-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JL0QGYAhTva9KtlNnRbT+5sLYXButROujEMTbTFItJMTE7YQoA9dw1lhaVIerVju M6Q48cICdemxHc9ukQcRtw== 0000074818-05-000047.txt : 20051114 0000074818-05-000047.hdr.sgml : 20051111 20051114150117 ACCESSION NUMBER: 0000074818-05-000047 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051114 DATE AS OF CHANGE: 20051114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBIT INTERNATIONAL CORP CENTRAL INDEX KEY: 0000074818 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 111826363 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-03936 FILM NUMBER: 051200547 BUSINESS ADDRESS: STREET 1: 80 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 7136675601 MAIL ADDRESS: STREET 1: 80 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 FORMER COMPANY: FORMER CONFORMED NAME: ORBIT INSTRUMENT CORP DATE OF NAME CHANGE: 19911015 10QSB 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark one) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended September 30, 2005 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NUMBER 0-3936 ORBIT INTERNATIONAL CORP. (Exact name of small business issuer as specified in its charter) DELAWARE 11-1826363 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 80 CABOT COURT, HAUPPAUGE, NEW YORK 11788 (Address of principal executive offices) 631-435-8300 (Issuer's telephone number, including area code) N/A (Former name, former address and formal fiscal year, if changed since last report) Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ___ - APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of registrant's Common Stock, par value $.10, as of November 10, 2005 was 4,550,185. --------- Transitional Small Business Disclosure Format (check one): Yes___ No X --
INDEX Page No. ------------ Report of Independent Registered Public Accounting Firm . . . 3 Part I. .. Financial Information: Item 1 - Financial Statements: Condensed Consolidated Balance Sheet - September 30, 2005(unaudited) and December 31, 2004 . . . . 4-5 Condensed Consolidated Statements of Operations (unaudited) Three and Nine Months Ended September 30, 2005 and 2004 . . . . . . . . . . . . . . . 6 Condensed Consolidated Statement of Cash Flows (unaudited) Nine Months Ended September 30, 2005 and 2004 . . . . . . . 7-8 Notes to Condensed Consolidated Financial Statements. . . . 9-15 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . 16-23 Item 3 - Controls and Procedures. . . . . . . . . . . . . . 24 Part II.. Other Information: Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . 25 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . 26 Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . 27-32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Orbit International Corp. We have reviewed the accompanying condensed consolidated balance sheet of Orbit International Corp. and Subsidiaries as of September 30, 2005, and the related condensed consolidated statements of operations for the nine-month and three-month periods ended September 30, 2005 and 2004 and the statements of cash flows for the nine-month periods ended September 30, 2005 and 2004. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards of The Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above in order for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board, the consolidated balance sheet as of December 31, 2004, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 18, 2005, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. GOLDSTEIN GOLUB KESSLER LLP New York, New York November 2, 2005 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
September 30, December 31, 2005 2004 -------------- ------------- (unaudited) ASSETS - ------------------------------------------ Current assets: Cash and cash equivalents. . . . . . . . $ 3,746,000 $ 1,112,000 Investments in marketable securities . . 871,000 158,000 Accounts receivable (less allowance for doubtful accounts). . . . . . . . . . . 4,146,000 2,472,000 Inventories. . . . . . . . . . . . . . . 9,170,000 8,265,000 Other current assets . . . . . . . . . . 163,000 147,000 Deferred tax asset . . . . . . . . . . . 490,000 564,000 -------------- ------------- Total current assets . . . . . . . . 18,586,000 12,718,000 Property and equipment, net. . . . . . . 366,000 198,000 Goodwill . . . . . . . . . . . . . . . . 5,984,000 868,000 Intangible assets, net . . . . . . . . . 1,748,000 - Other assets . . . . . . . . . . . . . . 1,182,000 1,058,000 Deferred tax asset . . . . . . . . . . . 1,352,000 200,000 -------------- ------------- TOTAL ASSETS. . . . . . . . . . . . $ 29,218,000 $ 15,042,000 ============== ============= See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (continued)
