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EX-23.1 - EX-23.1 - ORBIT FR INC | w77743exv23w1.htm |
EX-23.3 - EX-23.3 - ORBIT FR INC | w77743exv23w3.htm |
EX-32.2 - EX-32.2 - ORBIT FR INC | w77743exv32w2.htm |
EX-32.1 - EX-32.1 - ORBIT FR INC | w77743exv32w1.htm |
EX-31.2 - EX-31.2 - ORBIT FR INC | w77743exv31w2.htm |
EX-31.1 - EX-31.1 - ORBIT FR INC | w77743exv31w1.htm |
EX-23.4 - EX-23.4 - ORBIT FR INC | w77743exv23w4.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended December 31, 2009
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 | (IRS 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)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark in the registrant is a well-known seasoned issuer, as defined in
rule 405 of the Securities Act. Yes o No þ
Indicate by check mark in the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the act. Yes o No þ
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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained herein, and will not be
contained, to the best of the registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K 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 has submitted electronically and posted on its
corporate website, 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 the definitions of
large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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 checkmark whether the registrant is a shell company (as defined in
Rule 12-b-2 of the Act) Yes o No þ
As of June 30, 2009, the last business day of the Registrants most recently completed
second fiscal quarter, the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant was $1,381,064 (based on the closing price of the Common Stock
on June 30, 2009 of $0.60 per share). The information provided shall in no way be construed as an
admission that any officer, director, or 10% shareholder in the Company may or may not be deemed an
affiliate of the Company or that he/it is the beneficial owner of the shares reported as being held
by him/it, and any such inference is hereby disclaimed. The information provided herein is included
solely for record keeping purposes of the Securities and Exchange Commission. As of March 30, 2010,
6,001,773 shares of Common Stock were outstanding.
ORBIT/FR, Inc.
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EX-32.2 |
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Table of Contents
PART I
Forward-Looking Statements
This Annual Report on Form 10-K, and documents incorporated herein, contain
forward-looking statements that involve risks and uncertainties. Actual results could differ
materially from those discussed in the forward-looking statements as a result of certain factors,
including, but not limited to those set forth in Item 1A Risk Factors below and elsewhere in this
Annual Report on Form 10-K. The following discussion should be read in conjunction with Item 1A
Risk Factors below and the Consolidated Financial Statements and notes to the Consolidated Financial
Statements beginning on page F-1. As used in this Annual Report on Form 10-K, unless the context
otherwise requires, we, us, our, Company, or ORBIT/FR refers to ORBIT/FR, Inc. and its
subsidiaries.
ITEM 1. BUSINESS
General
ORBIT/FR, Inc. develops, markets and supports sophisticated automated microwave test and
measurement systems for the aerospace/defense, wireless communications, satellite and automotive
industries and manufactures anechoic foam, a microwave absorbing material that is an external
component of microwave test and measurement systems. Military antennas, cellular phones,
satellites, radars, radio transmitters, and global positioning system receivers all depend upon the
reliable and efficient transmission and reception of microwave signals in order to communicate. By
utilizing the Companys systems to test and measure the critical performance characteristics of
antennas, microwave signals, wireless manufacturers and service providers within these industries
can improve quality and time-to-market, lower the risk of failure and underperformance and reduce
costs.
Since its founding, the Company has expanded from distributing individual microwave test
and measurement components to providing a wide range of fully integrated microwave test and
measurement solutions. Components of an ORBIT/FR automated microwave test and measurement system
include proprietary software and hardware products, which can be combined into standard or
customized configurations to meet a customers specific needs.
The Company markets and sells its systems to customers in the United States and
throughout the world. Within its targeted industries, the Companys customers include
aerospace/defense systems integrators and product manufacturers that incorporate microwave
technology, such as Lockheed Martin, Raytheon, Northrop Grumman, BAE, L3 Communications, Alenia,
Astrium, Lufthansa and Boeing; manufacturers of wireless systems and products, such as Motorola,
Nokia, Ericsson, Samsung, Sony and Qualcomm; telecommunications service providers that rely on
microwave technology, such as AT&T, NTT and British Telecom; and automobile and automotive
subassembly manufacturers such as Daimler, Ford, BMW and Hyundai. The Companys customers also
include the United States government and several foreign governments.
The Companys primary objective is to strengthen its position in automated microwave test
and measurement systems while developing products and systems for a broader range of microwave
applications. The principal elements of the Companys strategy to reach its objectives are: (i)
offering comprehensive high quality solutions to customers; (ii) maintaining its technological
leadership; (iii) focusing on standard systems and proprietary off-the-shelf products: (iv)
pursuing growth in international markets; and (v) leveraging its technological expertise to expand
into complementary markets.
The Companys principal offices are located at 506 Prudential Road, Horsham, Pennsylvania
19044. Its telephone number is (215) 674-5100, its e-mail address is mail@orbitfr.com and its World
Wide Web home page is located at www.orbitfr.com.
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Table of Contents
History
The Company was incorporated in Delaware in December 1996. The Company is the holding
company for Orbit Advanced Technologies, Inc., a Delaware corporation (Technologies), and its
wholly owned subsidiary, Flam & Russell, Inc., a Delaware corporation (Flam & Russell), Orbit FR
Engineering, Ltd., an Israeli corporation (Engineering), Orbit FR Europe, GmbH, a German
corporation (GmbH), and Advanced ElectroMagnetics, Inc. (AEMI), a California corporation. The
Companys former majority shareholder was Orbit-Alchut Technologies, Ltd., a publicly traded
company in Israel which was founded in 1950 (Alchut). On May 13, 2008, Alchut sold all of its 3.7
million shares of common stock of the Company to Satimo, SA (Satimo) a publicly traded company on
the ALTERNEXT stock exchange. On June 30, 2009, Microwave Vision Group, SA, (Microwave Vision),
acquired the 3.7 million common shares of the Company through a reorganization involving its wholly
owned subsidiary, Satimo.
Technologies was incorporated in 1985 as a wholly-owned subsidiary of Alchut to provide
sales and customer support for Alchuts products in the United States, including positioning
subsystems. In 1991, Technologies began to focus on the development and design of its own
proprietary microwave test and measurement products and systems. In 1994, Technologies recognized
the potential for providing customers with fully integrated microwave test and measurement
solutions and began incorporating its software technology with hardware from third-party
manufacturers.
Engineering was incorporated in Israel in December 1996 as a wholly-owned subsidiary of
Alchut at which time Alchut transferred all of the assets relating to its microwave test and
measurement business to Engineering. Engineering is principally responsible for overseeing the
development, design and production of ORBIT/FRs electro-mechanical products. Along with providing
electro-mechanical products internally, Engineering is responsible for sales, marketing and
customer support to the Asian market.
In October 1997, Orbit FR Europe, GmbH was incorporated in Germany. GmbH develops compact
range measurement systems and components, and is responsible for sales, marketing and customer
support to the European market.
On June 28, 1996, Technologies purchased all of the issued and outstanding shares of Flam
& Russell for approximately $1,043,000. The acquisition of Flam & Russell augmented the Companys
product mix, staff of microwave and software engineers and customer base. Flam & Russell has been
active in the microwave test and measurement field since 1981.
On June 17, 1997, contemporaneously with the completion of its initial public offering,
the Company purchased all of the issued and outstanding shares of AEMI for approximately $1.2
million. One-half of the purchase price was payable in cash and the other half was payable by
issuance of shares of the Companys Common Stock at the initial offering price of $8.25 per share.
AEMI manufactures anechoic foam, a microwave absorbing material that is an integral component of
microwave test and measurement systems.
On September 6, 2005, the Company announced that it had reached a final settlement with
the Office of Defense Trade Controls Compliance, Directorate of Defense Trade Control (DDTC) of the
United States Department of State, terminating as of August 29, 2005 the statutory debarment that
prohibited the Companys direct or indirect participation in exports subject to the International
Traffic in Arms Regulations (ITAR) since November 2, 1999. Accordingly, under the terms of the
agreement DDTC has resumed the normal processing of license applications involving the Company.
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Table of Contents
Industry Overview
The need for microwave and antenna test and measurement systems and products expanded
rapidly during the 1960s and 1970s in conjunction with the growth and increased sophistication of
the aerospace/defense industry in the United States and Western Europe. In the last 30 years, this
need for test and measurement products and systems has expanded beyond aerospace/defense
applications to all aspects of modern telecommunications, including personal wireless
communications devices, satellite-based communications systems and smart automobiles. This
expansion has occurred in conjunction with a growing desire among companies to focus on their core
competencies and outsource many non-core functions such as the development and manufacture of
microwave test and measurement systems.
Within the wireless communications, satellite, automotive and aerospace/defense
industries, test and measurement products and systems are used during all stages of a products
life cycle, including product development, pre-production qualification, production testing and
product maintenance. Given the broad scope of testing procedures, it is not uncommon for a
manufacturer or service provider to own and operate more than one microwave test and measurement
system.
Aerospace/Defense . The need within the aerospace/defense community for accurate and
secure communications and tracking systems led to the emergence of microwave test and measurement
companies in the 1960s. Recent growth in Department of Homeland Security and Department of Defense budgets have
provided additional opportunities for the Company.
The industrys tracking requirements, such as air traffic control, precision guided
weapons, and data links and stealth aircraft, led to the development of Radar Cross Section (RCS)
and the test and measurement of radomes. RCS involves the transmission of microwave signals towards
a passive target, such as an aircraft or missile, and then the creation of an image of the target
by measuring the energy reflected back towards the transmit source. Radome testing evaluates the
impact of a radome (the dome-shaped casing that is placed on the leading edge of an aircraft or
missile to protect the radar and direction-finding equipment) on the microwave signals that pass
through it.
Wireless Communications . The wireless communications industry has grown in recent years
as a result of the development of cost-effective digital technologies and the gradual global
deregulation of the telecommunications industry. Wireless communications products include
cellular/PCS handsets and base stations, pagers, wireless PDAs, and Bluetooth, Wi-Fi and Wi-Max
products, and RFIDs (RF tags). The Company expects continued growth within the wireless
communications industry in the future due to an increase in available spectrum, new generations of
cellular systems, the adoption of efficient new digital technologies and the development of smart
antennas.
Growing worldwide demand for wireless communications products and services has generated
a need among wireless manufacturers and service providers for systems and products that address
their specific microwave test and measurement needs. These companies operate in highly-competitive,
rapidly changing markets in which the performance and reliability of their systems and products are
essential to achieve and maintain competitive advantage. The accurate transmission and reception of
microwave signals are fundamental to the performance of wireless systems and products. To ensure
the successful transfer of voice or data from one point to another and to minimize poor reception,
cross talk and dropped calls, manufacturers and service providers conduct extensive testing of both
cellular handsets and wireless base stations for signal quality, direction, strength and
interference.
Satellite . Satellite-related markets have grown over the past several years, driven by
the emergence of advanced communication technologies offering cost-effective global voice, video
and data transmission, GPS, internet access and tracking capabilities. Satellites provide several
advantages over
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terrestrial communications networks, including rapid installation and deployment, no
incremental cost as distances increase and higher rates of data transmission.
To ensure that satellite-based communications systems are effective and reliable, it is
essential that both satellites and earth stations transmit and receive microwave signals
accurately. The accuracy requirements for these satellite systems are critical, and failure to
detect a design error could result in a satellites footprint not covering its intended
geographic area. Satellite manufacturers cannot afford to make this kind of error since the cost to
manufacture, launch and insure a satellite can exceed approximately $200 million. Accordingly,
sophisticated microwave test and measurement systems are critical to satellite and earth station
manufacturers, as well as their subcontractors and sub-assembly manufacturers, to ensure that their
products work properly.
Automotive . The worlds major manufacturers of automobiles and automotive
sub-assemblies, driven by competitive pressures, are designing new generations of smart cars and
trucks. These vehicles incorporate the latest communications and safety devices including cellular,
GPS-based, navigation and anti-theft systems, satellite radios (e.g. XM, Sirius), data transfer,
digital TV and collision-avoidance systems. Each of these features requires a specialized,
highly-accurate microwave transmission and reception system. To ensure the performance of these
various systems and to assess how they are impacted by the electromagnetic properties of the car
itself, automotive manufacturers must test the car and these devices as a unit using a microwave
test and measurement system designed for automotive applications.
The ORBIT/FR Solution
ORBIT/FR provides its customers with flexible and reliable solutions for their complex
microwave test and measurement needs. The Company focuses its efforts and resources on developing
state-of-the-art microwave test and measurement systems and products that incorporate specialized
technologies and expertise. The Companys customers have a need for microwave test and measurement
systems and products but often do not have the in-house capabilities to develop, or the desire to
develop, such systems and products themselves. ORBIT/FRs systems and products provide customers
with cost- effective and user-friendly solutions to their microwave test and measurement needs,
thus allowing them to remain focused on their core competencies. The Companys systems and products
incorporate technological expertise developed and acquired by the Company over many years.
The Company offers a wide range of standard and custom microwave test and measurement
solutions for specialized aerospace/defense-related testing, cellular/PCS handset testing, cellular
base station testing, satellite testing and automotive testing. The Companys products include test
and measurement software, microwave receivers, positioner subsystems and controllers, as well as
other microwave products, and a full line of RF absorbing materials, all of which are typically
incorporated into the Companys systems. The Companys proprietary software supports the Companys
own test and measurement products as well as those manufactured by third parties. The Companys
engineers and other technical staff use their broad expertise to assess and understand their
customers specific microwave test and measurement needs, process orders quickly, keep delivery
time to a minimum, provide comprehensive customer support and release new software on a regular
basis.
The ORBIT/FR Strategy
The Companys objective is to strengthen its leadership position in automated microwave
test and measurement systems while developing products and systems for a broader range of microwave
applications. The principal elements of the Companys strategy to reach its objective are:
Offering Comprehensive Turnkey Solutions to Customers . Within the microwave test and
measurement market, new and existing customers increasingly desire to purchase comprehensive,
turnkey test and measurement systems from a single provider. The Company addresses this desire by
providing engineering and project management services, by offering an increasingly broad product
line and by maintaining close relationships with outside component suppliers. Additionally, the
Company
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Table of Contents
may periodically acquire companies with complementary products and services that can be
integrated with the Companys existing or proposed products and systems, as it did with its
acquisitions of Flam & Russell and AEMI. By acquiring suppliers of key components of microwave test
and measurement systems that the Company does not already provide, the Company believes, but cannot
assure, that it will be able to increase gross margins.
Maintaining Technological Leadership . The Company believes that it has sophisticated
and diversified technological capabilities and intends to strengthen its technologies by
continuously designing and developing new software releases and hardware upgrades which offer
greater performance and higher precision.
Focusing on Standard Products and Proprietary Off-the Shelf Products . Given the
diversified needs of the Companys customers, no two microwave test and measurement systems are
identical. However, the Company seeks to keep the costs of customization to a minimum by designing
and delivering specific types of systems that maximize the use of the Companys proprietary
off-the-shelf products. This approach enables the Company to optimize its margins while offering
its customers tailor-made solutions built around proven high-quality and reliable products.
Continued focus on Expanding U.S. Aerospace/Defense Market. As a result of its
reputation and diverse product line, the Company maintains relationships with the U.S. government
and several of the leading defense contractors. With expected increases in Department of Homeland Security and
Department of Defense budgets, the Company expects to expand this relationship.
Pursuing Growth in International Markets. Approximately 48% and 47% of the Companys
revenues during 2009 and 2008, respectively, were derived from international customers (i.e. customers
outside of North America). The Company believes that in addition to domestic growth as a result of
increases in Department of Defense and Homeland Security budgets, the international microwave test
and measurement marketplace will also grow over the next several years, due in large part to
worldwide economic development, governmental policies aimed at improving the communications
infrastructure in developing countries and the increasing globalization of commerce. The Company
has devoted and intends to continue to devote significant efforts to increasing its share of the
international market for microwave test and measurement systems by strengthening and expanding its
sales network through the establishment of foreign sales and customer service centers and the
appointment of additional international sales representatives. In addition, the Company believes it
has a competitive advantage due to the duty-free status of its products manufactured in Israel and
sold into the European Union.
Leveraging Technological Expertise to Expand into Complimentary Markets . The Company
intends to leverage its technological expertise in microwave test and measurement systems to expand
into complementary markets that the Company believes offer high growth potential and where the
Companys technology provides competitive advantages.
