<PAGE>

                                  FORM 10-QSB


                   U. S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549


                (x) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the Quarterly period ended June 30, 1999


               (_) TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
                              OF THE EXCHANGE ACT


                         Commission File No.  0-25548


                           ORBIT TECHNOLOGIES, INC.



                Delaware                                    841 00 1269
     ------------------------------                    -------------------
       (State of Jurisdiction of                        (I.R. S. Employer
     Incorporation or Organization)                    Identification No.)



          5950 La Place Court, Suite 140, Carlsbad, California 92008
          ----------------------------------------------------------
                   (Address of Principal Executive Offices)



                                (760) 918-9168
--------------------------------------------------------------------------------
               (Issuer's Telephone Number, Including Area Code)



Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 ____
No  X
  -----

The number of outstanding shares of the registrant's only class of common stock
as of March 31, 1999: 32,257,261.


     Transitional Small Business Disclosure Format: Yes ____   No   X
                                                                  -----
<PAGE>

                        PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.  (See accompanying Financial Report for the
period ended June 30, 1999.)

Item 2.  Management's Discussion and Analysis or Plan of Operation

Forward Looking Statements
--------------------------

This Form 10-QSB contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" in Exhibit 99 and elsewhere in
this Form 10-QSB.

Plan of Operation
-----------------

Since 1996, the Company has focused on the development and use of its
polydimethalsiloxane-based Polymer Encapsulation Technology (PET) as a method
for stabilizing and encapsulating various radioactive and toxic waste materials
leading to a final waste form for disposal.

Significant progress has been attained as evidenced by the success achieved on
test and evaluation contracts completed for Lockheed Martin Idaho Technologies
Company (LMITCO) in conjunction with the U. S. Department of Energy, Idaho
Operations Office, at their Idaho Falls waste site.  The Company's business plan
and near term strategy will focus the Company's human resources and funding on
developing the Polymer Encapsulation Technology (PET) as a modern technology
solution to various radioactive and toxic waste materials identified for
environmentally safe disposal.

As a next step in product acceptance, Lockheed Martin Idaho Technologies Company
and Orbit, together with input from the Microscale Physiochemical Laboratory at
the University of Akron and Ecology and Environmental, Inc. (Orbit's Teaming
Partner) have recently completed the Scope of Work that will lead to a follow-on
calcine evaluation contract utilizing Orbit's PET as a potential transportation
medium in addition to a stabilization and encapsulation material. The
elastomeric properties and material characteristics provided by PET are of
particular benefit in eliminating the potential risk that would occur in the
transportation of the waste from one site to another for long term storage or
disposal.  It is estimated that this evaluation phase will be completed in late
1999.

After product performance evaluations are successfully completed for stabilizing
and encapsulating the waste, a pilot plant evaluation is normally conducted.
The pilot plant demonstration represents actual processing methods and
applications incorporating both PET and selected waste materials.

Building on the successes achieved under the Lockheed Martin contracts, the
marketing strategy is to build a substantial government and private sector
business in which Orbit's system will be used in the containment of various
radioactive and heavy metal wastes. Work has begun with initial contacts being
made with industry leaders in the waste management and waste remediation sectors
and potential end-users of the technology.  Ultimately, the Company plans to
develop strategic relationships with prime contractors throughout the waste
management industry.

Until completion of the final development and evaluation of the technology and
the commencement of sales, the Company will have no operating revenues but will
continue to incur substantial expenses.  No assurances can be given that the
Company can complete development of any technology or that, if any technology is
fully developed, that it can be manufactured on a large-scale basis or at a
feasible cost.  Further, no assurance can be given that any technology will
receive market acceptance. Being a start-up stage entity, the Company is subject
to all the risks inherent in the establishment of a new enterprise and the
marketing and manufacturing of a new product, many of which risks are beyond the
control of the Company.

Background

In May 1996, the Company was awarded a sole source contract, within its
category, to participate in the U. S.

                                       2
<PAGE>

Department of Energy's Landfill Stabilization Project. This Project evaluates
materials for treating existing hazardous waste at the Idaho National
Engineering Laboratory's Subsurface Disposal Areas. Several materials in other
categories have also been selected for testing. The contract provides for
initial bench testing with an option that can be exercised for more extensive
field-testing.

