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EX-32.2 - EXHIBIT 32.2 - ORBIT FR INC | c17691exv32w2.htm |
EX-32.1 - EXHIBIT 32.1 - ORBIT FR INC | c17691exv32w1.htm |
EX-31.1 - EXHIBIT 31.1 - ORBIT FR INC | c17691exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - ORBIT FR INC | c17691exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31, 2011
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission File Number 0-22583
ORBIT/FR, Inc.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE | 23-2874370 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) | |
506 Prudential Road, Horsham, PA | 19044 | |
(Address of principal executive offices) | (Zip Code) |
(215) 674-5100
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
(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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer a non-accelerated filer or a smaller reporting company. See definitions of
large accelerated filer, accelerated filer and small reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
There were 6,001,773 shares of common stock, $.01 par value, outstanding as of May
23, 2011.
ORBIT/FR, Inc.
Index
Page No. | ||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
10 | ||||||||
14 | ||||||||
15 | ||||||||
15 | ||||||||
15 | ||||||||
16 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
2
Table of Contents
ORBIT/FR, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Unaudited | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 4,388 | $ | 2,400 | ||||
Accounts receivable, less allowance of $91 and $90 |
3,646 | 5,693 | ||||||
Inventory |
3,126 | 2,776 | ||||||
Costs and estimated earnings in excess of billings
on uncompleted contracts |
4,476 | 4,941 | ||||||
Income tax refunds receivable |
353 | 655 | ||||||
Deferred income taxes |
1,277 | 1,437 | ||||||
Other |
793 | 745 | ||||||
Total current assets |
18,059 | 18,647 | ||||||
Property and equipment, net |
2,487 | 2,296 | ||||||
Deferred income taxes |
649 | 688 | ||||||
Cost in excess of net assets acquired |
301 | 301 | ||||||
Total assets |
$ | 21,496 | $ | 21,932 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 2,849 | $ | 3,781 | ||||
Accounts payableparent company |
1,942 | 1,697 | ||||||
Accrued expenses |
3,677 | 3,728 | ||||||
Customer advances |
4 | 75 | ||||||
Billings in excess of costs and estimated earnings
on uncompleted contracts |
2,935 | 2,117 | ||||||
Total liabilities, all current |
11,407 | 11,398 | ||||||
Stockholders equity: |
||||||||
Preferred stock: $.01 par value: Authorized shares2,000,000 Issued and outstanding sharesnone |
| | ||||||
Common stock: $.01 par value: Authorized shares10,000,000 Issued shares6,084,473 |
61 | 61 | ||||||
Additional paid-in capital |
16,507 | 16,500 | ||||||
Accumulated deficit |
(6,243 | ) | (5,727 | ) | ||||
Accumulated other comprehensive income (loss)
foreign currency translation adjustment |
7 | (57 | ) | |||||
Treasury stock82,700 shares |
(243 | ) | (243 | ) | ||||
Total stockholders equity |
10,089 | 10,534 | ||||||
Total liabilities and stockholders equity |
$ | 21,496 | $ | 21,932 | ||||
See accompanying notes.
3
Table of Contents
ORBIT/FR, Inc.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Contract revenues |
$ | 7,317 | $ | 7,322 | ||||
Cost of revenues |
5,976 | 4,874 | ||||||
Gross profit |
1,341 | 2,448 | ||||||
Operating expenses: |
||||||||
General and administrative: |
746 | 752 | ||||||
Sales and marketing: |
720 | 733 | ||||||
Sales, marketing,
general and administrative MVG |
250 | 400 | ||||||
Research and development |
269 | 253 | ||||||
Total operating expenses |
1,985 | 2,138 | ||||||
Operating (loss) income |
(644 | ) | 310 | |||||
Other (loss) income, net |
(42 | ) | 4 | |||||
Income (loss) before income taxes |
(686 | ) | 314 | |||||
Income tax (benefit) |
(170 | ) | | |||||
Net (loss) income |
(516 | ) | 314 | |||||
Other comprehensive income (loss)
foreign currency translation adjustment |
64 | (76 | ) | |||||
Total comprehensive (loss) income |
$ | (452 | ) | $ | 238 | |||
Basic net (loss) income per share |
$ | (0.09 | ) | $ | 0.05 | |||
Diluted net (loss) income per share |
$ | (0.09 | ) | $ | 0.05 | |||
Weighted average number
basic common shares |
6,001,773 | 6,001,773 | ||||||
Weighted average number
diluted common shares |
6,001,773 | 6,001,773 | ||||||
See accompanying notes.