Microwave Products . The Company believes that opportunities exist to apply the
Companys core technologies to the design, manufacture and marketing of products that incorporate
microwave technology. The Company intends to continue marketing its radial power combiners,
amplifiers, antennas and mixers, and plans to develop and sell additional microwave-based products
in the future. The Company believes its large customer base will give it a competitive advantage in
marketing these products.
Systems and Products
Since its founding, the Company has expanded from distributing individual microwave test
and measurement components to providing turnkey solutions, which can include chamber design, RF
absorbing materials, antenna measurement and/or RCS subsystems, RF test equipment and software
suites, and a wide range of microwave test and measurement solutions. Components of an ORBIT/FR
automated microwave test and measurement system include proprietary software and hardware products
which can be combined into standard or customized configurations to meet customers specific needs.
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The Company believes that one of its principal strengths is its experienced design team that
solves complex technical and practical problems.
Microwave Test and Measurement Systems . The Company designs, manufactures and markets
automated microwave test and measurement systems. In addition to providing most of these systems
component parts, the Company also integrates the systems and trains its customers in use of the
systems. Although most customers purchase fully integrated turnkey microwave test and measurement
systems, the Company also sells its hardware and software products individually as replacement
parts or components of custom-designed systems. The Company offers seven types of microwave test
and measurement systems. The first, antenna measurement systems, are generic systems that can be
adapted for many uses, and the other types are designed and sold in response to well-defined
microwave test and measurement needs within specific industries. Prices for a typical ORBIT/FR
system ranges from $50,000 to $1,000,000, but large systems have been sold for over $3 million.
Antenna Measurement Systems . All products and systems that receive or transmit
microwave signals rely on antennas. Accordingly, items such as microwave radios, GPS receivers,
cellular handsets and base-stations, field service/delivery equipment, satellite earth stations and
radios, precision guided missiles, radar and commercial and military aircraft need to have their
antennas tested to ensure satisfactory performance characteristics. The Companys antenna
measurement systems offer both manufacturers and service providers user-friendly and cost-effective
solutions for their antenna measurement needs. The systems test for signal quality, direction,
strength and interference and can be adapted to perform testing in each of the stages of a
products life: development; qualification; production; and maintenance. Although antenna
measurement systems differ significantly from one application to another, all of the Companys
systems incorporate a personal computer running specialized proprietary software, a microwave
receiver, a positioning subsystem and at least one additional antenna or probe. The systems can be
designed for use in a wide variety of different test environments, ranging from a small anechoic
chamber to an outdoor range covering several acres. The Company offers three types of antenna
measurement methods:
Far-field :
|
Traditional method generally used outdoors | |
Near-field:
|
Cost-effective indoor method using mathematical conversion tools | |
Compact Range :
|
High-end indoor method using a microwave reflector |
The Company also has developed advanced systems that combine these measurement methods,
such as far-field and near-field, in a single chamber.
Cellular/PCS Base Station Systems . The Company develops and sells test and
measurement systems used to assess the microwave performance characteristics of cellular/PCS base
stations and smart antennas. These systems enable cellular/PCS base station antenna manufacturers
to design and build efficient and reliable products, and allow wireless communications service
providers to monitor more efficiently the performance of their base stations. The existing system
design is based on the Companys cylindrical near-field technology and is designed for indoor use.
Satellite Systems . The Company develops and sells microwave test and measurement
systems for satellite communication and broadcast systems which test the satellite performance of
the satellites antennas. These systems also test the transmit and receive characteristics of the
active array antennas used on most modern satellites and can have the ability to identify and
diagnose malfunctions within
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these complex antennas. The Companys satellite test systems utilize either near-field or
compact range technology. Both technologies are equally effective from a test and measurement
viewpoint, but each offers certain benefits. A near-field system offers diagnostic capabilities and
is generally less expensive than a comparably equipped compact range system, but a compact range
system is faster and easier to use.
Automotive Systems . ORBIT/FR believes it is a leader in the design and delivery of
high-performance test and measurement systems for automobile manufacturers and manufacturers of
automotive sub-assemblies. The Companys systems incorporate both near-field and far-field
technologies and are thus capable of microwave sampling over a wide range of frequencies. A typical
system includes a large mechanical arm that sweeps over a large turntable. The car being tested
rests on the turntable, and both the turntable and the mechanical arm are set in motion based upon
instructions received from the Companys measurement software. The systems broad capabilities are
essential given a growing trend by automobile manufacturers to integrate advanced microwave
technologies such as cellular/PCS, GPS-based navigation system, satellite radios, digital TV and
collision-avoidance systems into their advanced next generation cars.
RCS Systems . The Companys Radar Cross Section measurement systems transmit microwave
signals towards a passive target and then measure the energy reflected back towards the transmit
source. In an RCS system, the passive target is typically a model or full scale aircraft or missile
that is mounted on a special low-RCS testing pylon capable of rotating the target. Data collected
at various rotation angles and frequencies can be processed to form an electromagnetic image of
the target. This type of information enables the design engineer to assess more accurately the
detailed radar signature of the target. The Company believes that it is a market leader in this
field.
Radome Systems . A radome is a dome-shaped casing that is placed on the leading edge of
a commercial aircraft, military aircraft or missile to protect the radar and direction-finding
equipment. A radome is typically manufactured using fiberglass or other materials that are designed
to be transparent to microwave signals. Testing is performed periodically to ensure that
microwave signals are not degraded or deflected as they pass through the radome. The Companys
systems are designed to measure radome performance by analyzing the path of microwave signals as
they pass through the radome and then comparing it to the propagation path when the radome is not
present. Radome systems use far-field measurement methods but rely on high positioning accuracy
normally required by near-field systems.
Custom Systems . From time to time, the Company designs and manufactures custom
microwave test and measurement systems for a wide variety of uses and applications worldwide. The
Companys broad microwave and antenna expertise has enabled it to obtain these contracts, and the
Company intends to bid for similar jobs in the future if the expertise gained in designing such
systems is deemed to be of strategic value to the Company.
Multi-probe Measurement Systems. Through Microwave Vision, the Company
has access to a new multi-probe measurement technology. This technology allows for a substantial
increase in measurement speed. We believe that the combination of this technology with the Companys systems, provides the
Company with a competitive advantage.
Microwave Test and Measurement Software Products . Through its 959Spectrum and MiDAS
software packages, ORBIT/FR offers automatic measurement software for microwave test and
measurement systems. The Companys software products are Windows-based programs that provide the
customer with a consistent user-friendly interface with the test and measurement system. The
software products have a robust and modular structure that enables the Company to easily add
features for current and future customers. The software uses far-field and/or near-field algorithms
to generate accurate results, and the computational methodologies used have gained acceptance
throughout the microwave test and measurement community. The software supports the Companys own
measurement equipment as well as equipment manufactured by third parties. The Companys software
products are designed to be off-the-shelf, but are versatile and can be customized by the
Companys or the customers technical personnel to suit specific needs.
Although software can vary between systems, it always consists of three primary modules:
data acquisition, data analysis and report writing. The softwares data acquisition module records
actual measurements as it controls the microwave measurement equipment, the positioning subsystem,
and
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often the source antenna and/or the antenna being measured. Variables such as frequency, power
level, amplitude, phase, rotary and/or linear motion, polarization, transmit/receive switching,
electrical beam pointing and polarization switching are all controlled by the Companys measurement
software. The multidimensional results obtained are stored in a computer file for subsequent
analysis. The softwares data analysis module processes the acquired data using sophisticated
microwave and signal processing algorithms developed by the Company and the National Institute of
Standards and Technology. The data analysis module transforms the acquired data into
easily-understood numerical information and graphic representations, thus providing the customer
with the data required to satisfy its internal requirements and those of its own customers. The
softwares report writing module can be customized to meet each customers needs.
Positioner Subsystems . The positioner subsystem is the collection of equipment that
holds the device under test and causes it to be moved according to the needs of the test. A typical
positioner subsystem may include the following components:
Positioners . A positioner is the item upon which the device under test is placed while
it is being tested. The Companys positioners are rugged, yet highly precise, devices that adjust
themselves in accordance with the positioning instructions received from the measurement software.
Special circuitry and mechanical design features built into the positioner enable the data acquired
from the antenna under test to travel efficiently through the positioner to the computer to be
analyzed. The Companys simple positioners rotate around a single axis, while the Companys more
elaborate positioners incorporate up to three axes. An automated microwave test and measurement
system requires one or more positioners. The Company offers over 200 different positioner models
and believes that its positioners are among the most accurate.
Positioner Controllers and Power Control Units . The Company manufactures positioner
controllers and power control units (PCUs) as well as models that combine these two products into
one component. Working together, the positioner controller and the PCU act as the translators
between the measurement software and the positioner. The positioner controller receives digital
instructions from the microwave software and translates them into analog signals understood by the
PCU. These analog signals are then amplified by the PCU to provide precisely calibrated DC power to
the positioners electric motors, which then operate at a user-defined speed to move the antenna or
device under test through the desired positions. The Company offers four positioner controller
models, two PCU models and four models that combine both positioner controller and PCU.
Planar Scanners . A planar scanner is a rectangular device that enables a probe antenna
to be moved along an x- and y-axis so that its position at any time is known and can be exactly
replicated. Planar scanners are mounted to enable the probe to be moved throughout the height and
width dimensions of the scanner. Scanners enable test engineers to accurately and reliably analyze
many aspects of the microwave signals radiating from the antenna or device under test. The Company
offers 24 standard scanners ranging in size from 3 feet by 3 feet to over 100 feet by 100 feet.
Pylons and Model Towers . Pylons and model towers are used in many microwave test and
measurement applications and range in size from very large to very small. Large pylons can carry
substantial loads in indoor or outdoor environments, and certain models can even support a
full-sized aircraft. Pylons designed to minimize measurement interference are almost always used in
RCS systems.
Other Microwave Products . The Company has developed several microwave products used in
the larger microwave industry.
Radial Power Combiners . The Companys radial power combiners offer a highly efficient
electromagnetic mechanism to combine several identical low-energy signals together to make a single
high-energy signal. Radial power combiners have many uses, but their most common application is in
high-power microwave transmitters.
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Antennas, Probes and Other Microwave Accessories . The Company designs and
manufactures antennas, probes and other microwave accessories. These products are used in the
Companys microwave test and measurement systems, and they are also sold to customers as
stand-alone items.
Sales and Marketing
The Company markets and sells its products in the United States through direct regional
sales managers including Microwave Visions world-wide direct sales force and through
independent sales representatives that target specific geographic and strategic markets.
Internationally, the Company has established sales and customer service centers in Israel and
Germany and has a network of distributors, agents and representatives for sales, marketing and
customer support throughout Europe and Asia.
The Companys engineers and other technical staff support the efforts of the sales force.
Since a customers engineers typically play an important role in the procurement decision, the
Companys engineers work closely with them to help them understand the advantages of the Companys
products and systems. Additional business from existing customers is pursued through the joint
efforts of both the sales force and the engineers and other technical staff who has worked closely
with the customers engineers and who understand the customers needs. If a customer has already
purchased a microwave test and measurement system from ORBIT/FR, the Company believes it has an
advantage over competitors in obtaining orders for system upgrades as well as any additional
systems that the customer may wish to purchase at a later date. Typically, a substantial portion of
the Companys revenues in a given year is generated by customers for whom the Company has
previously provided products or systems.
The Company generates sales leads for new customers through referrals from existing
customers and other industry suppliers, its reputation in the industry, its on-line catalog (found
at www.orbitfr.com ), in coordination with Microwave Vision advertising in trade
publications, in conferences and trade shows, and on the World Wide Web.
Customer Support
The Company is committed to providing customer satisfaction through the service and
support of its products. Through its Customer Service Response Center, the Company handles warranty
support, field service, technical support, training, service contracts, spare parts and user
documentation issues. Through a trained customer service representative and direct phone support,
the Company believes it is positioned to provide rapid solutions upon request. ORBIT/FRs customer
service capabilities are achieved by providing comprehensive training through offices located in
the U.S., Europe and Israel.
Customers
The Company has performed several hundred world-wide installations for customers in the
aerospace/defense, wireless communications, satellite and automotive industries. Representative
customers that have purchased systems from the Company include:
Aerospace/Defense
|
Aerospatiale, Alenia Aeronautica, Allgon, Ball Aerospace, Boeing, Chelton, BAE Systems, Dassault, Elta, Ericsson Microwave, General Electric, Israel Aircraft Industry, ITT Avionics, JPL, L3 Communications, Lockheed Martin/Loral, Lufthansa, Mitsubishi Heavy Industries, NASA, Northrop-Grumman, Nurad, Pratt & Whitney, Racal Avionics, Raphael, Raytheon, Rockwell International, SAAB Missiles, SPAR Aerospace, Texas Instruments, and the United States Air Force, Army and Navy. | |
Wireless Communications
|
Alcatel, Andrew, AT&T, Bell Atlantic, BAE, Bosch, Celwave, Chelton, Daewoo, Ericsson, GTE, IBM, Intel, ITT, Korea Mobile Telecom, Lucent Technologies, Motorola, NEC, Nokia, Northern Telecom, NTT, Probrand, Qualcomm, RCA, Samsung, SiemensPlessey, Thales Antennas, Telebras and Tenovis. |
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Satellite
|
Astrium, DASA, EADS, Elenia Spazio, Harris, Lockheed Martin, Space Systems/Loral, Raytheon and TRW. | |
Automotive
|
Blaupunkt, BMW, Daimler-Chrysler, Ford, Fuba, Hyundai, Mitsubishi, SAAB and Toyota. | |
University
|
Georgia Tech, University of Hawaii, University of Hong Kong, University of Utah, UCLA, University of Illinois, Texas A&M University and Villanova University. |
The Companys customers are located in the Americas (the United States, Canada, Brazil
and Argentina), Europe (the United Kingdom, France, Germany, Israel, Italy, Holland, Spain,
Austria, Denmark, Belgium, Poland, Russia, Finland, Norway, Sweden, Switzerland, Turkey and
Portugal) and throughout the rest of the world (Japan, Korea, Thailand, Taiwan, Singapore,
Indonesia, Australia, China, and South Africa). See Note 8 of the Notes to Consolidated Financial
Statements for a discussion of the geographic concentration of the Companys revenues. No single
customer accounted for more than 10% of the Companys consolidated revenues.
Production and Suppliers
The Companys engineers, based in the United States, Germany and Israel, are responsible
for product design and development and for overseeing the production of the Companys products.
Although the Company maintains a production facility in Horsham, PA, most of the production of the
Companys products is performed by subcontractors. Through its wholly owned subsidiary, Advanced
ElectroMagnetics, Inc., the Company manufactures anechoic foam absorbing material, an integral
component of the microwave test and measurement system environment.
Although the Company produces many of the component parts for its microwave test and
measurement systems, it purchases certain components from outside vendors for turnkey microwave
test and measurement systems, including personal computers, shielded enclosures and microwave
absorbers.
Backlog
At December 31, 2009 and 2008, the Companys backlog was approximately $25.2 million and
$18.4 million, respectively. The Company includes in backlog only those orders for which it has
received and accepted a completed purchase order. Such orders are generally subject to cancellation
by the customer with payment of a specified charge. The delivery lead time on the Companys
products and systems is generally three to six months, but can be as short as a few days and as
long as 18 months or more. Because of the possibility of customer changes in delivery schedules,
cancellation of orders and potential shipment delays, the Companys backlog as of any particular
date may not be representative of actual sales for any succeeding period.
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Research and Development
The Company believes that its future success depends on its ability to adapt to rapidly
changing technological circumstances within the industries it serves and to continue to meet the
needs of its customers. Accordingly, the timely development and introduction of new products is
essential to maintain the Companys competitive position. Using its internal research and
development staff, augmented by external consultants, the Company develops most of its products
in-house. On occasion, the Companys research and development efforts have been conducted in direct
response to the specific requirements of customers orders, and, accordingly, such amounts are
included in cost of revenues when incurred and the related funding is included in net revenues at
such time. Included in cost of revenues are customer-funded research and development costs of
approximately $147,000 and $33,000 for the years ended December 31, 2009 and 2008, respectively.