The results of preliminary testing and analysis in Idaho was the development of
a "White Paper" which recommended a much more extensive evaluation of Orbit's
CSF be conducted to evaluate its use for Calcine Waste Stabilization at the
Idaho facility.  Calcine waste is specific to the Idaho facility and there are
about 13,000,000 pounds of material to be processed. Part of this study actually
produced three non-radioactive samples that produced acceptable results. A
conceptual process design was also performed as well as initial cost estimates
generated.  This study has had wide distribution within the Department of Energy
(DOE).

In November 1996, the Company entered into a Teaming Agreement with Ecology &
Environmental, Inc. (International Specialists in the Environment), for the sole
purpose of identifying and pursuing mutually agreeable business opportunities
within the U. S. Departments of Energy and Defense, and other federal and state
government agencies and private sectors where the environmental application of
Orbit's technology is possible.  Identification and pursuit of business
opportunities includes technology development (i. e. both system design and
application identification and construction), sales and client development
efforts, the bid/proposal process, and the contract negotiation process
regarding awarded projects.

In May 1997, the Company was awarded a contract by Lockheed Martin Idaho
Technologies Company (LMITCO) to test and evaluate Orbit's material as a
stabilizing media for sodium and nitrate salts, which included chromium, from
the Idaho National Engineering and Environmental Laboratory`s (INEEL)
Radioactive Waste Management Complex (RWMC).  Subcontractors under the contract
to Orbit are the University of Akron's Microscale Physiochemical Engineering
Center, Department of Civil Engineering and Pierpoint Environmental Management
Services.

In August 1997, Lockheed Martin expanded the initial contract to include two
additional nitrate-type surrogate waste materials containing cadmium and an
organic solvent. Conclusions from a report published in November 1997 by
Lockheed Martin indicated that Orbit's material appears to be suitable for the
stabilization of DOE complex salt wastes.  The final waste form passed the TCLP
protocol and DOT oxidizer tests.

In September 1997, Orbit Technologies, Inc., Ecology and Environmental, Inc.,
and The University of Akron submitted a proposal entitled "Low-activity Waste
Stabilization using Ceramic Silicon Foam (CSF)" to the Department of Energy -
Idaho Operations Office.  The proposal received wide dissemination within the
U.S. Department of Energy.

In March 1998, the Company was awarded a contract by Lockheed Martin Idaho
Technologies Company to evaluate encapsulation of both surrogate and actual WERF
(Waste Experimental Reduction Facility) low level waste with its Polymer
Encapsulation Technology (PET).

In July 1998, the Statement of Work was modified and redirected the Company to
focus on a low level calcine material.  These new tests included mixing studies
and enhanced treatment methodologies. Test reports by Lockheed Martin indicated
that encapsulation of the low-level mixed waste fraction from INTEC calcined
waste has potential as an encapsulating media for final disposal and the report
recommended exploration of further treatment formulations.

In August 1998, a paper detailing the Company's mixed waste encapsulation
technology, entitled "Encapsulation of Nitrate Salt Waste Using Polysiloxane,"
was selected for presentation at the 216th Annual American Chemical Society
National Meeting. The paper examined the use of a new waste management solution
to encapsulate the U.S. Department of Energy's approximately 250 million-kg of
dry nitrate salt waste which is laden with heavy metals and radioactive
isotopes.

In October 1998, the Company filed a new patent application for its Polymer
Encapsulation Technology (PET).  The new patent was the result of rigorous test
and evaluation over the last year and included the results of enhanced
formulations and improved process applications. The Company's system involves a
method for stabilizing granular salts generated by solidifying neutralized
acidic solutions used to recover and reformulate weapons material.

                                       3
<PAGE>

In the last six months the Company has included new surfactant additives, or
binding agents, that enable the system to encapsulate and stabilize waste
material which may include soluble chromium compounds, sodium nitrate, potassium
nitrate, plutonium 238 and 239, uranium 238, and other harmful contaminants.

Orbit's encapsulation system is designed to form a cohesive material suitable
for transportation and final disposal, featuring a low leaching index as well as
the ability to perform at increased waste loading factors. The system has been
developed for the treatment of waste material to prevent environmental damage,
because certain wastes that cannot be easily or economically rendered
environmentally harmless still pose significant disposal problems.

In October 1998, Orbit's new and recently patented Polymer Encapsulation
technology (PET) was selected for presentation at the 19th U. S. Department of
Energy Low-Level Radioactive Waste Management Conference. The goal of the
conference was to provide an opportunity for information exchange between
representatives of the commercial and defense related low-level radioactive
waste management communities.

