Attached files
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EX-32.2 - EXHIBIT 32.2 - ORBIT FR INC | ex32_2.htm |
EX-31.1 - EXHIBIT 31.1 - ORBIT FR INC | ex31_1.htm |
EX-32.1 - EXHIBIT 32.1 - ORBIT FR INC | ex32_1.htm |
EX-31.2 - EXHIBIT 31.2 - ORBIT FR INC | ex31_2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM 10-Q
(Mark One)
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended March 31, 2011
OR
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Transition Period from to
Commission File Number 0-22583
ORBIT/FR, Inc.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
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23-2874370
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(State or other jurisdiction
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(I.R.S. Employer
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of incorporation or organization)
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Identification No.)
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506 Prudential Road, Horsham, PA
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19044
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(Address of principal executive offices)
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(Zip Code)
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(215) 674-5100
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer, “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o |
Smaller reporting company x
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(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
There were 6,001,773 shares of common stock, $.01 par value, outstanding as of May 23, 2011.
EXPLANATORY NOTE
This Amended Form 10-Q (“Amended Report”) of Orbit/FR, Inc. for the period ended March 31, 2011, amends and restates our originally filed Form 10-Q which was originally filed on May 23, 2011(the “Original Report”).
This Amended Report is being filed for the purpose of restating certain amounts in Part I, Item 1, Financial Statements and Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and amending Item 4, Controls and Procedures.
The Company’s financial statements for the fiscal quarter ended March 31, 2011 included in the Original Report reflected an erroneous calculation of foreign exchange expense. The effect of correcting the error in calculation of the foreign exchange expense has been recorded in the restated period.
This Amended Report provides disclosure as at March 31, 2011, and does not, and is not intended to, reflect events or disclosure occurring after the filing of the Original Report, other than the restatement for the matter discussed above. Accordingly, this Amended Report should not be viewed as current information and should be considered only in conjunction with more recent reports and events. Such reports include, among other things, the events described in the company’s current reports on Form 8-K, each as may be amended or supplemented from time to time, all of which reflect events and information after the date of the Original Report.
2
ORBIT/FR, Inc.
Index
Page No.
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PART I.
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FINANCIAL INFORMATION
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||||
Item 1.
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Consolidated Financial Statements
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4
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|||||
5
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6
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7
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Item 2.
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11
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Item 4.
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14
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PART II.
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Other Information
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Item 1.
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16
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Item 1A.
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16
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Item 6.
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16
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17
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ORBIT/FR, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
March 31,
2011
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December 31,
2010
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|||||||
Unaudited
|
||||||||
ASSETS
|
||||||||
Current assets:
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||||||||
Cash and cash equivalents
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$ | 4,388 | $ | 2,400 | ||||
Accounts receivable, less allowance of $91 and $90
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3,646 | 5,693 | ||||||
Inventory
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3,126 | 2,776 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
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4,476 | 4,941 | ||||||
Income tax refunds receivable
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325 | 655 | ||||||
Deferred income taxes
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1,275 | 1,437 | ||||||
Other
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882 | 745 | ||||||
Total current assets
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18,118 | 18,647 | ||||||
Property and equipment, net
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2,487 | 2,296 | ||||||
Deferred income taxes
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648 | 688 | ||||||
Cost in excess of net assets acquired
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301 | 301 | ||||||
Total assets
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$ | 21,554 | $ | 21,932 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
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||||||||
Accounts payable
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$ | 2,849 | $ | 3,781 | ||||
Accounts payable—parent company
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2,115 | 1,697 | ||||||
Accrued expenses
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3,677 | 3,728 | ||||||
Customer advances
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4 | 75 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts
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2,935 | 2,117 | ||||||
Total liabilities, all current
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11,580 | 11,398 | ||||||
Stockholders' equity:
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||||||||
Preferred stock: $.01 par value: Authorized shares--2,000,000 Issued and outstanding shares--none
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-- | -- | ||||||
Common stock: $.01 par value: Authorized shares--10,000,000 Issued shares--6,084,473
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61 | 61 | ||||||
Additional paid-in capital
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16,507 | 16,500 | ||||||
Accumulated deficit
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(6,358 | ) | (5,727 | ) | ||||
Accumulated other comprehensive income (loss) - foreign currency translation adjustment
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7 | (57 | ) | |||||
Treasury stock--82,700 shares
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(243 | ) | (243 | ) | ||||
Total stockholders' equity
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9,974 | 10,534 | ||||||
Total liabilities and stockholders' equity
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$ | 21,554 | $ | 21,932 |
See accompanying notes.
