13Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    4,826
    
    
    
    2,813Total liabilities, all current
    
    
    12,347
    
    
    
    11,859Stockholders 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
    
    
    16,480
    
    
    
    16,460Accumulated deficit
    
    
    (6,718
    )
    
    
    (8,024
    )Accumulated other comprehensive (loss) 
foreign translation adjustment
    
    
    (184
    )
    
    
    Treasury stock82,700 shares
    
    
    (243
    )
    
    
    (243
    )Total stockholders equity
    
    
    9,396
    
    
    
    8,254Total liabilities and stockholders equity
    
    $
    21,743
    
    
    $
    20,113
   3




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ORBIT/FR, Inc.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts in thousands, except share and per share data)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Contract revenues
    
    $
    9,136
    
    
    $
    6,600
    
    
    $
    16,458
    
    
    $
    12,950Cost of revenues
    
    
    6,256
    
    
    
    4,459
    
    
    
    11,130
    
    
    
    8,919Gross profit
    
    
    2,880
    
    
    
    2,141
    
    
    
    5,328
    
    
    
    4,031Operating expenses:General and administrative:
    
    
    744
    
    
    
    669
    
    
    
    1,496
    
    
    
    1,238Sales and marketing:
    
    
    764
    
    
    
    911
    
    
    
    1,497
    
    
    
    1,824Sales, marketing,
general and administrative  MVG
    
    
    283
    
    
    
    635
    
    
    
    683
    
    
    
    635Research and development
    
    
    311
    
    
    
    377
    
    
    
    564
    
    
    
    712Loss on disposal of assets
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    154Total operating expenses
    
    
    2,102
    
    
    
    2,746
    
    
    
    4,240
    
    
    
    4,563Operating income (loss)
    
    
    778
    
    
    
    (605
    )
    
    
    1,088
    
    
    
    (532
    )Other income (loss), net
    
    
    122
    
    
    
    (101
    )
    
    
    126
    
    
    
    (122
    )Income (loss) before income taxes
    
    
    900
    
    
    
    (706
    )
    
    
    1,214
    
    
    
    (654
    )Income tax (benefit)
    
    
    (92
    )
    
    
    
    
    
    
    (92
    )
    
    
    Net income (loss)
    
    
    992
    
    
    
    (706
    )
    
    
    1,306
    
    
    
    (654
    )Other
comprehensive (loss)  foreign translation adjustment
    
    
    (108
    )
    
    
    
    
    
    
    (184
    )
    
    
    Total comprehensive income (loss)
    
    $
    884
    
    
    $
    (706
    )
    
    $
    1,122
    
    
    $
    (654
    )Basic income (loss) per share
    
    $
    0.17
    
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.11
    )Diluted income (loss) per share
    
    $
    0.16
    
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.11
    )Weighted average number
basic common shares
    
    
    6,001,773
    
    
    
    6,001,573
    
    
    
    6,001,773
    
    
    
    6,001,573Weighted average number
diluted common shares
    
    
    6,042,119
    
    
    
    6,001,573
    
    
    
    6,012,852
    
    
    
    6,001,573
   4




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ORBIT/FR, Inc.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts in thousands)
 Six Months EndedJune 30,2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    1,306
    
    
    $
    (654
    )Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    215
    
    
    
    167Loss on disposal of fixed assets
    
    
    
    
    
    
    53Stock based compensation
    
    
    20
    
    
    
    54Deferred income taxes
    
    
    (92
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    2,626
    
    
    
    2,504Inventory
    
    
    (160
    )
    
    
    (580
    )Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    
    (2,671
    )
    
    
    (1,290
    )Income tax refunds receivable
    
    
    250
    
    
    
    (65
    )Other current assets
    
    
    (274
    )
    
    
    (284
    )Accounts payable and accrued expenses
    
    
    (1,277
    )
    
    
    419Accounts payableparent company
    
    
    (216
    )
    
    
    699Customer advances
    
    
    73
    
    
    
    (267
    )Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    2,102
    
    
    
    1,418Net cash provided by operating activities
    
    
    1,902
    
    
    
    2,174Cash flows from investing activities:Purchase of property and equipment
    
    
    (552
    )
    
    
    (631
    )Net cash (used in) investing activities
    
    
    (552
    )
    
    
    (631
    )Cash flows from financing activities:Proceeds from short term notes payable
    
    
    
    
    
    
    400Repayment of short term notes payable
    
    
    (250
    )
    
    
    (1,681
    )Net cash (used in) financing activities
    
    
    (250
    )
    
    
    (1,281
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    117
    
    
    
    Net increase in cash and cash equivalents
    
    
    1,217
    
    
    
    262Cash and cash equivalents at beginning of period
    
    
    1,622
    
    
    
    1,521Cash and cash equivalents at end of period
    
    $
    2,839
    
    
    $
    1,783Supplemental disclosures of cash flow information:Cash paid during the period for income taxes
    
    $
    178
    
    
    $
    77Cash paid during the period for interest
    
    $
    
    
    
    $
    12
   5




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ORBIT/FR, Inc.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 June 30, 2010
 (Amounts in thousands, except share and per share data)
 1. Ownership and Basis of Presentation
  2. Summary of Significant Accounting Policies
 Interim Financial Information
   6




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ORBIT/FR, Inc.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 June 30, 2010
 (Amounts in thousands, except share and per share data)
 3. Inventory
  Parts and components
    
