<PAGE>
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

(MARK ONE)

[X]      QUARTERLY  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

                                       OR

[ ]      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. EMPLOYER
OF 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)


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]


         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ]  No [X]


         There were 6,084,473 shares of common stock, $.01 par value,
outstanding as of November 15, 2004.

================================================================================





                                       1
<PAGE>

                                 ORBIT/FR, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                  PAGE NO.
                                                                                                                  --------

<C>            <C>            <S>                                                                                 <C>
PART I.        FINANCIAL INFORMATION

               Item 1.        Consolidated Financial Statements

                              Consolidated Balance Sheets -- September 30, 2004
                                (Unaudited) and December 31, 2003.....................................................3

                              Consolidated Statements of Operations -- Three  and nine months
                                ended September 30, 2004 and 2003 (Unaudited).........................................4

                              Consolidated Statements of Cash Flows -- Nine months
                               ended September 30, 2004 and 2003 (Unaudited)..........................................5

                              Notes to Consolidated Financial Statements
                                (Unaudited)...........................................................................6

               Item 2.        Management's Discussion and Analysis of Financial
                                Condition and Results of Operations..................................................10

               Item 3.        Quantitative and Qualitative Disclosure of Market Risk.................................13

               Item 4         Controls and procedures................................................................13

PART II.       Other Information

               Item 1.        Legal Proceedings......................................................................14

               Item 2.        Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
                              Securities.............................................................................14

               Item 3.        Defaults upon Senior Securities........................................................14

               Item 4.        Submission of Matters to a Vote of Security Holders....................................14

               Item 5.        Other Information......................................................................14

               Item 6.        Exhibits...............................................................................14

Signatures...........................................................................................................15
</TABLE>



                                       2
<PAGE>

                                 ORBIT/FR, INC.

                           CONSOLIDATED BALANCE SHEETS
                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                          SEPTEMBER 30,        DECEMBER 31,
                                                                                             2004                 2003
                                                                                          -------------        ------------
                                                                                             UNAUDITED
<S>                                                                                       <C>                  <C>
                                    ASSETS
Current assets:
   Cash and cash equivalents                                                                  $ 2,909             $ 2,413
   Accounts receivable, less allowance of $147
     and $187 in 2004 and 2003, respectively                                                    4,116               4,026
   Inventory                                                                                    2,321               1,549
   Costs and estimated earnings in excess of billings
     on uncompleted contracts                                                                     861                 605
   Deferred income taxes                                                                          266                 275
   Other                                                                                          614                 465
                                                                                              -------             -------
Total current assets                                                                           11,087               9,333

Property and equipment, net                                                                     1,434               1,401
Deferred income taxes                                                                             150                 145
Cost in excess of net assets acquired                                                             381                 381
                                                                                              -------             -------

Total assets                                                                                  $13,052             $11,260
                                                                                              =======             =======



                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:
   Accounts
payable                                                                                       $ 1,043             $ 1,578
   Accounts payable--Parent                                                                     1,227                 197
   Short-term bank loan                                                                           498                  --
   Accrued expenses                                                                             2,247               1,880
   Customer advances                                                                              412                 456
   Income taxes payable                                                                            17                  19
   Billings in excess of costs and estimated earnings
     on uncompleted contracts                                                                   1,488               1,857
   Deferred income taxes                                                                          125                 125
                                                                                              -------             -------
Total liabilities, all current                                                                  7,057               6,112
                                                                                              -------             -------

Stockholders' 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                  61
  Additional paid-in capital                                                                   15,173              15,173
  Accumulated deficit                                                                          (8,996)             (9,843)
  Treasury stock -- 82,900 shares                                                                (243)               (243)
                                                                                              -------             -------
Total stockholders' equity                                                                      5,995               5,148
                                                                                              -------             -------
Total liabilities and stockholders' equity                                                    $13,052             $11,260
                                                                                              =======             =======
</TABLE>
                             See accompanying notes.




