10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                     to

Commission File Number 0-22583

ORBIT/FR, Inc.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE	23-2874370
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)
506 Prudential Road, Horsham, PA	19044
(Address of principal executive offices)	(Zip Code)

(215) 674-5100
(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 þ       No o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filed and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o       Accelerated filer o       Non-accelerated filer þ

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o       No þ

          There were 6,084,473 shares of common stock, $.01 par value, outstanding as of August 14, 2007.

ORBIT/FR, Inc.

Index

			Page No.
PART I.	FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements
		Consolidated Balance Sheets—June 30, 2007 (Unaudited) and December 31, 2006		3
		Consolidated Statements of Operations—Three and six months ended June 30, 2007 and 2006 (Unaudited)		4
		Consolidated Statements of Cash Flows-- Six months ended June 30, 2007 and 2006 (Unaudited)		5
		Notes to Consolidated Financial Statements (Unaudited)		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
	Item 3.	Quantitative and Qualitative Disclosure of Market Risk		14
	Item 4	Controls and procedures		14
PART II.	Other Information
	Item 1.	Legal Proceedings		16
	Item 1A.	Risk Factors		16
	Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		16
	Item 3.	Defaults upon Senior Securities		16
	Item 4.	Submission of Matters to a Vote of Security Holders		16
	Item 5.	Other Information		16
	Item 6.	Exhibits and Reports on Form 8-K		16
Signatures				17
1997 Equity Incentive Plan of Orbit/FR, Inc. as amended
Certification, Israel Adan, President and Chief Executve Officer
Certification, Dave Lubbe, Chief Financial Officer
Certification, Israel Adan, President and Chief Executve Officer, pursuant to Section 906
Certification, Dave Lubbe, Chief Financial Officer, Pursuant to Section 906

2

ORBIT/FR, Inc.

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)

	June 30,			December 31,
	2007			2006
	Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	1,722		$	3,901
Accounts receivable, less allowance of $215 and $269 in 2007 and 2006, respectively		4,870			5,769
Inventory		3,564			3,156
Costs and estimated earnings in excess of billings on uncompleted contracts		3,619			1,480
Income tax refunds receivable		211			336
Deferred income taxes		735			721
Other		166			151
Total current assets		14,887			15,514
Property and equipment, net		1,446			1,169
Deferred income taxes		759			463
Cost in excess of net assets acquired		381			381
Total assets	$	17,473		$	17,527
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,871		$	2,235
Accounts payable—Parent		1,207			833
Accrued expenses		3,014			2,789
Short term bank financing		200			400
Customer advances		577			2,232
Income taxes payable		14			47
Billings in excess of costs and estimated earnings on uncompleted contracts		1,911			935
Deferred income taxes		507			177
Total liabilities, all current		9,301			9,648
Stockholders’ equity:
Preferred stock: $.01 par value:
Authorized shares—2,000,000 Issued and outstanding shares—none		—			—
Common stock: $.01 par value:
Authorized shares—10,000,000
Issued shares—6,084,473		61			61
Additional paid-in capital		15,173			15,173
Accumulated deficit		(6,819	)		(7,112	)
Treasury stock—82,900 shares		(243	)		(243	)
Total stockholders’ equity		8,172			7,879
Total liabilities and stockholders’ equity	$	17,473		$	17,527

See accompanying notes.

3

ORBIT/FR, Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Contract revenues	$	7,204	$	7,280	$	13,718	$	14,809
Cost of revenues		4,929		5,382		9,222		10,601
Gross profit		2,275		1,898		4,496		4,208
Operating expenses:
General and administrative		832		749		1,729		1,522
Sales and marketing		865		722		1,682		1,493
Research and development		361		327		738		737
Total operating expenses		2,058		1,798		4,149		3,752
Operating income		217		100		347		456
Other income, net		23		6		108		52
Income before income taxes		240		106		455		508
Income tax expense		89		27		162		139
Net income	$	151	$	79	$	293	$	369
Basic and diluted income per share	$	0.03	$	0.01	$	0.05	$	0.06
Weighted average number basic common shares		6,001,573		6,001,573		6,001,573		6,001,573
Weighted average number diluted common shares		6,025,530		6,021,780		6,023,158		6,017,730

See accompanying notes.

4

ORBIT/FR, Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

	Six months ended
	June 30,
	2007			2006
Cash flows from operating activities:
Net income	$	293		$	369
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		191			186
Deferred income tax provision		20			12
Changes in operating assets and liabilities:
Accounts receivable		899			(740	)
Inventory		(408	)		(273	)
Costs and estimated earnings in excess of billings on uncompleted contracts		(2,139	)		(679	)
Income tax refunds receivable		125			67
Other current assets		(15	)		228
Accounts payable and accrued expenses		(139	)		1,508
Accounts payable—Parent		374			122
Customer advances		(1,655	)		685
Income taxes payable		(33	)		48
Billings in excess of costs and estimated earnings on uncompleted contracts		976			(1,713	)
Net cash used in operating activities		(1,511	)		(180	)
Cash flows from investing activities:
Purchase of property and equipment		(468	)		(226	)
Net cash used in investing activities		(468	)		(226	)
Cash flows from financing activities:
Proceeds from short term notes payable		200			—
Repayment of short term notes payable		(400	)		—
Net cash used in financing activities		(200	)		—
Net decrease in cash and cash equivalents		(2,179	)		(406	)
Cash and cash equivalents at beginning of period		3,901			3,189
Cash and cash equivalents at end of period	$	1,722		$	2,783
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes	$	190		$	141
Cash received during the period for interest	$	31		$	19

See accompanying notes.

5

ORBIT/FR, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2007
(Amounts in thousands, except share and per share data)

1. Ownership and Basis of Presentation

          ORBIT/FR, Inc. (the “Company”) was incorporated in Delaware on December 9, 1996, as a wholly owned subsidiary of Orbit-Alchut Technologies, Ltd., an Israeli publicly traded corporation (hereinafter referred to as the “Parent”). The Company develops, markets and supports sophisticated automated microwave test and measurement systems for the wireless communications, satellite, automotive, aerospace/defense and electromagnetic compatibility (EMC) industries, and manufactures anechoic foam, a microwave absorbing material that is an integral component of microwave test and measurement systems. ORBIT/FR, Inc., a holding company, supports its world-wide customers through its subsidiaries: ORBIT/FR Engineering, LTD (hereinafter referred to as “Engineering”, Israel); ORBIT/FR Europe (Germany); Advanced Electromagnetics, Inc. (“AEMI” San Diego, CA); and Orbit Advanced Technologies, Inc. and Flam and Russell, Inc, (Horsham, PA). The Company sells its products to customers throughout Asia, Europe, Israel, and North and South America.