Other research and development expenses of the Company for fiscal years ended
December 31, 2009 and 2008 were approximately $1,308,000 and $2,080,000, respectively.
Competition
The Company believes that its current systems and products compete effectively with the
systems and products offered by its competitors on the basis of product functionality, speed and
accuracy, reliability, price, ease of use and technical support. The market for automated microwave
test and measurement products, systems and services, however, is highly competitive and is
characterized by continuing advances in products and technologies. Some of the Companys
competitors have established relationships with current and potential customers of the Company. The
Company also competes, on a limited basis, with the internal development groups of its existing and
potential customers, many of whom design and develop parts of their own microwave test and
measurement systems. The Companys business, operating results and financial condition could be
materially adversely affected by such competition. The Companys primary competitors in the
microwave test and measurement market are MI Technology, Nearfield Systems, Inc., EMC Test Systems,
March Microwave.
Proprietary Rights
The Company is heavily dependent on its proprietary technology. The Company relies on a
combination of confidentiality agreements with its employees, license agreements, copyrights,
trademarks and trade secret laws to establish and protect rights to its proprietary technology. The
Company does not hold any material patents. All of the Companys software is shipped with a
security lock which limits software access to authorized users. Generally, the Company does not
license or release its source code. Effective copyright and trade secret protection of the
Companys proprietary technology may be unavailable or limited in certain foreign countries.
Employees
As of December 31, 2009, the Company had a total of 127 employees. The Company considers
its relations with its employees to be good.
ITEM 1A. RISK FACTORS
Rapid Technological Change . The microwave test and measurement industry is
characterized by rapid technological change. The Companys future success will depend upon its
ability to continually enhance its current products and to develop and introduce new products that
keep pace with the increasingly sophisticated needs of its customers and the technological
advancements of its competitors. There can be no assurance that the Company will be successful in
developing and marketing product enhancements or new products that will adequately meet the
requirements of the marketplace.
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Dependence on Proprietary Technology. The Companys success is heavily dependent
upon its proprietary technology. The Company does not currently have any material patents and
relies principally on trade secret and copyright laws to protect its technology. However, there can
be no assurance that these steps will prevent misappropriation of its technology. Moreover, third
parties could independently develop technologies that compete with the Companys technologies.
Although the Company believes that its products and proprietary rights do not infringe patents and
proprietary rights of third parties, there can be no assurance that infringement claims, regardless
of merit, will not be asserted against the Company. In addition, effective copyright and trade
secret protection of the Companys proprietary technology may be unavailable or limited in certain
foreign countries.
Dependence on Alchut; Operations in Israel. The Company previously maintained a number
of relationships with Alchut, the former majority stockholder of the Company. 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. As part of that transaction, Alchut had agreed to continue to provide
the services for a period of one year after the closing of the transaction. The Companys
subsidiary in Israel has moved its operations to a new location and all the general and
administrative services previously provided by Alchut were in place at the expiry of the one year
service agreement on May 13, 2009. The Company maintains part of its engineering operations, in
Israel. As a result, the Company may be directly influenced by the political, economic and military
conditions affecting Israel.
As a result of the change in ownership of the Company, utilization of the Companys
domestic net operating loss carryforwards is limited pursuant to Section 382 of the Internal
Revenue Code. Such limitation may have an effect on future results of operations.
Risks of Fixed-Price Contracts. Virtually all of the Companys contracts for its systems
and products are on a fixed-price basis. The profitability of such contracts is subject to inherent
uncertainties as to the cost of completion. In addition to possible errors or omissions in making
initial estimates, cost overruns may be incurred as a result of unforeseen obstacles, including
both physical conditions and unexpected problems in engineering, design or testing. Since the
Companys business may at certain times be concentrated in a limited number of large contracts, a
significant cost overrun on any one contract could have a material adverse effect on the Companys
business, operating results and financial condition.
Risks Associated with Entering New Markets . The Company has identified and is
evaluating whether to enter into certain complementary markets. The Companys success in these
markets will depend on, among other factors, the Companys ability to identify markets and develop
technologies for such markets on a timely basis, hire and retain skilled management, financial,
marketing and engineering personnel, successfully manage growth and obtain capital sufficient to
finance such expansion. There can be no assurance that the Company will successfully enter these
markets.
Management of Growth . The Company believes that growth will be required to maintain the
Companys competitive position. Future growth, coupled with the rapid evolution of the Companys
markets, has placed, and is likely to continue to place, significant strains on its management,
administrative, operating and financial resources, as well as increased demands on its internal
systems, procedures and controls. The Companys ability to manage future growth will require the
Company to continue to improve its financial and management controls, reporting systems and
procedures on a timely basis, to implement new systems as necessary and to expand, train, motivate
and manage its sales and technical personnel. There can be no assurance that the Company will be
able to manage its growth
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successfully. Failure to do so could have a material adverse effect on the Companys business,
operating results and financial condition.
Risks Associated with International Sales . In 2009 and 2008, international sales (sales to
customers outside of North America) comprised approximately 48% and 47%, respectively, of the
Companys total sales, and the Company expects its international business to continue to account
for a material part of its revenues. International sales are subject to numerous risks, including
political and economic instability in foreign markets, restrictive trade and export policies of
foreign governments, inconsistent product regulation by foreign agencies or governments, imposition
of product tariffs and burdens and costs of complying with a wide variety of international and U.S.
export laws and regulatory requirements. Approximately 86% of the Companys sales in 2009 were
denominated in U.S. dollars. Accordingly, the Company believes that it does not have significant
exposure to fluctuations in currency. However, fluctuations in currency could adversely affect the
Companys foreign customers.
Potential Fluctuations in Quarterly Results . The Companys operating results have varied from
quarter to quarter in the past and may vary significantly in the future depending on factors such
as the size and timing of significant contracts, the mix of third party products and the Companys
proprietary products included in a particular contract, customers budgetary constraints, increased
competition, the timing of new product announcements and changes in pricing policies by the Company
or its competitors, market acceptance of new and enhanced versions of the Companys products,
changes in operating expenses and changes in general economic factors and export license delays and
denials. The Companys expense levels are based, in part, on its expectations as to future revenue
levels. If the Companys revenue levels were to be below expectations, the Companys operating
results would likely be materially adversely affected.
Dependence on Qualified Technical Personnel . The Companys operating results depend in large
part upon the efforts of its microwave, software and systems engineers. The success of the
Companys business therefore depends on its ability to attract and retain engineers and other
technical personnel. There are a limited number of microwave engineers, and such individuals are
sought both by microwave test and measurement companies such as the Company and by manufacturers of
wireless products and telecommunications service providers. Competition for such personnel is
intense. The Company has at times experienced difficulty in recruiting and retaining technical
personnel, and there can be no assurance that the Company will not experience difficulties in the
future in attracting and in retaining technical personnel.
Dependence on Key Personnel . The success of the Company depends to a significant degree upon
the contribution of its executive officers and other key personnel. There can be no assurance that
the Company will be able to retain its managerial and other key personnel or to attract additional
managerial and other key personnel if required.
Product Liability; Risk of Product Defects . The sale of products and systems by the Company
may entail the risk of product liability and related claims. A product liability claim brought
against the Company could have a material adverse effect upon the Companys business, operating
results and financial condition. Complex software and system products, such as those offered by the
Company, may contain defects or failures when introduced or when new versions are released. There
can be no assurance that, despite testing by the Company, errors will not be found in new products
after commencement of commercial shipments, resulting in loss of market share or failure to achieve
market acceptance. The Company maintains product liability insurance in the amount of $2.0 million
and errors and omissions insurance in the amount of $7.0 million, although there can be no
assurance that such coverage will be applicable to a particular claim or that the amounts of such
insurance will be adequate if the Company experiences a significant claim. Although the Company has
not experienced any significant claims to date related to its systems or products, the occurrence
of such a claim could have a material adverse effect upon the Companys business, operating results
and financial condition.
Competition . The market for automated microwave test and measurement products, systems and
services is highly competitive and is characterized by continuing advances in products and
technologies.
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In general, competition in this market comes from major microwave test and measurement
vendors, some of which have a longer operating history, significantly greater financial, technical
and marketing resources, greater name recognition and a larger installed customer base than the
Company. These companies also have established relationships with current and potential customers
of the Company. The Company also competes, on a limited basis, with the internal development groups
of its existing and potential customers, who may design and develop parts of their own microwave
test and measurement systems. The Companys business, operating results and financial condition
could be materially adversely affected by such competition.
Fluctuations in Capital Spending. The Company is dependent upon the wireless communications,
satellite, automotive and aerospace/defense industries. Because these industries are characterized
by technological change, pricing and gross margin pressure and, particularly in the
aerospace/defense industry, government budget constraints, they have from time to time experienced
sudden economic downturns. During these periods, capital spending is frequently curtailed and the
number of design projects often decreases. Since the Companys revenues are dependent upon capital
spending trends and new design projects, negative factors affecting these industries could have a
material adverse effect on the Companys business, operating results and financial condition.
No Dividends . The Company has never paid cash dividends on its Common Stock and does not
anticipate that any cash dividends will be declared or paid in the foreseeable future.
Issuance of Preferred Stock and Common Stock; Anti-Takeover Provisions. Pursuant to its
Amended and Restated Certificate of Incorporation, the Company has an authorized class of 2,000,000
shares of Preferred Stock which may be issued by the Board of Directors with such terms and such
rights, preferences and designations as the Board may determine and without any vote of the
stockholders, unless otherwise required by law. Issuance of such Preferred Stock, depending upon
the rights, preferences and designations thereof, may have the effect of delaying, deterring or
preventing a change in control of the Company. Issuance of additional shares of Common Stock could
result in dilution of the voting power of the Common Stock. In addition, certain anti-takeover
provisions of the Delaware General Corporation Law among other things, may restrict the ability of
the stockholders to approve a merger or business combination or obtain control of the Company.
Market for Common Stock. The Companys Common Stock is traded on the OTCBB, which limits
exposure to market analysts and, in turn, may limit volume of trading. Investors may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value of, the Companys
common stock than would otherwise be the case were the Companys Common Stock listed on a more
recognized stock exchange or quotation service. In addition, trading in the Companys Common Stock
is currently subject to certain rules under the Exchange Act, which require additional disclosure
by broker-dealers in connection with any trades involving a stock defined as a penny stock. Penny
stocks are generally non-Nasdaq equity securities with a market price less than $5.00 per share.
The penny stock rules require broker-dealers selling penny stocks to make certain disclosures about
such stocks to purchasers thereof, and impose sales practice restrictions on broker-dealers in
certain penny stock transactions. The additional burdens imposed upon broker-dealers by these rules
may discourage them from effecting transactions in the Companys Common Stock, which could limit
the liquidity of the common stock and the ability of the Companys stockholders to sell their stock
in the secondary market.
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
ITEM 2. | PROPERTIES |
The Company occupies approximately 18,000 square feet of space at its headquarters in Horsham,
Pennsylvania under a lease expiring in October 2015. The current annual base rent is approximately
$151,000. The Company also maintains sales, engineering, technical support and
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program management facilities in Israel and Germany, and at its manufacturing facilities in
Santee, California. The Companys current aggregate annual rental expenses for these additional
facilities are approximately $371,000.
ITEM 3. | LEGAL PROCEEDINGS |
The Company is not currently subject to any additional material legal proceedings and is not
aware of any other threatened litigation unasserted claims or assessments that could have a
material adverse effect on the Companys business, operating results, or financial condition.
ITEM 4. | (Removed and Reserved) |
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PART II
ITEM 5. | MARKET FOR THE REGISTRANTS COMMON EQUITY, AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITES |
On April 11, 2003, the Companys Common Stock was delisted from the Nasdaq Stock Market and
began trading on the electronic over-the-counter quotation system of the Financial Industry
Regulatory Authority (FINRA), the Over-the-Counter Bulletin Board (the OTCBB) under the symbol
ORFR. The OTCBB is a regulated quotation service for subscribing members of FINRA that displays
the real-time quotes, last-sale prices and volume information in over-the-counter securities. The
OTCBBs market quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
The following table sets forth the high and low bid prices per share for the Common Stock for
the periods indicated below as reported to the OTCBB by the FINRAs member firms.
Year ended December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
High | Low | High | Low | |||||||||||||
First Quarter |
$ | 1.01 | $ | 0.51 | $ | 2.72 | $ | 1.85 | ||||||||
Second Quarter |
$ | 1.50 | $ | 0.38 | $ | 2.55 | $ | 1.62 | ||||||||
Third Quarter |
$ | 1.24 | $ | 0.57 | $ | 1.95 | $ | 1.35 | ||||||||
Fourth Quarter |
$ | 1.19 | $ | 0.61 | $ | 1.83 | $ | 0.35 |
On March 5, 2010, there were 32 holders of record of the Companys Common Stock. Based on
information received by the Company from its stock transfer agent, the Company believes that there
are approximately 705 beneficial owners of its Common Stock.
The Company has never paid any cash dividends on its Common Stock and does not intend to pay
cash dividends on its Common Stock in the foreseeable future. The Company currently intends to
reinvest its earnings, if any, in the development and expansion of the Companys business. Any
future declaration of cash dividends will be at the discretion of the Companys Board of Directors
and will depend upon the earnings, capital requirements and financial position of the Company,
general economic conditions and other pertinent factors.
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EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information, as of the end of the fiscal year ended December
31, 2009, with respect to compensation plans under which the Company is authorized to issue shares
of Common Stock.
Number of Shares | ||||||||||||
Remaining | ||||||||||||
Available for Future | ||||||||||||
Issuance | ||||||||||||
Number of Shares to | under Equity | |||||||||||
be Issued Upon | Compensation | |||||||||||
Exercise of | Weighted-Average | Plans (excluding | ||||||||||
Outstanding | Exercise Price of | securities | ||||||||||
Options, | Outstanding Options, | reflected in 1st | ||||||||||
Plan Category | Warrants and Rights | Warrants and Rights | column) | |||||||||
Equity compensation plan(s) approved by security holders (1) |
323,550 | $ | 2.55 | 876,450 | ||||||||
Equity compensation plan(s) not approved by security holders |
| | | |||||||||
Total |
323,550 | $ | 2.55 | 876,450 |
(1) | This plan consists of the Orbit/FR, Inc. 1997 Stock Option Plan. |
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ITEM 6. | SELECTED FINANCIAL DATA |
Consolidated Statement of Operations Data: | Year Ended December 31, | |||||||||||||||||||
(amounts in thousands, except per share data) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Contract revenues |
$ | 31,246 | $ | 23,118 | $ | 29,292 | $ | 29,441 | $ | 22,905 | ||||||||||
Cost of revenues |
20,483 | 17,103 | 20,044 | 20,750 | 15,540 | |||||||||||||||
Gross profit |
10,763 | 6,015 | 9,248 | 8,691 | 7,365 | |||||||||||||||
General and administrative |
3,005 | 2,768 | 3,119 | 2,996 | 2,427 | |||||||||||||||
Sales, marketing, general and administrative-MVG |
1,539 | |||||||||||||||||||
Sales and marketing |
3,565 | 3,655 | 3,569 | 3,248 | 3,325 | |||||||||||||||
Research and development |
1,308 | 2,080 | 1,607 | 1,443 | 1,188 | |||||||||||||||
Loss on disposal of assets |
167 | | | | | |||||||||||||||
Total operating expenses |
9,584 | 8,503 | 8,295 | 7,687 | 6,940 | |||||||||||||||
Operating income (loss), net |
1,179 | (2,488 | ) | 953 | 1,004 | 425 | ||||||||||||||
Impairment of cost in excess of net assets acquired |
| | (80 | ) | | | ||||||||||||||
Compensation charge coincident to change in control |
| (969 | ) | | | | ||||||||||||||
Other income (loss), net |
(217 | ) | (5 | ) | 223 | 96 | (51 | ) | ||||||||||||
Income (loss) before income tax (benefit) expense |
962 | (3,462 | ) | 1,096 | 1,100 | 374 | ||||||||||||||
Income tax (benefit) expense |
(508 | ) | 12 | 4 | (61 | ) | (244 | ) | ||||||||||||
Net income (loss) |
$ | 1,470 | $ | (3,474 | ) | $ | 1,092 | $ | 1,161 | $ | 618 | |||||||||
Basic and diluted income (loss) per share |
$ | 0.24 | $ | (0.58 | ) | $ | 0.18 | $ | 0.19 | $ | 0.10 | |||||||||
Consolidated Balance Sheet Data: | December 31, | |||||||||||||||||||
(amounts in thousands) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Working capital |
$ | 4,973 | $ | 4,760 | $ | 6,444 | $ | 5,866 | $ | 4,598 | ||||||||||
Total assets |
$ | 20,113 | $ | 16,552 | $ | 17,370 | $ | 17,527 | $ | 14,531 | ||||||||||
Stockholders equity |
$ | 8,254 | $ | 6,707 | $ | 9,073 | $ | 7,879 | $ | 6,718 |
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Critical Accounting Policies
Managements Discussion and Analysis of Financial Condition and Results of Operations
discusses the Companys consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. On an on-going basis,
management evaluates its estimates and judgments, including those related to bad debts, intangible
assets, income taxes, financing operations, warranty obligations, contingencies and litigation.