ORBIT/FR, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
Three Months Ended
|
||||||||
March 31,
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||||||||
2011
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2010
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|||||||
Contract revenues
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$ | 7,317 | $ | 7,322 | ||||
Cost of revenues
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5,976 | 4,874 | ||||||
Gross profit
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1,341 | 2,448 | ||||||
Operating expenses:
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||||||||
General and administrative:
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746 | 752 | ||||||
Sales and marketing:
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720 | 733 | ||||||
Sales, marketing, general and administrative – MVG
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250 | 400 | ||||||
Research and development
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269 | 253 | ||||||
Total operating expenses
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1,985 | 2,138 | ||||||
Operating (loss) income
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(644 | ) | 310 | |||||
Other (loss) income, net
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(216 | ) | 4 | |||||
Income (loss) before income taxes
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(860 | ) | 314 | |||||
Income tax (benefit)
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(229 | ) | -- | |||||
Net (loss) income
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(631 | ) | 314 | |||||
Other comprehensive income (loss) - foreign currency translation adjustment
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64 | (76 | ) | |||||
Total comprehensive (loss) income
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$ | (567 | ) | $ | 238 | |||
Basic net (loss) income per share
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$ | (0.11 | ) | $ | 0.05 | |||
Diluted net (loss) income per share
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$ | (0.11 | ) | $ | 0.05 | |||
Weighted average number basic common shares
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6,001,773 | 6,001,773 | ||||||
Weighted average number diluted common shares
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6,001,773 | 6,001,773 |
See accompanying notes.
ORBIT/FR, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Three Months Ended
|
||||||||
March 31,
|
||||||||
2011
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2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
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$ | (631 | ) | $ | 314 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
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144 | 113 | ||||||
Stock based compensation
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7 | 10 | ||||||
Deferred income taxes
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199 | -- | ||||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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2,070 | 2,894 | ||||||
Inventory
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(343 | ) | (374 | ) | ||||
Costs and estimated earnings in excess of billings on uncompleted contracts
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510 | (479 | ) | |||||
Income tax refunds receivable
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329 | 100 | ||||||
Other current assets
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(160 | ) | (120 | ) | ||||
Accounts payable and accrued expenses
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(1,030 | ) | (1,854 | ) | ||||
Accounts payable—parent company
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468 | 116 | ||||||
Customer advances
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(71 | ) | 6 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts
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789 | 1,866 | ||||||
Net cash provided by operating activities
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2,281 | 2,592 | ||||||
Cash flows from investing activities:
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||||||||
Purchase of property and equipment
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(322 | ) | (98 | ) | ||||
Net cash (used in) investing activities
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(322 | ) | (98 | ) | ||||
Cash flows from financing activities:
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||||||||
Proceeds from short term notes payable
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200 | -- | ||||||
Repayment of short term notes payable
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(200 | ) | (250 | ) | ||||
Net cash (used in) financing activities
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-- | (250 | ) | |||||
Effect of foreign exchange rate changes on cash and cash equivalents
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29 | (22 | ) | |||||
Net increase in cash and cash equivalents
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1,988 | 2,222 | ||||||
Cash and cash equivalents at beginning of period
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2,400 | 1,622 | ||||||
Cash and cash equivalents at end of period
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$ | 4,388 | $ | 3,844 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash (received) paid during the period for income taxes
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$ | (333 | ) | $ | 103 | |||
Cash paid during the period for interest
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$ | 6 | $ | -- |
See accompanying notes.
