10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the Quarterly period ended September 30, 2011

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 0-3936

ORBIT INTERNATIONAL CORP.

(Exact name of registrant as specified in its charter)

Delaware	11-1826363
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
80 Cabot Court, Hauppauge, New York	11788
(Address of principal executive offices)	(Zip Code)

631-435-8300

(Registrant's telephone number, including area code)

N/A

(Former name, former address and formal 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 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Registration S-T §232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer o	Accelerated Filer o
Non-accelerated filer o	Smaller reporting company x

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 4,732,695 shares of common stock, par value $.10, as of November 14, 2011.

1

INDEX

		Page No.
Part I.      Financial Information:
Item 1	-   Financial Statements:
	Condensed Consolidated Balance Sheets - September 30, 2011(unaudited) and December 31, 2010	3-4
	Condensed Consolidated Statements of Operations for the Nine and Three Months Ended September 30, 2011 and 2010 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (unaudited)	6-7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8-17
Item 2.	-   Management's Discussion and Analysis of Financial Condition and Results of Operations	18-29
Item 3.	-  Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	-  Controls and Procedures	30
Part II.     Other Information:
Item 1	–  Legal Proceedings	31
Item 2	-   Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3	–  Defaults Under Senior Securities	31
Item 4	–  (Removed and Reserved)	31
Item 5	–  Other Information	31
Item 6	-  Exhibits	31
Signatures		32
Exhibits		33-38

2

PART I - FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
ASSETS	2011		2010
	(unaudited)
Current assets:
Cash and cash equivalents	$	1,917,000	$	1,964,000
Investments in marketable securities		226,000		146,000
Accounts receivable (less allowance for doubtful accounts of $145,000)		3,929,000		3,927,000
Inventories		12,562,000		11,627,000
Costs and estimated earnings in excess of billings on uncompleted contracts		-		468,000
Deferred tax asset		379,000		391,000
Other current assets		891,000		1,043,000
Total current assets		19,904,000		19,566,000
Property and equipment, net		1,083,000		1,172,000
Goodwill		1,688,000		1,688,000
Deferred tax asset		1,886,000		1,847,000
Other assets		100,000		106,000
TOTAL ASSETS	$	24,661,000	$	24,379,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(continued)

	September 30,			December 31,
	2011			2010
LIABILITIES AND STOCKHOLDERS’ EQUITY	(unaudited)
Current liabilities:
Note payable – bank	$	-		$	387,000
Accounts payable		813,000			794,000
Current portion of long-term debt		931,000			931,000
Liability associated with former chief executive officer		813,000			1,194,000
Income taxes payable		35,000			-
Accrued expenses		1,139,000			1,051,000
Customer advances		63,000			118,000
Deferred income		85,000			85,000
Total current liabilities		3,879,000			4,560,000
Deferred income		22,000			86,000
Liability associated with former chief executive officer, net of current portion		7,000			494,000
Long-term debt, net of current portion		2,327,000			3,026,000
Total liabilities		6,235,000			8,166,000
STOCKHOLDERS’ EQUITY
Common stock - $.10 par value, 10,000,000 shares authorized, 5,102,000 and 5,101,000 shares issued  at 2011 and 2010, respectively, and 4,733,000 and 4,732,000 shares outstanding at 2011 and 2010,  respectively		510,000			510,000
Additional paid-in capital		22,481,000			22,360,000
Treasury stock, at cost, 369,000 shares at 2011 and 2010		(915,000	)		(915,000	)
Accumulated other comprehensive (loss) income, net of tax		(27,000	)		19,000
Accumulated deficit		(3,623,000	)		(5,761,000	)
Total stockholders’ equity		18,426,000			16,213,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	24,661,000		$	24,379,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Net sales	$	22,946,000		$	19,803,000		$	7,850,000		$	7,299,000
Cost of sales		13,317,000			12,594,000			4,464,000			4,484,000
Gross profit		9,629,000			7,209,000			3,386,000			2,815,000
Selling, general and administrative expenses		7,399,000			7,246,000			2,644,000			2,297,000
Interest expense		151,000			172,000			45,000			61,000
Investment and other income, net		(133,000	)		(213,000	)		(28,000	)		(32,000	)
Income before income tax provision(benefit)		2,212,000			4,000			725,000			489,000
Provision (benefit) for income taxes		74,000			1,000			28,000			(20,000	)
NET INCOME	$	2,138,000		$	3,000		$	697,000		$	509,000
Net income per common share:
Basic	$	.46		$	.00		$	.15		$	.11
Diluted	$	.46		$	.00		$	.15		$	.11

The accompanying notes are an integral part of these condensed financial statements.

5

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended
	September 30,
	2011			2010
Cash flows from operating activities:
Net income	$	2,138,000		$	3,000
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense		118,000			257,000
Amortization of intangible assets		-			94,000
Depreciation and amortization		202,000			206,000
Loss on disposal of property and equipment		4,000			-
Inventory reserves		139,000			50,000
Gain on sale of marketable securities		(45,000	)		(100,000	)
Deferred income		(64,000	)		(64,000	)
Changes in operating assets and liabilities:
Accounts receivable		(2,000	)		(92,000	)
Inventories		(1,074,000	)		265,000
Costs and estimated earnings in excess of billings on uncompleted contracts		468,000			566,000
Other current assets		152,000			4,000
Other assets		6,000			(31,000	)
Accounts payable		19,000			75,000
Accrued expenses		88,000			(97,000	)
Income taxes payable		35,000			(57,000	)
Customer advances		(55,000	)		34,000
Liability associated with former executive officer		(868,000	)		--
Net cash provided by operating activities		1,261,000			1,113,000
Cash flows from investing activities:
Purchase of property and equipment		(127,000	)		(303,000	)
Sale and disposal of property and equipment		10,000			-
Purchase of marketable securities		(262,000	)		-
Sale of marketable securities		156,000			659,000
Net cash (used in) provided by investing activities		(223,000	)		356,000

(continued)

6

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(continued)

	Nine Months Ended
	September 30,
	2011			2010
Cash flows from financing activities:
Purchase of treasury stock		-			(2,000	)
Proceeds from issuance of long-term debt and note payable-bank		5,790,000			1,809,000
Stock option exercises		1,000			113,000
Repayments of long-term debt and note payable-bank		(6,876,000	)		(3,085,000	)
Net cash used in financing activities		(1,085,000	)		(1,165,000	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(47,000	)		304,000
Cash and cash equivalents - January 1		1,964,000			2,321,000
CASH AND CASH EQUIVALENTS - September 30	$	1,917,000		$	2,625,000
Supplemental cash flow information:
Cash paid for interest	$	155,000		$	177,000
Cash paid for income taxes	$	30,000		$	66,000

The accompanying notes are an integral part of these condensed financial statements.