4
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ORBIT/FR, Inc.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net (loss) income |
$ | (516 | ) | $ | 314 | |||
Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |
||||||||
Depreciation and amortization |
144 | 113 | ||||||
Stock based compensation |
7 | 10 | ||||||
Deferred income taxes |
199 | | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
2,070 | 2,894 | ||||||
Inventory |
(343 | ) | (374 | ) | ||||
Costs and estimated earnings in excess of billings
on uncompleted contracts |
510 | (479 | ) | |||||
Income tax refunds receivable |
301 | 100 | ||||||
Other current assets |
269 | (120 | ) | |||||
Accounts payable and accrued expenses |
(1,030 | ) | (1,854 | ) | ||||
Accounts payableparent company |
(48 | ) | 116 | |||||
Customer advances |
(71 | ) | 6 | |||||
Billings in excess of costs and estimated earnings
on uncompleted contracts |
789 | 1,866 | ||||||
Net cash provided by operating activities |
2,281 | 2,592 | ||||||
Cash flows from investing activities: |
||||||||
Purchase of property and equipment |
(322 | ) | (98 | ) | ||||
Net cash (used in) investing activities |
(322 | ) | (98 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from short term notes payable |
200 | | ||||||
Repayment of short term notes payable |
(200 | ) | (250 | ) | ||||
Net cash (used in) financing activities |
| (250 | ) | |||||
Effect of foreign exchange rate changes on cash and cash equivalents |
29 | (22 | ) | |||||
Net increase in cash and cash equivalents |
1,988 | 2,222 | ||||||
Cash and cash equivalents at beginning of period |
2,400 | 1,622 | ||||||
Cash and cash equivalents at end of period |
$ | 4,388 | $ | 3,844 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash (received) paid during the period for income taxes |
$ | (333 | ) | $ | 103 | |||
Cash paid during the period for interest |
$ | 6 | $ | | ||||
See accompanying notes.
5
Table of Contents
ORBIT/FR, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2011
(Amounts in thousands, except share and per share data)
1. Ownership and Business
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. On
May 13, 2008, Orbit-Alchut Technologies, Ltd. (Alchut) sold all of its 3.7 million shares of
common stock of the Company to Satimo, SA (Satimo). On June 30, 2009, Microwave Vision Group, SA,
(Microwave Vision), acquired all 3.7 million common shares of the Company through a
reorganization involving its wholly owned subsidiary, Satimo. 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 (Israel) (hereinafter
referred to as Engineering); ORBIT/FR Europe GmbH (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 North America, Europe and
Asia.
2. Basis of Presentation
Interim Financial Information
The accompanying unaudited condensed consolidated financial statements for the three months
ended March 31, 2011 and 2010 have been prepared in accordance with generally accepted accounting
principles in the United States 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 condensed consolidated financial statements have been
included. The results of the interim period are not necessarily indicative of the results that may
be expected for the year ending December 31, 2011. The condensed consolidated financial statements
and footnotes should be read in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in this Form 10-Q and the Companys Form 10-K for the
year ended December 31, 2010, filed on March 31, 2011 with the Securities and Exchange Commission,
which included the consolidated financial statements and footnotes for the year ended December 31,
2010.
6
Table of Contents
ORBIT/FR, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2011
(Amounts in thousands, except share and per share data)
3. Inventory
Inventory at March 31, 2011 consists of the following:
Parts and components |
$ | 2,758 | ||
Work-in-process |
368 | |||
Total |
$ | 3,126 | ||
4. Property and Equipment
Property and equipment at March 31, 2011 consists of the following:
Lab and computer equipment |
$ | 3,113 | ||
Office equipment |
898 | |||
Transportation equipment |
61 | |||
Furniture and fixtures |
65 | |||
Fixed assets in progress |
130 | |||
Leasehold improvements |
661 | |||
Total |
4,928 | |||
Less accumulated depreciation |
2,441 | |||
Property and equipment, net |
$ | 2,487 | ||
5. Accrued Expenses
Accrued expenses at March 31, 2011 consist of the following:
Contract costs |
$ | 112 | ||
Compensation |
1,793 | |||
Commissions |
464 | |||
Royalties |
33 | |||
Warranty |
521 | |||
Deferred revenue |
220 | |||
Other accruals |
534 | |||
Total |
$ | 3,677 | ||
7
Table of Contents
ORBIT/FR, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2011
(Amounts in thousands, except share and per share data)
6. Long-Term Contracts
Long-term contracts in process accounted for using the percentage-of-completion method are
summarized as follows at March 31, 2011:
Accumulated expenditures on uncompleted contracts |
$ | 46,817 | ||
Estimated earnings thereon |
12,685 | |||
Total |
59,502 | |||
Less: Applicable progress billings |
(57,961 | ) | ||
Balance |
$ | 1,541 | ||
The long-term contracts are shown in the accompanying balance sheets as follows:
Costs and estimated earnings on uncompleted
contracts in excess of billings |
$ | 4,476 | ||
Billings on uncompleted contracts in excess of
costs and estimated earnings |
(2,935 | ) | ||
Total |
$ | 1,541 | ||
7. Income Taxes
The Company has recorded an income tax benefit of approximately $0.2 million for the three
months ended March 31, 2011 due to the operating loss incurred by the Company. However, the tax
benefit realized by the Companys operating loss in the period was partially offset by tax expense
of the Israeli subsidiary resulting from the reduction of their deferred tax assets reflecting the
reduction of Israels corporate tax rate.