September 30, December 31, 2005 2004 --------------- -------------- (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------- Current liabilities: Current portion of long-term obligations. $ 1,125,000 $ 13,000 Accounts payable. . . . . . . . . . . . . 1,322,000 712,000 Accrued expenses. . . . . . . . . . . . . 1,284,000 976,000 Deferred income . . . . . . . . . . . . . 85,000 85,000 Customer advances . . . . . . . . . . . . 513,000 - --------------- -------------- Total current liabilities . . . . . . . . 4,329,000 1,786,000 Deferred income . . . . . . . . . . . . . 534,000 598,000 Long-term obligations, net of current maturities.. . . . . . . . . . . . . . . 5,560,000 20,000 --------------- -------------- Total liabilities . . . . . . . . . . . . 10,423,000 2,404,000 --------------- -------------- STOCKHOLDERS' EQUITY Common stock - $.10 par value . . . . . . 453,000 384,000 Additional paid-in capital. . . . . . . . 20,313,000 16,580,000 Unearned compensation . . . . . . . . . . (1,384,000) (1,516,000) Accumulated other comprehensive loss. . . (5,000) (3,000) Accumulated deficit . . . . . . . . . . . (582,000) (2,807,000) --------------- -------------- Total stockholders' equity. . . . . . . . 18,795,000 12,638,000 --------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. $ 29,218,000 $ 15,042,000 =============== ============== See accompanying notes.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 ---- ---- ---- ---- Net sales $18,629,000 $13,398,000 $ 6,501,000 $ 4,536,000 Cost of sales 10,325,000 7,561,000 3,611,000 2,605,000 ----------- ----------- ----------- ------------- Gross profit 8,304,000 5,837,000 2,890,000 1,931,000 ----------- ----------- ----------- ---------- Selling, general and administrative expenses 5,996,000 4,495,000 2,061,000 1,453,000 Interest expense 215,000 2,000 112,000 1,000 Investment and other income, net (132,000) (77,000) (55,000) (27,000) -------- ------- ----------- ---------- Income before provision for income taxes 2,225,000 1,417,000 772,000 504,000 Income tax provision - (100,000) - (100,000) ------- ------------ --------- ----------- NET INCOME $ 2,225,000 $ 1,517,000 $ 772,000 $ 604,000 ============ ============ =========== =========== Net income per common share: (a) Net income Basic $ .56 $ .44 $ .18 $ .17 Diluted $ .51 $ .39 $ .17 $ .16 (a) Retroactively adjusted to reflect a twenty-five percent(25%) stock dividend effective July 18, 2005. See accompanying notes. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Nine Months Ended September 30, 2005 2004 ------------------- ------------ Cash flows from operating activities: Net income. . . . . . . . . . . . . . . . . . $ 2,225,000 $ 1,517,000 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets . . . . . . 217,000 - Expense due to restricted stock grant. . . . 132,000 14,000 Depreciation. . . . . . . . . . . . . . . . . 127,000 53,000 Deferred income.. . . . . . . . . . . . . . . (64,000) (64,000) Expense due to issuance of warrants . . . . . - 94,000 Deferred tax benefit. . . . . . . . . . . . . (1,078,000) (124,000) Tax benefit of options exercised. . . . . . . 1,078,000 24,000 Changes in operating assets and liabilities net of effects from purchase of Tulip Development Laboratory, Inc and TDL Manufacturing Inc.: Accounts receivable . . . . . . . . . . . . . (505,000) 79,000 Inventories . . . . . . . . . . . . . . . . . (65,000) (1,306,000) Other current assets. . . . . . . . . . . . . (4,000) (57,000) Other assets. . . . . . . . . . . . . . . . . (124,000) (145,000) Accounts payable. . . . . . . . . . . . . . . 357,000 544,000 Due to former shareholders of Tulip/TDLM. . . (450,000) - Accrued expenses. . . . . . . . . . . . . . . 108,000 (153,000) Customer advances . . . . . . . . . . . . . . 297,000 - ------------------- ------------ Net cash provided by operating activities . . . 2,251,000 476,000 ------------------- ------------ Cash flows from investing activities: Cash paid for acquisition of Tulip, net of cash received of $693,000. . . . . . . . . . (4,688,000) - Purchases of property and equipment . . . . . (89,000) (48,000) Purchase of marketable securities . . . . . . (715,000) (108,000) ------------------- ------------ Net cash used in investing activities . . . . . (5,492,000) (156,000) (continued)
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) (continued)
Cash flows from financing activities: Repayments of long-term debt. . . . . . . (349,000) (113,000) Proceeds from issuance of long term debt. 5,000,000 - Proceeds from issuance of stock grant . . - 1,000 Proceeds from exercise of stock options . 1,224,000 38,000 ----------- ----------- Net cash provided by (used in) financing activities . . . . . . . . . . 5,875,000 (74,000) NET INCREASE IN CASH AND CASH EQUIVALENTS . 2,634,000 246,000 Cash and cash equivalents - January 1 . . . 1,112,000 797,000 ----------- ----------- CASH AND CASH EQUIVALENTS - September 30. . $3,746,000 $1,043,000 =========== =========== Supplemental cash flow information: Cash paid for: Interest. . . . . . . . . . . . . . . . . $ 152,000 $ 2,000 Supplemental schedule of noncash investing and financing activities: The Company purchased all of the capital stock of Tulip Development Laboratory, Inc. and its manufacturing affiliate, TDL Manufacturing, Inc. for $8,881,000. In conjunction with the acquisition, net assets with a fair value of $1,800,000 were acquired. In connection with the aforementioned acquisition, the Company funded $2,000,000 of the purchase price with a promissory note issued to the former shareholders of Tulip. Also in connection with the acquisition, approximately 206,000 shares of Orbit $.10 par value common stock, valued at approximately $1,500,000, was issued to the former shareholders of Tulip.