7

  ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(NOTE 1) – Basis of Presentation and Summary of Significant Accounting Policies:

General

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 condensed consolidated financial statements do not purport to contain complete disclosures required for annual financial statements in accordance with accounting principles generally accepted in the United States of America.

The results of operations for the nine and three months ended September 30, 2011 are not necessarily indicative of the results of operations that can be expected for the year ending December 31, 2011.

These condensed consolidated statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2010 contained in the Company’s Annual Report on Form 10-K.

Reclassification

For comparability, certain 2010 amounts have been reclassified where appropriate, to conform to the financial presentation in 2011.

Marketable Securities

The Company's investments are classified as available-for-sale securities and are stated at fair value, based on quoted market prices, with the unrealized gains and losses, net of income tax, reported in other comprehensive income (loss). Realized gains and losses are included in investment income. Any decline in value judged to be other-than-temporary on available-for-sale securities are included in earnings to the extent they relate to a credit loss. A credit loss is the difference between the present value of cash flows expected to be collected from the security and the amortized cost basis. The amount of any impairment related to other factors will be recognized in comprehensive income. The cost of securities is based on the specific-identification method. Interest and dividends on such securities are included in investment and other income.

8

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 1) – Basis of Presentation and Summary of Significant Accounting Policies (continued):

Revenue and Cost Recognition

The Company recognizes a substantial portion of its revenue upon delivery of product, however for certain products, revenue and costs under larger, long-term contracts are reported on the percentage-of-completion method. For projects where materials have been purchased but have not been placed into production, the costs of such materials are excluded from costs incurred for the purpose of measuring the extent of progress toward completion. The amount of earnings recognized at the financial statement date is based on an efforts-expended method, which measures the degree of completion on a contract based on the amount of labor dollars incurred compared to the total labor dollars expected to complete the contract. When an ultimate loss is indicated on a contract, the entire estimated loss is recorded in the period the loss is identified. Costs and estimated earnings in excess of billings on uncompleted contracts represent an asset that will be liquidated in the normal course of contract completion, which at times may require more than one year. The components of cost and estimated earnings in excess of billings on uncompleted contracts are the sum of the related contract’s direct material, direct labor, and manufacturing overhead and estimated earnings less accounts receivable billings. We had no contracts outstanding at September 30, 2011 accounted for under the percentage-of completion method.

Stock Based Compensation

At September 30, 2011, the Company has various stock-based employee compensation plans. These plans provide for the granting of nonqualified and incentive stock options as well as restricted stock awards to officers, key employees and nonemployee directors. The terms and vesting schedules of stock-based awards vary by type of grant and generally the awards vest based upon time-based conditions. The Company estimates the fair value of its stock option awards on the date of grant using the Black-Scholes valuation model. Share-based compensation expense was $118,000 and $38,000 for the nine and three months ended September 30, 2011, respectively, and was $257,000 and $88,000, respectively, for the comparable 2010 periods.

The Company's stock-based employee compensation plans allow for the issuance of restricted stock awards that may not be sold or otherwise transferred until certain restrictions have lapsed. The unearned stock-based compensation related to restricted stock granted is being amortized to compensation expense over the vesting period, which ranges from two to ten years. The share based expense for these awards was determined based on the market price of the Company's stock at the date of grant applied to the total number of shares that were anticipated to vest. As of September 30, 2011, the Company had unearned compensation of $325,000 associated with all of the Company's restricted stock awards, which will be expensed over approximately the next three years.

9

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 1) – Basis of Presentation and Summary of Significant Accounting Policies (continued):

Stock option activity during the nine months ended September 30, 2011, under all stock option plans is as follows:

	Number of Shares			Weighted Average Exercise Price		Average Remaining Contractual Term (in years)
Options outstanding, January 1, 2011		314,000		$	4.24		3
Granted		—			—		—
Forfeited		(62,000	)		5.24		—
Exercised		(2,000	)		0.60		—
Options outstanding, September 30, 2011		250,000		$	4.03		3
Outstanding exercisable at September 30, 2011		207,000		$	4.44		3

At September 30, 2011 the aggregate intrinsic value of options outstanding and exercisable was $128,000 and $62,000, respectively. At the comparable 2010 period, the aggregate intrinsic value of options outstanding and exercisable was $231,000 and $151,000, respectively.

The following table summarizes the Company's nonvested stock option activity for the nine months ended September 30, 2011:

	Number of Shares			Weighted-Average Grant- Date Fair Value
Nonvested stock options at January 1, 2011		57,000		$	1.02
Granted		—			—
Vested		(14,000	)		1.02
Forfeited		—			—
Nonvested stock options at September 30, 2011		43,000		$	1.02

At September 30, 2011, there was approximately $7,000 of unearned compensation cost related to the above non-vested stock options. The cost is expected to be recognized over approximately the next two years.

10

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 2) – Financing Arrangements:

During March 2010, the Company entered into a $3,000,000 line of credit with a commercial lender secured by all the assets of the Company.  In addition, the Company refinanced its existing term loans with the same commercial lender with a five-year $4,655,000 term loan facility that matures March 2015. The aggregate amount of principal outstanding under the line of credit cannot exceed a borrowing base of eligible accounts receivable and inventory, as defined. The line of credit and term loan bear interest equal to the prime rate of interest (3.25% at September 30, 2011) plus 1% and the prime rate of interest plus 1.5%, respectively. The unpaid balance on the term loan was $3,258,000 at September 30, 2011. There were no outstanding borrowings under the line of credit as of September 30, 2011.

The Company was not in compliance with one of its financial covenants as of December 31, 2010. In March 2011, the Company and its lender agreed to(i) waive the covenant default; (ii) replace a financial covenant ratio for the first two quarters of 2011 with a new covenant related to the Company’s operating profitability; (iii) modify the definition of a financial covenant; (iv) institute a new covenant related to the Company’s liquidity; and (v) extend the expiration date of the Company’s line of credit to August 15, 2011. The lender, in consideration of such waiver and amendment, assessed a waiver fee of $10,000 plus legal fees but did not change the interest rate on the Company’s line of credit or term debt.

The Company was in compliance with all of its financial covenants for the first three quarterly reporting periods in 2011. During September 2011, the expiration date on the line of credit was extended from October 1, 2011 to June 1, 2012, unless sooner terminated for an event of default including non-compliance with financial covenants.

11

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 3) – Net Income Per Common Share:

The following table sets forth the computation of basic and diluted net income per common share:

	Nine Months Ended September30,				Three Months Ended September 30,
Denominator:	2011		2010		2011		2010
Denominator for basic net income per share —weighted—average common shares		4,660,000		4,417,000		4,660,000		4,444,000
Effect of dilutive securities:
Employee and directors stock options		25,000		59,000		26,000		46,000
Unearned portion of restricted stock awards		8,000		23,000		7,000		24,000
Denominator for diluted net income per share — weighted—average common shares and assumed conversion		4,693,000		4,499,000		4,693,000		4,514,000

The numerator for basic and diluted net income per share for the nine and three month periods ended September 30, 2011 and 2010 is the net income for each period.