                                       3
<PAGE>

                                 ORBIT/FR, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)




<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED                NINE MONTHS ENDED
                                                          SEPTEMBER 30,                    SEPTEMBER 30,
                                               -----------------------------       -----------------------------
                                                  2004              2003              2004              2003
                                               -----------       -----------       -----------       -----------
<S>                                            <C>               <C>               <C>               <C>
Contract revenues                              $     4,977       $     4,236       $    15,069       $    12,101
Cost of revenues                                     3,113             2,652             9,602             8,201
                                               -----------       -----------       -----------       -----------
Gross profit                                         1,864             1,584             5,467             3,900
                                               -----------       -----------       -----------       -----------
Operating expenses:
   General and administrative                          559               623             1,888             1,828
   Sales and marketing                                 731               765             1,942             1,946
   Research and development                            228               279               717               872
                                               -----------       -----------       -----------       -----------
Total operating expenses                             1,518             1,667             4,547             4,646
                                               -----------       -----------       -----------       -----------
Operating income (loss)                                346               (83)              920              (746)
Other expense, net                                      (9)              (16)              (39)              (85)
                                               -----------       -----------       -----------       -----------
Income (loss) before income tax
   expense (benefit)                                   337               (99)              881              (831)
Income tax expense (benefit)                           (90)              101                34               226
                                               -----------       -----------       -----------       -----------
Net income (loss)                              $       427       $      (200)      $       847       $    (1,057)
                                               ===========       ===========       ===========       ===========
Basic and diluted income (loss) per share      $      0.07       $     (0.03)      $      0.14       $     (0.18)
                                               ===========       ===========       ===========       ===========
Weighted average number
  common shares - basic and diluted              6,001,573         6,001,573         6,001,573         6,001,573
                                               ===========       ===========       ===========       ===========
</TABLE>

                             See accompanying notes.





                                       4
<PAGE>

                                 ORBIT/FR, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                     ---------------------
                                                                       2004          2003
                                                                     -------       -------
<S>                                                                  <C>           <C>
Cash flows from operating activities:
Net income (loss)                                                    $   847       $(1,057)
Adjustments to reconcile net income (loss) to net cash provided
      by  (used in) operating activities:
      Depreciation                                                       304           312
      Deferred income tax benefit                                          5           (52)
      Changes in operating assets and liabilities
         Accounts receivable                                             (90)        1,751
         Inventory                                                      (772)          243
         Costs and estimated earnings in excess of billings
           on uncompleted contracts                                     (256)         (424)
         Other assets                                                   (149)         (247)
         Accounts payable and accrued expenses                          (168)          110
         Accounts payable--Parent                                      1,030          (292)
         Income taxes payable                                             (2)            6
         Customer advances                                               (44)          (91)
         Billings in excess of costs and estimated earnings
           on uncompleted contracts                                     (370)       (1,086)
                                                                     -------       -------

Net cash provided by (used in) operating activities                      335          (827)

Cash flows from investing activities:
      Purchase of equipment                                             (337)         (443)
                                                                     -------       -------

Net cash used in investing activities                                   (337)         (443)
                                                                     -------       -------

Cash flows from financing activities:
      Short-term bank loan                                               498            --
      Repayment of note receivable                                        --            36
                                                                     -------       -------

Net cash provided by financing activities                                498            36
                                                                     -------       -------

Net increase (decrease) in cash and cash equivalents                     496        (1,234)
Cash and cash equivalents at beginning of period                       2,413         3,030
                                                                     -------       -------
Cash and cash equivalents at end of period                           $ 2,909       $ 1,796
                                                                     =======       =======

Supplemental disclosures of cash flow information:
Net cash paid during the period for income taxes                     $   126       $   213
                                                                     =======       =======
</TABLE>
                             See accompanying notes


                                       5
<PAGE>

                                 ORBIT/FR, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 2004
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1. OWNERSHIP AND BASIS OF PRESENTATION