In May 1999, Orbit was awarded a contract by Lockheed Martin Idaho Technologies
Company to evaluate the encapsulation of actual pilot scale calcine waste
processed at the Idaho Nuclear Technology and Engineering Center (INTEC) with
its Polymer Encapsulation Technology (PET).  All specific engineering, technical
tasks, and testing will be accomplished in accordance with ASTM, Department of
Transportation (DOT), and Toxicity Characteristic Leach Procedure (TCLP), and
standards.

Other Matters.
--------------

     None.

                          PART II - OTHER INFORMATION

Item 1.   Legal Proceedings.  Jeffer, Mangels, Butler & Marmaro, LLP v. Orbit
                              -----------------------------------------------
Technologies, Inc. Action filed in Los Angeles Superior Court, on September 17,
------------------
1996, Case No. BS 041 354, by former attorneys of Orbit to recover attorneys'
fees. Orbit stipulated to arbitration of fee dispute and entry of an interim
arbitration award in the amount of approximately $110,000, subject to any
defenses, offsets or claims, which Orbit asserted in the form of a legal
malpractice claim.

The Company's legal malpractice action was denied as a result of the retainer
agreement signed by Adrian Joseph in his capacity as Chairman and President when
he was with the Company.  Mr. Joseph was a personal client of Jeffer, Mangels,
Butler & Marmaro prior to Orbit's involvement with the firm.  Orbit declined to
participate in the arbitration and judgment had been awarded pursuant to the
interim arbitration.

On June 21, 1999, Orbit reached a Settlement Agreement and General Release with
Jeffer, Mangels, Butler & Marmaro, LLP whereby the parties agreed that Orbit
shall pay Jeffer, Mangels, Butler & Marmaro LLP the sum of $60,000 which
represents a compromise sum for the amounts due under a court judgment in favor
of Jeffer, Mangels, Butler & Marmaro LLP for past due services in the amount of
$107,696.59 plus interest at a rate of ten percent annum from December 10,1996,
and costs, including reasonable attorney's fees in the amount of $30,670,56.

Item 2.   Changes in Securities. No change.

Item 6.   Exhibits and Reports on Form 8-K.

          (a)  List of Documents filed as part of this report:

               (1)  Financial Statements.

               (2)  Exhibits - See (c) below.

          (b)  Reports on Form 8-K.  None.

                                       4
<PAGE>

         (c)  Exhibits

         Exhibit
         Number     Exhibit

         (10)       Material contracts.

         (11)       Computation of per share earnings./(1)/

         (15)       Letter on unaudited interim financial information./(1)/

         (18)       Letter on change in accounting principles./(1)/

         (27)       Financial Data Schedule./(1)/

         (99)       Risk Factors./(2)/

/(1)/  See Orbit Technologies Inc. and Subsidiaries Financial Report for the
       period ended June 30, 1999.

/(2)/  Previously filed as part of the Form 10-KSB for 1998 and which is hereby
       incorporated by reference.

                                  SIGNATURES

         In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


ORBIT TECHNOLOGIES INC.
-----------------------
      Registrant



Date: August 19, 1999             By: /s/ James B. Lahey
      ---------------                 ------------------------------------------
                                      James B. Lahey, Chief Executive Officer
                                      Chairman of the Board of Directors



Date: August 19, 1999             By: /s/ James A. Giansiracusa
      ---------------                 ------------------------------------------
                                      James A. Giansiracusa, Secretary/Chief
                                      Financial Officer

                                       5
<PAGE>

                    ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
                    ----------------------------------------


                                FINANCIAL REPORT
                                ----------------


                                 JUNE 30, 1999
                                 -------------
<PAGE>

                    ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

                              INDEX TO FORM 10-QSB

                                 JUNE 30, 1999



PART I  -  FINANCIAL INFORMATION

  ITEM 1  -  FINANCIAL STATEMENTS


    CONSOLIDATED BALANCE SHEETS                                 F-1
       At June 30, 1999 and December 31, 1998


    CONSOLIDATED STATEMENTS OF OPERATIONS                       F-2
       For the Three Months Ended June 30, 1998 and 1999


    CONSOLIDATED STATEMENTS OF OPERATIONS                       F-3
       For the Six Months Ended June 30, 1998 and 1999


    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY         F-4
       For the Six Months Ended June 30, 1999