See accompanying notes. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (NOTE 1) - Basis of Presentation: ------- ----------------------- The interim financial information herein is unaudited. However, in the opinion of management, such information reflects all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods being reported. Additionally, it should be noted that the accompanying consolidated financial statements do not purport to contain complete disclosures required for annual financial statements in conformity with generally accepted accounting principles. The results of operations for the nine and three months ended September 30, 2005, are not necessarily indicative of the results of operations for the full fiscal year ending December 31, 2005. These condensed consolidated statements should be read in conjunction with the Company's consolidated financial statements for the fiscal year ended December 31, 2004 contained in the Company's Form 10-KSB. As described in Note 10, the Company acquired Tulip Development Laboratory, Inc. and its manufacturing affiliate, TDL Manufacturing , Inc., collectively ("Tulip"), on April 4, 2005. Operating results for Tulip for the period April 1, 2005 through April 4, 2005 are included in these financial statements but were not material. On June 24, 2005, the Board of Directors approved a twenty-five percent (25%) stock dividend to shareholders of record on July 18, 2005. The payable date for the dividend was July 29, 2005. The stock dividend has been accounted for as a 5 for 4 stock split and all references to shares and per share amounts in the accompanying financial statements have been retroactively adjusted to reflect the stock dividend. The Company measures employee stock-based compensation cost using Accounting Principles Board ("APB") Opinion No. 25 as is permitted by Statement of Financial Accounting Standards("SFAS") No. 123, Accounting for Stock-Based Compensation. In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R (Revised 2004), Share-Based Payment ("SFAS No. 123R"), which requires that the compensation cost relating to share-based payment transactions be recognized in financial statements based on alternative fair value models. The share-based compensation cost will be measured based on the fair value of the equity or liability instruments issued. The Company currently discloses pro forma compensation expense quarterly and annually by calculating the stock option grants' fair value using the Black-Scholes and Binomial model and disclosing the impact on net income and net income per share in a Note to the Consolidated Financial Statements. Upon adoption, pro forma disclosure will no longer be an alternative. The table at the end of this footnote reflects the estimated impact that such a change in accounting treatment would have had on our net income and net income per share if it had been in effect during the nine-months and three-months ended September 30, 2005 and 2004. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a (continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) financing cash flow rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the Company cannot estimate what those amounts will be in the future, the amount of operating cash flows recognized for such deductions were $1,078,000 and $24,000 for the nine months ended September 30, 2005 and 2004, respectively. The Company will begin to apply SFAS No. 123R using the most appropriate fair value model as of the interim reporting period ending March 31, 2006. Had the Company elected to recognize compensation cost based on the fair value of the options granted at the grant date as prescribed by SFAS No. 123R, the Company's net income and income per common share would have been as follows:
Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 ------------------ -------------- -------- -------- Net Income - as reported. . . . . . . . . . . . . $ 2,225,000 $ 1,517,000 $772,000 $604,000 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards,net of related tax effects. . . . . . . . 62,000 915,000 8,000 67,000 ------------------ --------------- -------- -------- Net Income - pro forma. . . . . . . . . . . . . . $ 2,163,000 $ 602,000 $764,000 $537,000 ================== ============== ======== ======== Basic income per share - as reported. . . . . . . $ 0.56 $ 0.44 $ 0.18 $ 0.17 ================== ============== ======== ======== Basic income per share - pro forma. . . . . . . . $ 0.55 $ 0.17 $ 0.18 $ 0.16 ================== ============== ======== ======== Diluted income per share - as reported. . . . . . $ 0.51 $ 0.39 $ 0.17 $ 0.16 ================== ============== ======== ======== Diluted income per share - pro forma $ $0.49 $ 0.16 $ 0.17 $ 0.14 ================== ============== ======== ========
(NOTE 2) - Financing Arrangements: ------- ----------------------- In April 2005, the Company entered into an amended $2,500,000 credit facility with a commercial lender secured by accounts receivable, inventory and property and equipment. The agreement will continue from year to year thereafter unless sooner terminated for an event of default including non-compliance with financial covenants. Loans under the facility will bear interest equal to the sum of 2.00% plus the one-month London Inter-bank offer rate (LIBOR) (3.86% at September 30, 2005). No amounts have been borrowed under the credit facility. In April 2005, the Company entered into a new five-year $5,000,000 Term Loan Agreement with the same aforementioned lender to finance the acquisition of Tulip (Note 10). The Term Loan will have fifty-nine (59) monthly principal payments of approximately $60,000 and a sixtieth (60th) payment of approximately $1,500,000. The loan bears interest equal to the sum of 2.25% plus the one-month LIBOR. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) (NOTE 3) - Income Per Share: ------- ------------------ The following table sets forth the computation of basic and diluted income per common share:
Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 ----------------- ------------------ --------------------- --------- Denominator: Denominator for basic Income per share - weighted-average common shares . . . . . . . . . . . 3,963,000 3,463,000 4,245,000 3,464,000 Effect of dilutive securities: Employee and directors stock options. . . . . . . . 361,000 366,000 290,000 334,000 Stock Grant. . . . . . . . . 58,000 9,000 72,000 9,000 Warrants . . . . . . . . . . - 26,000 - 19,000 ----------------- ------------------ --------------------- --------- Denominator for diluted income per share - weighted-average common shares and assumed conversion . . . . . . . . . 4,382,000 3,864,000 4,607,000 3,826,000 ================= ================== ===================== =========
The numerator for basic and diluted income per share for the nine and three- month periods ended September 30, 2005 and 2004 is net income. Options to purchase 5,000 shares of common stock were outstanding during the nine months ended September 30, 2005 and options to purchase 101,354 and 104,478 shares were outstanding for the three and nine months periods ended September 30, 2004, respectively, but were not included in the computation of diluted earnings per share. The inclusion of these options would have been anti-dilutive due to the options' exercise prices being greater than the average market price of the Company's common shares during the respective periods. (NOTE 4) - Cost of Sales: ------- --------------- For interim periods, the Company estimates its inventory and related gross profit. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) (NOTE 5) - Inventories: - -------- ----------- Inventories are comprised of the following:
September 30, December 31, 2005 2004 -------------- ------------- Raw Materials . $ 4,356,000 $ 4,303,000 Work-in-process 4,240,000 3,478,000 Finished goods. 574,000 484,000 -------------- ------------- TOTAL . . . . $ 9,170,000 $ 8,265,000 ============== =============
(NOTE 6) - Comprehensive Income: - -------- --------------------- For the nine and three months ended September 30, 2005, total comprehensive income was $2,223,000 and $777,000, respectively. For the comparable periods during 2004, total comprehensive income was $1,517,000 and $604,000 respectively. Comprehensive income consists of net income and unrealized gains and losses on marketable securities. (NOTE 7) - Business Segments: - --------- ------------------ The Company operates through two business segments. The Electronics Segment is comprised of the Orbit Instrument Division and the Company's wholly owned subsidiary, Tulip Development Laboratory, Inc. and its manufacturing affiliate, TDL Manufacturing , Inc. The Electronics Segment is engaged in the design, manufacture and sale of customized electronic components and subsystems. The Company's Power Units Segment, through the Behlman Electronics, Inc. subsidiary, is engaged in the design, manufacture and sale of distortion free commercial power units, power conversion devices and electronic devices for measurement and display. The Company's reportable segments are business units that offer different products. The reportable segments are each managed separately as they manufacture and distribute distinct products with different production processes. The following is the Company's business segment information for the nine and three month periods ended September 30, 2005 and 2004.
Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 ------------------ ------------------- ---------- ---------- Net sales: Electronics Domestic. . . . . $ 10,558,000 $ 7,579,000 $4,325,000 $2,594,000 Foreign . . . . . 368,000 73,000 239,000 17,000 ------------------ ------------------- ---------- ---------- Total Electronics $ 10,926,000 7,652,000 4,564,000 2,611,000
(continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 ------------------- -------------------- ----------- ----------- Power Units Domestic. . . . . . 7,262,000 5,302,000 1,824,000 1,678,000 Foreign . . . . . . 441,000 444,000 113,000 247,000 ------------------- -------------------- ----------- ----------- Total Power Units . . 7,703,000 5,746,000 1,937,000 1,925,000 ------------------- -------------------- ----------- ----------- Total . . . . . . . . $ 18,629,000 $ 13,398,000 $6,501,000 $4,536,000 =================== ==================== =========== =========== Income from operations: Electronics . . . . . $ 2,026,000 $ 1,945,000 $ 999,000 $ 596,000 Power Units . . . . . 1,459,000 323,000 194,000 66,000 General corporate expenses not allocated . . . . . . (1,177,000) (925,000) (364,000) (183,000) Interest expense. . . . (215,000) (2,000) (112,000) (1,000) Investment and other income. . . . . . . . 132,000 76,000 55,000 26,000 ------------------- -------------------- ----------- ----------- Income before income taxes. . . . . $ 2,225,000 $ 1,417,000 $ 772,000 $ 504,000 =================== ==================== =========== ===========
(NOTE 8) - Goodwill and Other Intangible Assets: - --------- ----------------------------------------- Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. SFAS 142 requires that an intangible asset with a finite life be amortized over its useful life and that goodwill and other intangible assets with indefinite lives not be amortized but evaluated for impairment. The Company concluded, as of March 31, 2005, that there was no impairment to goodwill and, pursuant to SFAS 142, goodwill is no longer being amortized. Intangible assets with finite lives are being amortized over three and five years. Amortization expense for the remainder of 2005 and for the next five years are as follows: 2005 $109,000 2006 435,000 2007 435,000 2008 356,000 2009 330,000 2010 83,000 -------- Total $1,748,000 ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) (NOTE 9) - Income Taxes - --------- ------------- There was no provision for current income taxes during the nine and three months ended September 30, 2005 and 2004, due to the utilization of federal and state net operating loss carryforwards. During the third quarter of 2004, due to the probability of increased profitability, the Company adjusted its valuation allowance on its deferred tax asset. This adjustment created a $100,000 income tax benefit in the third quarter of 2004. (Note 10) - Acquisition - ---------- ----------- On April 4, 2005, the Company acquired all of the issued and outstanding capital stock of Tulip. The primary reason for the acquisition was accretion to earnings and the expansion of both our customer and product base. The total purchase price was $8.881 million consisting of $5.0 million in cash, which was funded by a term loan, a $2.0 million promissory note to the sellers, approximately 206,000 shares of Orbit stock valued at $1.5 million and direct acquisition costs of approximately $381,000. The Tulip acquisition was accounted for as a purchase, and accordingly, the assets purchased and liabilities assumed are included in the consolidated balance sheet as of September 30, 2005. The operating results of Tulip are included in the consolidated financial statements since the date of acquisition. In accordance with SFAS No. 141, Business Combinations, the purchase price allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on estimates and assumptions made by management and their consultants. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized but will be reviewed at least annually for impairment. Purchased intangible assets with finite lives will be amortized on a straight-line basis over their respective estimated useful lives. The total purchase price has been allocated as follows: Tangible assets and liabilities: Cash $ 693,000 Accounts receivable 1,169,000 Inventory 840,000 Other current assets 12,000 Property and equipment 206,000 Accounts payable (254,000) Accrued expenses (200,000) Due to stockholders (450,000) Customer advances (216,000) ----------- Total net tangible assets and liabilities 1,800,000 (continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) Amortizable intangible assets: Contract backlog 1,650,000 Non-compete provision of employment contract 315,000 ---------- Total amortizable intangible assets 1,965,000 Goodwill 5,116,000 ---------- Total purchase price $8,881,000 ========== The following summarized pro forma financial information presents the combined results of the Company and Tulip as if the acquisition had occurred as of the beginning of the periods presented. Adjustments, which reflect amortization of purchased intangible assets, interest on debt to finance the acquisition and recalculation of bonuses due to adjustments to net income, have been made to the combined results of operations for the nine months ended September 30, 2005 and 2004 and the three months ended September 30, 2004. The unaudited summarized pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the acquisition occurred at the beginning of the dates presented nor does it purport to represent the results of operations for future periods.