ORBIT/FR, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2011
(Amounts in thousands, except share and per share data)
1. Ownership and Business
ORBIT/FR, Inc. (the "Company") was incorporated in Delaware on December 9, 1996, as a wholly owned subsidiary of Orbit-Alchut Technologies, Ltd., an Israeli publicly traded corporation. On May 13, 2008, Orbit-Alchut Technologies, Ltd. (“Alchut”) sold all of its 3.7 million shares of common stock of the Company to Satimo, SA (“Satimo”). On June 30, 2009, Microwave Vision Group, SA, (“Microwave Vision”), acquired all 3.7 million common shares of the Company through a reorganization involving its wholly owned subsidiary, Satimo. The Company develops markets and supports sophisticated automated microwave test and measurement systems for the wireless
communications, satellite, automotive, aerospace/defense and electromagnetic compatibility (EMC) industries, and manufactures anechoic foam, a microwave absorbing material that is an integral component of microwave test and measurement systems. ORBIT/FR, Inc., a holding company, supports its world-wide customers through its subsidiaries: ORBIT/FR Engineering, LTD (Israel) (hereinafter referred to as “Engineering”); ORBIT/FR Europe GmbH (Germany); Advanced Electromagnetics, Inc. (“AEMI”) (San Diego, CA); and Orbit Advanced Technologies, Inc. and Flam and Russell, Inc, (Horsham, PA). The Company sells its products to customers throughout North America, Europe and Asia.
2. Basis of Presentation
Interim Financial Information
The accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2011 and 2010 have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the condensed consolidated financial statements have been included. The results of the interim
period are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. The condensed consolidated financial statements and footnotes should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in this Form 10-Q and the Company's Form 10-K for the year ended December 31, 2010, filed on March 31, 2011 with the Securities and Exchange Commission, which included the consolidated financial statements and footnotes for the year ended December 31, 2010.
ORBIT/FR, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2011
(Amounts in thousands, except share and per share data)
3. Inventory
Inventory at March 31, 2011 consists of the following:
Parts and components
|
$ | 2,758 | ||
Work- in- process
|
368 | |||
Total
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$ | 3,126 |
4. Property and Equipment
Property and equipment at March 31, 2011 consists of the following:
Lab and computer equipment
|
$ | 3,113 | ||
Office equipment
|
898 | |||
Transportation equipment
|
61 | |||
Furniture and fixtures
|
65 | |||
Fixed assets in progress
|
130 | |||
Leasehold improvements
|
661 | |||
Total
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4,928 | |||
Less accumulated depreciation
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2,441 | |||
Property and equipment, net
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$ | 2,487 |
5. Accrued Expenses
Accrued expenses at March 31, 2011 consist of the following:
Contract costs
|
$ | 112 | ||
Compensation
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1,793 | |||
Commissions
|
464 | |||
Royalties
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33 | |||
Warranty
|
521 | |||
Deferred revenue
|
220 | |||
Other accruals
|
534 | |||
Total
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$ | 3,677 |
ORBIT/FR, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2011
(Amounts in thousands, except share and per share data)
6. Long-Term Contracts
Long-term contracts in process accounted for using the percentage-of-completion method are summarized as follows at March 31, 2011:
Accumulated expenditures on uncompleted contracts
|
$ | 46,817 | ||
Estimated earnings thereon
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12,685 | |||
Total
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59,502 | |||
Less: Applicable progress billings
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(57,961 | ) | ||
Balance
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$ | 1,541 |
The long-term contracts are shown in the accompanying balance sheets as follows:
Costs and estimated earnings on uncompleted contracts in excess of billings
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$ | 4,476 | ||
Billings on uncompleted contracts in excess of costs and estimated earnings
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(2,935 | ) | ||
Total
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$ | 1,541 |
7. Income Taxes
The Company has recorded an income tax benefit of approximately $0.4 million for the three months ended March 31, 2011 due to the operating loss incurred by the Company. However, the tax benefit realized by the Company’s operating loss in the period was partially offset by tax expense of the Israeli subsidiary resulting from the reduction of their deferred tax assets reflecting the reduction of Israel’s corporate tax rate.
