<PAGE> 1
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, 1999
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 / /
There were 6,072,973 shares of Common Stock $.01 par value outstanding
as of May 17, 1999.
<PAGE> 2
ORBIT/FR, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -- March 31, 1999
(Unaudited) and December 31, 1998.................................................... 3
Consolidated Statements of Operations--
Three months ended March 31, 1999 and 1998
(Unaudited).......................................................................... 4
Consolidated Statements of Cash Flows--
Three months ended March 31, 1999 and 1998
(Unaudited).......................................................................... 5
Notes to Consolidated Financial Statements
(Unaudited).......................................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................. 11
PART II. Other Information
Item 1. Legal Proceedings...................................................................... 15
Item 2. Changes in Securities.................................................................. 15
Item 3. Defaults upon Senior Securities........................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.................................... 15
Item 5. Other Information...................................................................... 15
Item 6. Exhibits and Reports on Form 8-K....................................................... 15
Signatures ....................................................................................... 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ORBIT/FR, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------- --------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,586 $ 10,751
Accounts receivable, less allowance of $491 at
March 31, 1999 and December 31, 1998 3,715 3,716
Inventory 2,008 2,160
Costs and estimated earnings in excess of billings
on uncompleted contracts 1,648 1,777
Deferred income taxes 1,696 1,676
Prepaid and refundable income taxes 634 225
Other 401 262
-------- --------
Total current assets 19,688 20,567
Property and equipment, net 1,148 1,086
Cost in excess of net assets acquired, less
accumulated amortization of $80 and $68 at
March 31, 1999 and December 31, 1998, respectively 900 912
Purchased software, less accumulated amortization of $218
and $193 at March 31, 1999 and December 31, 1998, respectively 281 306
Other 126 134
-------- --------
Total assets $ 22,143 $ 23,005
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 722 $ 987
Accounts payable--Parent 368 681
Accrued expenses 2,730 2,784
Customer advances 32 63
Billings in excess of costs and estimated earnings
on uncompleted contracts 703 196
Note payable to Parent 2,722 2,722
Deferred income taxes 149 170
-------- --------
Total current liabilities 7,426 7,603
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 and outstanding shares --6,072,973 61 61
Additional paid-in capital 15,139 15,139
Retained earnings (accumulated deficit) (321) 364
Treasury stock--41,800 shares (162) (162)
-------- --------
Total stockholders' equity 14,717 15,402
Total liabilities and stockholders' equity $ 22,143 $ 23,005
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
ORBIT/FR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------
1999 1998
--------------------------------
(UNAUDITED)
<S> <C> <C>
Contract revenues $ 2,809 $ 4,315
Cost of revenues 2,703 2,349
----------- -----------
Gross profit 106 1,966
Operating expenses:
General and administrative 677 491
Sales and marketing 479 524
Research and development 98 301
----------- -----------
Total operating expenses 1,254 1,316
----------- -----------
Operating income (loss) (1,148) 650
Other income, net 94 172
----------- -----------
Income (loss) before income taxes (1,054) 822
Income tax expense (benefit) (369) 288
----------- -----------
Net income (loss) $ (685) $ 534
=========== ===========
Basic earnings (loss) per share $ (.11) $ .09
=========== ===========
Diluted earnings (loss) per share $ (.11) $ .09
=========== ===========
Weighted average number
common shares - basic 6,031,000 6,073,000
=========== ===========
Weighted average number
common shares - diluted 6,031,000 6,257,000
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
ORBIT/FR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (685) $ 534
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation 104 105
Amortization 37 28
Deferred income tax (benefit) provision (41) 63
Changes in operating assets and liabilities
Accounts receivable 1 1,084
Inventory 152 26
Costs and estimated earnings in excess of billings on uncompleted contracts 129 (133)
Prepaid taxes (409) --
Other assets (131) 3
Accounts payable and accrued expenses (319) (595)
Accounts payable--Parent (313) (151)
Income taxes payable -- (650)
Customer advances (31) (1)
Billings in excess of costs and estimated earnings on uncompleted contracts 507 (137)
Other liabilities -- (235)
-------- --------
Net cash used in operating activities (999) (59)
Cash flows from investing activities:
Purchase of property and equipment (166) (34)
Disposals of property and equipment -- 56
-------- --------
Net cash provided by (used in) investing activities (166) 22
-------- --------
Net decrease in cash and cash equivalents (1,165) (37)
Cash and cash equivalents at beginning of period 10,751 14,825
-------- --------
Cash and cash equivalents at end of period $ 9,586 $ 14,788
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ 81 $ 985
======== ========
Issuance of common stock relating to AEMI acquisition $ -- $ 602
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
(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 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,
and aerospace/defense industries. The 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, 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, 1999 and 1998 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, 1999. 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 10-K/A for the period ended December 31, 1998, filed on
March 31, 1999 and April 30, 1999 with the Securities and Exchange Commission,
which included the consolidated financial statements and footnotes for the year
ended December 31, 1998.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
Net Income (Loss) Per Share
Basic earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average common shares outstanding for the period. Diluted
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average common shares outstanding for the period plus the dilutive
effect of stock options. The dilutive effect of stock options was not assumed
for the three months ended March 31, 1999 because the assumed effect of these
securities would be antidilutive.