Management bases its estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the
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circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
The following accounting policies are the most critical and could impact our results of operations.
Revenue Recognition . The Company recognizes revenue and profit as work progresses on
long-term, fixed price contracts using the percentage-of-completion method, which measures the
percentage of costs incurred to date to the estimated total costs for each contract when such costs
can be reasonably estimated. The Company follows this method since reasonably dependable estimates
of the costs applicable to various stages of a contract can be made. Recognized revenues and profit
are subject to revisions as the contract progresses to completion. Revisions in profit estimates
are charged to income in the period in which the facts that give rise to the revision become known.
Bad Debts . The Company maintains an allowance for estimated losses resulting from the
non-payment of accounts receivable. If the estimate is not sufficient to cover actual losses, the
Company is required to take additional charges to its earnings.
Deferred Income Taxes. The Company has recorded a deferred tax valuation allowance due to
uncertainty with regard to the Companys ability to generate sufficient taxable income in the
future to realize a portion of its net deferred tax assets. Due to the Companys net income in 2009
the Company has reduced its deferred tax valuation allowance.
Recent Events. During 2004, the Israeli Ministry of Defense (IMOD) implemented a policy
temporarily suspending the export of all Israeli military and commercial use products to certain
countries in the Far East, which has affected our Israeli subsidiarys ability to deliver products
manufactured for a $1.2 million contract. Although it has received approximately $588,000 of
advance payments on that contract, all related activity had been reserved for in the Companys
financial statements. The Company has repaid to the customer the amount of advance payments
received. All costs remaining in inventory were charged to cost of revenues in the first quarter of
2008. The Company, in the fourth quarter of 2008, received a $500,000 payment from the IMOD as
settlement for costs incurred at the time of the export suspension. That payment, net of the costs
originally included in cost of revenues, is included in other income in the 2008 Consolidated
Statements of Operations.
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. On June 30, 2009, Microwave Vision SA, (Microwave
Vision), acquired the 3.7 million common shares of the Company through a reorganization involving
its wholly owned subsidiary, Satimo. As part of that transaction, Alchut had agreed to
continue to provide services under their service agreement with the subsidiary in Israel for a
period of one year after the closing of the transaction. The subsidiary in Israel has moved its
operations to the new location in 2009 and now has in place all the general and administrative services
previously provided by Alchut.
On August 14, 2009, the Company entered into an Assistance and Provision of Services Agreement
(the Services Agreement) with Microwave Vision and several subsidiaries of Microwave Vision,
including Satimo. Pursuant to the Services Agreement, Microwave Vision agreed to provide
management, operational, sales and marketing, legal, technical and other services to the Company,
Satimo, and Microwave Visions other direct and indirect subsidiaries (collectively, the
Subsidiaries). In consideration thereof, the Company, Satimo and each of the other Subsidiaries
agreed to pay Microwave Vision a fee to be determined as of the start of each calendar year,
commencing on January 1, 2009, 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 a result of the application of the Services Agreement effective as of
January 1, 2009, the Company has recorded approximately $1.54 million in additional expenses for
the year ended December 31, 2009 over the expenses reported for the same period of 2008 due to the
obligations owed by the Company to Microwave Vision under the Services Agreement. As provided by
the agreement, at the end of the year an adjustment will be calculated based upon the realized
gross margins and the expenses incurred by the Subsidiaries. Due to the gross margin results of
the Company relative to the other Subsidiaries, the amount of expense charged for the quarter ended
December 31, 2009 was approximately $588,000, or $271,000 greater than the quarterly charges accrued
by the Company based upon budget.
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Results of Operations
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
Revenues. Revenues for the year ended December 31, 2009 were approximately $31.2 million as
compared to approximately $23.1 million for the year ended December 31, 2008 an increase of
approximately $8.1 million. The increase was due to increased revenues from the defense market of
approximately $10.0 million. This increase in revenues was partially offset by decreased revenues
in the automotive, EMC, satellite, university and wire markets of approximately $0.5 million, $0.4
million, $0.1 million, $0.1 million and $0.8 million, respectively. Geographically, revenues from North
America, Europe and Asia increased approximately $4.0 million, $3.6 million and $0.5 million,
respectively. The increases in revenues reflect work performed on the increased contract backlog at
the beginning of the year 2009 versus the year 2008.
Cost of revenues. Cost of revenues for the year ended December 31, 2009 were approximately
$20.5 million compared to approximately $17.1 million for the year ended December 31, 2008, an
increase of approximately $3.4 million reflecting both increased business and increased gross
margins. Gross margin percentage for the year ended December 31, 2009 increased to 34.4% from 26.0%
for the year ended December 31, 2008. This increase primarily reflects the completion in 2008 of
low margin Asian business. In addition, the gross margin percentage of the Companys Europe
business increased to 34.7% from 22.2% reflecting primarily the completion of a low margin European
contract in 2008.
General and administrative expense-others. General and administrative expenses for the year
ended December 31, 2009 were approximately $3.0 million, compared to approximately $2.8 million for
the year ended December 31, 2008. As a percentage of revenues, general and administrative expenses
for the year ended December 31, 2009 decreased to 9.6% from 12.0% for the year ended December 31,
2008. This increase of general and administrative expenses is primarily due to the putting in place
the general and administrative functions for the Israeli subsidiary and increased compensation due
to approved management bonuses.
Sales, marketing, general and administrative expenses-Microwave Vision Group. As a result of
the implementation of the Services Agreement effective as of January 1, 2009, the Company has
recorded approximately $1.5 million in sales, marketing, general and administrative expenses for
the year ended December 31, 2009. This agreement was not in effect in 2008.
Sales and marketing expenses. Sales and marketing expenses for the year ended December 31,
2009 were approximately $3.6 million compared to approximately $3.7 million for the year ended
December 31, 2008, a decrease of approximately $100,000. This decrease reflects the reduced use of
consultants and marketing shows expenses.
Research and development expenses. Research and development expenses for the year ended
December 31, 2009 were approximately $1.3 million compared to approximately $2.1 million for the
year ended December 31, 2008, a decrease of approximately $800,000. The decreased 2009 costs are
primarily the result of the use of research and development personnel to meet contract delivery
schedules. In addition, the Company reduced the use of contractors for research and development
activity.
Loss on Disposal of Assets. The Company had a loss of $167,000 on the disposal of
assets for the year ended December 31, 2009. The Company had entered into an executive employment
agreement with the Companys current Chief Executive Officer (CEO) which provided that if he was
unable to independently sell his home in Atlanta, Georgia by October 10, 2008, the Company would provide a
guaranteed home purchase agreement at fair market value. On December 17, 2008, the Company
reimbursed the CEO for the equity he had accumulated on the home based upon the then fair market
value. On June 23, 2009, the home was sold. However, the Company was unable to fully recover the
equity amount paid which resulted in a loss on disposal of assets of approximately $101,000. In
addition, the move of the Israeli operation to its new location resulted in a loss on disposal of
assets of $66,000. There was no loss on disposal of assets for the year ended December 31, 2008.
Compensation charge. A non-cash charge of $969,000 was recorded by the Company in the twelve
month period ended December 31, 2008 related to a payment of such amount by Alchut to the Companys
former CEO, Israel Adan, in consideration of the cancellation of certain stock options held by Mr.
Adan and the waiver of Mr. Adans right to receive certain payments under his employment agreement
with the Company, in each case in connection with the sale of 3.7 million shares of common stock of
the Company by Alchut to Satimo on May 13, 2008. The amount paid to Mr. Adan by Alchut has been
treated as a capital contribution in the Companys balance sheet and compensation expense in the
Companys consolidated statement of operations.
Other (loss),net. Other (loss), net, for the year ended December 31, 2009 was approximately
$217,000 as compared to $5,000 for the year ended December 31, 2008, an increase of approximately
$212,000. This increase is primarily due to increased foreign exchange losses due to the strength
of the Euro and Shekel to the dollar and increased expenses for bank guarantees.
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Income taxes. Income tax benefit for the year ended December 31, 2009 was approximately
$508,000 compared to an income tax expense of $12,000 for the year ended December 31, 2008. The
Company records income tax expense on profitable operations and generally records income tax
benefits on losses where applicable except where it is not considered more likely than not that the future
benefit of such losses will be realized for income tax purposes in which case a valuation allowance is recorded equal to
such tax benefit. As a result of its profitability in 2009 and its estimate of
the ability to generate sufficient future taxable income in the U.S., Israel and Germany to realize
the benefit of a portion of its previously unrecognized deferred tax assets, the Company decreased its valuation allowance
by approximately $1.1 million at December 31, 2009. However, the benefit of the decrease of the
valuation allowance was partially offset by the expected results of a tax audit of the German
subsidiary for the years 2003 to 2006.
Liquidity and Capital Resources
The Company has historically satisfied its working capital requirements through cash flows from operations,
and through short term bank financing.
Net cash generated by operating activities during the year ended December 31, 2009 was
approximately $2,557,000 versus net cash used for operations of $1,756,000 for the year ended
December 31, 2008. In addition to net income of $1,470,000 the most significant sources of cash for
the year ended December 31, 2009 were the increase of accounts payable and accrued expenses of
$1,763,000 and accounts payable-current ultimate parent of $1,387,000. The most significant uses of
cash for the year ended December 31, 2009 were the increase in accounts receivable of $1,547,000
and the reduction of customer advances of $663,000.
Net cash used in investing activities for the year ended December 31, 2009 was $1,239,000
resulting primarily from the purchase of assets by the Israeli operation for its new production
facility.
The Company made use of its lines of credit to provide cash for its working capital
requirements. During the year ended December 31, 2009, the Company decreased its borrowings under
the lines of credit by $1,217,000 resulting in a total of $250,000 outstanding under its domestic
credit line of $750,000 at December 31, 2009. The Companys domestic line of credit expires on June
30, 2010. The Company anticipates that the line of credit will be renewed on or before the expiry
date. Orbit/FR Engineering, LTD has established lines of credit with the two Israeli banks and one
Indian Bank (Israeli Branch). The line of credit from one Israeli bank has a NIS denominated limit
of 378,000 and $1,900,000 for the issuances of bank guarantees of
letters of credit in favour of customers and one Israeli bank has a dollar
denominated limit of $250,000 and $2,400,000 for the issuances of
bank guarantees of letters of credit in favour of customers. The Indian bank line of
credit is $500,000 and $3,000,000 for the issuances of bank
guarantees of letters of credit in favour of customers. The interest rates charged by all the banks are LIBOR plus 2.25%. The bank
agreements with all three banks do not have expiration dates but are subject to termination on a
quarterly basis.
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 year ended December 31, 2009, approximately 86% of the
Companys revenues were billed in U.S. dollars. Most of the costs of the Companys contracts,
including costs subcontracted to the former Parent, have been, and will 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. The Company intends to continue to enter into U.S.
dollar-denominated contracts.
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Inflation and Seasonality
The Company does not believe that inflation or seasonality has had a significant effect on the
Companys operations to date.
Impact of Recent Accounting Pronouncements
In September 2006, FASB issued Statement No. 157, Fair Value Measurements. This Statement
defines fair value, established a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. This Statement is
effective for financial statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. The transition adjustment, measured as the difference
between the carrying amounts and the fair values of those financial instruments at the date this
Statement is initially applied, should be recognized as a cumulative effect adjustment to the
opening balance of retained earnings for the fiscal year in which this Statement is initially
applied. The adoption of this Statement did not have any immediate material impact on the Company.
In February 2007, the Financial Accounting Standards Board (FASB) issued statement No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of
FASB Statement No. 115. This Statement permits entities to choose to measure many financial
instruments and certain other items at fair value. The fair value option established by this
statement permits all entities to choose to measure eligible items at fair value at specified
election dates. A business entity reports its unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting date. This statement
was effective as of the beginning of the Companys year ended December 31, 2008 and did not have
any material impact on the Companys financial position and results of operations.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an Amendment of ARB 51. This guidance established new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. This guidance was effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years, except for the
presentation and disclosure requirements, which applied retrospectively. This guidance did not have
any material impact on our consolidated financial statements.
In April 2009, the FASB issued FSP No. FAS-107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. This amends previous guidance, to require disclosures about fair
value of financial instruments for interim reporting periods as well as in annual financial
statements. This guidance was effective for interim reporting periods ending after June 15, 2009.
This guidance did not have any impact on our consolidated financial statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This guidance was issued in
order to establish principles and requirements for reviewing and reporting subsequent events. On
February 24th 2010, the FASB issued Accounting Standards Update (ASU) 2010-09
to amend SFAS N0. 165, Subsequent Events. As a result, SEC registrants will not disclose the date
through which management evaluated subsequent events in the financial statements either in
originally issued financial statements or reissued financial statements. This guidance did not have
an impact on our consolidated financial statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles (FASB ASC) which was primarily codified
into Topic 105 Generally Accepted Accounting Standards in the ASC. This guidance becomes the
single source of authoritative nongovernmental U.S. generally accepted accounting principles
(GAAP), superseding all existing accounting standard documents and related accounting literature.
The guidance is effective for interim and annual periods ending after September 15, 2009. This
guidance did not have an impact on our consolidated financial statements.
Management does not believe that any other recently issued, but not yet effected, accounting
standards if currently adopted would have a material effect on the Companys consolidated financial
statements.
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ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
See Item 7 Managements Discussion and Analysis of Financial Conditions and Results of
Operations above.
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The reports of independent registered public accounting firms and consolidated financial
statements and schedule are set forth in this report beginning on page F-1.
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
None.
ITEM 9A(T). | CONTROLS AND PROCEDURES |
(a) Evaluation of disclosure controls and procedures. The Companys disclosure controls and
procedures (as defined in Rule 13a-15(e) or Rule 15d-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 Exchange Act 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 December 31, 2009. Based on this evaluation, the Companys Chief Executive Officer and Chief
Financial Officer concluded that, as of December 31, 2009, these controls and procedures were
effective.
(b) Change in Internal Controls. The management of Orbit/FR, Inc. (the Company) is responsible
for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rule 13a-15(f). The Companys internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the financial statements for external purposes in accordance with
generally accepted accounting principles. The Companys internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. All internal control systems, no matter how well designed, have inherent
limitations, including the possibility of human error and the circumvention of overriding controls.
Accordingly, even an effective system of internal control over financial reporting can provide only
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reasonable assurance with respect to financial statement preparation. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that degree of compliance with the policies or
procedures may deteriorate.
Management has assessed the effectiveness of the Companys internal control over financial
reporting as of December 31, 2009, based on the framework set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on
that assessment, management concludes that, as of December 31, 2009, the Companys internal control
over financial reporting is effective.
This annual report does not include an attestation report of the Companys registered public
accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by the Companys registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Company to provide only
managements report in this Annual Report on Form 10-K.
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
December 31, 2009 that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
ITEM 9B. | OTHER INFORMATION |
None.
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PART III
Item 10. | Directors, Executive Officers and Corporate Governance. |
Board of Directors
The following table sets forth the name, age and principal occupation of each director.
DIRECTOR | ||||||
NAME | AGE | SINCE | PRINCIPAL OCCUPATION | |||
Dr. Philippe Garreau |
48 | 2008 | Chairman of the Board of the Company, President and CEO of Microwave Vision, S.A. | |||
Per Iversen |
46 | 2008 | President and CEO of Orbit/FR, Inc. | |||
Raymond Boch |
45 | 2008 | Global Account Director for ORACLE Corporation | |||
Douglas Merrill |
42 | 2008 | President of Manufacturing and Supply Chain Strategies | |||
Eric Anderson |
50 | 2008 | President of SEAKR Engineering, Inc. |
Dr. Philippe Garreau has served as Chairman of the Board of the Company since May 2008. Mr.