8. Related Party Transactions
The Company is party to an Assistance and Provision of Services Agreement (the Services
Agreement) with its majority stockholder Microwave Vision Group SA (Microwave Vision) and
several subsidiaries of Microwave Vision. Microwave Vision provides for management, operational,
sales and marketing, legal, technical and other services to the Company, and Microwave Visions
other direct and indirect subsidiaries (collectively, the Subsidiaries). In consideration
thereof, the Company, and each of the other Subsidiaries agreed to pay Microwave Vision a fee
determined as of the start of each calendar year based on the projected gross margins of each
Subsidiary for that year. In addition, the Company agreed to pay Microwave Vision an additional fee
of 1% of its gross sales in consideration of the right to use the name Microwave Vision in the
Companys sales and marketing activities. As at March 31, 2011, the fee for the year ending
December 31, 2011 has not been determined. However, based on information provided by Microwave
Vision the Company has accrued an estimated performance fee of $0.25 million for the three months
ended March 31, 2011.
8
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ORBIT/FR, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2011
(Amounts in thousands, except share and per share data)
9. Segment and Geographic Information
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 in other geographic locations in Europe, Asia, North and
South America. The following table represents financial information by geographic region for the
three month months ended March 31, 2011 and 2010. The following table is exclusive of intercompany
transactions within the Company.
Three months ended March 31, 2011 | North America | Europe | Asia | Total | ||||||||||||
Contract revenues |
$ | 2,726 | $ | 1,999 | $ | 2,592 | $ | 7,317 | ||||||||
Cost of revenues |
2,623 | 1,526 | 1,827 | 5,976 | ||||||||||||
Gross profit |
$ | 103 | $ | 473 | $ | 765 | $ | 1,341 | ||||||||
Three months ended March 31, 2010 | North America | Europe | Asia | Total | ||||||||||||
Contract revenues |
$ | 2,816 | $ | 2,839 | $ | 1,667 | $ | 7,322 | ||||||||
Cost of revenues |
1,754 | 1,939 | 1,181 | 4,874 | ||||||||||||
Gross profit |
$ | 1,062 | $ | 900 | $ | 486 | $ | 2,448 | ||||||||
In the table above North America includes all United States operations, and Europe
includes subsidiaries in Germany and Israel.
9
Table of Contents
Item 2. | Managements 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 Companys financial condition, results of operations and
liquidity and capital resources and statements as to managements 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 Companys filings with the Securities and Exchange Commission
including in Part I, Item 1A Risk Factors of the Companys Annual Report on Form 10-K for the
year ended December 31, 2010, a copy of which may be obtained from the Company upon request and
without charge (except for the exhibits thereto).
Critical Accounting Policies
Revenue and Cost Recognition
The Companys principal sources of contract revenues are from engineering and design services
and the production of electro-mechanical equipment. Revenues from long-term fixed-price development
contracts performed principally under the Companys control are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs
for each contract when such costs can be reasonably estimated. Contract costs include all direct
material, labor and subcontractor costs and those indirect costs related to contract performance
such as indirect labor, supplies and equipment costs. General and administrative costs are charged
to expense as incurred. Changes in job performance, job conditions, and estimated profitability,
including those arising from contract penalty provisions and final contract settlements, may result
in revisions to costs and revenue and are recognized in the period in which the revisions are
determined. Any estimated losses on contracts are recorded in the period losses are first
identified. Revenues from electro-mechanical equipment sold to customers that are not part of a
larger contract are recognized when the contract is substantially completed. Revenues recognized in
excess of amounts billed are classified under current assets as costs and estimated earnings in
excess of billings on uncompleted contracts. Amounts received from clients in excess of revenues
recognized to date are classified under current liabilities as billings in excess of costs and
estimated earnings on uncompleted contracts.
