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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 MARCH 31, 2003
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 May 15, 2003.
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ORBIT/FR, INC.
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets--March 31, 2003
(Unaudited) and December 31, 2002..................................................... 3
Consolidated Statements of Operations-- Three months
ended March 31, 2003 and 2002 (Unaudited)............................................. 4
Consolidated Statements of Cash Flows-- Three months
ended March 31, 2003 and 2002 (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................................. 12
Item 4 Controls and procedures................................................................ 12
PART II. Other Information
Item 1. Legal Proceedings...................................................................... 13
Item 2. Changes in Securities and Use of Proceeds.............................................. 13
Item 3. Defaults upon Senior Securities........................................................ 13
Item 4. Submission of Matters to a Vote of Security Holders.................................... 13
Item 5. Other Information...................................................................... 13
Item 6. Exhibits and Reports on Form 8-K....................................................... 13
Signatures........................................................................................................... 15
2
ORBIT/FR, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 2,776 $ 3,030
Accounts receivable, less allowance of $256 and $254
in 2003 and 2002, respectively 3,367 4,160
Inventory 1,257 1,580
Costs and estimated earnings in excess of billings
on uncompleted contracts 727 683
Deferred income taxes 411 386
Other 427 302
-------- --------
Total current assets 8,965 10,141
Property and equipment, net 1,382 1,166
Deferred income taxes 140 135
Cost in excess of net assets acquired 381 381
Other 36 52
-------- --------
Total assets $ 10,904 $ 11,875
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,034 $ 1,017
Accounts payable--Parent 485 607
Accrued expenses 2,077 1,857
Customer advances 159 159
Income taxes payable 29 42
Billings in excess of costs and estimated earnings
on uncompleted contracts 526 1,426
Deferred income taxes 284 284
-------- --------
Total liabilities, all current 4,594 5,392
-------- --------
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 (8,681) (8,508)
Treasury stock--82,900 shares (243) (243)
-------- --------
Total stockholders' equity 6,310 6,483
-------- --------
Total liabilities and stockholders' equity $ 10,904 $ 11,875
======== ========
See accompanying notes.
3
ORBIT/FR, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED MARCH 31,
2003 2002
---- ----
Contract revenues $ 4,584 $ 3,833
Cost of revenues 3,131 2,835
----------- -----------
Gross profit 1,453 998
----------- -----------
Operating expenses:
General and administrative 596 674
Sales and marketing 631 521
Research and development 290 265
----------- -----------
Total operating expenses 1,517 1,460
----------- -----------
Operating loss (64) (462)
Other income (loss), net (33) 2
----------- -----------
Loss before income taxes and cumulative
effect of change in accounting principle (97) (460)
Income tax expense 76 86
----------- -----------
Loss before cumulative effect of
change in accounting principle (173) (546)
Cumulative effect of change in accounting principle -- (301)
----------- -----------
Net loss $ (173) $ (847)
=========== ===========
Basic and diluted net loss per share
before cumulative effect of change in
accounting principle $ (0.03) $ (0.09)
Cumulative effect of change in accounting principle -- (0.05)
----------- -----------
Basic and diluted net loss per share $ (0.03) $ (0.14)
=========== ===========
Weighted average number
common shares - basic and diluted 6,001,573 6,001,573
=========== ===========
See accompanying notes.
4
ORBIT/FR, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
---------
2003 2002
---- ----
Cash flows from operating activities:
Net loss $ (173) $ (847)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 106 108
Cumulative effect of change in accounting principle -- 301
Deferred income tax (expense) benefit (30) (11)
Changes in operating assets and liabilities:
Accounts receivable 793 1,247
Inventory 323 367
Costs and estimated earnings in excess of
billings on uncompleted contracts (44) (561)
Other assets (125) (131)
Accounts payable and accrued expenses 237 19
Accounts payable--Parent (122) (230)
Income taxes payable (13) 12
Customer advances -- (389)
Billings in excess of costs and estimated
earnings on uncompleted contracts (900) 97
-------- --------
Net cash provided by (used in) operating activities 52 (18)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (322) (36)
-------- --------
Net cash used in investing activities (322) (36)
-------- --------
Cash flows from financing activities
Net repayments of note receivable 16 --
-------- --------
Net cash provided by financing activities 16 --
-------- --------
Net decrease in cash and cash equivalents (254) (54)
Cash and cash equivalents at beginning of period 3,030 4,413
-------- --------
Cash and cash equivalents at end of period $ 2,776 $ 4,359
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ 87 $ 61
======== ========
See accompanying notes.