8. Related Party Transactions
The Company is party to an Assistance and Provision of Services Agreement (the "Services Agreement") with its majority stockholder Microwave Vision Group SA (“Microwave Vision”) and several subsidiaries of Microwave Vision. Microwave Vision provides for management, operational, sales and marketing, legal, technical and other services to the Company, and Microwave Vision's other direct and indirect subsidiaries (collectively, the "Subsidiaries"). In consideration thereof, the Company, and each of the other Subsidiaries agreed to pay Microwave Vision a fee determined as of the start of each calendar year based on the projected gross margins of each Subsidiary for that year. In addition, the
Company agreed to pay Microwave Vision an additional fee of 1% of its gross sales in consideration of the right to use the name “Microwave Vision” in the Company’s sales and marketing activities. As at March 31, 2011, the fee for the year ending December 31, 2011 has not been determined. However, based on information provided by Microwave Vision the Company has accrued an estimated performance fee of $0.25 million for the three months ended March 31, 2011.
ORBIT/FR, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2011
(Amounts in thousands, except share and per share data)
9. Segment and Geographic Information
The Company operates exclusively in one industry segment, the business of developing, marketing and supporting sophisticated automated microwave test and measurement systems. In addition to its principal operations and markets in the United States, the Company conducts sales, customer support and service operations in other geographic locations in Europe, Asia, North and South America. The following table represents financial information by geographic region for the three month months ended March 31, 2011 and 2010. The following table is exclusive of intercompany transactions within the Company.
Three months ended March 31, 2011
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North America
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Europe
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Asia
|
Total
|
||||||||||||
Contract revenues
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$ | 2,726 | $ | 1,999 | $ | 2,592 | $ | 7,317 | ||||||||
Cost of revenues
|
2,623 | 1,526 | 1,827 | 5,976 | ||||||||||||
Gross profit
|
$ | 103 | $ | 473 | $ | 765 | $ | 1,341 | ||||||||
Three months ended March 31, 2010
|
North America
|
Europe
|
Asia
|
Total
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||||||||||||
Contract revenues
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$ | 2,816 | $ | 2,839 | $ | 1,667 | $ | 7,322 | ||||||||
Cost of revenues
|
1,754 | 1,939 | 1,181 | 4,874 | ||||||||||||
Gross profit
|
$ | 1,062 | $ | 900 | $ | 486 | $ | 2,448 |
In the table above "North America" includes all United States operations, and "Europe" includes subsidiaries in Germany and Israel.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
Certain information contained in this Form 10-Q contains forward looking statements (as such term is defined in the Securities Exchange Act of 1934 and the regulations thereunder), including, without limitation, statements as to the Company's financial condition, results of operations and liquidity and capital resources and statements as to management's beliefs, expectations or options. Such forward looking statements are subject to risks and uncertainties and may be affected by various factors which may cause actual results to differ materially from those in the forward looking statements. Certain of these risks, uncertainties and other factors, as and when applicable, are discussed in the Company's filings with
the Securities and Exchange Commission including in Part I, Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, a copy of which may be obtained from the Company upon request and without charge (except for the exhibits thereto).
Critical Accounting Policies
Revenue and Cost Recognition
The Company’s 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 Company’s control are recognized on the percentage-of- completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract when such costs can be reasonably estimated. Contract costs include all direct material, labor and subcontractor costs and those indirect costs related to contract performance such as indirect labor, supplies and equipment costs. General and administrative costs are charged to expense as incurred.
Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and revenue and are recognized in the period in which the revisions are determined. Any estimated losses on contracts are recorded in the period losses are first identified. Revenues from electro-mechanical equipment sold to customers that are not part of a larger contract are recognized when the contract is substantially completed. Revenues recognized in excess of amounts billed are classified under current assets as costs and estimated earnings in excess of billings on uncompleted contracts. Amounts received from clients in excess of revenues recognized to date are classified under current liabilities as billings in excess of costs and estimated earnings on uncompleted contracts.
Accounts Receivable
The Company accounts for potential losses in accounts receivable utilizing the allowance method. In reviewing aged receivables, management considers their knowledge of our customers, historical losses and current economic conditions in establishing the allowance for doubtful accounts.