         ORBIT/FR, Inc. (the "Company"), was incorporated in Delaware on
December 9, 1996, as a wholly owned subsidiary of Orbit-Alchut Technologies,
Ltd., an Israeli publicly traded corporation (hereinafter referred to as the
"Parent"). The Company develops, markets, and supports sophisticated automated
microwave test and measurement systems for the wireless communications,
satellite, automotive, aerospace/defense and electromagnetic compatibility (EMC)
industries, and manufactures anechoic foam, a microwave absorbing material that
is an integral component of microwave test and measurement systems. ORBIT/FR,
Inc., a holding company, supports its world wide customers through its
subsidiaries ORBIT/FR Engineering, LTD (hereinafter referred to as
"Engineering", Israel), ORBIT/FR Europe, (Germany), Advanced Electromagnetics,
Inc. ("AEMI", San Diego, CA), and Orbit Advanced Technologies, Inc. and its
wholly-owned subsidiary, Flam and Russell, Inc, (Horsham, PA). The Company sells
its products to customers throughout Asia, Europe, Israel, and North and South
America.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Interim Financial Information

         The accompanying unaudited consolidated financial statements for the
three and nine months ended September 30, 2004 and 2003 have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the
consolidated financial statements have been included. The results of interim
periods are not necessarily indicative of the results that may be expected for
the year ending December 31, 2004. The consolidated financial statements and
footnotes should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in this Form
10-Q and in the Company's Form 10-K for the year ended December 31, 2003, filed
on March 30, 2004 with the Securities and Exchange Commission, which included
the consolidated financial statements and footnotes for the year ended December
31, 2003.

  Principles of Consolidation

         The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions of the Company and its wholly-owned subsidiaries have been
eliminated in consolidation.

  Use of Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts in the financial statements
and accompanying notes. Actual results could differ from those estimates.



                                       6
<PAGE>
                                 ORBIT/FR, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 2004
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

  Net  Income (Loss) Per Share

         Basic income (loss) per share is calculated by dividing net income
(loss) by the weighted average common shares outstanding for the period. Diluted
income (loss) per share is calculated by dividing net income (loss) by the
weighted average common shares outstanding for the period plus the dilutive
effect of stock options. The dilutive effect of stock options was not presented
for the three and nine months ended September 30, 2004 and 2003 because the
effect of these securities is antidilutive.

3. INVENTORY

         Inventory consists of the following:


<TABLE>
<CAPTION>
                            SEPTEMBER 30,   DECEMBER 31,
                                2004            2003
                            -------------   ------------
                             (UNAUDITED)

   <S>                          <C>            <C>
   Work-in-process              $1,575         $  991
   Parts and components            746            558
                                ------         ------
                                $2,321         $1,549
                                ======         ======
</TABLE>


4. PROPERTY AND EQUIPMENT

         Property and equipment consists of the following:


<TABLE>
<CAPTION>
                                      SEPTEMBER 30,  DECEMBER 31,
                                          2004           2003
                                      -------------  ------------
                                       (UNAUDITED)

   <S>                                   <C>            <C>
   Lab and computer equipment            $2,272         $2,536
   Office equipment                         933            908
   Transportation equipment                 397            376
   Furniture and fixtures                    16             38
   Leasehold improvements                   294            288
                                         ------         ------
                                          3,912          4,146
   Less accumulated depreciation          2,478          2,745
                                         ------         ------

   Property and equipment, net           $1,434         $1,401
                                         ======         ======
</TABLE>



                                       7
<PAGE>
                                 ORBIT/FR, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 2004
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


5. ACCRUED EXPENSES

   Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                               SEPTEMBER 30,   DECEMBER 31,
                                   2004            2003
                               -------------   ------------
                               (UNAUDITED)
   <S>                         <C>             <C>
   Accrued contract costs         $  368         $  338
   Accrued compensation            1,007            797
   Accrued commissions               195             65
   Accrued royalties                  80            117
   Accrued warranty                  351            411
   Other accruals                    246            152
                                  ------         ------
                                  $2,247         $1,880
                                  ======         ======