Nine Months Ended Three Months Ended September 30, September 30, 2005 2004 2005 2004 (Pro forma) (Pro forma) (Actual) (Pro forma) ------------------ ------------------- ----------------- ------------ Net Sales . . . . . $ 20,283,000 $ 17,029,000 $ 6,501,000 $5,652,000 Net Income. . . . . 2,388,000 1,950,000 772,000 575,000 Basic earnings per share. . . . . 0.59 0.53 0.18 0.16 Diluted earnings per share. . . . . 0.54 0.48 0.17 0.14
Item 2. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Overview - ------------------- The Company recorded a significant increase in operating results for the three and nine month periods ended September 30, 2005. The results of operations for the three and nine month periods ended September 30, 2005 include the operations of Tulip as of April 4, 2005, the date the transaction was completed. Revenues increased significantly and the Company's gross profit margins improved for the three month and nine month periods ended September 30, 2005 compared to the prior periods. Consequently, net income for both the three month and nine month periods ended September 30, 2005 also increased significantly compared to the prior periods. Our backlog at September 30, 2005 was approximately $13,100,000 compared to $12,600,000 at September 30, 2004. This modest increase was due to the addition of Tulip as well as a large contract that was in the backlog of our Power Units Segment in the prior year and completed shipment in the second quarter of 2005. There is no seasonality to the Company's business. Our shipping schedules are generally determined by the shipping schedules outlined in the purchase orders received from our customers. Both of our operating segments are pursuing a significant amount of business opportunities and our confidence level remains very high with respect to receiving many of the orders we are pursuing although timing is always an uncertainty. Nevertheless, we remain very encouraged by our business environment and we expect our strong operating results to continue for the remainder of 2005. Our success of the past few years has significantly strengthened our balance sheet evidenced by our 4.3 to 1 current ratio at September 30, 2005. We currently have a $2,500,000 credit facility in place that we have not used to date and the Company is currently exploring accretive acquisition opportunities that are compatible with our existing operations. We also have several financing alternatives available to us, if needed, in order to fund any potential acquisitions. Critical Accounting Policies - ------------------------------ The discussion and analysis of the Company's financial condition and the results of its operations are based on the Company's financial statements and the data used to prepare them. The Company's financial statements have been prepared based on accounting principles generally accepted in the United States of America. On an on-going basis, we re-evaluate our judgments and estimates including those related to inventory valuation, the valuation allowance on the Company's deferred tax asset and goodwill impairment. These estimates and judgments are based on historical experience and various other assumptions that are believed to be reasonable under current business conditions and circumstances. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect more significant judgments and estimates in the preparation of the consolidated financial statements. Inventories - ----------- Inventory is valued at the lower of cost (specific and average) or market. Inventory items are reviewed regularly for excess and obsolete inventory based on an estimated forecast of product demand. Demand for the Company's products can be forecasted based on current backlog, customer options to reorder under existing contracts, the need to retrofit older units and parts needed for general repairs. Although the Company makes every effort to insure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have an impact on the level of obsolete material in its inventory and operating results could be affected, accordingly. Deferred tax asset - -------------------- At December 31, 2004, the Company had an alternative minimum tax credit of approximately $564,000 with no limitation on the carry-forward period and federal and state net operating loss carry-forwards of approximately $24,000,000 and $8,700,000, respectively that expire through 2020. In addition, the Company receives a tax deduction when their employees exercise their non-qualified stock options thereby increasing the Company's deferred tax asset. The Company places a valuation allowance to reduce its deferred tax asset when it is more likely than not that a portion of the amount may not be realized. The Company estimates its valuation allowance based on an estimated forecast of its future profitability. Any significant changes in future profitability resulting from variations in future revenues or expenses could affect the valuation allowance on its deferred tax asset and operating results could be affected, accordingly. Impairment of Goodwill and Other Intangible Assets - ---------------------------------------------------- The Company has significant intangible assets related to goodwill and other acquired intangibles. In determining the recoverability of goodwill and other intangibles, assumptions must be made regarding estimated future cash flows and other factors to determine the fair value of the assets. If these estimates or their related assumptions change in the future, the company may be required to record impairment charges for those assets not previously recorded. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible assets". Under the provisions of SFAS 142, the cost of certain intangibles will no longer be subject to amortization. All costs were reviewed for potential impairment in 2003 and 2004. During the first quarter of 2005, the Company again determined that there was no impairment to its goodwill and other intangible assets. Material Changes in Results of Operations - ---------------------------------------------- Three-month period ended September 30, 2005 v. September 30, 2004 - -------------------------------------------------------------------------- The Company currently operates in two industry segments. Its Orbit Instrument Division and its newly acquired Tulip subsidiary are engaged in the design, manufacture and sale of electronic components and subsystems (the "Electronics Segment"). Its Behlman subsidiary is engaged in the design, manufacture and sale of commercial power units (the "Power Units Segment"). The results of operations for the three month and nine month periods ended September 30, 2005 include the operations of Tulip since April 4, 2005, the date the transaction was completed. Consolidated net sales for the three month period ended September 30, 2005 increased by 43.3% to $6,501,000 from $4,536,000 for the three month period ended September 30, 2004 principally due to a 74.8% and 0.6% increase in sales from its Electronics and Power Units Segments, respectively. The increase in sales from the Electronics Segment was due to the inclusion of the operations of Tulip in the current period. Gross