Garreau has held the position of President and CEO of Microwave Vision, S.A. (formerly Satimo, S.A.) since 1996, an affiliate of the Company by
virtue of its ownership of approximately 3.7 million shares of the Companys common stock. Prior to
joining Microwave Vision, Dr. Garreau worked for the European Space Agencys technology center in
the Netherlands. Mr. Garreau provides the board of directors with significant knowledge of our industry.
Per Iversen was named a director of the Company and President and its CEO in May 2008. Prior
to joining the Company, Mr. Iversen had been employed by Satimo, S.A. since 1998, which is now an affiliate of the Company. Most recently,
Mr. Iversen was Chief Technology Officer and Director of US Operations of Satimo, S.A. Prior to
joining Satimo, Mr. Iversen pent seven years with the European Space Agency where he managed
antenna development programs for both terrestrial and space- borne applications. Mr. Iversen has significant experience in our industry and,
additionally, his position as the Companys president and chief executive officer provides the board of directors with unique insight
into the operations of the Company.
Raymond Boch was named a director of the Company in May 2008 and is a Global Account Director
for ORACLE Corporation where he has been since 2006. Prior to ORACLE, Mr. Boch spent several years
dealing with international development and account management for Companies such as French Telecom
and Hewlett Packard. Mr. Boch provides the board of directors with significant experience in international business matters. Mr. Boch also is
an independent director who is unaffiliated with Microwave Vision, the Companys majority stockholder.
Douglas
Merrill was named a director of the Company in June 2008 and
is the President of
Manufacturing and Supply Chain Strategies, an operations management consulting firm. Prior to
Manufacturing and Supply Chain Strategies, Mr. Merrill served as Operations Manager for Husky
Injection Molding from 2005 to 2008. Between 1991 and 2005 Mr. Merrill held various positions with
General Electric Corporation, most recently serving as its Manufacturing Integration Leader for its
GE Energy Global Supply Chain Management division. Mr. Merrill provides the board of directors with significant management experience in
global supply chain and has expertise in accounting and financial matters. Mr. Merrill also is an independent director who is
unaffiliated with Microwave Vision, the Companys majority stockholder.
Eric Anderson was named a director of the Company in June 2008 and is the President of
SEAKR Engineering, Inc. where he has been employed since 1985 and currently is responsible for
operations and software development. Mr. Anderson provides the board of directors with significant experience in technical and
engineering matters. Mr. Anderson also is an independent director who is unaffiliated with Microwave Vision, the Companys majority stockholder.
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Executive Officers and Key Employees of the Company
The following table sets forth certain information regarding the Companys executive officers
and certain key employees.
The biographical information for Mr. Iversen
is set forth above under Board of Directors.
NAME | AGE | POSITION | ||||
Per Iversen
|
46 | President and Chief Executive Officer | ||||
Relland Winand
|
55 | Chief Financial Officer | ||||
John Aubin
|
56 | Vice President, Business Development and CTO | ||||
Moshe Pinkasy
|
59 | Managing Director, Engineering | ||||
Marcel Boumans
|
51 | Managing Director, GmbH | ||||
William Campbell
|
54 | Vice President, Engineering and Program Management | ||||
Scott Martin
|
46 | Managing Director, Advanced ElectroMagnetics, Inc. |
Relland Winand was named Chief Financial Officer in March, 2008. From 2003 to 2007, Mr. Winand
served in several capacities at Traffic.com, Inc. including Controller, Vice President Finance and
Vice President Administration.
John Aubin was named Vice President Business Development and Chief Technology Officer in 2002,
and served as Vice President of Measurement Systems since 1996 to 2001. From 1991 to 1996, Mr.
Aubin was Vice President in charge of the Antenna Measurement Business Area for Flam & Russell.
Moshe Pinkasy has served as the Managing Director of Engineering since January 1997. From
February 1996 to December 1996, Mr. Pinkasy was Alchuts Manager of the Microwave Test and
Measurement Business in Israel. From 1992 to 1996, Mr. Pinkasy served, in various capacities, as
the Mechanical Engineering Department Manager for Alchut.
Marcel Boumans has served as the Managing Director of GmbH since March 1997. Since January 1,
2000, Mr. Boumans has been responsible for sales and customer support for Europe. From June 1995 to
March 1997, Mr. Boumans was a Systems Design Engineer for Dornier Satelliten Systeme GmbH, the
satellite systems subsidiary of Daimler-Benz Aerospace. From 1990 to 1995, Mr. Boumans was a Systems Design Engineer for Dornier GmbH, the communications and defense subsidiary of
Daimler-Benz Aerospace.
William Campbell joined the Company as Vice President, Engineering and Program Management in
December 2002. Mr. Campbell managed Optical Transponder development and production activities at
JDS Uniphase Transmission Systems Division from 2000 to 2002. Prior to that, Mr. Campbell worked
for BAE systems where he served as Business Area Director of High Power Transmission Systems, and
other various program management activities during his 13 years at the company.
Scott Martin joined the Company as Managing Director of Advanced ElectroMagnetics, Inc. in
June, 2006. Mr. Martin was previously Director of Operations for Micromanipulator from 2004 to
2006. Prior to that Mr. Martin was a Vice President and General Manager for Hytek Microsystems
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Companys
directors and executive officers, and persons who own more than ten percent of a registered class
of the Companys equity securities, to file with the United States Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a)
forms they file.
To the Companys knowledge, based solely on a review of the copies of such reports furnished
to the Company and written representations that no other reports were required, during fiscal year
ended December 31, 2009, all Section 16(a) filing requirements applicable to its officers, directors and greater than
ten percent stockholders were complied with.
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Code of Ethics
The Company has adopted the ORBIT/FR, Inc. Employee Ethics Policy that applies to all of its
officers and employees. If the Company makes any amendment to a provision of the Employee Ethics
Policy that applies to the Companys principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions, or grants any
waiver from a provision of the Employee Ethics Policy that applies to any such persons, any such
amendment or waiver will be publicly disclosed as required by applicable law.
A copy of the ORBIT/FR, Inc. Employee Ethics Policy was filed with the Securities and Exchange
Commission on March 30, 2004 as an exhibit to the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, and a copy of the Employee Ethics Policy will be provided to
any person without charge, upon request, by contacting the Company by mail at ORBIT/FR, Inc., 506
Prudential Road, Horsham, Pennsylvania 19044, or by phone at (215) 674-5100.
Director Independence
The Board uses the standards set forth in rules promulgated by The NASDAQ Stock Market LLC in
determining the independence of each member of its Audit Committee and its Compensation Committee.
Applying these standards, the Board has determined that all of the current members of the Companys
Audit Committee are each independent (as independence for audit committee members is currently
defined under Rule 4350(d)(A)(i) and Rule 4350(d)(A)(ii) of the NASDAQ Manual).
Our Board of Directors affirmatively determines the independence of each director and nominee
for election as a director using the standards set forth in rules promulgated by The NASDAQ Stock
Market LLC for determining the independence of a director, including the consideration of any
relationship which, in the opinion of the Board, would interfere with the exercise of independent
judgment in carrying out the directors responsibilities as a member of the Board. During the
Boards annual review of director independence, the Board determined that each of Mr. Boch, Mr.
Merrill and Mr. Anderson is an independent director as that term is defined under Rule
4200(a)(15) of the NASDAQ Manual.
Information Regarding Corporate Governance
Committees of the Board of Directors
The Board of Directors maintains a standing Compensation Committee and Audit Committee. The
Board of Directors does not maintain a standing committee regarding the nominations of individuals
to serve on the board of directors. The Company does not currently have a separately designated
nominating committee, or a committee performing similar functions. Applying the committee
independence standards as set forth in the NASDAQ Manual with respect to all of the directors of
the Company, Dr. Garreau and Mr. Iversen are not independent directors for purposes of their
membership in a nominating committee, or a committee performing similar functions, were such a
committee to be separately designated and created.
The Compensation Committee of the Board of Directors, subject to the approval of the Board of
Directors, determines the compensation of the Companys executive officers and oversees the
administration of executive compensation programs. The Compensation Committee is comprised of Mr.
Merrill, Mr. Boch and Mr. Anderson, each of whom the Board of Directors has determined to be
independent.
The Audit Committee recommends outside accountants, reviews the results and scope of the
annual audit, the services provided by the Companys independent auditors and the recommendations
of the auditors with respect to the Companys accounting systems and controls. During 2009, the
Audit Committee conducted seven meetings. The Audit Committee is comprised of Mr. Merrill, Mr. Boch
and Mr. Anderson, each of whom the Board of Directors has determined to be independent.
Audit Committee Financial Expert
The Board of Directors has determined that Mr. Merrill is an audit committee financial
expert within the meaning of the rules of the Securities and Exchange Commission.
Stockholder Nominations
The Company has not adopted any procedures by which the holders of the Companys securities may
recommend nominees to the Companys Board of Directors.
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Item 11. | Executive Compensation. |
Overview
Compensation Philosophy
The Companys compensation program generally is designed to motivate and reward our executive
officers and other personnel responsible for attaining financial objectives that will contribute to
the overall goal of enhancing stockholder value. In administering the program, the Compensation
Committee assesses the performance of our business and our employees relative to those objectives.
The Companys compensation program generally provides incentives to achieve annual and longer term
objectives. The principal elements of the compensation plan include base salary, cash bonus awards
and stock awards in the form of grants of stock options. These elements generally are blended in
order to provide compensation packages which provide competitive pay, reward the achievement of
financial objectives and align the interests of our executive officers and other high level
personnel with those of our stockholders.
Compensation Program
Base Salary. Base salary levels for executive officers are determined annually. In setting
base salaries for officers and employees, the Compensation Committee considers the experience of
the individual, the scope and complexity of the position, our size and growth rate, profitability,
and the compensation paid by our competitors. The Compensation Committee generally approves, based
upon in appropriate circumstances the recommendations of the Companys Chief Executive Officer, the
base salaries that are paid to the Companys executive officers other than its Chief Executive
Officer whose base salary is approved by the Compensation Committee. Overall, the Compensation
Committee believes that the base salaries of its executive officers are approximately competitive
with median base salary levels for similar positions with our peer companies. The Compensation
Committee approved salary adjustments in March 2010, effective April 1, 2010, for Messrs. Iversen,
Aubin and Campbell of $4,500, $4,327 and $3,969 respectively.
Bonuses. The Companys executive officers are eligible to receive bonus awards designed to
motivate them to attain short-term and longer-term corporate and individual management goals.
Bonuses are based on the attainment of specific Company performance measures established by the
Compensation Committee early in the fiscal year, and by the achievement of specified individual
performance objectives and the degree to which each executive officer contributes to the overall
success of the Company and the management team. The annual bonus is paid in cash in an amount
reviewed and approved, in appropriate circumstances on the recommendation of Mr. Iversen, by the
Compensation Committee and is ordinarily paid in the first quarter following the completion of each
fiscal year. For the year ended December 31, 2009, bonuses were awarded to Messrs. Aubin and
Campbell of $25,000 and $35,000, respectively.
Stock Awards. To promote the Companys long-term objectives, stock awards are made to officers
and employees who are in a position to make a significant contribution to our long-term success.
The stock awards are made to employees and consultants pursuant to our 1997 Stock Option Plan, in
the form of qualified and nonqualified stock options with a exercise price of the market price of
the Companys common stock on the date of grant. The Compensation Committee has discretion to
determine which employees and consultants will be granted stock options, the number of shares to be
optioned and the terms and conditions of such options. The full Board of Directors conducts the
administration of the option plan with respect to options granted to directors or to executive
officers. Options currently outstanding generally vest over a five year period. In selecting
recipients and the size of grants, the Compensation Committee considers various factors such as the
potential of the recipient, the salary of the recipient and competitive factors affecting our
ability to attract and retain employees, prior grants, a comparison of awards made to officers in
comparable positions at similar companies and the performance of our business. The Company did not
grant stock options to the named executive officers during the year ended December 31, 2009.
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Director Compensation
The following table shows certain information with respect to the compensation of all
directors of the Company for the year ended December 31, 2009.
2008 DIRECTOR COMPENSATION TABLE
Fees Earned or | Option | |||||||||||
Paid in Cash | Awards | Total | ||||||||||
Name | ($) | ($) | ($) | |||||||||
Current Directors |
||||||||||||
Dr. Philippe Garreau |
| | | |||||||||
Per Iversen |
| | | |||||||||
Raymond Boch |
2,000 | | 2,000 | |||||||||
Douglas Merrill |
4,250 | | 4,250 | |||||||||
Eric Andersen |
3,750 | | 3,750 |
Directors not receiving compensation as an officer or employee of the
Company receive $500 per meeting attended and $250 per meeting attended telephonically.
Compensation Tables and Related Information
The following tables and footnotes set forth information, for the years ended December 31,
2009 and December 31, 2008, concerning compensation awarded to, earned by or paid to (i) the
Companys Chief Executive Officer, and (ii) each of the Companys two (2) other most highly
compensated executive officers for the years ended December 31, 2009 and December 31, 2008 (the
Named Executive Officers).
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Summary Compensation Table
Non-Equity Plan | ||||||||||||||||||||||||
Name and | Compensation | Option | All Other | |||||||||||||||||||||
Principal | Salary | Table | Awards | Compensation | Total | |||||||||||||||||||
Position | Year | ($) | ($) | ($)(1) | ($)(2) | ($) | ||||||||||||||||||
Per Iversen |
2009 | 158,285 | | | 7,738 | 166,023 | ||||||||||||||||||
Chief Executive Officer (Principal
Executive Officer) |
2008 | 80,774 | | | 433 | 81,207 | ||||||||||||||||||
John Aubin |
2009 | 161,716 | | 5,600 | 3,159 | 170,475 | ||||||||||||||||||
Vice President Chief Technology Officer |
2008 | 137,904 | 20,000 | 5,600 | 2,784 | 166,288 | ||||||||||||||||||
William Campbell |
2009 | 136,214 | | 5,600 | 681 | 142,495 | ||||||||||||||||||
Vice President, Engineering and
Program Management |
2008 | 127,207 | 25,000 | 5,600 | 733 | 158,540 |
(1) | Represents the amount recognized for financial statement reporting purposes for the year ended December 31, 2009 in accordance with FASB Statement No. 123(R). The valuation assumptions used for the FASB Statement No. 123(R) calculation are as follows: expected life of 7 years; volatility of 7.74%; dividends of zero; and a risk free interest rate of 5.5%. | |
(2) | Represents contributions under the Companys 401(k) Plan. In addition, Mr. Iversen received $5,688 in compensation for the personal use of a Company car. |
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Outstanding Equity Awards at Fiscal Year-End
Option Awards | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | ||||||||||||||
Options | Options | Exercise | Option | |||||||||||||
(#) | (#) | Price | Expiration | |||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | ||||||||||||
Per Iversen |
| | | | ||||||||||||
John Aubin |
20,000 | | 3.00 | 3/5/12 | ||||||||||||
7,500 | 7,500 | 1.95 | 7/9/17 | |||||||||||||
William Campbell |
15,000 | | 3.00 | 11/25/12 | ||||||||||||
7,500 | 7,500 | 1.95 | 7/9/17 |
Employment Agreement
Effective June 2, 2008 and executed on December 16, 2008, the Company entered into an
employment agreement with Per Iversen, pursuant to which Mr. Iversen was named President and Chief
Executive Officer of the Company. The agreement calls for Mr. Iversen to receive a base salary of
$150,000, and provides that Mr. Iversen may be entitled to an annual bonus as determined by the
Compensation Committee of the Companys Board of Directors. In addition, the Board of Directors
approved Mr. Iversens use of the company vehicle previously driven by the Companys former CEO.
Mr. Iversens employment agreement may be terminated by the Company for cause, which
is defined as the material breach of the employment agreement by Mr. Iversen or if Mr. Iversen
commits a material act of dishonesty or a material breach of trust or a fiduciary obligation with
respect to the Company. Under the employment agreement, Mr. Iversen is subject to certain
non-disclosure, non-solicitation and non-competitive covenants.