6
<PAGE> 7
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. EARNINGS (LOSS) PER SHARE
The following data show the amounts used in computing earnings (loss)
per share and the effect on income (loss) and the weighted average number of
shares of dilutive potential common stock.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Net income (loss) used in basic
earnings (loss) per share $ (685) $ 534
=========== ===========
Weighted average number of common shares
used in basic earnings (loss) per share 6,031,000 6,073,000
Effect of dilutive securities: stock options -- 184,000
----------- -----------
Weighted number of common shares and
diluted potential common stock used in
diluted earnings (loss) per share 6,031,000 6,257,000
=========== ===========
</TABLE>
4. INVENTORY
Inventory consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
-------- ------------
(UNAUDITED)
<S> <C> <C>
Work-in-process $ 781 $ 906
Parts and components 1,227 1,254
------ ------
$2,008 $2,160
====== ======
</TABLE>
7
<PAGE> 8
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ----------
(UNAUDITED)
<S> <C> <C>
Lab and computer equipment $1,349 $1,249
Office equipment 879 841
Transportation equipment 199 179
Furniture and fixtures 63 60
Leasehold improvements 79 74
------ ------
2,569 2,403
Less accumulated depreciation 1,421 1,317
------ ------
Property and equipment, net $1,148 $1,086
====== ======
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
(UNAUDITED)
<S> <C> <C>
Accrued Other Charges $1,259 $1,455
Accrued contract costs 230 280
Accrued compensation 566 454
Accrued commissions 148 151
Accrued royalties 78 115
Accrued warranty 202 192
Other accruals 247 137
------ ------
$2,730 $2,784
====== ======
</TABLE>
8
<PAGE> 9
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. LONG-TERM CONTRACTS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
Accumulated expenditures on uncompleted contracts $10,522 $10,720
Estimated earnings thereon 652 821
------- -------
11,174 11,541
Less: applicable progress billings 10,229 9,960
------- -------
Total $ 945 $ 1,581
======= =======
</TABLE>
The long-term contracts are shown in the accompanying balance sheets as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
-------- ------------
(UNAUDITED)
<S> <C> <C>
Costs and estimated earnings on uncompleted
contracts in excess of billings $ 1,648 $ 1,777
Billings on uncompleted contracts in excess of
costs and estimated earnings (703) (196)
------- -------
$ 945 $ 1,581
======= =======
</TABLE>
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 $51 per year. These agreements are to be evaluated on an annual basis.
9
<PAGE> 10
ORBIT/FR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
(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 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, 1999 and 1998.
<TABLE>
<CAPTION>
1999 North America Europe Asia Total
- ---- ------------- ------ ---- -----
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $1,875 $ 558 $ 376 $2,809
Cost of sales to unaffiliated customers 1,751 608 344 2,703
------- ----- ----- -------
Gross profit unaffiliated customers $ 124 $(50) $ 32 $ 106
======= ===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
1998 North America Europe Asia Total
- ---- ------------- ------ ---- -----
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $1,927 $2,008 $380 $4,315
Cost of sales to unaffiliated customers $1,201 $ 969 $179 $2,349
------ ------- ---- ------
Gross profit unaffiliated customers $ 726 $1,039 $201 $1,966
======= ====== ==== ======
</TABLE>
In table above "North America" includes all domestic operations, and
"Europe" includes subsidiaries in Germany and Israel.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Certain information contained in this Form 10-Q contains
forward-looking statements (as such term is defined in the Securities Exchange
Act of 1934 and the regulations thereunder), including without limitation,
statements as to the Company's financial condition, results of operations and
liquidity and capital resources and statements as to management's beliefs,
expectations or options. Such forward-looking statements are subject to risks
and uncertainties and may be affected by various factors which may cause actual
results to differ materially from those in the forward-looking statements.