2. Summary of Significant Accounting Policies

Interim Financial Information

          The accompanying unaudited consolidated financial statements for the three and six months ended June 30, 2007 and 2006 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements have been included. The results of interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. The consolidated financial statements and footnotes should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Form 10-Q and the Company’s Form 10-K for the year ended December 31, 2006, filed on March 29, 2007 with the Securities and Exchange Commission, which included the consolidated financial statements and footnotes for the year ended December 31, 2006.

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.

Adoption of New Standard

          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

6

ORBIT/FR, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2007
(Amounts in thousands, except share and per share data)

2. Summary of Significant Accounting Policies (continued)

accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 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. As of December 31, 2006, the Company had income tax payable of approximately $47. The Company did not record any cumulative effect adjustment to retained earnings as a result of adopting FIN No. 48.

The Company is no longer subject to U.S. federal and state and local income tax examinations by tax authorities for years prior to 2003.

Net Income Per Share

          Basic income per share is calculated by dividing net income 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 dilutive effect of stock options was not assumed for the three and six months ended June 30, 2007 and 2006 because the effect of those securities is antidilutive.

3. Inventory

     Inventory consists of the following:

	June 30,		December 31,
	2007		2006
	(Unaudited)
Work-in-process	$	862	$	1,885
Parts and components		2,702		1,271
	$	3,564	$	3,156

7

ORBIT/FR, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2007
(Amounts in thousands, except share and per share data)

4. Property and Equipment

          Property and equipment consists of the following:

	June 30,		December 31,
	2007		2006
	(Unaudited)
Lab and computer equipment	$	2,832	$	2,582
Office equipment		967		1,027
Transportation equipment		217		156
Furniture and fixtures		9		11
Leasehold improvements		139		341
		4,164		4,117
Less accumulated depreciation		2,718		2,948
Property and equipment, net	$	1,446	$	1,169

5. Accrued Expenses

     Accrued expenses consists of the following:

	June 30,		December 31,
	2007		2006
	(Unaudited)
Accrued contract costs	$	379	$	146
Accrued compensation		1,575		1,434
Accrued commissions		280		197
Accrued royalties		54		54
Accrued warranty		425		359
Accrued DTC settlement costs		33		33
Other accruals		268		566
	$	3,014	$	2,789

8

ORBIT/FR, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2007
(Amounts in thousands, except share and per share data)

6. Long-Term Contracts

	June 30,			December 31,
	2007			2006
	(Unaudited)
Accumulated expenditures on uncompleted contracts	$	17,976		$	16,869
Estimated earnings thereon		5,167			3,673
		23,143			20,542
Less: applicable progress billings		21,435			19,997
Total	$	1,708		$	545
The long-term contracts are shown in the accompanying balance sheets as follows:
Costs and estimated earnings on uncompleted contracts in excess of billings	$	3,619		$	1,480
Billings on uncompleted contracts in excess of costs and estimated earnings		(1,911	)		(935	)
	$	1,708		$	545

7. Related Party Transactions

          Engineering and the Parent have an agreement, whereby Engineering purchases from the Parent electrical and mechanical production services. In addition, the Parent provides other administrative services, including, but not limited to, bookkeeping, computer, legal, accounting, cost management, information systems, and production support. Engineering pays the Parent for these services based upon a rate of cost of production services plus 21%. Engineering is leasing office space from the Parent on an annual basis, for a rental of $61 per year. These agreements are evaluated on an annual basis.

9

ORBIT/FR, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2007
(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 out of other geographic locations in Europe, Asia, and North America. The following table represents financial information by geographic region for the three and six months ended June 30, 2007 and 2006.

Three months ended June 30, 2007	North America		Europe		Asia		Total
Sales to unaffiliated customers	$	2,457	$	1,125	$	3,622	$	7,204
Cost of sales to unaffiliated customers		1,384		1,050		2,495		4,929
Gross profit unaffiliated customers	$	1,073	$	75	$	1,127	$	2,275

Three months ended June 30, 2006	North America		Europe		Asia		Total
Sales to unaffiliated customers	$	3,178	$	2,919	$	1,183	$	7,280
Cost of sales to unaffiliated customers		2,105		2,455		822		5,382
Gross profit unaffiliated customers	$	1,073	$	464	$	361	$	1,898

Six months ended June 30, 2007	North America		Europe		Asia		Total
Sales to unaffiliated customers	$	5,326	$	2,611	$	5,781	$	13,718
Cost of sales to unaffiliated customers		3,002		2,219		4,001		9,222
Gross profit unaffiliated customers	$	2,324	$	392	$	1,780	$	4,496

Six months ended June 30, 2006	North America		Europe		Asia		Total
Sales to unaffiliated customers	$	7,180	$	4,459	$	3,170	$	14,809
Cost of sales to unaffiliated customers		4,617		3,910		2,074		10,601
Gross profit unaffiliated customers	$	2,563	$	549	$	1,096	$	4,208

          In table above “North America” includes all United States operations, and “Europe” includes subsidiaries in Germany and Israel.

10

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 Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, a copy of which may be obtained from the Company upon request and without charge (except for the exhibits thereto).

Results of Operations

          The following table sets forth certain financial data as a percentage of revenues for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	(Unaudited)						(Unaudited)
Revenues		100.0	%		100.0	%		100.0	%		100.0	%
Gross profit		31.6			26.1			32.8			28.4
General and administrative		11.6			10.3			12.6			10.3
Sales and marketing		12.0			9.9			12.3			10.1
Research and development		5.0			4.5			5.4			5.0
Operating income		3.0			1.4			2.5			3.1
Income before income taxes		3.3			1.5			3.3			3.4
Net income		2.1			1.1			2.1			2.5

Three months ended June 30, 2007 compared to three months ended June 30, 2006.

          Revenues. Revenues for the three months ended June 30, 2007 were approximately $7.2 million compared to approximately $7.3 million for the three months ended June 30, 2006, a decrease of approximately $76,000 or 1%. Revenues from the wireless and satellite markets increased approximately $795,000 and $30,000 respectively, while revenues from the defense, university, EMC and automotive markets decreased $517,000, $157,000, $144,000 and $83,000, respectively. Geographically, Asian revenues increased approximately $2.4 million, while European and North America revenues decreased approximately $1.8 million and $726,000, respectively from prior year levels. Revenues recognized during the three months ended June 30, 2007 were most significantly impacted by completion of large Asian defense contracts not in place during the three months ended June 30, 2006. Revenues recognized during the three months ended June 30, 2006 were most significantly impacted by extensive completion of the Company’s largest European defense contract, not completely replaced in 2007.