profit, as a percentage of sales, for the three months ended September 30, 2005 increased to 44.5% from 42.6% for the three-month period ended September 30, 2004. This increase resulted from a higher gross profit from both the Company's Electronics and Power Units Segments. The increase in gross profit from the Electronics Segment was principally due to a high gross profit recorded by Tulip due to higher sales and product mix. The increase in gross profit by the Power Units Segment was due principally to product mix. Selling, general and administrative expenses increased by 41.8% to $2,061,000 for the three month period ended September 30, 2005 from $1,453,000 for the three month period ended September 30, 2004 principally due to the inclusion of the operations of Tulip in the current period, higher corporate administrative costs and $108,000 of amortization of intangible assets associated with the Tulip acquisition. Despite the increase in expenses, selling, general and administrative expenses, as a percentage of sales, for the three month period ended September 30, 2005 decreased to 31.7% from 32.0% for the three month period ended September 30, 2004 principally due to the significant increase in sales. Interest expense, for the three month period ended September 30, 2005 increased to $112,000 compared to $1,000 for the three month period ended September 30, 2004, due to interest incurred in connection with a $5,000,000 Acquisition Loan from the Company's primary lender, for the acquisition of Tulip, as well as interest incurred on the $2,000,000 loan from the former shareholders of Tulip. Investment and other income for the three-month period ended September 30, 2005 slightly increased to $55,000 from $27,000 for the three-month period ended September 30, 2004 principally due to an increase in amounts invested during the current period. This increase in amounts invested during the current period resulted from cash generated from operations and the exercise of employee stock options. Net income for the three month period ended September 30, 2005 significantly increased to $772,000 from $604,000 for the three month period ended September 30, 2004 principally due to the significant increase in sales, the increase in gross margins, the decrease in selling, general and administrative expenses as a percentage of sales and despite the increase in interest expense. In addition, in the prior year, the Company adjusted its valuation allowance on its deferred tax asset thereby realizing $100,000 in an income tax benefit. Earnings before interest, taxes, depreciation and amortization, and amortization of unearned compensation (EBITDA) for the three month period ended September 30, 2005 significantly increased to $1,117,000 from $525,000 for the three month period ended September 30, 2004. Listed below is the EBITDA reconciliation to net income:
Three months ended September 30, 2005 2004 ------------------- ---------- Net income . . . . . . . . . . . . . . . . . $ 772,000 $ 604,000 Interest expense . . . . . . . . . . . . . . 112,000 1,000 Income tax expense (benefit) . . . . . . . . - (100,000) Depreciation and amortization. . . . . . . . 189,000 15,000 Amortization of unearned compensation 44,000. 5,000 ------------------- ---------- EBITDA . . . . . . . . . . . . . . . . . . . $ 1,117,000 $ 525,000
Nine month period ended September 30, 2005 v. September 30, 2004 - -------------------------------------------------------------------------- Consolidated net sales for the nine-month period ended September 30, 2005 increased by 39.0% to $18,629,000 from $13,398,000 for the nine-month period ended September 30, 2004 principally due to a 42.8% and a 34.1% increase in sales from its Electronics Segment and its Power Units Segment, respectively. The increase in sales from the Electronics Segment was due to the inclusion of the operations of Tulip since April 4, 2005. Gross profit, as a percentage of sales, for the nine months ended September 30, 2005 increased to 44.6% from 43.6% for the nine-month period ended September 30, 2004. This increase resulted from a higher gross profit realized by the Power Units Segment due principally to an increase in the segment's sales and to product mix that was partially offset by a lower gross profit from the Company's Electronics Segment due principally to a decrease in sales from the Company's Orbit Instrument Division that was partially offset by a higher gross profit realized by Tulip. Selling, general and administrative expenses increased by 33.4% to $5,996,000 for the nine-month period ended September 30, 2005 from $4,495,000 for the nine-month period ended September 30, 2004 principally due to the inclusion of the operations of Tulip in the current period, higher selling costs from the Power Units Segment, higher corporate administrative costs and $217,000 of amortization of intangible assets associated with the Tulip acquisition. Despite the increase, selling, general and administrative expenses, as a percentage of sales, for the nine-month period ended September 30, 2005 decreased to 32.2% from 33.5% for the nine-month period ended September 30, 2004 principally due to the significant increase in sales from both operating segments. Interest expense, for the nine month period ended September 30, 2005 increased to $215,000 compared to $2,000 for the nine month period ended September 30, 2004, due to interest incurred in connection with a $5,000,000 Acquisition Loan from the Company's primary lender for the acquisition of Tulip as well as interest incurred on the $2,000,000 loan from the former shareholders of Tulip. Investment and other income for the nine month period ended September 30, 2005 increased to $132,000 from $77,000 for the nine month period ended September 30, 2004 principally due to an increase in amounts invested during the current period. This increase in amounts invested during the current period resulted from cash generated from operations and the exercise of employee stock options. Net income for the nine month period ended September 30, 2005 significantly increased to $2,225,000 from $1,517,000 for the nine month period ended September 30, 2004 principally due to the significant increase in sales, the increase in gross margins, the decrease in selling, general and administrative expenses as a percentage of sales and despite the increase in interest expense. In addition, in the prior year, the Company adjusted its valuation allowance on its deferred tax asset thereby realizing $100,000 in an income tax benefit. Earnings before interest, taxes, depreciation and amortization, and amortization of unearned compensation (EBITDA) for the nine month period ended September 30, 2005 significantly increased to $2,916,000 from $1,486,000 for the nine month period ended September 30, 2004. Listed below is the EBITDA reconciliation to net income:
Nine months ended September 30, 2005 2004 ------------------ ----------- Net income . . . . . . . . . . . . . . $ 2,225,000 $1,517,000 Interest expense . . . . . . . . . . . 215,000 2,000 Income tax expense (benefit) . . . . . - (100,000) Depreciation and amortization. . . . . 344,000 53,000 Amortization of unearned compensation. 132,000 14,000 ------------------ ----------- EBITDA . . . . . . . . . . . . . . . . $ 2,916,000 $1,486,000