    CONSOLIDATED STATEMENTS OF CASH FLOWS                       F-5
       For the Six Months Ended June 30, 1998 and 1999


    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS               F-6 - F-9


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


PART II - OTHER INFORMATION
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS



                                    ASSETS
                                    ------

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                                         At                At
                                                                 December 31, 1998    June 30,1999
                                                                 -----------------   -------------
                                                                                       (Unaudited)
-----------------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>
Current Assets:
  Cash                                                                     $ 20,367       $ 18,048
                                                                           --------       --------

    Total Current Assets                                                     20,367         18,048

Property and Equipment - At cost, net of accumulated
   depreciation and allowance against equipment expenditures                 39,735         29,801

Intangible Assets, Net of accumulated amortization                           67,809         65,243

Other Assets                                                                  4,800          5,300
                                                                           --------       --------

    Total Assets                                                           $132,711       $118,392
                                                                           ========       ========
-----------------------------------------------------------------------------------------------------
</TABLE>

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                    ----------------------------------------

<TABLE>
------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>              <C>
Current Liabilities:
  Accounts payable and accrued liabilities                                 $  1,977,161     $  2,025,216
  Notes payable                                                               1,632,591        1,680,091
                                                                           ------------     ------------

    Total Current Liabilities                                                 3,609,752        3,705,307
                                                                           ------------     ------------
Commitments, Contingencies and Other Matters (Notes 1, 2 and 3)


Stockholders' Deficiency:
  Preferred stock - par value $.01 per share; shares authorized -
    1,000,000; shares issued and outstanding - none                                   -                -
  Common stock - par value $.01 per share; shares authorized -
    50,000,000;  shares issued and outstanding - 32,484,716 and
    33,137,692 as of December 31, 1998 and June 30, 1999,
    respectively                                                                324,848          331,377
  Additional paid-in capital                                                 11,093,727       11,321,934
  Accumulated deficit                                                       (14,895,616)     (15,240,226)
                                                                           ------------     ------------

    Total Stockholders' Deficiency                                           (3,477,041)      (3,586,915)
                                                                           ------------     ------------

    Total Liabilities and Stockholders' Deficiency                         $    132,711     $    118,392
                                                                           ============     ============
------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

                                      F-1
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)



<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                           For the Three Months Ended
                                                                                                    June 30,
                                                                                            ------------------------
                                                                                              1998            1999
                                                                                            --------        --------
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>             <C>
Revenue                                                                                   $         -     $         -
                                                                                          -----------     -----------
Costs and Expenses
  Research and development                                                                      1,250               -
  General and administrative                                                                  100,985         116,244
  Amortization of financing costs                                                               5,344               -
  Interest expense                                                                             39,214          39,760
  Other (income) expense, net                                                                       -         (47,696)
                                                                                          -----------     -----------

      Total Costs and Expenses                                                                146,753         108,308
                                                                                          -----------     -----------

Net Loss                                                                                  $  (146,793)    $  (108,308)
                                                                                          ===========     ===========
PER SHARE DATA:


Basic and Diluted Loss Per Share                                                               $(.005)         $(.003)
                                                                                          ===========     ===========

Weighted Average Common Shares Used in Basic and Diluted Loss Per Share                    29,800,242      32,916,032
                                                                                          ===========     ===========

---------------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

                                      F-2
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                                                       For the Six Months Ended
                                                                               June 30,
                                                                    ------------------------------
                                                                     1998                   1999
                                                                    ------------------------------
--------------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>


Revenue                                                             $           -   $           -
                                                                    -------------   -------------
Costs and Expenses
  Research and development                                                  3,350               -
  General and administrative                                              265,838         216,577
  Amortization of financing costs                                          10,688               -
  Debt conversion expense                                                       -          95,593
  Interest expense                                                        100,190          80,136
  Other (income) expense, net                                                   -         (47,696)
                                                                    -------------   -------------
      Total Costs and Expenses                                            380,066         344,610
                                                                    -------------   -------------
Net Loss                                                            $    (380,066)  $    (344,610)
                                                                    =============   =============
PER SHARE DATA:

Basic and Diluted Loss Per Share                                    $        (.01)  $        (.01)
                                                                    =============   =============
Weighted Average Common Shares Used in Basic and Diluted Loss Per
 Share                                                                 29,800,242      32,823,543
                                                                    =============   =============
-------------------------------------------------------------------------------------------------
</TABLE>



See notes to consolidated financial statements.