11

          Cost of revenues. Cost of revenues for the three months ended June 30, 2007 were approximately $4.9 million compared to approximately $5.4 million for the three months ended June 30, 2006, a decrease of approximately $453,000 or 8%. Gross margins increased to 31.6% for the three months ended June 30, 2007 from 26.1% for the three months ended June 30, 2006. The higher margin percentage in 2007 is largely a result of a greater mix of higher margin software deliveries during the three months ended June 30, 2007, compared to lower margin contracts with high subcontract components completed during the three months ended June 30, 2007.

          General and administrative expenses. General and administrative expenses for the three months ended June 30, 2007 were $832,000 compared to $749,000 for the three months ended June 30, 2006, an increase of approximately $83,000 or 11%. As a percentage of revenues, general and administrative expenses increased to 11.6% for the three months ended June 30, 2007 from 10.3% for the three months ended June 30, 2006. The increased general and administrative expenses were a result of increased compliance costs incurred during the three months ended June 30, 2007.

          Sales and marketing expenses. Sales and marketing expenses for the three months ended June 30, 2007 were $865,000 compared to $722,000 for the three months ended June 30, 2006, an increase of approximately $143,000 or 20%. As a percentage of revenues, sales and marketing expenses increased to 12.0% for the three months ended June 30, 2007, from 9.9% for the three months ended June 30, 2006. The decreased sales and marketing expenses were largely due to increased commissions paid during the three months ended June 30, 2007.

          Research and development expenses. Research and development expenses for the three months ended June 30, 2007 were $361,000 compared to $327,000 for the three months ended June 30, 2006, an increase of approximately $34,000.

          Other income, net. Other income, net, for the three months ended June 30, 2007 was approximately $23,000 compared to $6,000 for the three months ended June 30, 2006, an increase of approximately $17,000. The Company recognizes interest income and expense and foreign currency translation gains and losses as other income.

          Income taxes. Income tax expense for the three months ended June 30, 2007 was $89,000 compared to $27,000 for the three months ended June 30, 2006, an increase in expense of $62,000. The Company records income tax expense on profitable operations and income tax benefits on losses.

Six months ended June 30, 2007 compared to six months ended June 30, 2006.

          Revenues. Revenues for the six months ended June 30, 2007 were approximately $13.7 million, compared to approximately $14.8 million for the six months ended June 30, 2006, a decrease of approximately $1.1 million or 7%. Revenues from the satellite market increased approximately $64,000, while revenues from the wireless, defense, EMC, university, and automotive markets decreased approximately $485,000, $313,000, $188,000, $129,000, and $39,000, respectively. Geographically, revenues from Asia increased approximately $2.6 million, while revenues from North America and Europe decreased approximately $1.9 and $1.8 million from prior year levels, respectively. Revenues recognized during the six months ended June 30, 2007 were most significantly impacted by completion of several large Asian defense contracts, while revenues recognized during the six months ended June 30, 2006 were most significantly impacted by significant completion of the Company’s largest European defense contract, which were not completely replaced in 2007.

          Cost of revenues. Cost of revenues for the six months ended June 30, 2007 were approximately $9.2 million compared to approximately $10.6 million for the six months ended June 30, 2006, a decrease of approximately $1.4 million or 13%. Gross margins increased to 32.8% for the six months ended June

12

30, 2007 from 28.4% for the six months ended June 30, 2006. The higher margin percentage in 2007 is a largely a result of a greater mix of higher margin software deliveries during the six months ended June 30, 2007, compared to lower margin contracts with high subcontract components completed during the six months ended June 30, 2007.

          General and administrative expenses. General and administrative expenses for the six months ended June 30, 2007 were approximately $1.7 million compared to approximately $1.5 million for the six months ended June 30, 2006, an increase of approximately $200,000 or 14%. As a percentage of revenues, general and administrative expenses increased to 12.6% for the six months ended June 30, 2007 from 10.3% for the six months ended June 30, 2006. The increased general and administrative expenses were largely a result of inefficiencies related to the Company’s relocation of its European office.

          Sales and marketing expenses. Sales and marketing expenses for the six months ended June 30, 2007 were approximately $1.7 million, compared to approximately $1.5 million for the six months ended June 30, 2006, an increase of approximately $189,000 or 13%. As a percentage of revenues, sales and marketing expenses increased to 12.3% for the six months ended June 30, 2007, from 10.1% for the six months ended June 30, 2006. The increased sales and marketing expenses were largely due to increased commissions paid during the six months ended June 30, 2007.

          Research and development expenses. Research and development expenses for the six months ended June 30, 2007 were $738,000 compared to $737,000 for the six months ended June 30, 2006, an increase of approximately $1,000.

          Other income net, Other income, net for the six months ended June 30, 2007 was approximately $108,000 compared to $52,000 for the six months ended June 30, 2006, an increase of approximately $56,000. The Company recognizes interest income and expense and foreign currency translation gains and losses as other income.

          Income taxes. Income tax expense for the six months ended June 30, 2007 was $162,000 compared to $139,000 of income tax expense for the six months ended June 30, 2006. The Company records income tax expense on profitable operations and income tax benefits on losses.

Liquidity and Capital Resources

          Net cash used in operating activities during the six months ended June 30, 2007 was approximately $1.5 million compared to approximately $180,000 during the six months ended June 30, 2006. The Company’s net income, adjusted for non-cash items, provided $504,000 of operating cash during the six months ended June 30, 2007, compared to $567,000 during the six months ended June 30, 2006. Due primarily to increases in the Company’s costs and estimated earning in excess of billings on uncompleted contracts, and customer advances, changes in the Company’s operating assets and liabilities during the six months ended June 30, 2007 used approximately $2.0 million in operating cash. Changes in the Company’s operating assets and liabilities during the six months ended June 30, 2006 used were approximately to $747,000.

          Net cash used in investing activities during the six months ended June 30, 2007 for the purchase of property and equipment was approximately $468,000 compared to approximately $226,000 invested during the six months ended June 30, 2006. The most significant investments in property and equipment during the six months ended June 30, 2007 related to improving the Company’s ability to manufacture and align its mechanical subsystems.

          Net cash used in financing activities during the six months ended June 30, 2007 for the repayment of short term financing amounted to $200,000.