Certain of these risks, uncertainties and other factors, as and when applicable,
are discussed in the Company's filings with the Securities and Exchange
Commission including its most recent Registration Statement on Form S-1, and in
its most recent Annual Report on Form 10 K, as amended, a copy of which may be
obtained from the Company upon request and without charge (except for the
exhibits thereto).
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage
of revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE-MONTHS ENDED MARCH 31,
------------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues 100.0% 100.0%
Gross profit 3.8 45.6
General and
administrative 24.1 11.4
Sales and marketing 17.0 12.1
Research and development 3.5 7.0
Operating income (loss) (40.9) 15.1
Income (loss) before
income taxes (37.5) 19.0
Net income (loss) (24.4) 12.4
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998.
Revenues. Revenues for the three months ended March 31, 1999 were $2.8
million compared to $4.3 million for the three months ended March 31, 1998, a
decrease of approximately $1.5 million or 34.9%. Although revenues from the
electromagnetic compatibility (EMC) and automotive markets increased
approximately $400,000 and $100,000 respectively, revenues from the
aerospace/defense, satellite, and wireless markets declined approximately $1.2
million, $500,000, and $400,000, respectively. Geographically, revenues from the
U.S. and Asia during the three months ended March 31,1999 remained relatively
constant with the three months ended March 31, 1998, while European revenues
fell approximately $1.5 million from prior year levels. The licensing
restrictions imposed on the Company by the U.S. State Department in 1998 caused
many delays on existing European contracts. In addition the Company believes
that new foreign orders were also impacted, leading to the revenue declines.
11
<PAGE> 12
Cost of revenues. Cost of revenues for the three months ended March 31,
1999 were $2.7 million compared to $2.3 million for the three months ended March
31, 1998, an increase of approximately $400,000 or 17.4%. Gross margins fell to
3.8% for the three months ended March 31, 1999 from 45.6% for the three months
ended March 31, 1998. This decrease is primarily due to losses resulting from
delays and uncertainties on certain exports related to licensing and other
related charges combined with an overall revenue decline associated with the
same.
General and administrative expenses. General and administrative
expenses for the three months ended March 31, 1999 were $677,000 compared to
$491,000 for the three months ended March 31, 1998, an increase of approximately
$186,000 or 37.9%. As a percentage of revenues, general and administrative
expenses increased to 24.1% for the three months ended March 31, 1999 from 11.4%
for the three months ended March 31, 1998. Legal expenses accounted for a
portion of this increase along with an increase in costs associated with export
administration.
Sales and marketing expenses. Sales and marketing expenses for the
three months ended March 31, 1999 were $479,000 compared to $524,000 for the
three months ended March 31, 1998, a decrease of approximately $45,000 or 8.6%.
As a percentage of revenues, sales and marketing expenses were 17% for the three
months ended March 31, 1999, an increase from 12.1% for the three months ended
March 31, 1998. Much of the decrease relates to reduced commissions due to less
revenues recognized in the three months ended March 31, 1999 .
Research and development expenses. Research and development expenses
for the three months ended March 31, 1999 were $98,000 compared to $301,000 for
the three months ended March 31, 1998, a decrease of $203,000 or 67.4% due
mainly to reduced customer funded research and development products.
Other Income. Other income for the three months ended March 31, 1999
was approximately $94,000 in income compared to $172,000 in expenses for the
three months ended March 31, 1999. This decrease reflects a reduction in the
Company's cash balances available for investment.
Income taxes. Income tax benefit for the three months ended March 31,
1999 was $369,000 compared to a $288,000 expense for the three months ended
March 31, 1998, a decrease of $657,000. The Company's effective tax rate
remained at 35% for both periods.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its working capital
requirements through cash flows from its operations. At March 31, 1999 the
Company had two working capital bank lines of credit aggregating $2,150,000. At
March 31, 1999, no amount under these lines was outstanding. These lines expired
in May 1999, and the Company is currently seeking alternative financing sources.
At March 31, 1999, the Note Payable to Parent of $2,722,000 represented a
non-interest bearing promissory note owed by ORBIT/FR Engineering, Ltd., the
Company's Israeli subsidiary to Orbit-Alchut Technologies, Ltd., the majority
shareholder of the Company for the transfer by the Parent of working capital at
the end of 1996. This note is due in December 1999.
Net cash used in operating activities during the first three months of
1999 amounted to $999,000 compared to $59,000 used in operations in the first
three months of 1998. The most significant change in net cash used in
operating activities resulted from the Company posting a $685,000 net loss
during the three months ended March 31, 1999, compared to a $534,000 net profit
during the three months ended March 31, 1998.