Material Change in Financial Condition - ------------------------------------------ Working capital increased to $14,257,000 at September 30, 2005 compared to $10,932,000 at December 31, 2004. The ratio of current assets to current liabilities decreased to 4.3 to 1 at September 30, 2005 from 7.1 to 1 at December 31, 2004. Net cash provided by operations for the nine month period ended September 30, 2005 was $2,251,000, primarily attributable to the net income for the period, the non-cash amortization of intangible assets and restricted stock awards, depreciation, an increase in accounts payable, accrued expenses and customer advances that was partially offset by an increase in accounts receivable and other long term assets and a decrease in the amount due to the former shareholders of Tulip. Net cash provided by operations for the nine month period ended September 30, 2004 was $476,000, primarily attributable to the net income for the period and an increase in accounts payable that was partially offset by an increase in inventory and other long term assets, a decrease in accrued expenses and the non cash effect of the income tax benefit. Cash flows used in investing activities for the nine month period ended September 30, 2005 was $5,492,000, attributable to the purchase of Tulip, purchases of marketable securities and property and equipment. Cash flows used in investing activities for the nine-month period ended September 30, 2004 was $156,000, attributable to the purchases of marketable securities and property and equipment. Cash flows provided by financing activities for the nine month period ended September 30, 2005 was $5,875,000, primarily attributable to the proceeds from the issuance of long term debt and the proceeds from stock option exercises that was partially offset by the repayments of long term debt. Cash flows used in financing activities for the nine-month period ended September 30, 2004 was $74,000, primarily attributable to the repayment of long term debt that was partially offset by the proceeds from stock option exercises due to a material increase in the price of the Company's stock. In February 2003, the Company entered into a $2,000,000 credit facility with a commercial lender secured by accounts receivable, inventory and property and equipment. In April 2005, the Company entered into a new $2,500,000 credit facility with the same lender along with a new five-year $5,000,000 Term Loan Agreement to finance the acquisition of Tulip and its manufacturing affiliate. The new credit facility will continue from year to year unless sooner terminated for an event of default including non-compliance with certain financial covenants. Loans under the old facility did bear interest equal to the sum of 2.75% plus the one-month London Inter-bank Offer Rate (LIBOR) (3.86% at September 30, 2005). Loans under the new facility bear interest equal to the sum of 2.00% plus the one-month LIBOR and the Term Loan bear interest equal to the sum of 2.25% plus the one-month LIBOR. Monthly principal payments under the Term Loan, of approximately $60,000 per month, commenced in June 2005. In April 2005, the Company entered into a five year $2,000,000 Promissory Note with the selling shareholders of Tulip at an interest rate of prime plus 2.00% (6.75% at September 30, 2005). Principal payments of $100,000 are made on a quarterly basis along with accrued interest. The Company's contractual obligations and commitments are summarized as follows:
Less than 1-3 4-5 After 5 Obligation. . . . . . . Total 1 Year Years Years Years - ---------- ---------- ---------- ---------- ------- -------- Long-term debt $6,662,000 $1,114,000 $3,343,000 $2,205,000 0 Capital lease Obligations 23,000 10,000 13,000 0 0 Operating leases 3,447,000 463,000 1,365,000 940,000 679,000 - ---------------- ---------- ------------ -------------------------------- Total contractual Obligations $10,132,000 $1,587,000 $4,721,000 $3,145,000 $679,000
The Company's existing capital resources, including its bank credit facilities, and its cash flow from operations are expected to be adequate to cover the Company's cash requirements for the foreseeable future. Inflation has not materially impacted the operations of the Company. Certain Material Trends - ------------------------- In April 2005, the Company completed the acquisition of Tulip and its operations became part of the Company's Electronics Segment. The Company's Electronics Segment and the Custom Division of its Power Units Segment are heavily dependent on military spending. The events of September 11, 2001 have put a tremendous emphasis on defense and homeland security spending and the Company has seen improvement in bookings and revenue levels since 2001. The Company has realized a significant increase to the backlog of its Power Units Segment and shipments from this Segment contributed to very strong operating results for the first and second quarters of 2005. In particular, its commercial division has realized an increase in bookings, particularly for military requirements for its standard commercial products. Both of the Company's business segments had strong bookings in 2004 and this trend has continued into 2005. The addition of Tulip in April 2005 added approximately $4.5 million to the Company's backlog. Although the Electronics Segment and the Custom Division of the Power Units Segment are pursing several opportunities for reorders as well as new contract awards, the Company has always found it difficult to predict the timing of such awards. There is no seasonality to the Company's business. The Company's revenues are generally determined by the shipping schedules outlined in the purchase orders received from its customers. The Company stratifies all the opportunities it is pursuing by various confidence levels. The Company generally realizes a very high success rate with those opportunities that it applies a high confidence level to. The Company currently has a significant amount of potential contract awards that it has applied a high confidence level to. However, because it is difficult to predict the timing of awards for most of the opportunities the Company is pursuing, it also becomes difficult to predict when the Company will commence shipping under these contracts. A delay in the receipt of any contract from its customer ultimately causes a corresponding delay in shipments under that contract. Despite the increase in military spending, the Company still faces a challenging environment. The government is emphasizing the engineering of new and improved weaponry and it continues to be our challenge to work with each of our prime contractors so that we can participate on these new programs. In addition, these new contracts require incurring up-front design, engineering, prototype and pre-production costs. While the Company attempts to negotiate contract awards for reimbursement of product development, there is no assurance that sufficient monies will be set aside by its customers, including the United States Government, for such effort. In addition, even if the United States Government