13

          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 six months ended June 30, 2007, approximately 81% of the Company’s revenues were billed in U.S. dollars. Substantially all of the costs of the Company’s contracts, including costs subcontracted to the Parent, have been, and will continue to be, U.S. dollar-denominated except for wages for employees of the Company’s Israeli and German subsidiaries, which are denominated in local currency. The Company intends to continue to enter into U.S. dollar-denominated contracts.

Inflation and Seasonality

          The Company does not believe that inflation or seasonality has had a significant effect on the Company’s operations to date.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

          We are exposed to market risk from fluctuations in foreign currency exchange rates. We manage exposure to variability in foreign currency exchange rates primarily through the use of natural hedges, as both liabilities and assets are denominated in the local currency. However, different durations in our funding obligations and assets may expose us to the risk of foreign exchange rate fluctuations. We have not entered into any derivative instrument transactions to manage this risk. Based on our overall foreign currency rate exposure at June 30, 2007, we do not believe that a hypothetical 10% change in foreign currency rates would materially adversely affect our financial position.

Item 4. Controls and Procedures

(a)

Evaluation of disclosure controls and procedures. The Company’s 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 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 June 30, 2007. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer previously concluded that as of June 30, 2007, these controls and procedures were effective.

Prior to the evaluation of the Company’s disclosure controls and procedures as of March 31, 2007, on March 13, 2007 the Company’s Board of Directors approved amendments to the Company’s 1997 Equity Incentive Plan (the “Amendments”). The Company failed to file the details of the Amendments on a Current Report on Form 8-K within the four (4) business day period after the date of such approval of the Amendment, as required by the rules governing the filing of Current Reports on Form 8-K, and did not file a copy of the 1997 Equity Incentive Plan, as amended by the Amendments, with its Quarterly Report on Form 10-Q for the period ended March 31, 2007. The Company has described the Amendments under Item 5 of this Form 10-Q and has filed a copy of the 1997 Equity Incentive Plan, as amended by the Amendments, as an exhibit to this Form 10-Q. Based upon the failure of the Company to file a Current Report on Form 8-K regarding the Amendment within the time period permitted under the rules governing the filing of Current Reports on Form 8-K and to file a copy of the 1997 Equity Incentive Plan, as amended by the Amendments, with its Quarterly Report on Form 10-Q for the period ended

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March 31, 2007, our Chief Executive Officer and Chief Financial Officer have subsequently concluded that our disclosure controls and procedures were deficient as of March 31, 2007 as such disclosure controls and procedures applied to the filing of Current Reports on Form 8-K and Quarterly Reports on Form 10-Q relating to the Amendments. The Company has since revised and updated its disclosure controls and procedures to address this deficiency to ensure that such information relating to the public announcement or release in the future of non-public information regarding amendments to material agreements will be recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)

Change in Internal Control. There have been no changes in internal control over financial reporting identified in connection with the foregoing evaluation that occurred during the Company’s fiscal quarter ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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, 2006 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, 2006 are not 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 2. Unregistered Sales of Equity Securities and Use of Proceed—Not applicable

Item 3. Defaults upon Senior Securities—Not applicable

Item 4. Submission of Matters to a Vote of Security Holders—Not applicable

Item 5. Other Information

          On March 13, 2007, the Company’s Board of Directors approved amendments to the Company’s 1997 Equity Incentive Plan (the “Plan”) pursuant to which (1) the total number of shares of the Company’s common stock issuance under the Plan was increased to 1,200,000, and (2) the term of the Plan was amended to continue until terminated by the Board of Directors. A copy of the Plan, as amended, has been filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.

Item 6. Exhibits

10.1	1997 Equity Incentive Plan of Orbit/FR, Inc., as amended.
31.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Israel Adan, President and Chief Executive Officer.
31.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Dave Lubbe, 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 2002, Israel Adan, 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 2002, Dave Lubbe, Chief Financial Officer.

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ORBIT/FR, Inc.

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Orbit/FR, Inc.
	Registrant
Date: August 14, 2007
	/s/ Israel Adan
	President and Chief Executive Officer
Date: August 14, 2007
	/s/ Dave Lubbe
	Chief Financial Officer

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EX-10.1

ORBIT/FR, INC.

1997 EQUITY INCENTIVE PLAN
as amended on March 13, 2007

1. Purpose

     The purpose of the Orbit/FR, Inc. 1997 Equity Incentive Plan (the “Plan”) is to promote the long-term retention of key employees of Orbit/FR, Inc. (“Orbit”) and its current and future subsidiaries (collectively, the “Company”) and other persons or entities who are in a position to make significant contributions to the success of the Company, to further reward these employees and other persons or entities for their contributions to the Company’s success, to provide additional incentive to these employees and other persons or entities to continue to make similar contributions in the future, and to further align the interests of these employees and other persons or entities with those of Orbit’s stockholders. These purposes will be achieved by granting to such employees and other persons and entities, in accordance with the provisions of this Plan, Options, Stock Appreciation Rights, Restricted Stock or Unrestricted Stock Awards or Performance Awards, for shares of Orbit’s common stock, no par value per share (“Common Stock”), or Loans or Supplemental Grants, or combinations thereof (“Awards”).

2. Aggregate Number of Shares

     2.1 The aggregate number of shares of Common Stock for which Awards may be granted under the Plan will be 1,200,000 shares. Notwithstanding the foregoing, if there is any change in the capitalization of Orbit, such as by stock dividend, stock split, combination of shares, exchange of securities, recapitalization or other event which the Board of Directors (the “Board”) of Orbit deems, in its sole discretion, to be similar circumstances, the aggregate number and/or kind of shares for which Awards may be granted under the Plan shall be appropriately adjusted in a manner determined by the Board. No fractional shares of Common Stock will be delivered under the Plan.

     2.2 Treasury shares, reacquired shares and unissued shares of Common Stock may be used for purposes of the Plan, at Orbit’s sole discretion.

     2.3 Shares of Common Stock that were issuable pursuant to an Award that has terminated but with respect to which such Award had not been exercised, shares of Common Stock that are issued pursuant to an Award but that are subsequently forfeited, and shares of Common Stock that were issuable pursuant to an Award that was payable in Common Stock or cash but that was satisfied in cash, shall be available for future Awards under the Plan.

3. Eligible Employees and Participants

     3.1 All current and future key employees of the Company, including officers and directors who are employed by the Company (“Employees”), and all other persons or entities, including directors of the Company who are not Employees, who in the opinion of the Board are in a

position to make a significant contribution to the success of the Company, shall be eligible to receive Awards under the Plan (a “Participant”). No eligible Employee or such other person or entity shall have any right to receive an Award except as expressly provided in the Plan.