Accounts Receivable
The Company accounts for potential losses in accounts receivable utilizing the allowance
method. In reviewing aged receivables, management considers their knowledge of our customers,
historical losses and current economic conditions in establishing the allowance for doubtful
accounts.
10
Table of Contents
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, | ||||||||
2011 | 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenues |
100.0 | % | 100.0 | % | ||||
Gross profit |
18.3 | 33.4 | ||||||
General and administrative |
10.2 | 10.3 | ||||||
Sales and marketing |
9.8 | 10.0 | ||||||
Research and development |
3.7 | 3.5 | ||||||
Microwave Vision Group
corporate expenses |
3.4 | 5.5 | ||||||
Operating (loss) income |
(8.8 | ) | 4.2 | |||||
(Loss) income before income taxes |
(9.4 | ) | 4.3 | |||||
Net (loss) income |
(7.1 | ) | 4.3 |
Three months ended March 31, 2011 compared to three months ended March 31, 2010.
Revenues. Revenues for the three months ended March 31, 2011 and March 31, 2010 were
approximately $7.3 million. Revenues from the university and EMC markets increased approximately
$0.5 million, $0.1 million, respectively, while revenues from the wireless, defense and automotive
markets decreased $0.3 million, $0.2 million and $0.1 million respectively. Geographically,
revenues from Asia increased $0.9 million. Europe and North America revenues decreased
approximately $0.8 million and $0.1 million respectively.
Cost of revenues. Cost of revenues for the three months ended March 30, 2011 was
approximately $6.0 million compared to approximately $4.9 million for the three months ended March
31, 2010, an increase of approximately $1.1 million or 22.6%. Gross margins decreased to 18.3% of
revenues for the three months ended March 31, 2011 from 33.4% for the three months ended March 31,
2010. The lower gross margin percentage was due to several factors; contract mix in the European
and North American business as work was performed on contracts that have lower gross margins for
the three months ended March 31, 2011 versus the three month period ended March 31, 2010 and higher
subcontractor costs in the North American business due to the high volume of installations in the
current period.
In addition, as discussed in the December 31, 2010 Form 10-K, the Companys AEMI subsidiary
had increased costs of revenues in the period due to the impact of the oven fire in the fourth
quarter of 2010. The Company expects to receive approximately $0.14 million as full reimbursement
by the insurance company for these costs in the quarter ending June 30, 2011, the period in which
notification from the insurance company was received.
11
Table of Contents
General and administrative expense. General and administrative expenses, exclusive of the
charges from MVG, were $0.7 million for the three months ended March 31, 2011 and $0.8 million for
the three months ended March 31, 2010. As a percentage of revenues, these general and
administrative expenses decreased to 10.2% for the three months ended March 31, 2011 from 10.3% for
the three months ended March 31, 2010. There were no material changes in the individual components
of general and administrative expense in the quarter ended March 31, 2011 versus the quarter ended
March 31, 2010.
Sales and marketing expense. Sales and marketing expense, exclusive of the charges from MVG,
for the three months ended March 31, 2011 and March 31, 2010 were $0.7 million in each period. As a
percentage of revenues, sales and marketing expenses decreased to 9.8% for the three months ended
March 31, 2011, from 10.0% for the three months ended March 31, 2010. There were no material
changes in the individual components of sales and marketing expense in the quarter ended March 31,
2011 versus the quarter ended March 31, 2010.
Sales, marketing general and administrative-Microwave Vision Group. The preliminary
performance fee for the year ending December 31, 2011 has not yet been determined as of March 31,
2011. Based on information provided by Microwave Vision, the Company has accrued an estimated
quarterly fee of $0.25 million through this date. The MVG fee may be subject to adjustment before
the year end and will be adjusted at December 31, 2011 based upon the actual gross margin of each
Subsidiary at year-end.
Research and development expenses. Research and development expenses for the three months
ended March 31, 2011 and March 31, 2010 were $0.3 million in each period. As a percentage of
revenues, research and development increased to 3.7% for the three months ended March 31, 2011 from
3.5% for the three month period ended March 31, 2010. There were no material changes in the
individual components of research and development expenses in the quarter ended March 31, 2011
versus the quarter ended March 31, 2010.