Options to purchase 163,000 shares of common stock were outstanding during nine and three months ended September 30, 2011 and options to purchase 229,000 shares of common stock were outstanding during the comparable 2010 periods but were not included in the computation of diluted income per share. The inclusion of these options would have been anti-dilutive as the options’ exercise prices were greater than the average market price of the Company’s common shares during the relevant period.

Approximately 73,000 shares of outstanding common stock during the nine and three months ended September 30, 2011 were not included in the computation of basic earnings per share. These shares were excluded because they represent the unearned portion of restricted stock awards.

Approximately 225,000 shares of outstanding common stock during the nine and three months ended September 30, 2010 were not included in the computation of basic earnings per share. These shares were excluded because they represent the unearned portion of restricted stock awards.

12

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 4) - Cost of Sales:

For interim periods, the Company estimates certain components of its inventory and related gross profit.

(NOTE 5) - Inventories:

Inventories are comprised of the following:

	September 30,		December 31,
	2011		2010
Raw Materials	$	7,070,000	$	7,584,000
Work—in—process		4,778,000		3,512,000
Finished goods		714,000		531,000
TOTAL	$	12,562,000	$	11,627,000

(NOTE 6) – Marketable Securities:

The following is a summary of the Company’s available for sale marketable securities at September 30, 2011 and December 31, 2010:

September 30, 2011	Adjusted Cost		Fair Value		Unrealized Holding (Loss) Gain
Corporate Bonds	$	267,000	$	225,000	$	(42,000	)
U.S. Government Agency Bonds		1,000		1,000		—
Total	$	268,000	$	226,000	$	(42,000	)
December 31, 2010
Corporate Bonds	$	116,000	$	145,000		29,000
U.S. Government Agency Bonds		1,000		1,000		—
Total	$	117,000	$	146,000	$	29,000

(NOTE 7) - Fair Value of Financial Instruments:

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, requires disclosure that establishes a framework for measuring fair value in GAAP and expands disclosure about fair value measurements. This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

13

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 7) - Fair Value of Financial Instruments (continued):

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to ASC 820.

The table below presents the balances, as of September 30, 2011 and December 31, 2010, of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy.

September 30, 2011	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	225,000	$	225,000	$	—	$	—
U.S. Government Agency Bonds		1,000		1,000		—		—
Total Assets	$	226,000	$	226,000	$	—	$	—

December 31, 2010	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	145,000	$	145,000	$	—	$	—
U.S. Government Agency Bonds		1,000		1,000		—		—
Total Assets	$	146,000	$	146,000	$	—	$	—

The Company’s only asset or liability that is measured at fair value on a recurring basis is marketable securities, based on quoted market prices in active markets and therefore classified as level 1 within the fair value hierarchy. The carrying value of cash and cash equivalents, accounts receivable, accounts payable, and short-term debt reasonably approximate their fair value due to their relatively short maturities. Long-term debt carrying value and liability associated with former chief executive officer are approximate to their fair value at the balance sheet date. The fair value estimates presented herein were based on market or other information available to management. The use of different assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts.

(NOTE 8) – Comprehensive Income (loss):

For the nine and three months ended September 30, 2011, total comprehensive income (loss), net of tax, was $2,092,000 and $675,000, respectively. For the comparable 2010 periods, total comprehensive income (loss), net of tax, was $(27,000) and $515,000, respectively. Comprehensive income (loss) consists of the net income (loss) and unrealized gains and losses on marketable securities, net of tax.

14

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 9) - Business Segments:

The Company operates through two business segments, the Electronics Segment (or "Electronics Group") and the Power Units Segment (or "Power Group").  The Electronics Segment is comprised of the Orbit Instrument Division and the Company’s TDL and ICS subsidiaries. The Orbit Instrument Division and TDL are engaged in the design, manufacture and sale of customized electronic components and subsystems. ICS performs system integration for Gun Weapons Systems and Fire Control Interface as well as logistics support and documentation. The Company's Power Units Segment, through the Company's 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, 2011 and 2010:

	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Net sales:
Electronics
Domestic	$	13,342,000		$	11,806,000		$	4,544,000		$	4,701,000
Foreign		739,000			1,136,000			332,000			185,000
Total Electronics		14,081,000			12,942,000			4,876,000			4,886,000
Power Units
Domestic		8,346,000			6,159,000			2,763,000			2,106,000
Foreign		910,000			868,000			211,000			344,000
Total Power Units		9,256,000			7,027,000			2,974,000			2,450,000
Intersegment sales		(391,000	)		(166,000	)		-			(37,000	)
Total	$	22,946,000		$	19,803,000		$	7,850,000		$	7,299,000
Income before income tax provision (benefit):
Electronics	$	1,076,000		$	160,000		$	419,000		$	448,000
Power Units		2,011,000			708,000			620,000			340,000
Intersegment profit		(3,000	)		42,000			11,000			(10,000	)
General corporate expenses not allocated		(854,000	)		(947,000	)		(308,000	)		(260,000	)
Interest expense		(151,000	)		(172,000	)		(45,000	)		(61,000	)
Investment and other income, net		133,000			213,000			28,000			32,000
Income before income tax provision (benefit)		2,212,000		$	4,000		$	725,000		$	489,000

15

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 10) - Goodwill and Other Intangible Assets:

The Company applies ASC 350, Intangibles-Goodwill and Other. ASC 350 requires that goodwill not be amortized but evaluated for impairment. The Company performs its annual impairment test of goodwill at the end of its fiscal year or when impairment indicators are present.

As of September 30, 2011 and December 31, 2010, the Company's goodwill and intangible assets consist of the following:

	Estimated Useful Life	Gross Carrying Value		Accumulated Amortization			Accumulated Impairment			Net Carrying Value
Goodwill		$	9,798,000		-		$	(8,110,000	)	$	1,688,000
Intangible Assets:
Contract relationships	15 Years		2,000,000	$	(278,000	)		(1,722,000	)		-
Contract backlog	1-5 Years		1,750,000		(1,750,000	)		-			-
Non-compete agreements	3 Years		415,000		(386,000	)		(29,000	)		-
		$	4,165,000	$	(2,414,000	)	$	(1,751,000	)	$	-

The Company recognized amortization expense of $94,000 and $4,000, respectively, for the nine and three months ended September 30, 2010.

(NOTE 11) – Income Taxes:

The Company utilized net operating loss carryforwards to offset income taxes, except for $74,000 and $28,000 of state income and federal minimum tax expense, for the nine and three months ended September 30, 2011, respectively. For the comparable periods in 2010, the Company recorded income tax expense (benefit) of $1,000 and $(20,000), respectively, for state income and federal minimum taxes.