     3.2 The Participants who shall actually receive Awards under the Plan shall be determined by the Board in its sole discretion. In making such determinations, the Board shall consider the positions and responsibilities of eligible Participants, their past performance and contributions to the Company’s growth and expansion, the value of their services to the Company, the difficulty of finding qualified replacements, and such other factors as the Board deems pertinent in its sole discretion.

4. Administration

     4.1 The Plan shall be administered by the Board, unless the Board determines to delegate such administration to a committee of the Board. If the Board makes such delegation, (i) the Committee shall consist of at least two directors, (ii) each member of such committee shall be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and (iii) the provisions of the Plan relating to the Board shall apply to such committee. In addition to its other authority and subject to the provisions of the Plan, the Board shall have the authority to determine, in its sole discretion, the Participants who shall be eligible to receive Awards, the Participants who shall actually receive Awards, the size of each Award, including the number of shares of Common Stock subject to the Award, the type or types of each Award, the date on which each Award shall be granted, the terms and conditions of each Award, whether to waive compliance by a Participant with any obligations to be performed by the Participant under an Award or waive any term or condition of an Award, whether to amend or cancel an existing Award in whole or in part (except that the Board may not, without the consent of the holder of an Award or unless specifically authorized by the terms of an Award, take any action under this clause with respect to such Award if such action would adversely affect the rights of such holder), and the form or forms of instruments that are required or deemed appropriate under the Plan, including any written notices and elections required of Participants.

     4.2 The Board may adopt such rules for the administration of the Plan as it deems necessary or advisable, in its sole discretion. For all purposes of the Plan, a majority of the members of the Board shall constitute a quorum, and the vote or written consent of a majority of the members of the Board on a particular matter shall constitute the act of the Board on that matter. The Board shall have the exclusive right to construe the Plan and any Award, to settle all controversies regarding the Plan or any Award, to correct defects and omissions in the Plan and in any Award, and to take such further actions as the Board deems necessary or advisable, in its sole discretion, to carry out the purpose and intent of the Plan. Such actions shall be final, binding and conclusive upon all parties concerned.

     4.3 No member of the Board shall be liable for any act or omission (whether or not negligent) taken or omitted in good faith, or for the good faith exercise of any authority or discretion granted in the Plan to the Board, or for any act or omission of any other member of the Board.

     4.4 All costs incurred in connection with the administration and operation of the Plan shall be paid by the Company. Except for the express obligations of the Company under the Plan and under Awards granted in accordance with the provisions of the Plan, the Company shall have no liability with respect to any Award, or to any Participant or any transferee of shares of Common Stock from any Participant, including, but not limited to, any tax liabilities, capital losses, or other costs or losses incurred by any Participant or any such transferee.

5. Types of Awards

     5.1 Options.

          (a) An Option is an Award entitling the recipient on exercise thereof to purchase Common Stock at a specified exercise price. Both “incentive stock options,” as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) (any Option intended to qualify as an incentive stock option being hereinafter referred to as an “ISO”), and Options that are not incentive stock options (“non-ISO”), may be granted under the Plan. ISOs shall be awarded only to Employees.

          (b) The exercise price of an Option will be determined by the Board subject to the following:

               (1) The exercise price of an ISO shall not be less than 100% (110% in the case of an ISO granted to a ten percent shareholder) of the fair market value (as defined in Section 11.9) of the Common Stock subject to the ISO, determined as of the time the ISO is granted. A “ten-percent shareholder” is any person who at the time of grant owns, directly or indirectly, or is deemed to own by reason of the attribution rules of Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of Orbit or of any of its subsidiaries.

               (2) The exercise price of a non-ISO shall not be less than 85% of the fair market value of the Common Stock subject to the non-ISO, determined as of the time the non-ISO is granted, provided that the discount from fair market value is in lieu of a reasonable amount of cash compensation, and provided further that the exercise price of a non-ISO granted pursuant to a Performance Award may be determined either as of the time the Performance Award is granted or as of the time the non-ISO is granted pursuant to the Performance Award.

               (3) In no case may the exercise price paid for Common Stock which is part of an original issue of authorized Common Stock be less than the par value per share of the Common Stock.

          (c) The period during which an Option may be exercised will be determined by the Board, except that the period during which an ISO may be exercised will not exceed ten years five years, in the case of an ISO granted to a ten-percent shareholder) from the day immediately preceding the date the Option was granted.

          (d) An Option will become exercisable at such time or times, and on such terms and conditions, as the Board may determine. The Board may at any time accelerate the time at which all or any part of the Option may be exercised. Any exercise of an Option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any documents required by the Board and (2) payment in full in accordance with Section 5.1(e) below for the number of shares for which the Option is exercised.

          (e) Stock purchased on exercise of an Option must be paid for as follows: (1) in cash or by check (acceptable to Orbit in accordance with guidelines established for this purpose), bank draft or money order payable to the order of Orbit or (2) if so permitted by the instrument evidencing the Option (or in the case of an Option which is not an ISO, by the Board at or after grant of the Option), (i) through the delivery of shares of Common Stock which have been outstanding for at least six months (unless the Board expressly approves a shorter period) and which have a fair market value on the last business day preceding the date of exercise equal to the exercise price, or (ii) by delivery of a promissory note of the Option holder to Orbit, payable on such terms and conditions as the Board may determine, or (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to Orbit sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment; provided, that if the Common Stock delivered upon exercise of the Option is an original issue of authorized Common Stock, at least so much of the exercise price as represents the par value of such Common Stock must be paid other than by the Option holder’s promissory note.

          (f) If the market price of shares of Common Stock subject to an Option exceeds the exercise price of the Option at the time of its exercise, the Board may cancel the Option and cause Orbit to pay in cash or in shares of Common Stock (at a price per share equal to the fair market value per share) to the person exercising the Option an amount equal to the difference between the fair market value of the Common Stock which would have been purchased pursuant to the exercise (determined on the date the Option is canceled) and the aggregate exercise price which would have been paid. The Board may exercise its discretion to take such action only if it has received a written request from the person exercising the Option, but such a request will not be binding on the Board.