Results of Operations
The following table sets forth certain financial data as a percentage of revenues for the periods indicated:
Three Months Ended March 31,
|
||||||||
2011
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Revenues
|
100.0 | % | 100.0 | % | ||||
Gross profit
|
18.3 | 33.4 | ||||||
General and administrative
|
10.2 | 10.3 | ||||||
Sales and marketing
|
9.8 | 10.0 | ||||||
Research and development
|
3.7 | 3.5 | ||||||
Microwave Vision Group corporate expenses
|
3.4 | 5.5 | ||||||
Operating (loss) income
|
(8.8 | ) | 4.2 | |||||
(Loss) income before income taxes
|
(9.4 | ) | 4.3 | |||||
Net (loss) income
|
(7.1 | ) | 4.3 |
Three months ended March 31, 2011 compared to three months ended March 31, 2010.
Revenues. Revenues for the three months ended March 31, 2011 and March 31, 2010 were approximately $7.3 million. Revenues from the university and EMC markets increased approximately $0.5 million, $0.1 million, respectively, while revenues from the wireless, defense and automotive markets decreased $0.3 million, $0.2 million and $0.1 million respectively. Geographically, revenues from Asia increased $0.9 million. Europe and North America revenues decreased approximately $0.8 million and $0.1 million respectively.
Cost of revenues. Cost of revenues for the three months ended March 30, 2011 was approximately $6.0 million compared to approximately $4.9 million for the three months ended March 31, 2010, an increase of approximately $1.1 million or 22.6%. Gross margins decreased to 18.3% of revenues for the three months ended March 31, 2011 from 33.4% for the three months ended March 31, 2010. The lower gross margin percentage was due to several factors; contract mix in the European and North American business as work was performed on contracts that have lower gross margins for the three months ended March 31, 2011 versus the three month period ended March 31,
2010 and higher subcontractor costs in the North American business due to the high volume of installations in the current period.
In addition, as discussed in the December 31, 2010 Form 10-K, the Company’s AEMI subsidiary had increased costs of revenues in the period due to the impact of the oven fire in the fourth quarter of 2010. The Company expects to receive approximately $0.14 million as full reimbursement by the insurance company for these costs in the quarter ending June 30, 2011, the period in which notification from the insurance company was received.
General and administrative expense. General and administrative expenses, exclusive of the charges from MVG, were $0.7 million for the three months ended March 31, 2011 and $0.8 million for the three months ended March 31, 2010. As a percentage of revenues, these general and administrative expenses decreased to 10.2% for the three months ended March 31, 2011 from 10.3% for the three months ended March 31, 2010. There were no material changes in the individual components of general and administrative expense in the quarter ended March 31, 2011 versus the quarter ended March 31, 2010.
Sales and marketing expense. Sales and marketing expense, exclusive of the charges from MVG, for the three months ended March 31, 2011and March 31, 2010 were $0.7 million in each period. As a percentage of revenues, sales and marketing expenses decreased to 10.2% for the three months ended March 31, 2011, from 10.0% for the three months ended March 31, 2010. There were no material changes in the individual components of sales and marketing expense in the quarter ended March 31, 2011 versus the quarter ended March 31, 2010.
Sales, marketing general and administrative-Microwave Vision Group. The preliminary performance fee for the year ending December 31, 2011 has not yet been determined as of March 31, 2011. Based on information provided by Microwave Vision, the Company has accrued an estimated quarterly fee of $0.25 million through this date. The MVG fee may be subject to adjustment before the year end and will be adjusted at December 31, 2011 based upon the actual gross margin of each Subsidiary at year-end.
Research and development expenses. Research and development expenses for the three months ended March 31, 2011 and March 31, 2010 were $0.3 million in each period. As a percentage of revenues, research and development increased to 3.7% for the three months ended March 31, 2011 from 3.5% for the three month period ended March 31, 2010. There were no material changes in the individual components of research and development expenses in the quarter ended March 31, 2011 versus the quarter ended March 31, 2010.