The Company applies ASC 740 relating to accounting for uncertainty in income taxes. A tax benefit from an uncertain position may be recognized only if it is "more likely than not" that the position is sustainable based on its technical merits. Additionally, this pronouncement provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company does not have any liabilities for uncertain tax positions at September 30, 2011 or December 31, 2010.

16

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 12) – Commitments:

The Company elected not to renew the employment agreement of its former chief executive officer, effectively terminating his employment as of December 31, 2010. The Company recorded an expense during the year ended December 31, 2010 of $2,000,000 representing its estimated contractual obligation, along with associated costs, relating to the contract non-renewal. Included in the recorded expense was $312,000 of stock compensation expense relating to the accelerated vesting of restricted stock. As of September 30, 2011, the liability associated with the former chief executive officer was approximately $820,000. A majority of the obligation will be paid by early January 2012. The former chief executive officer has filed for an arbitration hearing in the City of New York to settle a dispute regarding certain contractual provisions in connection with the contract non-renewal. The arbitration hearing is scheduled for the fourth quarter of 2011. The Company is committed to paying the amount that it believes is owed to its former chief executive officer. The Company believes any claims for amounts over what it believes are contractually owed to him is without merit and will be vigorously defended.

(NOTE 13) – Recent Accounting Pronouncements:

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, “Presentation of Comprehensive Income”, which eliminates the option to present the components of other comprehensive income in the statement of changes in stockholders’ equity. Instead, entities will have the option to present the components of net income, the components of other comprehensive income and total comprehensive income in a single continuous statement or in two separate but consecutive statements. The guidance does not change the items reported in other comprehensive income or when an item of other comprehensive income is reclassified to net income. This ASU is effective, for fiscal years, and interim periods within those years, beginning after December 15, 2011, or as subsequently amended, and will be applied retrospectively. As this guidance only revises the presentation of comprehensive income, the adoption of this guidance is not expected to affect the company’s financial position, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, ”Testing Goodwill for Impairment”. The objective of this ASU is to simplify how entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely that not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more likely than not threshold is defined as having a likelihood of more than 50 percent. This ASU is effective for fiscal years beginning after December 15, 2011 and early adoption is permitted. We do not expect the adoption of ASU No. 2011-08 to have a material impact on our financial condition,  results of operations or cash flows.

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Item 2.

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

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.

Executive Overview

We recorded increases in revenue and profitability for the nine and three months ended September 30, 2011 as compared to the same periods in 2010. Our sales increase in the nine month current period was due to an increase in sales from both our Power and Electronics Groups. The sales increase during the current three month period was attributable to an increase in sales at our Power Group which was due to a significant increase in sales at its commercial division and despite a slight decrease in sales at its COTS division. We recorded net income of $2,138,000 and $697,000 during the nine and three months ended September 30, 2011, respectively, compared to net income of $3,000 and $509,000, respectively, during the comparable 2010 periods. The increase in net income in both the nine and three month current year periods was primarily attributable to an increase in sales and gross profit and despite an increase in selling, general and administrative expenses.

Our backlog at September 30, 2011 was approximately $15,800,000 compared to $20,100,000 at September 30, 2010.  There is no seasonality to our 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 we are confident that we will receive many of the orders we are pursuing, although timing is always an uncertainty.

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Our financial condition has improved, due to the strong 2011 operating results, as evidenced by our 5.1 to 1 current ratio at September 30, 2011. In March 2010, we entered into a credit agreement with a commercial lender pursuant to which we (a) established a line of credit up to $3,000,000 and (b) entered into a term loan in the amount of approximately $4,700,000. These facilities were used to pay off in full our obligations to our former primary lender pursuant to a prior credit facility and to provide us general working capital needs. As a result of our 2010 fourth quarter loss due mainly to costs associated with the non-renewal of our former chief executive officer’s employment contract, we were not in compliance with one of our financial covenants at December 31, 2010. However, we did negotiate an amendment to our Credit Agreement in March 2011 and obtained a waiver relating to the covenant violation. We were in compliance with all of our financial covenants for the first three quarterly reporting periods in 2011.

Critical Accounting Policies

The discussion and analysis of our financial condition and the results of operations are based on our financial statements and the data used to prepare them.  Our 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 our deferred tax asset, goodwill and intangible assets impairment, valuation of share-based compensation, revenue and cost recognition on long-term contracts accounted for under the percentage-of-completion method and other than temporary impairment on marketable securities.  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.  We believe 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 our 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 we make every effort to insure the accuracy of our 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 our inventory and operating results could be affected, accordingly.  However, world events have forced our country into various situations of conflict whereby equipment is used and parts may be needed for repair.  This could lead to increased product demand as well as the use of some older inventory items that we had previously determined obsolete.

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Deferred Tax Asset

At September 30, 2011, we had an alternative minimum tax credit of approximately $573,000 with no limitation on the carry-forward period and Federal and state net operating loss carry-forwards of approximately $17,000,000 and $8,000,000, respectively, that expire through 2030. Approximately, $11,000,000 of federal net operating loss carry-forwards expire between 2011-2012. In addition, we receive a tax deduction when our employees exercise their non-qualified stock options thereby increasing our deferred tax asset.  We record a valuation allowance to reduce our deferred tax asset when it is more likely than not that a portion of the amount may not be realized.  We estimate our valuation allowance based on an estimated forecast of our 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

We have a significant amount of goodwill.  In determining the recoverability of goodwill, assumptions are made regarding estimated future cash flows and other factors to determine the fair value of the asset.  After completing the impairment testing of goodwill, we concluded an impairment charge should be taken at December 31, 2010 for the remaining carrying value of goodwill and intangible assets in connection with the acquisition of ICS in 2007. As of December 31, 2010, all acquired intangible assets have either been fully amortized or written off.

Our analysis employed the use of both a market and income approach. Significant assumptions used in the income approach include growth and discount rates, margins and our weighted average cost of capital. We used historical performance and management estimates of future performance to determine margins and growth rates. Discount rates selected for each reporting unit varied. Our weighted average cost of capital included a review and assessment of market and capital structure assumptions. The balance of our goodwill for each of our operating units as of December 31, 2010 and September 30, 2011 is as follows: TDL $820,000 and Behlman $868,000. After the impairment charge taken on the remaining carrying value of ICS’ goodwill and intangible assets at December 31, 2010, of the two reporting units with goodwill, TDL and Behlman have a fair value that is in excess of their carrying value by approximately 23% and 27%, respectively.  Considerable management judgment is necessary to evaluate the impact of operating changes and to estimate future cash flows. Changes in our actual results and/or estimates or any of our other assumptions used in our analysis could result in a different conclusion.