6. LONG-TERM CONTRACTS
                                                           SEPTEMBER 30,      DECEMBER 31,
                                                               2004               2003
                                                           -------------      ------------
                                                            (UNAUDITED)
   <S>                                                      <C>               <C>
   Accumulated expenditures on uncompleted contracts         $ 10,984          $  7,856
   Estimated earnings thereon                                   1,404               560
                                                             --------          --------
                                                               12,388             8,416
   Less: applicable progress billings                          13,015             9,668
                                                             --------          --------
      Total                                                  $   (627)         $ (1,252)
                                                             ========          ========
</TABLE>


The long-term contracts are shown in the accompanying balance sheets as follows:

<TABLE>
   <S>                                                      <C>               <C>
   Costs and estimated earnings on uncompleted
     contracts in excess of billings                         $    861          $    605
   Billings on uncompleted contracts in excess of
     costs and estimated earnings                              (1,488)           (1,857)
                                                             --------          --------
                                                             $   (627)         $ (1,252)
                                                             ========          ========
</TABLE>


7. RELATED PARTY TRANSACTIONS

         Engineering and the Parent have an agreement, whereby Engineering
purchases from the Parent electrical and mechanical production services. In
addition, the Parent provides other administrative services, including, but not
limited to, bookkeeping, computer, legal, accounting, cost management,
information systems, and production support. Engineering pays the Parent for
these services based upon a rate of cost of production services plus 21%.
Engineering is leasing office space from the Parent on an annual basis, for a
rental of $61 per year. These agreements are to be evaluated on an annual basis.



                                       8
<PAGE>
                                 ORBIT/FR, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 2004
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



8. SEGMENT AND GEOGRAPHIC INFORMATION

         The Company operates exclusively in one industry segment, the business
of developing, marketing and supporting sophisticated automated microwave test
and measurement systems. In addition to its principal operations and markets in
the United States, the Company conducts sales, customer support and service
operations out of other geographic locations in Europe, Asia, and North America.
The following table represents financial information by geographic region for
the three and nine months ended September 30, 2004 and 2003.

<TABLE>
<CAPTION>
Three months ended September 30, 2004           North America      Europe           Asia           Total
-------------------------------------           -------------      ------          ------          ------
<S>                                               <C>             <C>             <C>             <C>
     Sales to unaffiliated customers               $2,888          $1,064          $1,025          $4,977
     Cost of sales to unaffiliated customers        1,644             822             647           3,113
                                                   ------          ------          ------          ------
     Gross profit unaffiliated customers           $1,244          $  242          $  378          $1,864
                                                   ======          ======          ======          ======
</TABLE>

<TABLE>
<CAPTION>
Three months ended September 30, 2003           North America      Europe           Asia           Total
-------------------------------------           -------------      ------          ------          ------
<S>                                               <C>             <C>             <C>             <C>
   Sales to unaffiliated customers                 $1,667          $  715          $1,854          $4,236
   Cost of sales to unaffiliated customers          1,008             486           1,158           2,652
                                                   ------          ------          ------          ------
   Gross profit unaffiliated customers             $  659          $  229          $  696          $1,584
                                                   ======          ======          ======          ======
</TABLE>

<TABLE>
<CAPTION>
Nine months ended September 30, 2004            North America     Europe           Asia            Total
------------------------------------            -------------     -------         -------         -------
   <S>                                            <C>             <C>             <C>             <C>
   Sales to unaffiliated customers                 $ 8,591        $ 3,088         $ 3,390         $15,069
   Cost of sales to unaffiliated customers           5,587          1,896           2,119           9,602
                                                   -------        -------         -------         -------
   Gross profit unaffiliated customers             $ 3,004         $1,192         $ 1,271         $ 5,467
                                                   =======        =======         =======         =======
</TABLE>

<TABLE>
<CAPTION>

Nine months ended September 30, 2003            North America     Europe          Asia            Total
------------------------------------            -------------     -------        -------         -------
   <S>                                            <C>             <C>            <C>             <C>
   Sales to unaffiliated customers                 $ 6,051        $ 1,612        $ 4,438         $12,101
   Cost of sales to unaffiliated customers           4,173          1,364          2,664           8,201
                                                   -------        -------        -------         -------
   Gross profit unaffiliated customers             $ 1,878        $   248        $ 1,774         $ 3,900
                                                   =======        =======        =======         =======
</TABLE>

         In the table above, "North America" includes all United States
operations, and "Europe" includes subsidiaries in Germany and Israel.