5
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
(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 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 months ended March 31, 2003 and 2002 have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 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, 2003. 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 the
Company's Forms 10-K and the amendment thereto on Form10K/A for the period ended
December 31, 2002, filed on March 31, 2003 and April 30, 2003, respectively,
with the Securities and Exchange Commission, which included the consolidated
financial statements and footnotes for the year ended December 31, 2002.
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
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net Loss Per Share
Basic loss per share is calculated by dividing net loss by the weighted
average common shares outstanding for the period. Diluted loss per share is
calculated by dividing net 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 assumed for the three months ended
March 31, 2003 and 2002 because the effect of these securities is antidilutive.
3. ADOPTION OF NEW ACCOUNTING STANDARD REGARDING GOODWILL AND OTHER INTANGIBLE
ASSETS
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS No. 142"), was issued in July 2001 and became
effective for the Company on January 1, 2002. SFAS No. 142 addresses how
goodwill and other intangible assets should be accounted for upon their
acquisition and afterwards. The primary impact of SFAS No. 142 on the Company is
that existing goodwill ("cost in excess of net assets acquired") is no longer
amortized beginning in 2002. Instead of amortization, goodwill is subject to an
assessment for impairment on a reporting unit basis by applying a
fair-value-based test annually, and more frequently if circumstances indicate a
possible impairment. If a reporting unit's net book value is more than its fair
value and the reporting unit's net book value of its goodwill exceeds the fair
value of that goodwill, an impairment loss is recognized in an amount equal to
the excess goodwill net book value.
Based on the December 31, 2001 cost in excess of net assets acquired
balance, the Company reported lower amortization of goodwill and higher
operating profit of approximately $43 for the full year 2002 compared to the
full year 2001. The Company tested the goodwill of AEMI for impairment during
the first quarter of 2002 using a present value of future cash flows valuation
method. This process resulted in an impairment of $301 which is accounted for as
a cumulative effect of a change in accounting principle during the three months
ended March 31, 2002.
4. INVENTORY
Inventory consisted of the following:
MARCH 31, DECEMBER 31,
2003 2002
----------- -----------
(UNAUDITED)
Work-in-process $ 689 $ 973
Parts and components 568 607
--------- --------
$ 1,257 $ 1,580
========= ========
7
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
MARCH 31, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED)
Lab and computer equipment $ 2,287 $ 1,972
Office equipment 923 1,158
Transportation equipment 351 336
Furniture and fixtures 31 44
Leasehold improvements 320 320
---------- ----------
3,912 3,830
Less accumulated depreciation 2,530 2,664
---------- ----------
Property and equipment, net $ 1,382 $ 1,166
========== ==========
6. ACCRUED EXPENSES
Accrued expenses consists of the following:
MARCH 31, DECEMBER 31,
2003 2002
----------- -----------
(UNAUDITED)
Accrued contract costs $ 476 $ 381
Accrued compensation 831 758
Accrued commissions 111 99
Accrued royalties 110 114
Accrued warranty 286 293
Other accruals 263 212
---------- ----------
$ 2,077 $ 1,857
========== ==========
7. LONG-TERM CONTRACTS
MARCH 31, DECEMBER 31,
2003 2002
----------- -----------
(UNAUDITED)
Accumulated expenditures on uncompleted contracts $ 11,692 $ 9,796
Estimated earnings thereon 249 (136)
---------- ----------
11,941 9,660
Less: applicable progress billings 11,740 10,403
---------- ----------
Total $ 201 $ (743)
========== ==========
The long-term contracts are shown in the accompanying balance sheets as follows:
8
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. LONG-TERM CONTRACTS (CONTINUED)
MARCH 31, DECEMBER 31,
2003 2002
----------- -----------
(UNAUDITED)
Costs and estimated earnings on uncompleted
contracts in excess of billings $ 727 $ 683
Billings on uncompleted contracts in excess of
costs and estimated earnings (526) (1,426)
---------- ----------
$ 201 $ (743)
========== ==========
8. 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.
9. 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 months ended March 31, 2003 and 2002.
North America Europe Asia Total
------------- ------ ---- -----
Three months ended March 31, 2003
Sales to unaffiliated customers $ 2,648 $ 559 $ 1,377 $ 4,584
Cost of sales to unaffiliated customers 1,892 477 762 3,131
------------- ---------- ---------- ----------
Gross profit from unaffiliated customers $ 756 $ 82 $ 615 $ 1,453
============= ========== ========== ==========
Three months ended March 31, 2002
Sales to unaffiliated customers $ 1,149 $ 942 $ 1,742 $ 3,833
Cost of sales to unaffiliated customers 864 882 1,089 2,835
------------- ---------- ---------- ----------
Gross profit from unaffiliated customers $ 285 $ 60 $ 653 $ 998
============= ========== ========== ==========
In table above "North America" includes all United States operations,
and "Europe" includes subsidiaries in Germany and Israel.