12
<PAGE> 13
During 1999, the Company plans to incur capital expenditures of
approximately $500,000, ($331,000 in 1998) a portion of which will be used to
improve the Company's hardware and software tools, and by investing in
information systems for the Company and its subsidiaries.
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, 1999, all 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
subsidiary, 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.
IMPACT OF YEAR 2000
Some of the Company's older computer systems were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment and will have to modify or
replace portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and thereafter. The total year
2000 project cost is estimated to be less than $250,000 which includes up to
$150,000 for the purchase of new software that will be capitalized and $100,000
that will be expensed as incurred. To date, the Company has incurred and
expensed approximately $10,000 primarily for the assessment of the year 2000
issue and the development of a modification plan for the purchase of new
software. The project is estimated to be completed no later than September 30,
1999, which is prior to any anticipated impact on its operating systems. The
Company believes that due to its planned modifications to existing software and
conversions to new software, the year 2000 issue will not pose significant
operational problems for its computer systems. However, if such modifications
and conversions are not made, or are not completed timely, the year 2000 issue
could have a material impact on the operations of the Company.
The Company believes that all of its products are year 2000 compliant
except for its FR959 Antenna & RCS Measurement System Software and its FR944
Digital Pattern Recorder Software. New versions of these products are nearing
completion and will be available by June, 1999.
With respect to third parties, many of the Company's customers order
products from the Company using ECHO(R), the Company's proprietary software
system, which is year 2000 compliant. The Company also utilizes Electronic Data
Interchange ("EDI"). The Company is partially complete with its remediation
efforts relating to EDI software and expects to be complete by June, 1999.
The Company is currently in process of developing contingency plans to
address the Year 2000 risks as necessary. The Company plans to evaluate the
status of completion of its year 2000 efforts by June, 1999 and to determine
what contingency plans are necessary at that time. As part of the plan, the
Company will survey its key suppliers to determine the extent to which the
systems of such suppliers are year 2000 compliant, and the extent to which the
Company could be affected by the failure of such third parties to be year 2000
compliant. At this time the Company cannot estimate the impact of the failure of
such third
13
<PAGE> 14
parties to be year 2000 compliant. In the normal course of business, the Company
has contingency plans for disruption of business events and intends to augment
those plans with specific Year 2000 considerations.
The costs of the project and the date on which the Company believes it
will complete the year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and other similar uncertainties.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS--NOT APPLICABLE.
ITEM 2. CHANGES IN SECURITIES
Use of Proceeds
The Company filed a Registration Statement on Form S-1 with the Securities and
Exchange Commission (File N. 333-25015) for the sale of Common Stock in the
Company's initial public offering (the "Offering"). The Company registered
2,300,000 shares of Common Stock including an over-allotment of 300,000 shares
(which was sold by the Parent) at the initial public offering price. The
effective date of the Registration Statement was June 17, 1997. The Offering
commenced June 17, 1997 and was terminated after the sale of all securities
registered. The aggregate price to the public of the 2,300,000 shares of Common
Stock registered was $18,975,000, of which $16,500,000 was raised by the
Company.
The Company incurred the following expenses in connection with the
issuance and distribution of its Common Stock in the Offering:
<TABLE>
<S> <C>
Underwriting Discounts and Commissions $ 1,230,000
Expenses paid to or for Underwriters 100,000
Other Expenses 1,062,000
-----------
Total Expenses $ 2,392,000
===========
</TABLE>
All payments of expenses were direct or indirect payments to persons
other than directors or officers of the Company or their associates, persons
owning ten percent or more of any class of equity securities of the Company, or
affiliates of the Company.
The Company used the net proceeds of the Offering ($14,108,000) for the
following purposes:
<TABLE>
<S> <C>
Purchase of Advanced Electromagnetics Inc. $ 602,000
Used for working capital purposes 4,586,000
Temporary Investments 8,920,000
-------------
Net Proceeds of the Offering $ 14,108,000
=============
</TABLE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES--NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NOT APPLICABLE.
ITEM 5. OTHER INFORMATION--NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
27 Financial Data Schedule
b. REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1999.
15
<PAGE> 16
ORBIT/FR, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORBIT/FR, INC.
-------------------------------------------
Registrant
Date: May 17, 1999
By: /s/ Ze'ev Stein
-------------------------------------------
Acting President and Chief Executive Officer
(Principal Executive Officer)
Date: May 17, 1999
By: /s/ William A. Torzolini
-------------------------------------------
Chief Financial Officer
(Principal Financial Officer)
16
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