Share-Based Compensation

We account for share-based compensation awards by recording compensation based on the fair value of the awards on the date of grant and expensing such compensation over the vesting periods of the awards, which is generally one to ten years. Total share-based compensation expense was $118,000 and $257,000 for the nine months ended September 30, 2011 and 2010, respectively. No restricted stock or stock options were granted during the nine months ended September 30, 2011. We account for stock option grants using the Black-Scholes model. This model requires the use of input assumptions. These assumptions include expected volatility, expected life, expected dividend rate, and expected risk-free rate of return.

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Revenue and Cost Recognition

Revenue and costs under larger, long-term contracts are reported on the percentage-of-completion method. For projects where materials have been purchased, but have not been placed in production, the costs of such materials are excluded from costs incurred for the purpose of measuring the extent of progress toward completion. The amount of earnings recognized at the financial statement date is based on an efforts-expended method, which measures the degree of completion on a contract based on the amount of labor dollars incurred compared to the total labor dollars expected to complete the contract. When an ultimate loss is indicated on a contract, the entire estimated loss is recorded in the period. Assets related to these contracts are included in current assets as they will be liquidated in the normal course of contract completion, although this may require more than one year.

Marketable Securities

We currently have approximately $226,000 invested primarily in corporate bonds.  We treat our investments as available-for-sale which requires us to assess our portfolio each reporting period to determine whether declines in fair value below book value are considered to be other than temporary.  We must first determine that we have both the intent and ability to hold a security for a period of time sufficient to allow for an anticipated recovery in its fair value to its amortized cost.  In assessing whether the entire amortized cost basis of the security will be recovered, we compare the present value of future cash flows expected to be collected from the security (determination of fair value) with the amortized cost basis of the security. If the impairment is determined to be other than temporary, the investment is written down to its fair value and the write-down is included in earnings as a realized loss, and a new cost is established for the security.   Any further impairment of the security related to all other factors is recognized in other comprehensive income. Any subsequent recovery in fair value is not recognized until the security either is sold or matures.

We use several factors in our determination of the cash flows expected to be collected including the length of time and extent to which market value has been less than cost; ii) the financial condition and near term prospects of the issuer; iii) whether a decline in fair value is attributable to adverse conditions specifically related to the security or specific conditions in an industry; iv) whether interest payments continue to be made and v) any changes to the rating of the security by a rating agency.

Results of Operations

Three month period ended September 30, 2011 v. September 30, 2010

We currently operate in two industry segments.  Our Orbit Instrument Division and our TDL subsidiary are engaged in the design and manufacture of electronic components and subsystems and our ICS subsidiary performs system integration for Gun Weapons Systems and Fire Control Interface as well as logistics support and documentation (the “Electronics Group”).  Our Behlman subsidiary is engaged in the design and manufacture of commercial power units and COTS power solutions (the “Power Group”).

21

Consolidated net sales for the three month period ended September 30, 2011 increased by 7.5% to $7,850,000 from $7,299,000 for the three month period ended September 30, 2010, due to higher sales from our Power Group and despite slightly lower sales from our Electronics Group. Sales from our Power Group increased by 21.4% which was due to a significant increase in sales from its commercial division which was partially offset by a slight decrease in sales from its COTS division. The increase in sales from the Power Group’s commercial division was mainly attributable to an increase in shipments pursuant to customer delivery schedules. Sales from our Electronics Group decreased slightly due to a decrease in sales at our TDL subsidiary and despite an increase in sales at our Orbit Instrument Division and ICS subsidiary.

Gross profit, as a percentage of sales, for the three months ended September 30, 2011 increased to 43.1% from 38.6% for the three month period ended September 30, 2010.  This increase was primarily the result of higher gross profit from both our Power and Electronics Groups. The increase in gross profit from our Power Group was principally due to operating leverage inherent in our business due to the increase in sales during the current period. The increase in gross profit from our Electronics Group was primarily due to product mix and the operating leverage inherent in our business that resulted from the increase in sales at our Orbit Instrument Division and ICS subsidiary.

Selling, general and administrative expenses increased by 15.1% to $2,644,000 for the three month period ended September 30, 2011 from $2,297,000 for the three month period ended September 30, 2010 principally due to higher corporate costs and certain labor inefficiencies related to downsizing at our ICS subsidiary. Selling, general and administrative expenses, as a percentage of sales, for the three month period ended September 30, 2011 increased to 33.7% from 31.5% for the three month period ended September 30, 2010 principally due to the increase in costs and despite the increase in sales.

Interest expense for the three months ended September 30, 2011 decreased to $45,000 from $61,000 for the three months ended September 30, 2010 due to a decrease in the amounts owed to lenders under our term debt and line of credit.

Investment and other income for the three month period ended September 30, 2011 decreased to $28,000 from $32,000 for the three month period ended September 30, 2010 principally due to a decrease in the amounts invested during the period.

Net income before taxes was $725,000 for the three months ended September 30, 2011 compared to $489,000 for the three months ended September 30, 2010.  The increase in income was principally due to the increase in sales from our Power Group and an increase in gross profit from both the Electronics and Power Groups and despite an increase in selling, general and administrative expenses.

22

Income taxes for the three months ended September 30, 2011 was $28,000 which consisted of state income and Federal minimum taxes that cannot be offset by any state or Federal net operating loss carry-forwards. We had an income tax benefit of $20,000 for the three months ended September 30, 2010 principally due to the reversal of certain state income taxes previously accrued.

As a result of the foregoing, net income for the three months ended September 30, 2011 was $697,000 compared to net income of $509,000 for the three months ended September 30, 2010.

Earnings before interest, taxes and depreciation and amortization (EBITDA) for the three months ended September 30, 2011 increased to $838,000 from $625,000 for three months ended September 30, 2010.  Listed below is the EBITDA reconciliation to net income:

	Three months ended
	September 30,
	2011		2010
Net income	$	697,000	$	509,000
Interest expense		45,000		61,000
Income tax expense (benefit)		28,000		(20,000	)
Depreciation and amortization		68,000		75,000
EBITDA	$	838,000	$	625,000

EBITDA is a Non-GAAP financial measure and should not be construed as an alternative to net income. An element of the Company's growth strategy has been through strategic acquisitions which have been substantially funded through the issuance of debt. This has resulted in significant interest expense and amortization expense. EBITDA is presented as additional information because the Company believes it is useful to our investors and management as a measure of cash generated by our business operations that will be used to service our debt and fund future acquisitions as well as provide an additional element of operating performance.

Nine month period ended September 30, 2011 v. September 30, 2010

Consolidated net sales for the nine month period ended September 30, 2011 increased by 15.9% to $22,946,000 from $19,803,000 for the nine month period ended September 30, 2010 due to higher sales from both our Electronics and Power Groups.  Sales from our Electronics Group increased by 8.8%, due principally to increased sales from our Orbit Instrument Division and ICS Subsidiary and despite a decrease in sales from our TDL subsidiary.  Sales from our Power Group increased by 31.7% from the same period in the prior year due to increased sales from both its COTS and commercial divisions. The increase in sales from our commercial division was mainly attributable to an increase in bookings during the current period and the increase in sales from our COTS division was principally due to increased shipments pursuant to customer delivery schedules.