9. INCOME TAXES

Income tax expense was not recorded during the three and nine months ended
September 30, 2004 on the Company's profitable domestic operations as previous
income tax benefits on losses were reserved for in prior periods. The Company
has reflected income tax expense on profitable foreign operations during the
three and nine months ended September 30, 2004 and 2003.





                                       9
<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING STATEMENTS

         Certain information contained in this Form 10-Q contains forward
looking statements (as such term is defined in the Securities Exchange Act of
1934 and the regulations thereunder), including without limitation, statements
as to the Company's financial condition, results of operations and liquidity and
capital resources and statements as to management's beliefs, expectations or
options. Such forward looking statements are subject to risks and uncertainties
and may be affected by various factors which may cause actual results to differ
materially from those in the forward looking statements. Certain of these risks,
uncertainties and other factors, as and when applicable, are discussed in the
Company's filings with the Securities and Exchange Commission including its most
recent Registration Statement on Form S-1, and in its most recent Annual Report
on Form 10-K, as amended, a copy of which may be obtained from the Company upon
request and without charge (except for the exhibits thereto).


RESULTS OF OPERATIONS

         The following table sets forth certain financial data as a percentage
of revenues for the periods indicated:



<TABLE>
<CAPTION>
                                  THREE MONTHS ENDED SEPTEMBER 30,  NINE MONTHS ENDED SEPTEMBER 30,
                                  --------------------------------  -------------------------------
                                          2004           2003            2004          2003
                                         -----          -----           -----          -----
<S>                                      <C>            <C>             <C>            <C>
Revenues                                 100.0%         100.0%          100.0%         100.0%
Gross profit                              37.5           37.4            36.3           32.2
General and administrative                11.2           14.7            12.5           15.1
Sales and marketing                       14.7           18.1            12.9           16.1
Research and development                   4.6            6.6             4.8            7.2
Operating income (loss)                    7.0           (2.0)            6.1           (6.2)
Income (loss) before
  income tax expense (benefit)             6.8           (2.3)            5.9           (6.9)
Net income (loss)                          8.6           (4.7)            5.6           (8.7)
</TABLE>


THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2003.

         Revenues. Revenues for the three months ended September 30, 2004 were
approximately $5.0 million compared to $4.2 million for the three months ended
September 30, 2003, an increase of approximately $741,000 or 17.5%. Revenues
from the defense, satellite, automotive and university markets increased
approximately $697,000, $399,000, $148,000, and $38,000 respectively, while
revenues from the wireless and EMC market decreased approximately $510,000 and
$31,000. Geographically, revenues from North America and Europe increased
approximately $1.2 million and 349,000, respectively, while revenues from Asia
decreased approximately $829,000 from prior year levels. The increased sales are
largely a result of significant completion of large U.S. defense contracts.

         Cost of revenues. Cost of revenues for the three months ended September
30, 2004 were approximately $3.1 million compared to approximately $2.7 million
for the three months ended September



                                       10
<PAGE>

30, 2003, an increase of approximately $461,000 or 17.4%. Gross margins remained
stable at approximately 37% for both periods.

         General and administrative expenses. General and administrative
expenses for the three months ended September 30, 2004 were $559,000 compared to
$623,000 for the three months ended September 30, 2003, a decrease of
approximately $64,000 or 10%. As a percentage of revenues, general and
administrative expenses decreased to 11.2% for the three months ended September
30, 2004 from 14.7% for the three months ended September 30, 2003. The decreased
costs were mostly the result of investments made in the Company's compliance
programs during 2003.

         Sales and marketing expenses. Sales and marketing expenses for the
three months ended September 30, 2004 were $731,000 compared to $765,000 for the
three months ended September 30, 2003, a decrease of approximately $34,000 or
4%. As a percentage of revenues, sales and marketing expenses decreased to 14.7%
for the three months ended September 30, 2004 from 18.1% for the three months
ended September 30, 2003.