                                      F-3
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                                  (UNAUDITED)

                    FOR THE SIX MONTHS ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
                                                          Common Stock        Additional     Accumulated
                                                   -----------------------
                                                      Shares        Amount  Paid -in Capital   Deficit          Total
                                                   -----------------------  ----------------   -------          -----
<S>                                                <C>          <C>         <C>              <C>             <C>
Balances at December 31, 1998                       32,484,716  $  324,848  $ 11,093,727     $ (14,895,616)  $ (3,477,041)

Issuance of stock                                      256,573       2,566        42,434                 -         45,000
Issuance of stock for conversion of notes
payable and accrued interest                           393,903       3,938        89,705                 -         93,643
Issuance of stock for accrued interest                   2,500          25           475                 -            500
Debt conversion expense                                      -           -        95,593                 -         95,593
Net loss                                                     -           -             -          (344,610)      (344,610)
                                                   -----------  ----------  ------------     -------------   ------------
Balances at June 30, 1999
                                                    33,137,692  $  331,377  $ 11,321,934     $ (15,240,226)  $ (3,586,915)
                                                   ===========  ==========  ============     =============   ============
</TABLE>


See notes to consolidated financial statements.

                                      F-4
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                                    For the Six Months Ended
                                                                            June 30,
                                                                    -------------------------
                                                                       1998           1999
                                                                    ----------     ----------
-----------------------------------------------------------------------------------------------
<S>                                                                 <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                                            $(380,066)      $(344,610)
 Adjustments to reconcile net loss to net cash used in operating
  activities:
     Depreciation and amortization                                       5,312          12,500
     Amortization of unearned and deferred finance costs                10,688               -
     Debt conversion expense                                                 -          95,593
     Issuance of stock for services                                        586               -

  Cash provided by (used for) the change in assets and liabilities:
     Increase in other assets                                                -            (500)
     Increase in accounts payable and accrued liabilities              135,966          67,198
                                                                     ---------       ---------

     NET CASH USED IN OPERATING ACTIVITIES                            (227,514)       (169,819)
                                                                     ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds from sale of stock                                           236,100          45,000
 Proceeds from loans                                                    15,000         122,500
                                                                     ---------       ---------

     NET CASH PROVIDED BY FINANCING ACTIVITIES                         251,100         167,500
                                                                     ---------       ---------

INCREASE (DECREASE) IN CASH                                             23,586          (2,319)

CASH - BEGINNING                                                         3,631          20,367
                                                                     ---------       ---------

CASH - ENDING                                                        $  27,217       $  18,048
                                                                     =========       =========

SCHEDULE OF NON-CASH INVESTING AND FINANCING
 ACTIVITIES:
  Issuance of 393,903 shares of common stock for conversion
    of $93,643 of notes payable and accrued interest of $18,643      $       -       $  93,643
                                                                     =========       =========

  Issuance of 2,500 shares of common stock for payment of
    accrued interest                                                 $       -       $     500
                                                                     =========       =========

  Issuance of 108,412 shares of common stock for conversion
    of $25,000 notes payable and legal fees                          $  25,586       $       -
                                                                     =========       =========
-----------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

                                      F-5
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)



NOTE 1 -  BUSINESS AND CONTINUED OPERATIONS

          Orbit Technologies Inc. (the "Company") was incorporated in the State
          of Delaware on April 29, 1985. The Company is a commercial technology
          research and development company holding rights to certain patents and
          their technologies.

          The Company's business plan is to develop certain technologies until
          commercially viable products are possible and to license or sell these
          technologies to third parties which would be responsible for the
          production and marketing of any products resulting therefrom. Since
          its incorporation in 1985, the Company has pursued the research,
          development, acquisition and licensing of certain technologies. The
          Company concentrated its efforts in the areas of coatings technologies
          and new materials technologies. While the technologies are undergoing
          certain feasibility studies and testing, none has proved commercially
          feasible, except for the TiTRODE type electrodes. To date, the Company
          has not financially benefitted from the commercialization of the
          TiTRODE electrode.