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Gross profit, as a percentage of sales, for the nine months ended September 30, 2011 increased to 42.0% from 36.4% for the nine month period ended September 30, 2010. This increase was primarily the result of higher gross profit from both our Electronics and Power Groups. The increase in gross profit from our Electronics Group was principally due to higher gross profit from our Orbit Instrument Division and ICS subsidiary and despite lower gross profit from our TDL subsidiary. This increase was principally due to operating leverage inherent in our business due to the increase in sales at both operating units. The increase in gross profit from our Power Group was principally due to operating leverage inherent in our business due to the increase in sales during the current period.

Selling, general and administrative expenses increased by 2.1% to $7,399,000 for the nine month period ended September 30, 2011 from $7,246,000 for the nine month period ended September 30, 2010 principally due higher selling, general and administrative expenses from our Electronics and Power Groups and despite a slight reduction in corporate costs. Selling, general and administrative expenses, as a percentage of sales, for the nine month period ended September 30, 2011 decreased to 32.2% from 36.6% for the nine month period ended September 30, 2010 principally due to the increase in sales and despite the increase in expenses.

Interest expense for the nine months ended September 30, 2011 decreased to $151,000 from $172,000 for the nine months ended September 30, 2010 due principally to a decrease in the amounts owed to lenders under our term debt.

Investment and other income for the nine month period ended September 30, 2011 decreased to $133,000 from $213,000 for the nine month period ended September 30, 2010 principally due to a gain of $109,000 on a corporate bond sold in the prior period and lower amounts invested during the current period and despite a $45,000 gain on the sale of corporate bonds during the current period.

Net income before taxes was $2,212,000 for the nine months ended September 30, 2011 compared to $4,000 for the nine months ended September 30, 2010. The increase in income was principally due to the increase in sales and gross profit from both the Electronics and Power Groups and despite an increase in selling, general and administrative expenses and a decrease in investment and other income.

Income taxes for the nine months ended September 30, 2011 and September 30, 2010 consist of $74,000 and $1,000, respectively, in state income and Federal minimum taxes that cannot be offset by any state or Federal net operating loss carry-forwards.

As a result of the foregoing, the net income for the nine months ended September 30, 2011 was $2,138,000 compared to $3,000 for the nine months ended September 30, 2010.

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Earnings (loss) before interest, taxes and depreciation and amortization (EBITDA) for the nine months ended September 30, 2011 increased to $2,565,000 from $476,000 for the nine months ended September 30, 2010.  Listed below is the EBITDA reconciliation to net income:

	Nine months ended
	September 30,
	2011		2010
Net income	$	2,138,000	$	3,000
Interest expense		151,000		172,000
Income tax expense		74,000		1,000
Depreciation and amortization		202,000		300,000
EBITDA	$	2,565,000	$	476,000

Material Change in Financial Condition

Working capital increased to $16,025,000 at September 30, 2011 compared to $15,006,000 at December 31, 2010.  The ratio of current assets to current liabilities increased to 5.1 to 1 at September 30, 2011 compared to 4.3 to 1 at December 31, 2010. The increase in working capital was due principally to the net income for the period and despite the repayment of debt and liability associated with our former chief executive officer.

Net cash provided by operating activities for the nine month period ended September 30, 2011 was $1,261,000, primarily attributable to the net income for the period, non-cash depreciation, stock compensation and inventory reserves, a decrease in costs and estimated earnings in excess of billings and other current assets and despite an increase in inventory and a decrease in the liability associated with our former chief executive officer. Net cash provided by operating activities for the nine month period ended September 30, 2010 was $1,113,000, primarily attributable to non-cash depreciation and stock compensation expense, the decrease in inventory and costs and estimated earnings in excess of billings on uncompleted contracts and despite the non-cash gain from the sale of marketable securities.

Cash flows used in investing activities for the nine month period ended September 30, 2011 was $223,000, primarily attributable to the purchase of fixed assets and marketable securities that was partially offset by the sale of marketable securities and fixed assets. Cash flows provided by investing activities for the nine month period ended September 30, 2010 was $356,000, primarily attributable to the sale of marketable securities that was partially offset by the purchase of fixed assets.

Cash flows used in financing activities for the nine month period ended September 30, 2011 was $1,085,000, primarily attributable to the repayment of long term debt and note payable-bank which was partially offset by the proceeds from note payable-bank. Cash flows used in financing activities for the nine month period ended September 30, 2010 was $1,165,000, primarily attributable to the repayment of long term debt and note payable-bank which was partially offset by the proceeds from the issuance of long term debt and the exercise of stock options.

25

On March 10, 2010, we entered into a credit agreement (the “Credit Agreement”) with a commercial lender pursuant to which we (a) established a new line of credit of up to $3,000,000, and (b) entered into a term loan in the amount of approximately $4,655,000.  These credit facilities were used to pay off all of our obligations to our former primary lender and to provide for our general working capital needs.  The credit facilities are secured by a first priority security interest in substantially all of our assets.

The term loan is payable in 60 consecutive monthly installments of principal and interest and matures on March 1, 2015. The line of credit and term loan bear interest equal to the prime rate of interest plus 1% and the prime rate of interest plus 1.5%, respectively. The Credit Agreement contains customary affirmative and negative covenants and certain financial covenants.  Available borrowings under the line of credit are subject to a borrowing base of eligible accounts receivable, inventory and, for the term loan facility only, cash and marketable securities.  The Credit Agreement also contains customary events of default such as non-payment, bankruptcy and material adverse change.

As a result of our loss in the fourth quarter of 2010, primarily due to the costs associated with the non-renewal of our former chief executive officer’s employment contract, we were not in compliance with one of our financial covenants at December 31, 2010. In March 2011, we and our lender agreed to (i) waive the covenant default; (ii) replace a financial covenant ratio for the first two quarters of 2011 with a new covenant related to the our operating profitability; (iii) modify the definition of a financial covenant; (iv) institute a new covenant related to the Company’s liquidity; and (v) extend the expiration date of our line of credit to August 15, 2011. The lender, in consideration of such waiver and amendment, assessed a waiver fee of $10,000 plus legal fees but did not change the interest rate on our line of credit or term debt. We were in compliance with all of our financial covenants for the first three quarterly reporting periods in 2011. Our primary lender has extended the expiration date of our line of credit from October 1, 2011 to June 1, 2012.

Our existing capital resources, including our bank credit facilities and our cash flow from operations, are expected to be adequate to cover our cash requirements for the foreseeable future.