         Research and development expenses. Research and development expenses
for the three months ended September 30, 2004 were $228,000 compared to $279,000
for the three months ended September 30, 2003, a decrease of approximately
$51,000 or 18%. The decrease is largely due both to significant research and
development efforts expended during the three months ended September 30, 2003 on
the Company's 959 Spectrum software product, and to the Company's utilization of
its existing resources to meet contract deadlines in 2004. As a percentage of
revenues, research and development expenses decreased to 4.6% for the three
months ended September 30, 2004 from 6.6% for the three months ended September
30, 2003.

         Other expense, net. Other expense, net for the three months ended
September 30, 2004 was approximately $9,000 compared to $16,000 for the three
months ended September 30, 2003, a decrease of approximately $7,000. The Company
recognizes interest income and expense and foreign currency translation gains
and losses as other expense. Favorable foreign currency translation rates
reduced the Company's other expense in 2004.

         Income taxes. Income tax benefit for the three months ended September
30, 2004 was $90,000 compared to an expense of $101,000 for the three months
ended September 30, 2003, a decrease in expense of $191,000. Income tax expense
was not recorded during the three months ended September 30, 2004 on the
Company's profitable domestic operations as previously recorded income tax
benefits on losses were reserved for. The Company has reflected an income tax
benefit on its foreign operations during the three months ended September 30,
2004 and an income tax expense during the three months ended September 30, 2003.

NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2003.

         Revenues. Revenues for the nine months ended September 30, 2004 were
approximately $15.1 million, compared to approximately $12.1 million for the
nine months ended September 30, 2003, an increase of approximately $3.0 million
or 25%. Revenues from the defense, satellite, automotive, EMC and University
markets increased approximately $2.4 million, $793,000, $361,000, $178,000 and
$91,000, respectively, while revenues from the wireless market decreased
$832,000. Geographically, revenues from North America and Europe increased
approximately $2.5 million and $1.5 million, respectively while revenues from
Asia decreased approximately $1.0 million from prior year levels. The increased
sales are largely a result of significant completion of large U.S. defense
contracts.

         Cost of revenues. Cost of revenues for the nine months ended September
30, 2004 were approximately $9.6 million compared to approximately $8.2 million
for the nine months ended September 30, 2003, an increase of approximately $1.4
million or 17%. Gross margins increased to 36.3% for the nine



                                       11
<PAGE>

months ended September 30, 2004 from 32.3% for the nine months ended September
30, 2003. The increase in gross margins in the period are largely the result of
improvements in contract bid and program management processes, and a greater
utilization of existing resources.

         General and administrative expenses. General and administrative
expenses for the nine months ended September 30, 2004 were approximately $1.9
million compared to approximately $1.8 million for the nine months ended
September 30, 2003, an increase of approximately $60,000 or 3%. As a percentage
of revenues, general and administrative expenses decreased to 12.5% for the nine
months ended September 30, 2004 from 15.1% for the nine months ended September
30, 2003. The increased costs are largely a result of investments made in the
Company's compliance program.

         Sales and marketing expenses. Sales and marketing expenses for the nine
months ended September 30, 2004 and 2003 were approximately $1.9 million. As a
percentage of revenues, sales and marketing expenses decreased to 12.9% for the
nine months ended September 30, 2004 from 16.1% for the nine months ended
September 30, 2003.

         Research and development expenses. Research and development expenses
for the nine months ended September 30, 2004 were $717,000 compared to $872,000
for the nine months ended September 30, 2003, a decrease of approximately
$155,000 or 18%. The decrease is due both to significant research and
development efforts expended during the nine months ended September 30, 2003 on
the Company's 959 Spectrum software product, and to the Company's utilization of
its resources to meet contract deadlines in 2004. As a percentage of revenues,
research and development expenses decreased to 4.8% for the nine months ended
September 30, 2004 from 7.2% for the nine months ended September 30, 2003.

         Other expense, net. Other expense, net for the nine months ended
September 30, 2004 was approximately $39,000 compared to $85,000 for the nine
months ended September 30, 2003, a decrease of approximately $46,000. The
Company recognizes interest income and expense and foreign currency translation
gains and losses as other expense. Favorable foreign currency translation rates
reduced the Company's other expense in 2004.