    $
    2,592Work- in- process
    
    
    234Total
    
    $
    2,826
 4. Property and Equipment
  Lab and computer equipment
    
    $
    2,801Office equipment
    
    
    833Transportation equipment
    
    
    61Furniture and fixtures
    
    
    12Fixed assets in progress
    
    
    93Leasehold improvements
    
    
    648Total
    
    
    4,448Less accumulated depreciation
    
    
    2,081Property and equipment, net
    
    $
    2,367
 5. Accrued Expenses
  Contract costs
    
    $
    130Compensation
    
    
    1,584Commissions
    
    
    525Royalties
    
    
    65Warranty
    
    
    532Deferred revenue
    
    
    180Other accruals
    
    
    406Total
    
    $
    3,422
  7




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ORBIT/FR, Inc.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 June 30, 2010
 (Amounts in thousands, except share and per share data)
 6. Long-Term Contracts
  Accumulated expenditures on uncompleted contracts
    
    $
    41,006Estimated earnings thereon
    
    
    13,169Total
    
    
    54,175Less: Applicable progress billings
    
    
    (54,709
    )Balance
    
    $
    (534
    )
  Costs and estimated earnings on uncompleted
contracts in excess of billings
    
    $
    4,292Billings on uncompleted contracts in excess of
costs and estimated earnings
    
    
    (4,826
    )Total
    
    $
    (534
    )
 7. Income Taxes
  8. Related Party Transactions
   8




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ORBIT/FR, Inc.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 June 30, 2010
 (Amounts in thousands, except share and per share data)
 9. Segment and Geographic Information
  Three months ended June 30, 2010
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalContract revenues to unaffiliated customers
    
    $
    3,801
    
    
    $
    3,373
    
    
    $
    1,962
    
    
    $
    9,136Cost of revenues to unaffiliated customers
    
    
    2,453
    
    
    
    2,517
    
    
    
    1,286
    
    
    
    6,256Gross profit from unaffiliated customers
    
    $
    1,348
    
    
    $
    856
    
    
    $
    676
    
    
    $
    2,880
 Three months ended June 30, 2009
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalContract revenues to unaffiliated customers
    
    $
    3,085
    
    
    $
    2,708
    
    
    $
    807
    
    
    $
    6,600Cost of revenues to unaffiliated customers
    
    
    2,191
    
    
    
    1,752
    
    
    
    516
    
    
    
    4,459Gross profit from unaffiliated customers
    
    $
    894
    
    
    $
    956
    
    
    $
    291
    
    
    $
    2,141
 Six months ended June 30, 2010
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalContract revenues to unaffiliated customers
    
    $
    6,617
    
    
    $
    6,212
    
    
    $
    3,629
    
    
    $
    16,458Cost of revenues to unaffiliated customers
    
    
    4,208
    
    
    
    4,455
    
    
    
    2,467
    
    
    
    11,130Gross profit from unaffiliated customers
    
    $
    2,409
    
    
    $
    1,757
    
    
    $
    1,162
    
    
    $
    5,328
 Six months ended June 30, 2009
    
    North America
    
    
    Europe
    
    
    Asia
    
    
    TotalContract revenues to unaffiliated customers
    
    $
    6,235
    
    
    $
    3,395
    
    
    $
    3,320
    
    
    $
    12,950Cost of revenues to unaffiliated customers
    
    
    4,286
    
    
    
    2,338
    
    
    
    2,295
    
    
    
    8,919Gross profit from unaffiliated customers
    
    $
    1,949
    
    
    $
    1,057
    
    
    $
    1,025
    
    
    $
    4,031
   9




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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
   10




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Results of Operations
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    (Unaudited)Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    31.5
    
    
    
    32.4
    
    
    
    32.4
    
    
    
    31.1General and
administrative
    
    
    8.1
    
    
    
    10.1
    
    
    
    9.1
    
    
    
    9.6Sales and marketing
    
    
    8.4
    
    
    
    13.8
    
    
    
    9.1
    
    
    
    14.1Research and development
    
    
    3.4
    
    
    
    5.7
    
    
    
    3.4
    
    
    
    5.5Microwave Vision Group
corporate expenses
    
    
    3.1
    
    
    
    9.6
    
    
    
    4.2
    
    
    
    4.9Loss on disposal of assets
    
    

    
    
    
    
    2.3
    
    
    
    
    
    
    
    1.1Operating income (loss)
    
    
    8.5
    
    
    
    (9.1
    )
    
    
    6.6
    
    
    
    (4.1
    )Income (loss) before income taxes
    
    
    9.9
    
    
    
    (10.7
    )
    
    
    7.4
    
    
    
    (5.1
    )Net income (loss)
    
    
    10.9
    
    
    
    (10.7
    )
    
    
    7.9
    
    
    
    (5.1
    )
 Three months ended June 30, 2010 compared to three months ended June 30, 2009.
 Revenues.
 Cost of revenues.
 General and administrative expense.
  11




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Sales and marketing expenses.
 Sales, marketing general and administrative-Microwave Vision Group.
 Research and development expenses.
 Other -income (loss), net.
 Income taxes.
 Six months ended June 30, 2010 compared to six months ended June 30, 2009.
 Revenues.
  12




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Cost of revenues.
 General and administrative expenses.
 Sales and marketing expenses.
 Sales, marketing general and administrative-Microwave Vision Group.
 Research and development expenses.
 Loss on disposal of assets.
 Other-income (loss),net,
  13




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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
March 31, 2010. Based on this evaluation, the Companys Chief Executive Officer and Chief
Financial Officer concluded that as of June 30, 2010, 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, 2010 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 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.
  16




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ORBIT/FR, Inc.
 
 SIGNATURES
  Orbit/FR, Inc.RegistrantDate:      August 19, 2010/s/  Per IversenPresident and Chief Executive OfficerDate:      August 19, 2010/s/  Relland WinandChief Financial Officer  17