In August 2008, our Board of Directors authorized a stock repurchase program through December 2010, allowing us to purchase up to $3.0 million of our outstanding shares of common stock in open market or privately negotiated transactions.  During the period from August 2008 through May 2010, we repurchased approximately 369,000 shares at an average price of $2.48 per share.  Total consideration for the repurchased stock was approximately $915,000.  In May 2010, in connection with the amendment to our credit agreement, we suspended our stock repurchase program.

Inflation has not materially impacted the operations of our Company.

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Certain Material Trends

Backlog at September 30, 2011 was $15.8 million compared to $20.1 million at September 30, 2010.  An MK-119 order for ICS, valued at $2.4 million, had been included in last year’s backlog; however, a new MK-119 order is not expected to be awarded until late 2012 for foreign military sales.  The reduction in backlog is also due to a slight decrease in the Orbit Instrument Division backlog.  Our backlog as of October 31, 2011 increased to $16.7 million.

During the third and fourth quarters of 2010, our Orbit Instrument Division received several new follow-on contract awards for its legacy hardware.  Based on these awards, our Orbit Instrument Division, in 2010, recorded bookings of over $11,000,000, its highest level in many years.  In addition, during the fourth quarter of 2010, the Division was notified by its prime contractor on a program in which the Division provides one of its products related to Federal Aviation Administration air traffic control towers that the prime contractor is seeking to procure a significant amount of units which could approximate in excess of $4,400,000.  The Division has received orders, for these products, in excess of $1,200,000 through October 2011 and is expecting another large order in the fourth quarter of 2011.  Deliveries for orders that have been received to date, commenced in the third quarter and are expected to continue through the first quarter of 2012; Delivery schedules for the remaining units have not yet been determined although it is currently expected that the concentration of deliveries will be in 2013.  Our Orbit Instrument Division is also expecting a significant order for its RCU on the Common Transponder Program with deliveries expected in 2012 and 2103. Due to its strong backlog and these two large follow-on opportunities, our Orbit Instrument Division appears well-positioned for strong revenue and profitability for the remainder of 2011 and into early 2012.

ICS does not expect a follow-on award for its MK-119 Gun Console System for 2012 delivery.  However, it does expect future orders on this program for foreign military sales. ICS is expecting the first order for foreign military sales to be awarded in late 2012.  ICS developed and shipped three prototype Serial Data Converter (SDC) units during the second quarter and is expecting an order for two additional prototype SDC’s for delivery in the first half of 2012.   The bid for the actual SDC production work is currently being prepared by the U.S. Navy.  However, the potential revenue from the SDC is not expected to replace the revenue lost on the MK-119.  ICS is currently working on other business opportunities and has taken certain cost saving initiatives including a slight reduction in personnel and the consolidation of its two operating facilities into one.

TDL continues to work with several prime contractors on new prototype and pre-production orders and many of these opportunities have been delayed in moving to the initial production stage.  As a result, TDL, through the first nine months of 2011, did not meet internal projections for revenue and profitability.  However, during the month of October 2011, TDL did receive three anticipated new prototype awards that are either expected to be shipped in the fourth quarter of 2011 or the first quarter of 2012.  We expect that these awards will progress to initial production sometime during 2012.

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Business conditions at our Power Group remain very good with continued strong bookings for both the commercial and COTS divisions.  In particular, our COTS division has received a significant number of awards during the third quarter and in October 2011, many of which have follow-on potential in both the near and long term.  Bookings for our Power Group for 2011 will most likely be at a record level.  Consequently, operating results for this segment through the first three quarters of 2011 have been very strong and we expect these results to continue at least through the first half of 2012.

In summary and looking ahead to 2012, we expect our two largest operating units, our Power Group and our Orbit Instrument Division, to remain strong.  Our Power Group is well positioned for strong operating results for 2012 and Orbit Instrument Division, assuming the timely receipt of follow-on business opportunities, should also continue good operating results in 2012.

In April 2005, we completed the acquisition of TDL and its operations became part of our Electronics Group.  In December 2007, we completed the acquisition of ICS which also became part of our Electronics Group.  Our Electronics Group and the COTS Division of our Power Group are heavily dependent on military spending. Although we are heavily dependent upon military spending as a source of revenues and income, increased military spending does not necessarily guarantee us increased revenues, particularly, when the allocation of budget dollars may vary depending on what may be needed for specific military conflicts.   Due to budget constraints, government spending is coming under intense pressure and the defense budget, usually immune from such pressures, is also under review.

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 our future revenues and earnings.  However, we believe that any future cuts in defense spending will be in certain areas of the defense budget that we generally do not participate in.  In fact, we believe that as military assets return from the Middle East, the need for refurbishment and modernization should become a defense spending priority.  Therefore, we believe there could be significant opportunities for us as military efforts are curtailed and defense spending priorities are refocused.  However, future business for our Company, resulting from these opportunities will also be dependent upon the make/buy decisions made by our prime contractors.

Although our Electronics Group and our COTS Division of our Power Group are pursuing several opportunities for reorders, as well as new contract awards, we have normally found it difficult to predict the timing of such awards.  In addition, we have a number of new opportunities that are in the prototype or pre-production stage.  These opportunities generally move to a production stage at a later date, but the timing of such is also uncertain.  However, once initial production orders are received, we are generally well positioned to receive follow-on orders depending on government needs and funding requirements.

There is no seasonality to our business.  Our revenues are generally determined by the shipping schedules outlined in the purchase orders received from our customers.  We stratify all the opportunities we are pursuing by various confidence levels.  We generally realize a very high success rate with those opportunities to which we apply a high confidence level.  We currently have a significant amount of potential contract awards to which we have applied a high confidence level.  However, because it is difficult to predict the timing of awards for most of the opportunities we are pursuing, it is also difficult to predict when we will commence shipping under these contracts.  A delay in the receipt of any contract from our customer ultimately causes a corresponding delay in shipments.

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Despite the expected increase in military refurbishment and modernization, we still face 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 we attempt to negotiate contract awards for reimbursement of product development, there is no assurance that sufficient monies will be set aside by our 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 we have completed the design and pre-production stage, there is no assurance that funding will be provided for future production.  In such event, even if we are reimbursed for our development costs, it will not generate any significant profits.

In May 2009, we hired an investment banker to pursue strategic alternatives to enhance shareholder value.  The investment banker’s activities were primarily focused on a potential sale of the Company.  In January 2011, we terminated the services with such investment banker and we are no longer actively pursuing a sale of the Company.