         Income taxes. Income tax expense for the nine months ended September
30, 2004 was $34,000 compared to $226,000 of income tax expense for the nine
months ended September 30, 2003. Income tax expense was not recorded during the
nine months ended September 30, 2004 on the Company's profitable domestic
operations as previously recorded income tax benefits on losses were reserved
for. The Company has reflected income tax expense on its profitable foreign
operations during the nine months ended September 30, 2004 and 2003.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operating activities during the nine months ended
September 30, 2004 was $335,000 compared to $827,000 used in operating
activities during the nine months ended September 30, 2003. The Company's net
income, adjusted for non cash items, provided $1.2 million of operating cash
during the nine months ended September 30, 2004, compared to $797,000 used in
operating activities during the nine months ended September 30, 2003. Changes in
the Company's operating assets and liabilities during the nine months ended
September 30, 2004 used $821,000 in operating cash compared to $30,000 used
during the nine months ended September 30, 2003.

         Net cash used in investing activities during the nine months ended
September 30, 2004 for the purchase of property and equipment was $337,000.
During the nine months ended September 30, 2003, the Company purchased $443,000
in property and equipment.

         The Company obtained $498,000 of short-term bank financing during the
nine months ended September 30, 2004.



                                       12
<PAGE>

         The Company has exposure to currency fluctuations as a result of
billing certain of its contracts in foreign currency. When selling to customers
in countries with less stable currencies, the Company bills in U.S. dollars. For
the nine months ended September 30, 2004, approximately 81% of the Company's
revenues were billed in U.S. dollars. Substantially all of the costs of the
Company's contracts, including costs subcontracted to the Parent, have been, and
will continue to be, U.S. dollar-denominated except for wages for employees of
the Company's Israeli and German subsidiaries, which are denominated in local
currency. The Company intends to continue to enter into U.S. dollar-denominated
contracts.

INFLATION AND SEASONALITY

         The Company does not believe that inflation or seasonality has had a
significant effect on the Company's operations to date.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to market risk from fluctuations in foreign currency
exchange rates. We manage exposure to variability in foreign currency exchange
rates primarily through the use of natural hedges, as both liabilities and
assets are denominated in the local currency. However, different durations in
our funding obligations and assets may expose us to the risk of foreign exchange
rate fluctuations. We have not entered into any derivative instrument
transactions to manage this risk. Based on our overall foreign currency rate
exposure at September 30, 2004, we do not believe that a hypothetical 10% change
in foreign currency rates would materially adversely affect our financial
position.

ITEM 4.  CONTROLS AND PROCEDURES

         The Company's Chief Executive Officer and Chief Financial Officer,
after evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of the
end of the period covered by this quarterly report (the "Evaluation Date"), have
concluded that as of the Evaluation Date, the Company's disclosure controls and
procedures were adequate and effective to ensure that material information
relating to the Company would be made known to them by others within the
Company, particularly during the period in which this quarterly report was being
prepared. There were no significant changes in the Company's internal controls
over financial reporting or in other factors that could significantly affect the
Company's internal controls and procedures subsequent to the Evaluation Date,
nor any significant deficiencies or material weaknesses in such internal
controls and procedures requiring corrective actions.




                                       13
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         The Company is not currently subject to any material legal proceedings
and is not aware of any threatened litigation, unasserted claims or assessments
that could have a material adverse effect on the Company's business, operating
results, or financial condition.


ITEM 2. CHANGES IN  SECURITIES,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
SECURITIES--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,
                  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.


                                       14
<PAGE>



ORBIT/FR, INC.

SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                                     ORBIT/FR, INC.
                                          --------------------------------------
                                                       Registrant


Date: November  15, 2004
                                                    /s/  Israel Adan
                                          --------------------------------------
                                          President and Chief Executive Officer


Date: November  15, 2004
                                                     /s/  Dave Lubbe
                                          --------------------------------------
                                                    Chief Financial Officer





                                       15