Other (loss) income, net. Other loss net, for the three months ended March 31, 2011 was
approximately $0.04 million compared to other income, net of $0.004 million for the three months
ended March 31, 2010. The Companys other loss, net in 2011 results primarily from foreign currency
exchange losses attributable to the Companys expenses payable in Euros which include the invoices
billed to the Company by Microwave Vision under the Services Agreement.
Income taxes. For the three months ended March 31, 2011 the Company recorded a net tax
benefit of approximately $0.2 million resulting from the operating loss in the current period. This
net benefit was partially offset by the reduction of the Israelis subsidiarys tax assets due to a
tax rate reduction in Israel.
Other comprehensive income (loss)-foreign currency translation adjustment. The Company
recorded other comprehensive income-foreign currency translation adjustment of $0.06 million for
the three months ended March 31, 2011 versus a comprehensive loss-foreign currency translation
adjustment of $0.1 million for the three months ended March 31, 2010. This comprehensive income is
the result of the Euro exchange rate to the U.S. dollar increasing for the three months ended March
31, 2011. Other comprehensive (loss)-foreign translation adjustment was recognized in the three
months ended March 31, 2010.
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Liquidity and Capital Resources
The Company has satisfied its working capital requirements through cash flows from operations.
Net cash generated by operating activities during the three months ended March 31, 2011 was
approximately $2.3 million compared to $2.6 million during the three months ended March 31, 2010.
The reduction of accounts receivable of approximately $2.1 million, billings in excess of costs and
estimated earnings on uncompleted contracts of $0.8 million and costs and estimated earnings in
excess of billings on uncompleted contracts of $0.5 were the most significant sources of cash for
the three months ended March 31, 2011. The net loss of $0.5 million and the decrease in accounts
payable and accrued expenses of approximately $1.0 million were the most significant use of cash
for the three months ended March 31, 2010.
Net cash used in investing activities for the purchase of property and equipment
was $0.3 million for the three month period ended March 31, 2011 an increase of $0.2 million from
the three month period ended March 31, 2010.
Cash generated by operations for the three months ended March 31, 2011 was used to repay $0.2
million borrowed in the quarter.
The Company has exposure to currency fluctuations as a result of billing certain of
its contracts in foreign currency, primarily the Euro. When selling to customers in countries with
less stable currencies, the Company bills in U.S. dollars. For the three months ended March 31,
2011, approximately 79% of the Companys revenues were billed in U.S. dollars. A large portion of
the costs of the Companys contracts have been, and are expected in the future to continue to be,
U.S. dollar-denominated except for wages for employees of the Companys Israeli and German
subsidiaries, which are denominated in local currency.
Inflation and Seasonality
The Company does not believe that inflation or seasonality has had a significant effect on the
Companys operations to date.
13
Table of Contents
Item 4. | Controls and Procedures |
(a) | Evaluation of disclosure controls and procedures. |
The Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) are designed to ensure that information required to be disclosed by us in the
reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms. These disclosure controls and procedures include
controls and procedures designed to ensure that information required to be disclosed under
the Securities Exchange Act of 1934 is accumulated and communicated to our management on a
timely basis to allow decisions regarding required disclosure. The Company evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as of
March 31, 2011. Based on this evaluation, the Companys Chief Executive Officer and Chief
Financial Officer concluded that as of March 31, 2011, these controls and procedures were
effective.
(b) | Changes in Internal Control Over Financial Reporting |
There have been no changes in internal control over financial reporting identified in
connection with the foregoing evaluation that occurred during the Companys fiscal quarter
ended March 31, 2011 that have materially affected, or are reasonably likely to affect, the
Companys internal control over financial reporting.
14
Table of Contents
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 Companys business, operating results, or financial condition.
Item 1A. | Risk Factors |
In addition to the other information set forth in this Form 10-Q, you should carefully
consider the factors discussed in Part I, Item 1A Risk Factors of our Annual Report on Form 10-K
for the year ended December 31, 2009 which could materially affect our business, financial
condition or future results of operations. The risks described in our Annual Report on Form 10-K
for the year ended December 31, 2009 may not be the only risks that we face. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial may also
materially adversely affect our business, financial condition and future results of operations.
Item 6. | Exhibits |
31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, Per Iversen, President and Chief Executive Officer. |
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31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, Relland Winand, Chief Financial Officer. |
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32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Per Iversen,
President and Chief Executive Officer. |
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32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Relland Winand, Chief
Financial Officer. |
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