agrees to reimburse development costs, there is still a significant risk of cost overrun that may not be reimbursable. Furthermore, once the Company has completed the design and pre-production stage, there is no assurance that funding will be provided for future production. In such event, even if the Company is reimbursed its development costs it will not generate any significant profits. The Company is heavily dependent upon military spending as a source of revenues and income. However, even increased military spending does not necessarily guarantee the Company of increased revenues, particularly, when the allocation of budget dollars may vary depending on what may be needed for specific military conflicts Any future reductions in the level of military spending by the United States Government due to budget constraints or for any other reason, could have a negative impact on the Company's future revenues and earnings. In addition, due to major consolidations in the defense industry, it has become more difficult to avoid dependence on certain customers for revenue and income. Behlman's line of commercial products gives the Company some diversity and the addition of Tulip gives the Electronics Segment a more diversified customer base. Forward Looking Statements - ---------------------------- Statements in this Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this document are certain statements which are not historical or current fact and constitute "forward-looking statements" within the meaning of such term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual financial or operating results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Such forward looking statements are based on our best estimates of future results, performance or achievements, based on current conditions and the most recent results of the Company. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms "may", "will", "potential", "opportunity", "believes", "belief", "expects", "intends", "estimates", "anticipates" or "plans" to be uncertain and forward-looking. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission. Item 3. CONTROLS AND PROCEDURES The Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There has been no changes to our internal control over financial reporting during the three months ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II- OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submissions of Matters to Vote of Security Holders None. Item 5. Other Information None Item 6. Exhibits and Reports on form 8-K (a) Exhibits Exhibit Number Description --------------- ----------- 31.1* Certification of the Chief Executive Officer Required by Rule 13a-14 (a) or Rule 15d-14(a). 31.2* Certification of the Chief Financial Officer Required by Rule 13a-14 (a) or Rule 15d-14(a). 32.1* Certification of the Chief Executive Officer Required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. 32.2* Certification of the Chief Financial Officer Required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. _________________ *Filed with this report. (b) Reports on 8-K On August 5, 2005, the Company filed a current report on Form 8-K under Item 2.02 Disclosure of Results of Operations and Financial Condition relating to its press release issued on August 4, 2005, announcing the Company's operating results for the second quarter and six months ended June 30, 2005. On September 16, 2005, the Company filed a current report on Form 8-K under Item 7.01 Regulation FD Disclosure relating to its press release issued on September 15, 2005, regarding management presenting at LI INVEST 2005 Conference and reaffirming its 2005 guidance. SIGNATURES ---------- In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ORBIT INTERNATIONAL CORP. ------------------------ Registrant Dated: November 14, 2005 /s/ Dennis Sunshine --------------------------- Dennis Sunshine, President, Chief Executive Officer and Director Dated: November 14, 2005 /s/Mitchell Binder ------------------------- Mitchell Binder, Vice President-Finance, Chief Financial Officer and Director EXHIBIT 31.1 I, Dennis Sunshine, certify that: 1. I have reviewed this report on Form 10-QSB of Orbit International Corp.; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer'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 small business issuer 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 small business issuer, 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) *; (c) Evaluated the effectiveness of the small business issuer'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 (d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions): (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 small business issuer'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 small business issuers internal control over financial reporting. Date: November 14, 2005 /s/ Dennis Sunshine -------------------- Dennis Sunshine Chief Executive Officer *Indicates material omitted in accordance with SEC Release Nos. 33-8238 and 34-47986. EXHIBIT 31.2 I, Mitchell Binder, certify that: 1. I have reviewed this report on Form 10-QSB of Orbit International Corp.; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer'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 small business issuer 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 small business issuer, 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) *; (c) Evaluated the effectiveness of the small business issuer'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 (d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions): (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 small business issuer'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 small business issuers internal control over financial reporting. Date: November 14, 2005 /s/ Mitchell Binder ------------------------ Mitchell Binder Chief Financial Officer *Indicates material omitted in accordance with SEC Release Nos. 33-8238 and 34-47986. 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 I, Dennis Sunshine, Chief Executive Officer of Orbit International Corp., certify, pursuant to 18 U.S.C. 1350, as enacted by 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2005 (the "Periodic Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Orbit International Corp. Dated: November 14, 2005 /s/ Dennis Sunshine ------------------------ Dennis Sunshine Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Orbit International Corp. and will be retained by Orbit International Corp. and furnished to the Securities and Exchange Commission or its staff upon request. 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 I, Mitchell Binder, Chief Financial Officer of Orbit International Corp., certify, pursuant to 18 U.S.C. 1350, as enacted by 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2005 (the "Periodic Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Orbit International Corp. Dated: November 14, 2005 /s/ Mitchell Binder ------------------------ Mitchell Binder Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Orbit International Corp. and will be retained by Orbit International Corp. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----