Other (loss) income, net. Other loss net, for the three months ended March 31, 2011 was approximately $0.2 million compared to other income, net of $0.004 million for the three months ended March 31, 2010. The Company’s other loss, net in 2011 results primarily from foreign currency exchange losses attributable to the Company’s expenses payable in Euros which include the invoices billed to the Company by Microwave Vision under the Services Agreement.
Income taxes. For the three months ended March 31, 2011the Company recorded a net tax benefit of approximately $0.4 million resulting from the operating loss in the current period. This net benefit was partially offset by the reduction of the Israeli’s subsidiary’s tax assets due to a tax rate reduction in Israel.
Other comprehensive income (loss)-foreign currency translation adjustment. The Company recorded other comprehensive income-foreign currency translation adjustment of $0.06 million for the three months ended March 31, 2011 versus a comprehensive loss-foreign currency translation adjustment of $0.1 million for the three months ended March 31, 2010. This comprehensive income is the result of the Euro exchange rate to the U.S. dollar increasing for the three months ended March 31, 2011. Other comprehensive (loss)-foreign translation adjustment was recognized in the three months ended March 31, 2010.
Liquidity and Capital Resources
The Company has satisfied its working capital requirements through cash flows from operations. Net cash generated by operating activities during the three months ended March 31, 2011 was approximately $2.3 million compared to $2.6 million during the three months ended March 31, 2010. The reduction of accounts receivable of approximately $2.1 million, billings in excess of costs and estimated earnings on uncompleted contracts of $0.8 million, costs and estimated earnings in excess of billings on uncompleted contracts of $0.5 and the increase of accounts payable-parent company of $0.5 million were the most significant sources of cash for the three
months ended March 31, 2011. The net loss of $0.8 million and the decrease in accounts payable and accrued expenses of approximately $1.0 million were the most significant use of cash for the three months ended March 31, 2011.
Net cash used in investing activities for the purchase of property and equipment was $0.3 million for the three month period ended March 31, 2011 an increase of $0.2 million from the three month period ended March 31, 2010.
Cash generated by operations for the three months ended March 31, 2011 was used to repay $0.2 million borrowed in the quarter.
The Company has exposure to currency fluctuations as a result of billing certain of its contracts in foreign currency, primarily the Euro. When selling to customers in countries with less stable currencies, the Company bills in U.S. dollars. For the three months ended March 31, 2011, approximately 79% of the Company's revenues were billed in U.S. dollars. A large portion of the costs of the Company's contracts have been, and are expected in the future to continue to be, U.S. dollar-denominated except for wages for employees of the Company's Israeli and German subsidiaries, which are denominated in local currency.
Inflation and Seasonality
The Company does not believe that inflation or seasonality has had a significant effect on the Company's operations to date.
Item 4. Controls and Procedures
|
(a)
|
Evaluation of disclosure controls and procedures.
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The Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed by us in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934 is accumulated and communicated to our management on a timely basis to allow decisions regarding
required disclosure. The Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2011. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2011, these controls and procedures were effective.
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(b)
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Changes in Internal Control Over Financial Reporting
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During the three months ended March 31, 2011, we determined that there was a material weakness in the recording of foreign exchange expense. This material weakness, if not corrected, could result in the misstatement of foreign exchange gain or loss. As a result, the Company has amended its internal control procedures to include a process whereby all foreign exchange calculations are subject to an enhanced review by senior management. The material weakness resulted in the misstatement of foreign exchange loss in the Company’s unaudited condensed consolidated statement of operations for three months ended March 31, 2011 which has been corrected in this amendment.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently subject to any material legal proceedings and is not aware of any threatened litigation, unasserted claims or assessments that could have a material adverse effect on the Company's business, operating results, or financial condition.
Item 1A. Risk Factors
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2010 which could materially affect our business, financial condition or future results of operations. The risks described in our Annual Report on Form 10-K for the year ended December 31, 2010 may not be the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and future results of operations.
Item 6. Exhibits
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Per Iversen, President and Chief Executive Officer.
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Relland Winand, Chief Financial Officer.
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Per Iversen, President and Chief Executive Officer.
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Relland Winand, Chief Financial Officer.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Orbit/FR, Inc.
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Date: August 22, 2011
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/s/ Per Iversen
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President and Chief Executive Officer
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