9
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:
THREE-MONTHS ENDED MARCH 31,
----------------------------
2003 2002
---- ----
Revenues 100.0% 100.0%
Gross profit 31.7 26.0
General and administrative 13.0 17.6
Sales and marketing 13.8 13.6
Research and development 6.3 6.9
Operating loss (1.4) (12.0)
Loss before income
tax expense (2.1) (12.0)
Net loss (3.8) (22.1)
THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002.
Revenues. Revenues for the three months ended March 31, 2003 were
approximately $4.6 million compared to approximately $3.8 million for the three
months ended March 31, 2002, an increase of approximately $800,000 or 21%.
Revenues from the defense, satellite, EMC and automotive markets increased
approximately $1.7 million, $166,000, $25,000, and $21,000, respectively.
Revenues from the wireless and university markets decreased approximately
$913,000 and $267,000. Geographically, revenues from North America increased
approximately $1.5 million, while revenues from Asia and Europe decreased
approximately $360,000 and $382,000 from prior year levels. The increase in
revenues related to the defense industry was a result of significant completion
of North American defense contracts in the three months ended March 31, 2003.
Significant European and Asian wireless revenues recognized during the three
months ended March 31, 2002 were not completely replaced during the 2003.
10
Cost of revenues. Cost of revenues for the three months ended March 31,
2003 were approximately $3.1 million compared to approximately $2.8 million for
the three months ended March 31, 2002. Gross margins increased to 32% for the
three months ended March 31, 2003 from 26% for the three months ended March 31,
2002. The increased margins are due to greater efficiencies related to greater
beginning backlog, and fewer cost overruns recognized on large contracts.
General and administrative expenses. General and administrative
expenses for the three months ended March 31, 2003 were $596,000 compared to
$674,000 for the three months ended March 31, 2002, a decrease of approximately
$78,000 or 12%, a result of the Company's shift of resources from general and
administrative expenses to cost of revenues during the three months ended March
31, 2003. As a percentage of revenues, general and administrative expenses
decreased to 13.0% for the three months ended March 31, 2003 from 17.6% for the
three months ended March 31, 2002.
Sales and marketing expenses. Sales and marketing expenses for the
three months ended March 31, 2003 were $631,000 compared to $521,000 for the
three months ended March 31, 2002, an increase of approximately $110,000 or 21%.
This increase is a result of the Company's investment in senior marketing
personnel, and its increased focus on worldwide marketing opportunities. As a
percentage of revenues, sales and marketing expenses increased to 13.8% for the
three months ended March 31, 2003, from 13.6% for the three months ended March
31, 2002.
Research and development expenses. Research and development expenses
for the three months ended March 31, 2003 were $290,000 compared to $265,000 for
the three months ended March 31, 2002, an increase of $25,000 or 9%, due mainly
to the Company's continued expenditures on development activity focused on new
software development. As a percentage of revenues, research and development
expenses decreased to 6.3% for the three months ended March 31, 2003, from 6.9%
for the three months ended March 31, 2002.
Other income (loss). Other income (loss), net, for the three months
ended March 31, 2003 was a loss of approximately $33,000 compared to income of
$2,000 for the three months ended March 31, 2002, a decrease of approximately
$35,000. The increased loss is a result of a decrease in the Company's interest
income due to a reduction in interest rates and cash balances available for
investment, and foreign currency translation losses recognized during the three
months ended March 31, 2003.
Income taxes. Income tax expense for the three months ended March 31,
2003 was $76,000 compared to $86,000 of income tax expense for the three months
ended March 31, 2002, a decrease in expense of $10,000. Although no income tax
benefit on losses was recorded during the quarter ended March 31, 2003, the
Company's income tax expense for the three months ended March 31, 2003 reflects
income taxes recorded by its profitable foreign operations.
Cumulative effect of a change in accounting principle. During the three
months ended March 31, 2002, the Company adopted the Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No.