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Table of Contents
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of March 30, 2010, certain information with regard to
beneficial ownership (as determined in accordance with Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of outstanding shares of the Companys Common Stock by (i) each
person known by the Company to beneficially own five percent (5%) or more of the outstanding shares
of the Companys Common Stock, (ii) each director and Named Executive Officer (as defined below)
individually, and (iii) all executive officers and directors of the Company as a group. Unless
otherwise indicated, the address of each of the persons named in the following table is c/o
Orbit/FR, Inc., 506 Prudential Road, Horsham, Pennsylvania 19044.
Percentage of | ||||||||
Total Number of | Class of | |||||||
Shares of | Common | |||||||
Common | Stock | |||||||
Stock Beneficial | Beneficially | |||||||
Name and Address of Beneficial Owner | Owned (1) | Owned (1) | ||||||
Five Percent (5%) or more Beneficial Owners Microwave Vision, SA 17, Avenue de Norvege 91 953 Coutaboeuf-France |
3,700,000 | 61.8 | % | |||||
Wellington Trust Company (2) c/o Wellington Management Company, LLP 75 State Street Boston, MA 02109 |
334,800 | 5.6 | % | |||||
Directors Dr. Philippe Garreau (3) 17, Avenue de Norvege 91 953 Coutaboeuf-France |
3,700,000 | 61.8 | % | |||||
Raymond Boch Douglas Merrill |
| | ||||||
Eric Anderson |
| | ||||||
Named Executive Officers |
| | ||||||
Per Iversen |
| | ||||||
John Aubin (4) |
27,500 | * | ||||||
William Campbell (5) |
22,500 | * | ||||||
All executive officers and directors as a group (10 persons) |
3,821,350 | 62.4 | % |
* | Less than 1% of the outstanding Common Stock. |
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(1) | The securities beneficially owned by an individual are determined in accordance with the definition of beneficial ownership set forth in the regulations of the United States Securities and Exchange Commission (the SEC). Accordingly, they may include securities owned by or for, among others, the spouse and/or minor children of the individual and any other relative who has the same home as such individual, as well as other securities as to which the individual has or shares voting or investment power or has the right to acquire under outstanding stock options within 60 days of March 31, 2010. Beneficial ownership may be disclaimed as to certain of the securities. | |
(2) | Based on information set forth in the Schedule 13G filed by Wellington Trust Company with the Securities and Exchange Commission on February 17, 2009. | |
(3) | Represents 3,700,000 shares held by Microwave Vision, Dr. Garreau serves as its President and CEO. | |
(4) | Represents 27,500 shares of Common Stock issuable upon the exercise of options granted to Mr. Aubin. | |
(5) | Represents 22,500 shares of Common Stock issuable upon the exercise of options granted to Mr. Campbell. |
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Item 13. Certain Relationships and Related Transactions, and Director Independence.
Review, Approval or Ratification of Transactions with Related Persons
The Board of Directors has adopted a policy regarding the review and approval of transactions
with related persons, which provides that certain transactions in which the Company is a party must
be approved by (i) the Audit Committee, and (ii) to the extent such transaction involves
compensation, also by the Compensation Committee. Those transactions that require review and
approval include transactions to which any executive officer, or board member or board member
nominee, or any immediate family member or affiliate of any of the foregoing, is a party with the
Company. Types of transactions excluded by the policy include transactions generally available to
all of our employees and transactions involving solely matters of executive compensation, which
transactions need only to be approved by our compensation committee.
Transactions subject to review under this policy may proceed if the Audit Committee finds that
the transaction is on terms comparable to those that could be obtained in arms length dealings
with an unrelated third party, and, to the extent they involve compensation, if they are also
approved by the Compensation Committee.
As of December 31, 2009, Microwave Vision owned 3.7 million shares, representing approximately
61.8% of the outstanding shares, of the Companys common stock.
Transactions with Related Persons during Fiscal Year 2009
Orbit-Alchut Technologies, Ltd., an Israeli publicly traded corporation controlled
approximately 61.8% of the Companys stock until the sale of that stock to Satimo, S.A. on May 13,
2008 (Alchut). On June 30, 2009, Microwave Vision acquired the 3.7 million common shares of the
Company through a reorganization involving its wholly owned subsidiary, Satimo. Included in sales
and cost of revenues for the year ended December 31, 2009 are approximately $530,000 and $683,000,
respectively, relating to sales to and purchases from Microwave Vision subsequent to May 13, 2008.
On August 14, 2009, the Company entered into an Assistance and Provision of Services Agreement (the
Services Agreement) with Microwave Vision and several subsidiaries of Microwave Vision, including
Satimo. Pursuant to the Services Agreement, Microwave Vision agreed to provide management,
operational, sales and marketing, legal, technical and other services to the Company, Satimo and
Microwave Visions other direct and indirect Subsidaries (collectively, the Subsidaries). In
consideration thereof, the Company, Satimo and each of the other Subsidiaries agreed to pay
Microwave Vision a fee to be determined as of the start of each calendar year, commencing on
January 1, 2009, 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 a result of the implementation of the Services Agreement effective as of January 1,
2009, the Company recorded approximately $1.54 million in expenses related to the Sales Agreement
for the year ended December 31, 2009.
Item 14. Principal Accountant Fees and Services.
Accountant Fees
The following table presents fees for professional services rendered in the United States by
Cornick, Garber & Sandler, LLP and in Israel, Ziv Haft in 2009 and by Hoberman Miller and in Israel by Kost Forer Gabbay &
Kaiserer for 2008, for the audit of the Companys annual financial statements, the review
of the interim financial statements the preparation of its tax returns, and fees for consulting and
other professional services.
2009 | 2008 | |||||||
Audit Fees |
$ | 168,000 | $ | 143,000 | ||||
Audit-Related Fees |
66,000 | 56,000 | ||||||
Tax Fees |
19,000 | 16,000 | ||||||
All Other Fees |
4,000 | -0- |
All other fees relate to work performed under Sarbanes-Oxley Section 404 compliance
Audit Committee Pre-Approval Policies and Procedures
The Companys Audit Committee policies and procedures require the pre-approval by the Audit
Committee of all fees paid to, and all services performed by, the Companys independent accounting
firm. The Audit Committee approves the proposed services, including the
36
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nature, type, and scope of services contemplated and the related fees, to be rendered by the
Companys independent accounting firm during the year. In addition, Audit Committee pre-approval is
also required for those engagements that may arise during the course of the year that are outside
the scope of the initial services and fees pre-approved by the Audit Committee.
Pursuant to the Sarbanes-Oxley Act of 2002, the fees and services provided as noted in the
table above were authorized and approved by the Audit Committee in compliance with the pre-approval
policies and procedures described herein.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE
(a)(1) | Consolidated Financial Statements |
Independent Auditors Reports | |||
Auditors Reports to the Shareholders of ORBIT/FR Engineering, LTD. | |||
Consolidated Balance Sheets at December 31, 2009 and 2008 | |||
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008 | |||
Consolidated Statements of Stockholders Equity for the years ended December 31, 2009 and 2008 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008 | |||
Notes to Consolidated Financial Statements |
(a)(3) | Exhibits |
The exhibits filed as part of this report are listed under exhibits as subsection (c) of this Item 15. |
(b) | Exhibits |
2.1 | Stock Purchase Agreement dated March 31, 1997 by and among Advanced ElectroMagnetics, Inc., Anechoic Systems, Inc., Gabriel A. Sanchez, Barbara Sanchez and the Company. (1) | |
2.2 | Share Exchange Agreement dated December 31, 1996 by and among Orbit-Alchut Technologies, Ltd., Orbit Advanced Systems, Ltd. and the Company. (1) | |
2.3 | Asset Acquisition Agreement dated December 31, 1996 by and between Orbit-Alchut Technologies, Ltd. and
Orbit F.R. Engineering, Ltd. (1) |
|
2.4 | Inventory Acquisition Agreement dated January 1, 1997 by and between Orbit-Alchut Technologies, Ltd. and
Orbit F.R. Engineering, Ltd. (1) |
|
2.5 | Stock Purchase Agreement dated June 28, 1996 by and among Orbit Advanced Technologies, Inc., The Samuel T. Russell Trust, Richard P. Flam, Rickey E. Hartman, Lois A. R. Charles, Dorothy Russell, John Aubin, Norma D. Kegg and Flam & Russell, Inc. (1) |
37
Table of Contents
3.1 | Amended and Restated Certificate of Incorporation of the Company. (2) | |
3.2 | Bylaws of the Company. (7) | |
4.1 | Specimen Common Stock Certificate of the Company. (2) | |
10.1* | Employment Agreement dated February 15, 1997 by and between the Company and Aryeh Trabelsi. (1) |
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10.2* | Employment Agreement dated January 1, 1997 by and between the Company and Moshe Pinkasy. (1) | |
10.3 | 1997 Equity Incentive Plan. (1) | |
10.4 | Services Agreement dated January 1, 1997 by and among Orbit-Alchut Technologies, Ltd., Orbit F.R. Engineering, Ltd. and the Company. (1) | |
10.5 | ORBIT/FR Inc. non-debarment agreement dated February 15, 2000 (4) | |
10.6 | Consulting agreement dated July 24, 2002 by and between the Company and Gurion Meltzer. (5) | |
10.7* | Employment Agreement dated September 5, 2002 by and between the Company and Zeev Stein. (5) | |
10.8* | Amended and Restated Employment Agreement dated June 20, 2003 by and between the Company and Israel Adan (5) | |
10.9 | Management Agreement dated January 1, 2003 by and between the Company and Zeev Stein Properties, LTD. (6) | |
10.10 | Consent Agreement. (8) | |
10.11* | Employment Agreement dated December 16, 2008 by and between the Company and Per Iversen. (9) | |
10.12 | Services Agreement dated August 14, 2009 among the Company, Microwave Vision Group, S.A. and the other parties thereto. (10) | |
14.1 | Employee Ethics Policy. (6) | |
21.1 | Subsidiaries of the Registrant. (3) | |
23.1 | Consent of Cornick, Garber & Sandler, LLP. | |
23.3 | Consent of Kost, Forer, Gabbay & Kaslever | |
23.4 | Consent of Ziv Haft Certified Public Accountants (Isr.). | |
24.1 | Power of Attorney (included on signature page). | |
31.1 | Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2003, of Per Iversen, President and Chief Executive Officer. | |
31.2 | Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2003, of Relland Winand, Chief Financial Officer. | |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003, of Per Iversen, President and Chief Executive Officer | |
32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003, of Relland Winand, Chief Financial Officer. |
* | Management contract, compensatory plan or arrangement | |
(1) | Incorporated by reference to the Companys Registration Statement on Form S-1 (File No. 333-25015), filed with the Commission on April 11, 1997 | |
(2) | Incorporated by reference to Amendment 1 of the Companys Registration Statement on Form S-1 (File No. 333-25015), filed with the Commission on May 19, 1997 | |
(3) | Incorporated by reference to Amendment 2 of the Companys Registration Statement on Form S-1 (File |
39
Table of Contents
No. 333-25015), filed with the Commission on June 5, 1997 | ||
(4) | Incorporated by reference to Companys Annual Report on Form 10-K filed on March 30, 2001 | |
(5) | Incorporated by reference to Companys Annual Report on Form 10-K filed on March 31, 2003 | |
(6) | Incorporated by reference to Companys Annual Report on Form 10-K filed on March 30, 2004 | |
(7) | Incorporated by reference to Companys Quarterly Report on Form 8-K filed on March 26, 2007 | |
(8) | Incorporated by reference to Companys Annual Report on Form 10-K filed on March 29, 2006 | |
(9) | Incorporated by reference to Companys Annual Report on Form 10-K filed on April 15, 2009 | |
(10) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q filed on August 19, 2009 |
40
Table of Contents
ORBIT/FR, Inc.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) 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 |
||||
Date: March 30, 2010 | /s/ Philippe Garreau | |||
Philippe Garreau | ||||
Chairman of the Board | ||||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Philippe Garreau and each of them, his true and lawful attorney-in-fact and agent with
full power of substitution or resubstitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments to this Annual Report, and to file the same, with
all exhibits thereto, and other documentation in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the 30th day of March
2010.
Name | Title | |
/s/ Philippe Garreau
|
Chairman of the Board | |
/s/ Per Iversen
|
Director, President and Chief Executive Officer | |
(principal executive officer) | ||
/s/ Relland Winand
|
Chief Financial Officer | |
(principal accounting and financial officer) | ||
/s/ Raymond Boch
|
Director | |
/s/ Douglas Merrill
|
Director | |
/s/ Eric Anderson
|
Director | |
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and
Board of Directors
Orbit/FR, Inc.
We have audited the consolidated balance sheets of Orbit/FR, Inc. and Subsidiaries as of December
31, 2009 and December 31, 2008 and the related consolidated statements of operations, stockholders
equity and cash flows for the years then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the financial statements
of Orbit/FR Engineering, LTD., a wholly owned subsidiary, which statements reflect total assets of
$9,283,000 as of December 31, 2009 and $7,532,000 at December 31, 2008 and total revenues of
$14,435,000 and $9,009,000 for the respective years then ended. Those statements were audited by
other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to
the amounts included for Orbit/FR Engineering, LTD., is based solely on the reports of the other
auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits and
the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the consolidated
financial statements referred to above present fairly, in all material respects, the financial
position of Orbit/FR, Inc. and Subsidiaries as of December 31, 2009 and December 31, 2008 and the
consolidated results of their operations and cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ CORNICK, GARBER & SANDLER, LLP |
March 30, 2010
New York, NY
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
ORBIT/FR ENGINEERING, LTD.
We have audited the accompanying balance sheet of Orbit/Fr Engineering, Ltd. (the Company)
as of December 31, 2009, and the related statements of operations, changes in shareholders equity
and cash flows for the period ended December 31, 2009. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We
were not engaged to perform an audit of the Companys internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2009, and the results of its
operations and its cash flows for the period ended December 31, 2009, in conformity with accounting principles generally accepted in the
United States of America.
/s/ Ziv Haft. | ||
Certified Public Accountants (Isr.) | ||
BDO Member Firm |
Tel-Aviv, Israel
March 25, 2010
March 25, 2010
Table of Contents
n | Kost Forer Gabbay & Kasierer 3 Aminadav St. Tel-Aviv 67067, Israel |
n | Phone: 972-3-6232525 Fax: 972-3-5622555 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
ORBIT/FR ENGINEERING, LTD.
We have audited the accompanying balance sheets of Orbit/Fr Engineering, Ltd. (the Company)
as of December 31, 2008 and 2007, and the related statements of income, changes in shareholders equity and
cash flows for each of the two years in the period ended December 31, 2008. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Companys internal control over
financial reporting. Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2008 and 2007, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S.
generally accepted accounting principles.
Tel-Aviv, Israel | /S/ KOST FORER GABBAY & KASIERER | |
March 31, 2009 | A Member of Ernst & Young Global |
F-3
Table of Contents
ORBIT/FR, Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
December 31, | ||||||||
2009 | 2008 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,622 | $ | 1,521 | ||||
Accounts receivable, less allowance of $67 and $45 in 2009 and 2008, respectively |
9,207 | 7,660 | ||||||
Inventory |
2,681 | 2,353 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts |
1,668 | 1,445 | ||||||
Income tax refunds receivable |
542 | 440 | ||||||
Deferred income taxes |
835 | 887 | ||||||
Other |
277 | 299 | ||||||
Total current assets |
16,832 | 14,605 | ||||||
Property and equipment, net |
2,093 | 1,319 | ||||||
Deferred income taxes |
887 | 327 | ||||||
Cost in excess of net assets acquired |
301 | 301 | ||||||
Total assets |
$ | 20,113 | $ | 16,552 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 3,946 | $ | 2,174 | ||||
Accounts payablecurrent ultimate parent |
1,482 | 95 | ||||||
Accrued expenses |
3,355 | 3,364 | ||||||
Short-term bank financing |
250 | 1,467 | ||||||
Customer advances |
13 | 675 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts |
2,813 | 2,070 | ||||||
Total liabilities, all current |
11,859 | 9,845 | ||||||
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 |
16,460 | 16,383 | ||||||
Accumulated deficit |
(8,024 | ) | (9,494 | ) | ||||
Treasury stock82,700 shares in 2009 and 82,900 shares in 2008, at cost |
(243 | ) | (243 | ) | ||||
Total stockholders equity |
8,254 | 6,707 | ||||||
Total liabilities and stockholders equity |
$ | 20,113 | $ | 16,552 | ||||
See accompanying notes.