          The accompanying financial statements have been prepared in conformity
          with generally accepted accounting principles, which contemplate
          continuation of the Company as a going concern. However, for the year
          ended December 31, 1998 and the six months ended June 30, 1999, the
          Company incurred net losses of approximately $877,000 and $345,000,
          respectively, and as of June 30, 1999, had a stockholders' deficiency
          and a working capital deficiency of approximately $3,857,000 and
          $3,687,000, respectively. The Company is also in default on a
          significant number of loan agreements which total approximately
          $2,193,000 in principal and interest as of June 30, 1999, and is in
          arrears with substantially all of its other payables and accrued
          liabilities. The Company requires additional funds to continue
          research and development efforts and complete the necessary work to
          commercialize its technologies. Until completion of the development of
          a technology and the commencement of sales, the Company will have no
          operating revenues, but will continue to incur substantial expenses
          and operating losses. No assurances can be given that the Company can
          complete development of any technology or that, if any technology is
          fully developed, it can be manufactured on a large scale basis or at a
          feasible cost. Further, no assurance can be given that any technology
          will receive market acceptance. These factors raise substantial doubt
          about the Company's ability to continue as a going concern.

          The Company is exploring additional sources of working capital
          including private borrowings, sales of its securities, joint ventures
          and licensing of technologies. While no assurance can be given,
          management believes the Company can raise adequate capital to keep the
          Company functioning at a minimum level of operation in 1999. From
          January 1, 1999 through June 30, 1999, the Company's proceeds from all
          financing activities amounted to approximately $167,500.

          The Company is exploring ways to reduce its existing liabilities
          including exchanging certain of its liabilities for shares of its
          common stock. For the six months ended June 30, 1999, the Company
          exchanged $75,000 of principal on various promissory notes outstanding
          at December 31, 1998 for shares of common stock (see Note 2).

                                      F-6
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


NOTE 1 -  BUSINESS AND CONTINUED OPERATIONS (Continued)

          To date, the Company has not completed its restructuring of the
          remaining debt and the Company continues to be in default under such
          agreements. On March 6, 1997, one group of note holders, representing
          $600,000 of the promissory notes outstanding as of December 31, 1997,
          has filed a lawsuit against the Company to recover loans and other
          monies provided to the Company. During June 1998, the Company and the
          note holders reached a tentative settlement, which is subject to the
          approval of the majority of the shareholders and approval of the
          residing court (see Note 3b).

          The Company's ability to continue as a going concern is dependent upon
          obtaining the additional financing, restructuring and/or curing the
          defaults on its debt, completion of research and development and the
          successful marketing of its technologies. These financial statements
          do not include any adjustments relating to the recoverability of
          recorded asset amounts that might be necessary as a result of the
          above uncertainty.

          The accompanying unaudited financial statements have been prepared in
          accordance with generally accepted accounting principles for interim
          financial information and with instructions to Form 10-QSB.
          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, the interim
          financial statements include all adjustments necessary in order to
          make the financial statements not misleading. The results of
          operations for the three-month and six-month periods then ended are
          not necessarily indicative of the results to be expected for the full
          year. For further information, refer to the Company's audited
          financial statements and footnotes thereto at December 31, 1998,
          included in the Company's Form 10-KSB, filed with the Securities and
          Exchange Commission.

NOTE 2 -  CAPITALIZATION

          Conversion of Debt to Equity
          ----------------------------

          During the first quarter of 1999, the Company converted $25,000 of
          principal and $362 of accrued interest, relating to a note payable
          outstanding at December 31, 1998, into 120,771 shares of the Company's
          common stock.

          As part of a settlement agreement with a noteholder, during the first
          quarter of 1999, the Company agreed to convert principal of $50,000
          and accrued interest of $18,281, relating to a note payable
          outstanding at December 31, 1998, into 273,132 shares of the Company's
          common stock. Under the original loan agreement, the debt was
          convertible, at the option of the noteholder, at $0.60 per share. The
          difference between the original conversion rate of $0.60 and the
          actual conversion rate of $0.25 was reflected in the accompanying
          financial statement as a debt conversion expense of $95,593.

                                      F-7
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


NOTE 2 -  CAPITALIZATION (Continued)

          Notes Payable
          -------------

          During the first quarter of 1999, the Company received the proceeds of
          a $50,000 from loans from two unrelated individuals. The loans are due
          in one year, bear interest at 8% per annum, and are convertible into
          common stock at a 20% discount to the average 5-day market price at
          the conversion date.

          During the second quarter of 1999, the Company received the proceeds
          of a $25,000 loan from an individual. The loan is due in one year,
          bears interest at 8% per annum, and is convertible into common stock
          at a 20% discount to the average five-day market price at the
          conversion date.