     5.2 Stock Appreciation Rights.

          (a) A Stock Appreciation Right is an Award entitling the recipient on exercise of the Right to receive an amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), determined in whole or in part by reference to appreciation in Common Stock value. In general, a Stock Appreciation Right entitles the Participant to receive, with respect to each share of Common Stock as to which the Right is exercised, the excess of the share’s fair market value on the date of exercise over its fair market value on the date the Right was granted. However, the Board may provide at the time of grant that the amount the recipient is entitled to receive will be adjusted upward or downward under rules established by the Board to take into account the performance of the Common Stock in comparison with the performance of other stocks or an index or indices of other stocks. The Board may also grant Stock Appreciation Rights that provide that following a Change in Control of the Company (as defined in Section 6.3(b) hereof) the holder of such Right will be entitled to receive, with respect to each

share of Common Stock subject to the Right, an amount equal to the excess of a specified value (which may include an average of values) for a share of Common Stock during a period receding such Change in Control over the fair market value of a share of Common Stock on the date the Right was granted.

          (b) Stock Appreciation Rights may be granted in tandem with, or independently of, Options granted under the Plan. A Stock Appreciation Right granted in tandem with an Option which is not an ISO may be granted either at or after the time the Option is granted. A Stock Appreciation Right granted in tandem with an ISO may be granted only at the time the Option is granted.

          (c) When Stock Appreciation Rights are granted in tandem with Options, the following rules will apply:

               (1) The Stock Appreciation Right will be exercisable only at such time or times, and to the extent, that the related Option is exercisable and will be exercisable in accordance with the procedure required for exercise of the related Option.

               (2) The Stock Appreciation Right will terminate and no longer be exercisable upon the termination or exercise of the related Option, except that a Stock Appreciation Right granted with respect to less than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the Stock Appreciation Right.

               (3) The Option will terminate and no longer be exercisable upon the exercise of the related Stock Appreciation Right.

               (4) The Stock Appreciation Right will be transferable only with the related Option.

               (5) A Stock Appreciation Right granted in tandem with an ISO may be exercised only when the market price of the Stock subject to the Option exceeds the exercise Price of such option.

          (d) A Stock Appreciation Right not granted in tandem with an Option will become exercisable at such time or times, and on such terms and conditions, as the Committee may specify. The Board may at any time accelerate the time at which all or any part of the Right may be exercised. Any exercise of an independent Stock Appreciation Right must be in writing, signed by the proper person and delivered or mailed to Orbit, accompanied by any other documents required by the Board.

     5.3 Restricted and Unrestricted Stock.

          (a) A Restricted Stock Award entitles the recipient to acquire, for a purchase price not less than the par value, shares of Common Stock subject to the restrictions described in Section 5.3(d) below (“Restricted Stock”).

          (b) A Participant who is granted a Restricted Stock Award shall have no rights with respect to such Award unless the Participant accepts the Award by written instrument delivered or mailed to Orbit accompanied by payment in full of the specified purchase price, if any, of the shares covered by the Award. Payment may be by certified or bank check or other instrument acceptable to the Board.

          (c) A Participant who receives Restricted Stock shall have all the rights of a stockholder with respect to such stock, including voting and dividend rights, subject to the restrictions described in paragraph (d) below and any other conditions imposed by the Board at the time of grant. Unless the Board otherwise determines, certificates evidencing shares of Restricted Stock will remain in the possession of Orbit until such shares are free of all restrictions under the Plan.

          (d) Except as otherwise specifically provided by the Plan or the Award, Restricted Stock may not be transferred, sold, assigned, exchanged, pledged, gifted or otherwise disposed of, and if a Participant suffers a Status Change (as defined in Section 6.1 below) for any reason, must be offered to Orbit for purchase for the amount of cash paid for the such stock, or forfeited to Orbit if no cash was paid. These restrictions will lapse and the shares will become unrestricted (“Unrestricted Stock”) at such time or times, and on such terms and conditions, as the Board may determine. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares will lapse.

          (e) Any Participant making, or required by an Award to make, an election under Section 83(b) of the Code with respect to Restricted Stock shall deliver to Orbit, within 10 days of the filing of such election with the Internal Revenue Service, a copy of such election.

          (f) The Board may, at the time any Award described in this Section 5 is granted, provide that any or all the Common Stock delivered pursuant to the Award will be Restricted Stock.

          (g) The Board may, in its sole discretion, approve the sale to any Participant of shares of Common Stock free of restrictions under the Plan for a price which is not less than the par value of the Common Stock, provided that the value of such Award, which equals the difference between the price and the fair market value of such shares on the date of grant, is in lieu of a reasonable amount of cash compensation.

     5.4 Performance Awards. A Performance Award entitles the recipient to receive, without payment, an Award or Awards described in this Section 5 following the attainment of such performance goals, during such measurement period or periods, and on such other terms and conditions, all as the Board may determine. Performance goals may be related to overall corporate performance, operating group or business unit performance, personal performance or such other category of performance as the Board may determine. Financial performance may be measured by revenue, operating income, net income, earnings per share, number of days sales outstanding in accounts receivable, productivity, return on equity, common stock price, price-earnings multiple, or such other financial factors as the Board may determine.

     5.5 Loans and Supplemental Grants.

          (a) The Company may make a loan to a Participant (“Loan”), either in connection with the purchase of Common Stock under the Award or the payment of any Federal, state and local income tax with respect to income recognized as a result of the Award. The Board shall have the authority, in its sole discretion, to determine whether to make a Loan, the amount, terms and conditions of the Loan, including the interest rate (which may be zero), whether the Loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the Loan is to be repaid and the terms and conditions, if any, under which the Loan may be forgiven. In no event shall any Loan have a term (including extensions) in excess of ten years.

          (b) In connection with any Award, the Board may grant a cash award to the Participant (“Supplemental Grant”) not to exceed an amount equal to (1) the amount of any Federal, state and local income tax on ordinary income for which the Participant may be liable with respect to the Award, determined by assuming taxation at the highest marginal rate, plus (2) an additional amount on a grossed-up basis intended to make the Participant whole on an after-tax basis after discharging all the Participant’s income tax liabilities arising from all payments under this Section 5. Any payments under this Section 5.5(b) shall be made at the time the Participant incurs Federal income tax liability with respect to the Award.

6. Events Affecting Outstanding Awards

     6.1 Termination of Service by Death or Disability. If a Participant ceases to be an Employee or if there is a termination of the consulting service or other relationship in respect of which a non-Employee Participant was granted an Award (such termination of employment or other relationship being hereinafter referred to as a “Status Change”) by reason of death or permanent disability (as determined by the Board), the following rules shall apply, unless otherwise determined by the Board:

          (a) All Options and Stock Appreciation Rights held by the Participant at the time of such Status Change, to the extent then exercisable, will continue to be exercisable by the Participant’s heirs, executor, administrator or other legal or personal representative, for a period of one year after the Participant’s Status Change. After the expiration of such one- year period, all such Options and Stock Appreciation Rights shall terminate. In no event, however, shall an Option or Stock Appreciation Right remain exercisable beyond the latest date on which it could have been exercised without regard to this Section 6. All Options and Stock Appreciation Rights held by a Participant at the time of such Status Change that are not then exercisable shall terminate upon such Status Change.