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Table of Contents
ORBIT/FR, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
Years Ended December 31, | ||||||||
2009 | 2008 | |||||||
Contract revenues |
$ | 31,246 | $ | 23,118 | ||||
Cost of revenues |
20,483 | 17,103 | ||||||
Gross profit |
10,763 | 6,015 | ||||||
Operating expenses: |
||||||||
General and administrative |
3,005 | 2,768 | ||||||
Sales and marketing |
3,565 | 3,655 | ||||||
Sales, marketing, general and administrative-MVG |
1,539 | | ||||||
Research and development |
1,308 | 2,080 | ||||||
Loss on disposal of assets |
167 | | ||||||
Total operating expenses |
9,584 | 8,503 | ||||||
Operating income (loss) |
1,179 | (2,488 | ) | |||||
Compensation charge coincident to change in control |
| (969 | ) | |||||
Other (loss), net |
(217 | ) | (5 | ) | ||||
Income (loss) before income tax (benefit) expense |
962 | (3,462 | ) | |||||
Income tax (benefit) expense |
(508 | ) | 12 | |||||
Net income (loss) |
$ | 1,470 | $ | (3,474 | ) | |||
Basic and diluted income (loss) per share |
$ | 0.24 | $ | (0.58 | ) | |||
Weighted average number common shares basic |
6,001,583 | 6,001,573 | ||||||
Weighted average number common shares diluted |
6,001,583 | 6,001,573 | ||||||
See accompanying notes.
F-5
Table of Contents
ORBIT/FR, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Shares and amounts in thousands)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Shares and amounts in thousands)
Additional | Total | |||||||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Treasury Stock | Stockholders | ||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Equity | ||||||||||||||||||||||
Balance,
January 1, 2008 |
6,084 | 61 | 15,275 | (6,020 | ) | 83 | (243 | ) | 9,073 | |||||||||||||||||||
Net (loss) |
| | | (3,474 | ) | | | (3,474 | ) | |||||||||||||||||||
Compensation charge
coincident to change in
control |
969 | 969 | ||||||||||||||||||||||||||
Stock-based compensation |
| | 139 | | | | 139 | |||||||||||||||||||||
Balance, December 31, 2008 |
6,084 | $ | 61 | $ | 16,383 | $ | (9,494 | ) | 83 | $ | (243 | ) | $ | 6,707 | ||||||||||||||
Net income |
1,470 | 1,470 | ||||||||||||||||||||||||||
Stock-based compensation |
| | 77 | | | | 77 | |||||||||||||||||||||
Balance, December 31, 2009 |
6,084 | $ | 61 | $ | 16,460 | $ | (8,024 | ) | 83 | $ | (243 | ) | $ | 8,254 | ||||||||||||||
See accompanying notes.
F-6
Table of Contents
ORBIT/FR, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended December 31, | |||||||||
2009 | 2008 | ||||||||
Cash flows from operating activities: |
|||||||||
Net income (loss) |
$ | 1,470 | $ | (3,474 | ) | ||||
Adjustments to reconcile results of operations to net cash (used in) provided by operating activities: |
|||||||||
Depreciation |
399 | 363 | |||||||
Loss on disposal of fixed assets |
66 | 3 | |||||||
Non-cash and stock-based compensation |
77 | 1,108 | |||||||
Deferred income tax provision |
(508 | ) | | ||||||
Changes in operating assets and liabilities: |
|||||||||
Accounts receivable |
(1,547 | ) | (871 | ) | |||||
Inventory |
(327 | ) | 84 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts |
(223 | ) | 647 | ||||||
Income tax refunds receivable |
(102 | ) | (176 | ) | |||||
Other current assets |
22 | (24 | ) | ||||||
Accounts payable and accrued expenses |
1,763 | (79 | ) | ||||||
Accounts payablecurrent ultimate parent |
1,387 | (623 | ) | ||||||
Customer advances |
(663 | ) | 180 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts |
743 | 1,106 | |||||||
Net cash provided by (used in) operating activities |
2,557 | (1,756 | ) | ||||||
Cash flows from investing activities: |
|||||||||
Proceeds from sale of property and equipment |
| 68 | |||||||
Purchase of property and equipment |
(1,239 | ) | (212 | ) | |||||
Net cash (used in) investing activities |
(1,239 | ) | (144 | ) | |||||
Cash flows from financing activities |
|||||||||
Proceeds from short term bank financing |
1,050 | 1,507 | |||||||
Repayments of short term bank financing |
(2,267 | ) | (300 | ) | |||||
Net cash (used in) provided by financing activities |
(1,217 | ) | 1,207 | ||||||
Net increase (decrease) in cash and cash equivalents |
101 | (693 | ) | ||||||
Cash and cash equivalents at beginning of year |
1,521 | 2,214 | |||||||
Cash and cash equivalents at end of year |
$ | 1,622 | $ | 1,521 | |||||
Supplemental disclosures of cash flow information: |
|||||||||
Net cash paid during the year for income taxes |
$ | 267 | $ | 308 | |||||
Net cash paid during the year for interest |
$ | 15 | $ | 42 | |||||
See accompanying notes.
F-7
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
1. Summary of Significant Accounting Policies
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 Alchut). On May 13, 2008, Alchut sold all of its
3.7 million shares of common stock of the Company to Satimo Industries, SA (Satimo) and on June 30,
2009, as a result of a corporate reorganization, Satimo became a wholly owned subsidiary of
Microwave Vision, SA (Microwave Vision) a newly created holding company which is publicly traded
on the ALTERNEXT stock exchange. The Company develops, markets, and supports sophisticated
automated microwave test and measurement systems for the wireless communications, satellite,
automotive, and aerospace/defense 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 (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 America.
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.
Cash and Cash Equivalents
The Company classifies as cash equivalents all highly liquid instruments with
original maturities of three months or less at the time of purchase.
Accounts Receivable
The Company accounts for potential losses in accounts receivable utilizing the
allowance method. In reviewing aged receivables, management considers its knowledge of customers,
historical losses and current economic conditions in establishing the allowance for doubtful
accounts.
Inventory
Inventory is stated at the lower of cost, determined on the first-in first out
method, or market.
F-8
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
1. Summary of Significant Accounting Policies (continued)
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed on accelerated
methods for both financial reporting and income tax reporting purposes over the estimated useful
lives as follows: office equipment 5-7 years; lab equipment 5 years; furniture and fixtures 7
years; transportation equipment 5 years; leasehold improvements life of lease.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (goodwill), represents the excess of costs
over the fair value of the net assets acquired in connection with the Companys acquisition of
Advanced ElectroMagnetics, Inc. (AEMI) in 1997.
The Company has tested the goodwill of AEMI for impairment at December 31, 2009 and
2008 using the present value of future cash flow valuation method. No adjustment for the value of
goodwill was necessary.
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 tool 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. 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.
Revenues from electro-mechanical equipment sold to customers which are not part of a larger
contract are recognized when the contract is completed and the equipment is delivered.
Research and Development
Internally funded research and development costs are charged to operations as
incurred. Included in cost of revenues are customer-funded research and development costs of
approximately $147 and $33 for the years ended December 31, 2009 and 2008, respectively. Other
research and development costs are separately reflected in the Consolidated Statement of
Operations.
Concentrations of Credit Risk and Significant Customers
Financial instruments, which potentially subject the Company to a concentration of
credit risk, consist principally of cash and accounts receivable.
F-9
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
1. Summary of Significant Accounting Policies (continued)
The Company maintains cash and cash equivalents with various major commercial
institutions in the U.S. and overseas. At December 31, 2009, cash balances that are either
uninsured under the Federal Deposit Insurance Corporation coverage limit of $250,000 per financial
institution, or are located overseas without such type of insurance coverage, totaled approximately
$1,466. The Company does not anticipate credit risk in connection with its concentration of cash.
To reduce credit risk relating to the Companys sales in the U.S. and overseas, the
Company performs ongoing credit evaluations of its commercial customers financial condition, but
generally does not require collateral for government and domestic commercial customers. For certain
foreign commercial customers, the Company generally requires irrevocable letters of credit in the
amount of the total contract. At December 31, 2009, there were twenty bank guarantees in place for
foreign customers with an aggregate value of approximately $3,444.
Warranty Expense
The Company provides for warranty costs on its products. Product warranty periods
generally extend for one year from the date of sale.
Income Taxes
The Company uses the liability method to account for income taxes. Accordingly, deferred
income taxes reflect the net tax effect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts reportable for income tax
purposes. The Company files a consolidated federal income tax return with its domestic subsidiaries
and separate income tax returns in Israel and Germany for its foreign subsidiaries.
Effective January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprises financial statements in
accordance with SFAS Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a
recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition.
F-10
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
1. Summary of Significant Accounting Policies (continued)
Foreign Currency Translation
The Companys functional currency for operations in Israel is the U.S. dollar. The
Companys functional currency for the operations of its German subsidiary is the Euro. Foreign
currency transaction gains and losses net, both realized and unrealized, are recognized currently
in the consolidated statements of operations. Unrealized gains and losses arising from the
translation of financial statements in consolidation, which would be recognized in other
comprehensive income within stockholders equity, historically have not been material and have
been omitted.
For the years ended December 31, 2009 and 2008, approximately 14% and 19%, respectively,
of the Companys revenue was billed in currencies other than the U.S. dollar. Substantially all of
the costs of the Companys contracts have been from U.S. dollar denominated transactions.
Income (Loss) Per Share Amounts
Basic income (loss) per share is calculated by dividing the net income (loss) by the
weighted average common shares outstanding for the period. Diluted income per share is calculated
by dividing net income by the weighted average common shares outstanding for the period plus the
dilutive effect of stock options. The effect of outstanding stock options on net losses would be
anti-dilutive and is not included in the presentation of diluted loss per share in 2008 and there
were no dilutive stock options outstanding in 2009.
Stock-Based Compensation
The Company has stock-based employee compensation plans, which are described more fully
in Note 12. Prior to January 1, 2006, the Company accounted for stock options issued pursuant to
its stock option plans (the Plans) under recognition and measurement provisions of APB Opinion
No. 25, as permitted by SFAS No. 123. Effective January 1, 2006, the Company adopted the fair value
provisions for share-based awards pursuant to SFAS No. 123(R), and compensation costs for all share
based awards granted subsequent to January 1, 2006, are based on the grant-date fair value
estimated in accordance with the provisions of SFAS No. 123(R) and recognized on a straight line
basis over the shorter of the vesting or requisite service periods.
Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and
bank financing reported in the consolidated balance sheets equal or approximate fair value due to
their short maturities.
F-11
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
1. Summary of Significant Accounting Policies (continued)
Impact of Recent Accounting Pronouncements
In September 2006, FASB issued Statement No. 157, Fair Value Measurements. This
Statement defines fair value, established a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value measurements. This
Statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The transition adjustment,
measured as the difference between the carrying amounts and the fair values of those financial
instruments at the date this Statement is initially applied, should be recognized as a cumulative
effect adjustment to the opening balance of retained earnings for the fiscal year in which this
Statement is initially applied. The adoption of this Statement did not have any immediate material
impact on the Company.
In February 2007, the Financial Accounting Standards Board (FASB) issued statement
No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an
amendment of FASB Statement No. 115. This Statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The fair value option established by
this statement permits all entities to choose to measure eligible items at fair value at specified
election dates. A business entity reports its unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting date. This Statement
was effective as of the beginning of the Companys year ended December 31, 2008 and did not have
any material impact on the Companys financial position and results of operations.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an Amendment of ARB 51. This guidance established new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. This guidance was effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years, except for the
presentation and disclosure requirements, which applied retrospectively. This guidance did not have
any material impact on our consolidated financial statements.
In April 2009, the FASB issued FSP No. FAS-107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. This amends previous guidance, to require disclosures about fair
value of financial instruments for interim reporting periods as well as in annual financial
statements. This guidance was effective for interim reporting periods ending after June 15, 2009.
This guidance did not have any impact on our consolidated financial statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This guidance was issued in
order to establish principles and requirements for reviewing and reporting subsequent events. On
February 24th 2010, the FASB issued Accounting Standards Update (ASU) 2010-09
to amend SFAS N0. 165, Subsequent Events. As a result, SEC registrants will not disclose the date
through which management evaluated subsequent events in the financial statements either in
originally issued financial statements or reissued financial statements. This guidance did not have
an impact on our consolidated financial statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles (FASB ASC) which was primarily codified
into Topic 105 Generally Accepted Accounting Standards in the ASC. This guidance becomes the
single source of authoritative nongovernmental U.S. generally accepted accounting principles
(GAAP), superseding all existing accounting standard documents and related accounting literature.
The guidance is effective for interim and annual periods ending after September 15, 2009. This
guidance did not have an impact on our consolidated financial statements.
F-12
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
Management does not believe that any other recently issued, but not yet effected,
accounting standards if currently adopted would have a material effect on the Companys
consolidated financial statements.
2. Inventory
Inventory consists of the following:
December 31, | ||||||||
2009 | 2008 | |||||||
Work-in-process |
$ | 509 | $ | 273 | ||||
Parts and components |
2,172 | 2,080 | ||||||
Total |
$ | 2,681 | $ | 2,353 | ||||
3. Property and Equipment
Property and equipment consists of the following:
December 31, | ||||||||
2009 | 2008 | |||||||
Lab and computer equipment |
$ | 2,411 | $ | 2,709 | ||||
Office equipment |
742 | 943 | ||||||
Transportation equipment |
45 | 45 | ||||||
Furniture and fixtures |
10 | 10 | ||||||
Fixed assets in process |
125 | | ||||||
Leasehold improvements |
627 | 140 | ||||||
Total |
3,960 | 3,847 | ||||||
Less accumulated depreciation |
1,867 | 2,528 | ||||||
Property and equipment, net |
$ | 2,093 | $ | 1,319 | ||||
F-13
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
4. Accrued Expenses
Accrued expenses consist of the following:
December 31, | ||||||||
2009 | 2008 | |||||||
Contract costs |
$ | 58 | $ | 298 | ||||
Compensation |
1,525 | 1,433 | ||||||
Commissions |
450 | 465 | ||||||
Royalties |
58 | 58 | ||||||
Warranty |
452 | 308 | ||||||
Customer advances and deferred revenue |
241 | 433 | ||||||
Other |
571 | 369 | ||||||
Total |
$ | 3,355 | $ | 3,364 | ||||
5. Short Term Bank Financing
On July 21, 2009, the Company renewed its domestic line of credit to December 31, 2009.
The amount of the line was reduced to $0.75 million from $1.25 million based upon the cash
requirements of the Company. In addition, the line of credit bears interest at 0.5% in excess of
the banks prime rate with a minimum interest rate of 5%. The Company was not in compliance with a
provision of its loan agreement which required a 30 consecutive day period with no outstanding
loans during the period ended July 3, 2009. However, this provision was waived by the bank. On
December 23, 2009 the Company executed a Change in Terms Agreement whereby the term of the line of
credit was extended to June 30, 2010. In addition, the Company must maintain a certain financial
covenant with which it is in compliance at December 31, 2009. The line of credit is collateralized
by the assets of Orbit Advanced Technologies, Inc. a subsidiary of Orbit/FR, Inc. Loans under this
line of credit are also subject to a subjective acceleration clause. Orbit/FR Engineering, LTD has
established lines of credit with the two Israeli banks and one Indian Bank (Israeli Branch). The
line of credit from one Israeli bank has a NIS denominated limit of 378 and $1,900 for the issuances of bank
guarantees of letters of credit in favour of customers
and one Israeli bank has a
dollar denominated limit of $250 and $2,400 for the issuances of bank
guarantees of letters of credit in favour of customers. The Indian bank line of credit is $500 and
$3,000 for the issuances of bank guarantees of letters of credit in favour of customers. The interest rates
charged by all the banks are LIBOR plus 2.25%. The outstanding balance due at December 31, 2009 and
2008 was $0 and $819, respectively. The bank agreements with all three banks do not have expiration
dates but are subject to termination on a quarterly basis based upon the Companys financial
performance for the quarter. These lines of credit are collateralized by the assets of Orbit/FR
Engineering, LTD., a subsidiary of Orbit/FR, Inc.