          During the second quarter of 1999, the Company received the proceeds
          of a $7,500 loan from two individuals. The terms of the loans have not
          yet been determined.

          During the second quarter of 1999, the Company received the proceeds
          of a $40,000 loan from two of the Company's principal officers. The
          proceeds were used to pay Jeffer, Mangels, Butler & Marmaro, LLP under
          a court judgement for past due services.

          Common Stock
          ------------

          During the second quarter of 1999, the Company sold 256,573 shares of
          common stock for $45,000 in cash and paid related interest expense of
          $500 by the issuance of 2,500 common shares.

NOTE 3 -  COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

          Litigation/Disputes
          -------------------

          a)  Jeffer, Mangels, Butler & Marmaro, LLP v. Orbit Technologies, Inc.
              -----------------------------------------------------------------
              Action by former attorneys of Orbit to compel arbitration to
              recover attorney fees. Orbit stipulated to arbitration of fee
              dispute and stipulated to entry of interim arbitration award in
              the amount of approximately $160,000, subject to any defenses,
              offsets or claims, which Orbit is asserting by way of a separate
              legal malpractice action.

              The Company's legal malpractice action was directed to arbitration
              by a retainer agreement signed by Mr. Joseph, in his capacity when
              he was with the Company. Prior to Orbit becoming a client, Mr.
              Joseph was a personal client of Jeffer, Mangels, Butler & Marmaro.
              The retainer agreement signed by Joseph has barred Orbit from
              filing a legal malpractice action.

                                      F-8
<PAGE>

                   ORBIT TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


NOTE 3 -  COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

          Litigation/Disputes (Continued)
          -------------------

          a)  Jeffer, Mangels, Butler & Marmaro, LLP v. Orbit Technologies, Inc.
              ------------------------------------------------------------------
              (Continued)  On June 21, 1999, the Company reached a settlement
              -----------
              agreement and general release with Jeffer, Mangels, Butler &
              Marmaro, LLP, whereby the parties agreed that Orbit shall pay the
              sum of $60,000, which represents a comprise sum for the amounts
              due under a court judgment in favor of Jeffer, Mangels, Butler &
              Marmaro, LLP for past due services in the amount of $107,697, plus
              interest, at a rate of ten percent per annum from December 10,
              1996, and costs, including reasonable attorney's fees in the
              amount of $30,671. This settlement resulted in a net gain of
              $47,697 which has been reflected as other income during the
              quarter ended June 30, 1999.

          b)  Benveniste, et. al. vs. Orbit and Its Officers.  The action was
              ----------------------------------------------
              filed on March 6, 1997 in the Los Angeles Superior Court. The
              action is to collect principal, interest and other fees and
              damages relating to various promissory notes executed between the
              plaintiffs and Orbit during 1992 totalling $197,000 and additional
              loans made during 1995 totalling $600,000.

              In June of 1998, a tentative comprehensive settlement was reached
              by all parties. The financial terms of the tentative settlement
              include the conversion of all the Benveniste's debt to 5,745,000
              shares of common stock. Because the accord requires the surrender
              and cancellation of approximately 5 million shares of Orbit common
              stock issued by past officers and directors that Orbit contends
              are invalid, the net effect will be to essentially maintain the
              existing equity structure. The agreement also grants to the
              Benvenistes the option to purchase up to 1,100,000 shares at a
              price ranging from $0.23 to $0.75 per share, which depend on the
              period of time from the option grant date that the options are
              exercised. The settlement has several contingencies, which need to
              be resolved before the settlement is final.

          c)  Benveniste, et al. vs. Lahey, et al.  On June 2, 1997, Richard
              -----------------------------------
              Benveniste and Edgar Benveniste filed suit in the Delaware Court
              of Chancery on behalf of themselves and purportedly on behalf of
              the Company against James B. Lahey, James A. Giansiracusa, Stephen
              V. Prewett, Ian C. Gent and William N. Whelen. The complaint
              sought a determination by the Court of Chancery for: (i) as to who
              constituted the valid directors of the Company in connection with
              a written consent action initiated by the plaintiffs or, (ii) in
              the alternative, that the Company be required to hold a annual
              meeting of shareholders.

              On September 2, 1997, the Court of Chancery decided to defer a
              decision on the defendants motion to dismiss until such time as an
              annual meeting of the Company's shareholders was held. The Court
              thereafter ordered that the Company hold its annual meeting. The
              Company is in the process of complying with the Court's
              requirements.

                                      F-9