142"). Under SFAS No. 142, goodwill is no longer amortized over its estimated
useful life, but is subject to an annual fair value based assessment. This fair
value assessment resulted in an impairment of $301,000 at January 1, 2002, which
was accounted for as a cumulative effect of a change in accounting principle
during the three months ended March 31, 2002. No such impairment was recognized
during the three months ended March 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
During recent years the Company has satisfied its working capital
requirements through cash flows from equity financing. Net operating losses
recorded in recent years have caused negative cash flows from operating
activities.
11
Net cash provided by operating activities during the three months ended
March 31, 2003 was $52,000 compared to $18,000 used in operating activities
during the three months ended March 31, 2002. No significant cash transaction
occurred in either period. The Company's net income, adjusted for non cash
items, used $97,000 of operating cash, compared to $449,000 used in operating
activities during the three months ended March 31, 2002. Changes in the
Company's operating assets and liabilities during the three months ended March
31, 2003 provided $149,000 in operating cash compared to $431,000 provided in
the three months ended March 31, 2002.
Net cash used in investing activities during the three months ended
March 31, 2003 for the purchase of property and equipment was $322,000.
Approximately $225,000 of this amount was invested in the Company's new absorber
manufacturing facility in Santee California. During the three months ended March
31, 2002 the Company purchased $36,000 in property and equipment.
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 three months ended March 31, 2003, approximately 90% 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 March 31, 2003, 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 a
date within 90 days of filing date of 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 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.
12
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--NOT APPLICABLE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES--NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the Company's stockholders was held on January 23,
2003. At the special meeting, the stockholders approved an amendment to the
Company's certificate of incorporation to effect a 1-for-4 reverse stock split
and granted the Company's Board of Directors the authority to effectuate the
reverse stock split in the Board's discretion. The results of the votes cast by
the Company's stockholders are as follows:
For Against Abstain
--- ------- -------
3,700,000 0 0
The reverse stock split was intended to effect an increase in the trading price
per share of the Company's Common Stock in order to comply with Nasdaq's minimum
closing bid price requirements. However, in light of the Company's inability to
meet the minimum public float market value requirement to maintain its listing
on the Nasdaq SmallCap Market, the Board has elected not to proceed with the
reverse stock split at this time. On April 9, 2003, the Company received a
letter from The Nasdaq Stock Market, Inc. notifying the Company that the Nasdaq
Listing Qualifications Panel rejected the Company's appeal of the Nasdaq Staff
Determination to delist the Company's securities from The Nasdaq SmallCap Market
due to the Company's failure to meet The Nasdaq SmallCap Market continued
listing requirement for minimum market value of public float. The Company's
Common Stock was delisted from The Nasdaq SmallCap Market effective April 11,
2003, and was immediately eligible for quotation on the OTC Bulletin Board
effective with the open of business on April 11, 2003, under the symbol ORFR.
ITEM 5. OTHER INFORMATION--NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
99.1 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.
99.2 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.
13
b. REPORTS ON FORM 8-K
1. The Company filed a Form 8-K on February 6, 2003, reporting
that, on February 4, 2003, the Company received a letter from
The Nasdaq Stock Market, Inc. notifying the Company that the
Company's common stock failed to meet The Nasdaq SmallCap
Market continued listing requirement for minimum market value
of public float.
2. The Company filed a Form 8-K on April 10, 2003, reporting
that, on April 9, 2003, the Company received a letter from The
Nasdaq Stock Market, Inc. notifying the Company that the
Nasdaq Listing Qualifications Panel rejected the Company's
appeal of the Nasdaq Staff Determination to delist the
Company's securities from The Nasdaq SmallCap Market because
the Company's Common Stock failed to meet The Nasdaq SmallCap
Market continued listing requirement for minimum market value
of public float. The report further stated that the Company's
securities would be delisted from The Nasdaq SmallCap Market
effective April 11, 2003, and would be immediately eligible
for quotation on the OTC Bulletin Board effective with the
open of business on April 11, 2003, under the symbol ORFR.
14
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.
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Registrant
Date: May 15, 2003
_____________________________
President and Chief Executive Officer
Date: May 15, 2003
_______________________
Chief Financial Officer
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CERTIFICATIONS
CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Israel Adan, Chief Executive Officer of ORBIT/FR, Inc. certify that:
1. I have reviewed this quarterly report on Form 10-Q of ORBIT/FR, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
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b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003 /s/ Israel Adan
-----------------------
Israel Adan
Chief Executive Officer
17
CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dave Lubbe, Chief Financial Officer of ORBIT/FR, Inc. certify that:
1. I have reviewed this quarterly report on Form 10-Q of ORBIT/FR, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
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6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003 /s/ Dave Lubbe
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Dave Lubbe
Chief Financial Officer
19