6. Related Party Transactions
Prior to May 13, 2008, Engineering and Alchut had an agreement, whereby Engineering
purchased from Alchut electrical and mechanical production services. In addition, Alchut provides
other administrative services, including but not limited to, bookkeeping, computer, legal,
accounting, cost management, information systems, and production support. Engineering paid Alchut
for these services based upon a rate of cost of production services plus 18%. Engineering had been
leasing office space from Alchut on an annual basis, for a rental of $73 per year. These agreements
were to be evaluated on an annual basis, and were intended to be at market value.
On May 13, 2008, Alchut sold all of its 3.7 million shares of common stock of the Company
to Satimo. As part of that transaction, Alchut had agreed to continue to provide the services for a
period of one year after the closing of the transaction. In 2009, the subsidiary in Israel signed
a lease and moved its operations to the new location. The general and administrative services
previously provided by Alchut were in place at the expiration of the one year service agreement,
May 13, 2009.
F-14
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
6. Related Party Transactions (continued)
The Company was charged $357 from January 1, 2008 through May 13, 2008 by Alchut for
administrative services. In addition, an Israeli corporation wholly-owned by the Companys former
Chairman of the Board, charged $55 to the Company, through May 13, 2008, under a management
services agreement. This agreement was terminated on May 13, 2008 when Alchut sold all of its
3.7 million shares of common stock of the Company to Satimo. A non-cash charge of $969,000 was
recorded by the Company in the three month period ended June 30, 2008 related to a payment by
Alchut to the Companys former CEO in consideration of the cancellation of certain stock options
held by him and the waiver of his right to receive certain payments under his employment agreement
with the Company, in each case in connection with the sale of 3.7 million shares of common stock of
the Company by Alchut to Satimo on May 13, 2008. The amount paid to the former CEO has been treated
as a capital contribution to the Company and also reflected as compensation expense in its 2008
consolidated statement of operations.
Included in cost of revenues for the year December 31, 2008 are approximately $1,041
relating to the production services provided by Alchut.
Included in sales and cost of revenues for the year ended December 31, 2009, are
approximately $530 and $683, respectively, relating to sales to and purchases from Microwave
Vision. Included in sales and cost of revenues for the year ended December 31, 2008, are
approximately $98 and $238, respectively, relating to sales to and purchases from Microwave
Vision, subsequent to May 13, 2008.
On August 14, 2009, the Company entered into an Assistance and Provision of Services Agreement
(the Services Agreement) with Microwave Vision and several subsidiaries of Microwave Vision,
including Satimo Microwave Vision owns 3.7 million shares of common stock of the Company, which it
acquired through a reorganization involving its wholly owned subsidiary, Satimo. Satimo originally
acquired its shares of common stock of the Company from Orbit-Alchut Technologies, Ltd. on May 13,
2008. Pursuant to the Services Agreement, Microwave Vision agreed to provide management,
operational, sales and marketing, legal, technical and other services to the Company, Satimo, and
Microwave Visions other direct and indirect Subsidiaries (collectively, the Subsidiaries). In
consideration thereof, the Company, Satimo and each of the other Subsidiaries agreed to pay
Microwave Vision a fee to be determined as of the start of each calendar year, effective on January
1, 2009, 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 a result of the implementation of the Services Agreement effective as of January 1, 2009, the
Company has recorded approximately $1.5 million in sales, marketing and general and administrative
expenses for the year ended December 31, 2009.
7. Commitments and Contingencies
The Company leases its operating facilities and certain equipment under non-cancelable
operating lease agreements which expire in various years through 2015. Rent expense for the years
ended December 31, 2009 and 2008 was approximately $906 and $634, respectively. Future minimum
lease payments under non-cancelable operating leases with initial terms of one year or more are as
follows:
Year ending December 31: | ||||
2010 |
$ | 759 | ||
2011 |
744 | |||
2012 |
632 | |||
2013 |
336 | |||
2014 |
220 | |||
2015 |
152 | |||
Total |
$ | 2,843 | ||
Under the terms of the Chief Scientist grant in Israel, Engineering is obligated to
pay royalties at a rate of 2% of revenues generated from the sale of certain products up to the
amount of the grant. For the years ended December 31, 2009 and 2008, royalties under this program
were approximately $0 and $1, respectively. At December 31, 2009, the Company had an outstanding
contingent obligation to the Chief Scientist of $58. Such contingent obligation is payable in
future periods based upon annual sales of products developed under the grants.
At December 31, 2009, the Company has outstanding letters of credit in the favor of
customers and a landlord totaling $1,744.
F-15
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
8. Segment and Geographic Information
The Company operates exclusively in one industry segment, the business of developing,
marketing and supporting sophisticated automated microwave test and measurement systems. In
addition to its principal operations and markets in the United States, the Company conducts sales,
customer support and service operations to other geographic locations in Europe, Asia, and North
America. The following table represents financial information by geographic region for the years
ended December 31, 2009 and 2008.
North America |
Europe | Asia | Total | |||||||||||||
2009 |
||||||||||||||||
Sales to unaffiliated customers |
$ | 16,152 | $ | 8,208 | $ | 6,886 | $ | 31,246 | ||||||||
Cost of revenues to unaffiliated customers |
10,316 | 5,362 | 4,805 | 20,483 | ||||||||||||
Gross profit unaffiliated customers |
$ | 5,836 | $ | 2,846 | $ | 2,081 | $ | 10,763 | ||||||||
Net property and equipment |
$ | 812 | $ | 1,281 | $ | | $ | 2,093 | ||||||||
Total assets |
$ | 11,452 | $ | 8,661 | $ | | $ | 20,113 | ||||||||
2008 |
||||||||||||||||
Sales to unaffiliated customers |
$ | 12,169 | $ | 4,610 | $ | 6,339 | $ | 23,118 | ||||||||
Cost of revenues to unaffiliated customers |
7,917 | 3,586 | 5,600 | 17,103 | ||||||||||||
Gross profit unaffiliated customers |
$ | 4,252 | $ | 1,024 | $ | 739 | $ | 6,015 | ||||||||
Net property and equipment |
$ | 615 | $ | 704 | $ | | $ | 1,319 | ||||||||
Total assets |
$ | 9,446 | $ | 7,230 | $ | | $ | 16,676 | ||||||||
In the table above North America includes all domestic operations, and Europe
includes subsidiaries in Germany and Israel.
9. Income Taxes
Pretax income (loss) for the years ended December 31 was applicable to the following
jurisdictions:
2009 | 2008 | |||||||
Domestic |
$ | 665 | $ | (2,446 | ) | |||
Foreign |
297 | (1,016 | ) | |||||
Total |
$ | 962 | $ | (3,462 | ) | |||
F-16
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
9. Income Taxes (continued)
The components of income tax (benefit) expense are as follows:
Year ended December 31, | ||||||||
2009 | 2008 | |||||||
Current: |
||||||||
State and local taxes within the U.S. |
$ | | $ | 12 | ||||
Foreign |
| | ||||||
Total |
| 12 | ||||||
Deferred: |
||||||||
Federal |
(539 | ) | | |||||
Foreign |
31 | | ||||||
Total |
(508 | ) | | |||||
Total income tax (benefit) expense |
$ | (508 | ) | $ | 12 | |||
A reconciliation of income tax expense (benefit) at the U.S. Federal statutory tax
rate and the actual income tax (benefit) expense is as follows:
Year ended December 31, | ||||||||
2009 | 2008 | |||||||
Tax expense (benefit) at statutory U.S. Federal rate |
$ | 327 | $ | (1,166 | ) | |||
State and local taxes within the U.S. |
17 | 8 | ||||||
(Decrease) increase in deferred tax asset valuation allowance |
(1,181 | ) | 1,125 | |||||
Net additional prior years foreign income taxes resulting from tax examination |
274 | | ||||||
Foreign tax rate difference compared to U.S. tax rate |
31 | 80 | ||||||
Utilization of foreign loss carryforwards |
| (39 | ) | |||||
Other, net |
24 | 4 | ||||||
Total income tax (benefit) expense |
$ | (508 | ) | $ | 12 | |||
F-17
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
9. Income Taxes (continued)
The tax effects of temporary differences that give rise to a significant portion of deferred
tax assets and liabilities consist of the following:
December 31, | ||||||||
2009 | 2008 | |||||||
Deferred tax assets: |
||||||||
U.S. net operating loss and tax credit carryforwards |
$ | 2,912 | $ | 3,258 | ||||
Allowance for doubtful accounts |
24 | 16 | ||||||
Accrued warranty reserves |
63 | 56 | ||||||
Inventory reserve |
21 | 8 | ||||||
Accrued compensation |
174 | 95 | ||||||
Stock-based compensation |
113 | 85 | ||||||
Unearned service revenue |
86 | 65 | ||||||
Foreign, including German and Israel net operating loss carryforwards |
827 | 1,227 | ||||||
Total deferred tax assets |
4,220 | 4,810 | ||||||
Deferred tax liabilities: |
||||||||
Long-term contracts |
| | ||||||
Purchase accounting basis differences |
(124 | ) | (124 | ) | ||||
Total deferred tax liabilities |
(124 | ) | (124 | ) | ||||
Net deferred tax asset |
4,096 | 4,686 | ||||||
Less valuation allowance |
(2,374 | ) | (3,472 | ) | ||||
Net deferred tax asset |
$ | 1,722 | $ | 1,214 | ||||
As of December 31, 2009, the Company has net operating loss carryforwards of
approximately $8,465 for U.S. federal income tax purposes which expire through 2024. On May 13,
2008, Alchut sold all of its 3.7 million shares of common stock of the Company to Satimo. Due to
the change in ownership of the Company utilization of a portion of these net operating loss
carryforward is limited pursuant to Section 382 of the Internal Revenue Code to approximately
$1,315 a year, plus any losses incurred after May 13, 2008. The Company also has a German net
operating loss carryforward of approximately $953 and an Israeli net operating loss carryforward of
approximately $278, both of which are available indefinitely. The German net operating loss has
been adjusted to reflect the expected results of a tax audit for the years 2003 through 2006.
In 2009, the Company decreased its valuation allowance on its deferred tax asset by
$1,098 due to the Companys estimate of its ability to generate sufficient future taxable income in
the U.S., Israel and Germany to realize a portion of its deferred tax assets.
F-18
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
10. Retirement Plans
The Company has retirement plans which cover substantially all U.S. employees who have
attained the age of 21 and have completed 3 months of service. Eligible employees make voluntary
contributions to the plans up to specified percentages of their annual compensation as defined in
the plans. Under the plans, the Company makes discretionary matching contributions determinable
each plan year and additional contributions based on annual eligible compensation for each
participant. The plans are funded on a current basis. For the years ended December 31, 2009 and
2008, the Companys contributions to the plans were $45 and $51, respectively.
11. Long-Term Contracts
Long-term contracts in process accounted for using the percentage-of-completion method
are as follows:
December 31, | ||||||||
2009 | 2008 | |||||||
Accumulated expenditures on uncompleted contracts |
$ | 45,179 | $ | 35,168 | ||||
Estimated earnings thereon |
13,335 | 9,158 | ||||||
Total |
58,514 | 44,326 | ||||||
Less: applicable progress billings |
(59,659 | ) | (44,951 | ) | ||||
Net |
$ | (1,145 | ) | $ | (625 | ) | ||
The long-term contracts are shown in the accompanying balance sheets as follows: |
||||||||
Costs and estimated earnings on uncompleted contracts in excess of billings |
$ | 1,668 | $ | 1,445 | ||||
Billings on uncompleted contracts in excess of costs and estimated earnings |
(2,813 | ) | (2,070 | ) | ||||
Net |
$ | (1,145 | ) | $ | (625 | ) | ||
12. Stock Option Plan
In March 1997, the Board of Directors adopted, and the Companys stockholders approved,
the Companys 1997 Equity Incentive Plan (the Incentive Plan) which, as subsequently amended,
provides for awards of 1,200,000 shares of the Companys stock. Options granted generally vest over
five years and typically have a life of ten years. The purpose of the Incentive Plan is to promote
the long-term retention of the Companys key employees and certain other persons who are in a
position to make significant contributions to the success of the Company. The Incentive Plan
permits grants of incentive stock options (ISOs), options not intended to qualify as ISOs
(nonqualified options), stock appreciation rights (SARs), restricted, unrestricted and deferred
stock awards, performance awards, loans and supplemental cash awards, and combinations of the
foregoing (all referred to as Awards).
F-19
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
12. Stock Option Plan (continued)
In July of 2007, the Board of Directors approved two grants of non qualified stock
options for 84,300 and 435,100 shares to key employees, management and Board members of the
Company. These grants resulted in stock-based compensation expense of $63 and $128 for the years
ended December 31, 2009 and December 31, 2008, respectively.
In March of 2008, the Board of Directors approved a grant of non-qualified stock options
for 30,000 shares to the Companys Chief Financial Officer. This grant resulted in stock-based
compensation of $14 and $11 for the years ended December 31, 2009 and December 31, 2008,
respectively.
Detailed information concerning the Stock Option Plan is as follows at December 31:
2009 | 2008 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Options | Price | Options | Price | |||||||||||||
Options authorized |
1,200,000 | 1,200,000 | ||||||||||||||
Outstanding, beginning of year |
482,700 | $ | 2.44 | 1,040,100 | $ | 2.44 | ||||||||||
Options granted |
| 30,000 | 2.55 | |||||||||||||
Options forfeited |
(159,150 | ) | 2.22 | (587,400 | ) | 2.45 | ||||||||||
Options outstanding, end of year |
323,550 | 2.55 | 482,700 | 2.44 | ||||||||||||
Options exercisable, end of year |
246,250 | $ | 2.61 | 249,425 | $ | 2.72 | ||||||||||
Weighted average remaining contractual life (years) |
5.51 | 6.69 | ||||||||||||||
Weighted average fair value of options granted at
market value |
$ | | $ | 2.55 | ||||||||||||
Range of exercise prices per share, options
outstanding |
$ | 1.95-$6.63 | $ | 1.35-$6.63 | ||||||||||||
F-20
Table of Contents
ORBIT / FR, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
12. Stock Option Plan (continued)
The Company uses the Black-Scholes option valuation model for use in estimating the fair
value of its stock options. This model was developed for traded options which have no vesting
restrictions and are fully transferable. Option models require input of highly subjective
assumptions including future stock price volatility. Because the Companys stock options have
characteristics significantly different from those of traded options, and because changes in the
subjective assumptions can materially affect the fair value estimates, in managements opinion, the
Black-Scholes model does not necessarily provide a reliable measure of the fair value the Companys
stock options.
The following weighted-average significant assumptions were
utilized by the Company in ascertaining the fair value of its options
granted in 2008; no option were granted in 2009.
2008 | ||||
Risk free interest rate |
4.3 | % | ||
Dividend yield |
0.0 | % | ||
Volatility factor of expected price of the Companys common stock (average) |
8.0 | % | ||
Average life (years) |
7.0 |
13. Stockholders Equity
Common Stock
The holders of shares of Common Stock are entitled to one vote for each share on record
on any matters to be voted on by the stockholders. The holders of Common Stock are entitled to
receive dividends if declared by the Board of Directors and to share ratably in the assets of the
Company legally available for distribution to its stockholders in the event of liquidation,
dissolution or winding-up of the Company. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights.
Preferred Stock
The Companys Board of Directors may, without further action by the Companys
stockholders, from time to time, direct the issuance of shares of Preferred Stock in series and
may, at the time of issuance, determine the rights, preferences and limitations of each series. The
holders of Preferred Stock would normally be entitled to receive a preference payment in the event
of any liquidation, dissolution or winding-up of the Company before any payment is made to the
holders of the Common Stock. The issuance of Preferred Stock could decrease the amount of earnings
and assets available for distribution to the holders of Common Stock or could adversely affect the
rights and powers, including voting rights, of the holders of Common Stock.
Treasury Stock
On June 24, 1998, the Companys Board approved the repurchase of up to 300,000 shares of
its stock. The Company has repurchased for $243, 82,900 shares through December 31, 2009, of which
200 shares were re-issued in 2009 for a nominal amount.
F-21