          (b) All Restricted Stock held by the Participant at the time of such Status Change shall immediately become free of all restrictions and conditions.

          (c) Any payment or benefit under a Performance Award or Supplemental Grant to which the Participant was not irrevocably entitled at the time of such Status Change shall be forfeited and the Award canceled as of the time of such Status Change.

     6.2 Termination of Service Other Than by Death or Disability. If a Participant suffers a Status Change other than by reason of death or permanent disability (as determined by the Board), the following rules shall apply, unless otherwise determined by the Board at the time of grant of an Award:

          (a) All Options and Stock Appreciation Rights held by the Participant at the time of such Status Change, to the extent then exercisable, will continue to be exercisable by the Participant for a period of three months after the Participant’s Status Change. After the expiration of such three-month period, all such Options and Stock Appreciation Rights shall terminate. In no event, however, shall an Option or Stock Appreciation Right remain exercisable beyond the latest date on which it could have been exercised without regard to this Section 6. All Options and Stock Appreciation Rights held by a Participant at the time of such Status Change that are not then exercisable shall terminate upon such Status Change.

          (b) All Restricted Stock held by the Participant at the time of such Status Change shall immediately become free of all restrictions and conditions, unless such Status Change results from a voluntary resignation or termination for Cause (as defined in Section 6.2(d)), in which event all Restricted Stock held by the Participant at the time of the Status Change shall be transferred to Orbit (and, in the event the certificates representing such Restricted Stock are held by Orbit, such Restricted Stock shall be so transferred without any further action by the Participant) in accordance with Section 5.3 above.

          (c) Any payment or benefit under a Performance Award or Supplemental Grant to which the Participant was not irrevocably entitled at the time of such Status Change shall be forfeited and the Award canceled as of the date of such Status Change.

          (d) A termination by the Company of a Participant’s employment with or service to the Company shall be for “Cause” only if: (1) the Board determined that the Participant (i) was guilty of gross negligence or willful misconduct in the performance of his or her duties for the Company, or (ii) breached or violated, in a material respect, any agreement between the Participant and the Company or any of the Company’s policy statements regarding conflicts-of-interest, insider trading or confidentiality, or (iii) committed a material act of dishonesty or breach of trust; (2) such determination was made at a duly convened meeting of the Board with respect to which the Participant received at least 10 days prior written notice, had a reasonable opportunity to make a statement and answer the allegations against him or her; and (3) either (i) the Participant was given a reasonable opportunity to take remedial action but failed or refused to do so, or (ii) the Board also determined, at such meeting, that an opportunity to take remedial action would not have been meaningful under the circumstances.

          (e) For all purposes of this Section 6.2, (1) if a Participant is an Employee of a subsidiary of and such subsidiary ceases to be a subsidiary of Orbit, then the Participant’s employment with the Company will be deemed to have been terminated by the Company without Cause, unless the Participant is transferred to Orbit or another subsidiary of Orbit; (2) the employment with the Company of a Participant will not be deemed to have been terminated if the Participant is transferred from Orbit to a subsidiary of Orbit, or vice versa, or from one

subsidiary of Orbit to another; and (3) if a Participant terminates his or her employment with the Company following a reduction in his or her rate of compensation, then the Participant’s employment with the Company will be deemed to have been terminated by the Company without Cause.

7. Grant and Acceptance of Awards

     7.1 The Board’s approval of a grant of an Award under the Plan, including the names of Participants and the size of the Award, including the number of shares of Common Stock subject to the Award, shall be reflected in minutes of meetings held by the Board or in written consents signed by members of the Board. Once approved by the Board, each Award shall be evidenced by such written instrument, containing such terms as are required by the Plan and such other terms, consistent with the provisions of the Plan, as may be approved from time to time by the Board.

     7.2 Each instrument may be in the form of agreements to be executed by both the Participant and Orbit, or certificates, letters or similar instruments, which need not be executed by the Participant but acceptance of which shall evidence agreement to the terms thereof. The receipt of an Award shall not impose any obligation on the Participant to accept the Award.

     7.3 Except as specifically provided by the Plan or the instrument evidencing an Award, a Participant shall not become a stockholder of Orbit until (i) the Participant makes any required payments in respect of the Common Stock issued or issuable pursuant to the Award, (ii) the Participant furnishes Orbit with any required agreements, certificates, letters or other instruments, and (iii) the Participant actually receives the shares of Common Stock. Subject to any terms and conditions imposed by the Plan or the instrument evidencing an Award, upon the occurrence of all of the conditions set forth in the immediately preceding sentence, a Participant shall have all rights of a stockholder with respect to shares of Common Stock, including, but not limited to, the right to vote such shares and to receive dividends and other distributions paid with respect to such shares. The Board may, upon such conditions as it deems appropriate, provide that a Participant will receive a benefit in lieu of cash dividends that would have been payable on any and all Common Stock subject to the Participant’s Award, had such Common Stock been outstanding. Without limitation, the Board may provide for payment to the Participant of amounts representing such dividends, either currently or in the future, or for the investment of such amounts on behalf of the Participant.

     7.4 Notwithstanding any other provision of the Plan, the Company shall not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares of Common Stock previously delivered under the Plan (a) until all conditions to the Award have been satisfied or removed, (b) until, in the opinion of counsel to Orbit, all applicable Federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange or included for quotation on an inter-dealer system, until the shares to be delivered have been listed or included or authorized to be listed or included on such exchange or system upon official notice of notice of issuance, (d) if it might cause Orbit to issue or sell more shares of Common Stock than Orbit is then legally entitled to issue or sell, and (e) until all other legal matters in connection with the issuance and delivery of

such shares have been approved by counsel to Orbit. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of an Award, such representations or agreements as counsel to Orbit may consider appropriate to avoid violation of such Act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the Participant’s legal representative, the Company shall be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative.

8. Tax Withholding

     The Company shall withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all Federal, state and local withholding tax requirements (the “withholding requirements”). In the case of an Award pursuant to which Common Stock may be delivered, the Board shall have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit a Participant to elect at such time and in such manner as the Board may determine to have the Company hold back from the shares of Common Stock to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. If at the time an ISO is exercised, the Board determines that the Company could be liable for withholding requirements with respect to a disposition of the Common Stock received upon exercise, the Board may require as a condition of exercise that the person exercising the ISO agree (a) to inform the Company promptly of any disposition (within the meaning of Section 424(c) of the Code) of Common Stock received upon exercise, and (b) to give such security as the Board deems adequate to meet the potential liability of the Company for the withholding requirements and to augment such security from time to time in any amount reasonably deemed necessary by the Board to preserve the adequacy of such security.

9. Stockholder Approval, Effective Date and Term of Plan

     The Plan was adopted by the Board on March 17, 1997 (“Effective Date”), and approved by Orbit’s stockholder on March 17, 1997. The Plan will continue in effect until terminated in accordance with Section 10; provided, however, that no ISO will be granted hereunder on or after the 10th anniversary of the Effective Date, but provided further, that ISOs granted prior to such 10th anniversary may extend beyond that date.

10. Effect, Amendment, Suspension and Termination

     Neither adoption of the Plan nor the grant of Awards to a Participant will affect the Company’s right to grant to such Participant awards that are not subject to the Plan, to issue to such Participant Common Stock as a bonus or otherwise, or to adopt other plans or arrangements under which Common Stock may be issued to Employees or other persons or entities. The Board reserves the right, at any time and from time to time, to amend the Plan in any way, or to suspend or terminate the Plan, effective as of the date specified by the Board when it takes such action,

which date may be before or after the date the Board takes such action; provided that any such action shall not affect any Awards granted before the actual date on which such action is taken by the Board; and further provided that the approval of Orbit’s stockholders shall be required whenever necessary for the Plan to continue to satisfy the conditions of Section 422 of the Code with respect to the award of ISOs (unless the Board determines that ISOs shall no longer be granted under the Plan), any bylaw, rule or regulation of the primary market system or stock exchange on which Orbit’s Common Stock is then listed or admitted to trading, or any other applicable law, rule or regulation.

11. Other Provisions

     11.1 Nothing contained in the Plan or any Award shall confer upon any Employee or other Participant the right to continue in the employ of, or to continue to provide service to, the Company or any affiliated corporation, or interfere in any way with the right of the Company or any affiliated corporation to terminate the employment or service of any Employee or other Participant for any reason.

     11.2 Corporate action constituting an offer by Orbit of Common Stock to any Participant under the terms of an Award shall be deemed completed as of the date of grant of the Award, regardless of when the instrument, certificate, or letter evidencing the Award is actually received or accepted by the Participant.

     11.3 Except as otherwise specifically provided by an Award (other than an ISO), neither any Award nor a Participant’s rights under any Award or under the Plan may be assigned or transferred in any manner other than by will or under the laws of descent and distribution. An Award may be exercised only by the Participant to whom such Award was granted (or by such Participant’s heirs, estate, beneficiary or personal or legal representative under Section 6.1). The foregoing shall not, however, restrict a Participant’s rights with respect to Unrestricted Stock or the outright transfer of cash, nor shall it restrict the ability of a Participant’s heirs, estate, beneficiaries, or personal or legal representatives to enforce the terms of the Plan with respect to Awards granted to the Participant.

     11.4 The Plan, and all Awards granted hereunder, shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. The headings of the Sections of the Plan are for convenience of reference only and shall not affect the interpretation of the Plan. All pronouns and similar references in the Plan shall be construed to be of such number and gender as the context requires or permits. If any provision of the Plan is determined to be unenforceable for any reason, then that provision shall be deemed to have been deleted or modified to the extent necessary to make it enforceable, and the remaining provisions of the Plan shall be unaffected.

     11.5 All notices with respect to the Plan shall be in writing and shall be hand delivered or sent by certified mail or reputable overnight delivery service, expenses prepaid. Notices to the Company or the Board shall be delivered or sent to Orbit’s headquarters to the attention of its Chief Financial Officer. Notices to any Participant or holder of shares of Common Stock issued

pursuant to an Award shall be sufficient if delivered or sent to such person’s address as it appears in the regular records of the Company or Orbit’s transfer agent.

     11.6 If there is any change in the capitalization of Orbit, such as by stock dividend, stock split, combination of shares, exchange of securities, recapitalization or other event which the Board deems, in its sole discretion, to be similar circumstances, the Board may make such adjustments to the number and/or kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to such Awards and any other provision of such Awards affected by such change, as the Board may determine in its sole discretion. The Board may also make such adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions or similar corporate transactions, or any other event, as the Board may determine in its sole discretion.

     11.7 The Board may agree at any time, upon request of a Participant, to defer the date on which any payment under an Award shall be made.

     11.8 In any case that a Participant purchases Common Stock under an Award for a price equal to the par value of the Common Stock, the Board may determine, in its sole discretion, that such price has been satisfied by past services rendered by the Participant.

     11.9 For the purposes of the Plan and any Award granted hereunder, unless otherwise determined by the Board, the term “fair market value” of Common Stock on or as of a specified date shall mean either (i) in the case of an Option not granted under a Performance Award, the last sale price (as defined below in this Section) for one share of Common Stock on the last trading day on or before the specified date, or, if the foregoing does not apply, the market value determined by the Board; or (ii) in the case of an Option granted under a Performance Award, the average of the last sale prices during the first ten trading days beginning on or after the specified date, or the average of the last sale prices during such other period of time beginning on or after the specified date as is determined by the Board, or, if the foregoing does not apply, the market value determined by the Board. “Last sale price” means the last sale price reported on The Nasdaq Stock Market or on such other primary market system or stock exchange on which Orbit’s Common Stock is then listed or admitted to trading.

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Israel Adan, Chief Executive Officer of ORBIT/FR, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of ORBIT/FR, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

          a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

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          a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2007	/s/ Israel Adan
	Israel Adan
	Chief Executive Officer

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EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dave Lubbe, Chief Financial Officer of ORBIT/FR, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of ORBIT/FR, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

          a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

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          a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2007	/s/ Dave Lubbe
	Dave Lubbe
	Chief Financial Officer

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EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the Quarterly Report of Orbit/FR, Inc. (the “Company”) on Form 10-Q for the six months ending June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Israel Adan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 14, 2007

/s/ Israel Adan

Israel Adan

President and Chief Executive Officer

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EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the Quarterly Report of Orbit/FR, Inc. (the “Company”) on Form 10-Q for the six months ending June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dave Lubbe, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 14, 2007

/s/ Dave Lubbe

Dave Lubbe

Chief Financial Officer

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