In March 2011, we hired a new investment banker to help us expand our operations and achieve better utilization of our existing facilities through strategic, accretive acquisitions.  Through the past several years, we reviewed various potential acquisitions and believe there are opportunities presently available, particularly to integrate into our current operating facilities.    However, there is no assurance that any future acquisition will be accomplished.  In addition, due to current economic conditions and tightening of credit markets, there can be no assurance that we will obtain the necessary financing to complete additional acquisitions and even if we do, there can be no assurance that we will have sufficient income from operations of such acquired companies to satisfy scheduled debt payments, in which case, we will be required to pay them out of our existing operations which may be adversely affected.

Off-balance sheet arrangements

We presently do not have any off-balance sheet arrangements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risks

Not applicable.

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Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) as of the end of the period covered by this report. Based on such evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective (i) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) to ensure that information required to be disclosed by us in the reports that we submit under the Exchange Act is accumulated and communicated to its management, including the Company’s principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

There has been no change to the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II- OTHER INFORMATION

Item 1. Legal Proceedings

Except as previously disclosed on Form 10-Q for the period ending March 31, 2011, the Company is not party to any material legal proceedings as of the date of this report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. (Removed and Reserved)

Item 5. Other Information

None

Item 6. Exhibits

(a) Exhibits

Exhibit Number	Description
10.1*	Employment Agreement.
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.
101.1*	Financial statements from the Quarterly Report on Form 10-Q of Orbit International Corp. for the quarter ended September 30, 2011, filed on November 14, 2011, formatted in XBRL.

_________________

*Filed with this report.

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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, 2011	/s/ Mitchell Binder
		Mitchell Binder, President,
		Chief Executive Officer and
		Director
Dated:	November 14, 2011	/s/ David Goldman
		David Goldman, Chief
		Financial Officer

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (the “Agreement”) dated August 22, 2011 and made effective as of June 1, 2011 (the “Effective Date”) by and between ORBIT INTERNATIONAL CORP., a Delaware corporation, (the “Company”) and MITCHELL BINDER (the “Executive”) (collectively, the “Parties”)

WHEREAS, Executive is presently employed by the Company in a senior executive capacity pursuant to an Employment Agreement dated as of January 1, 2008, as amended on December 22, 2009 (the “Original Agreement”);

WHEREAS, the Company desires to continue to employ Executive and to enter into an agreement embodying the terms of such employment; and

WHEREAS, Executive desires to continue his employment with the Company on the terms and conditions set forth herein and enter into such agreement.

NOW THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, the Parties agree as follows:

1.             EFFECTIVENESS; TERM OF EMPLOYMENT.

A.          EFFECTIVENESS. This Agreement shall constitute a binding agreement between the parties as of the date hereof.

B.          TERM OF EMPLOYMENT. The term of this Agreement shall commence on the date first set forth above and shall continue until the earlier of December 31, 2014 or terminated pursuant to Paragraph 9 below (the “Term”)

2.             POSITION.

A.          During the Term, Executive shall serve as the Company’s Chief Executive Officer. Executive shall have and perform such duties and authority generally associated with an Chief Executive Officer of a publicly owned defense electronics corporation. Executive will have and perform other duties as shall be determined from time to time by the Company’s Board of Directors (the “Board”) consistent with Executive’s position.

B.           During the Term, Executive shall, if elected, and for no additional compensation, serve as a member of the Board and such other committees of the Board to which Executive may be appointed and/or as an officer or director of any subsidiary of the Company.

C.           During the Term, Executive will devote substantially all of his business time and efforts (excluding periods of vacation and sick days) to the performance of Executive’s duties hereunder, and will not engage in any other business, profession or occupation which would conflict or interfere with the rendition of such services, either directly or indirectly, without the prior written consent of the Board. Executive may: (i) engage in personal investment activities (including for Executive’s immediate family); (ii) serve on the boards of nonprofit organizations and business entities; and/or (iii) be involved in other organizations, in each case provided that any of such activities do not materially interfere with Executive’s performance of his duties for the Company or create a conflict of interest with that of the Company.

D.          Subject to such travel as the performance of Executive’s duties may reasonably require, Executive shall perform the duties required of him by this Agreement in Hauppauge, New York.

3.             COMPENSATION.

A.          BASE SALARY. Executive’s Gross Base Salary, is hereinafter referred to as “Base Salary.” During the Term, the Company shall pay to Executive an annual Base Salary at the rate of $349,000, paid in accordance with the Company’s regular payroll practices, but not less frequently than monthly. Executive’s Base Salary will be subject to all legally required tax deductions.

B.          ANNUAL INCENTIVE PLAN. During the Term, Executive shall be eligible to participate in the Company’s Executive Annual Incentive Plan, or such other individual annual incentive arrangement for Executive’s benefit approved by the Company’s Compensation Committee (the “AIP”). Pursuant to such AIP, for each year during the Term, Executive’s annual target incentive will be fifty percent (50%) of Executive’s Base Salary, with an incentive range of zero percent (0%) to one hundred fifty percent (150%) of Executive’s Base Salary annually (the “Annual Incentive”). The Company shall make payment of the Annual Incentive in a lump sum payment consistent with the terms of the AIP on the March 15th following each year during the Term for which such Annual Incentive is earned, subject to the release of the Company’s audited financial statements. Executive’s Annual Incentive will be based on strategic objectives submitted to and approved by the Board each year during the Term.  Executive’s Annual Incentive will be subject to all appropriate legally required tax deductions.

C.          DISCRETIONARY BONUS. During the Term, Executive may submit a written request to the Company’s Compensation Committee detailing specifics for the Compensation Committee to consider a discretionary bonus. The determination of whether to authorize a discretionary bonus and the timing and amount of such discretionary bonus, shall be made by the Company’s Compensation Committee, at its sole discretion.

4.             BENEFITS AND INSURANCE.

A.          EXECUTIVE BENEFITS. During the Term, Executive shall be entitled to participate in the Company’s employee and/or executive benefit plans (other than any annual incentive or other compensation or severance plans or programs, which benefits are set forth in this Agreement), as in effect from time to time (collectively “Executive Benefits”), on the same basis as those benefits are generally made available to other senior Company executives. Such Executive Benefits shall include, but not be limited to health, dental, defined contribution plan, disability and life insurance benefits. The Company reserves the right to change or cancel any Executive Benefits, at its sole discretion, except as specifically set forth in this Agreement.

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B.           LIFE INSURANCE. During the Term, the Company may maintain key person life insurance on Executive in the amount of one million dollars or such other amount as the Company in its discretion may determine.  Executive shall cooperate, at no cost to Executive, in any Company efforts to obtain and maintain such key person life insurance.  In addition, during the Term, the Company shall maintain life insurance on Executive in the amount of two million dollars.  Executive shall have the right to designate the beneficiary under this policy, which policy shall be in full satisfaction of any obligation to provide life insurance benefits under Section 4A hereof.

C.           DIRECTORS AND OFFICERS LIABILITY INSURANCE. During the Term, and for a reasonable period (not less than two years) thereafter, the Company shall maintain Directors and Officers liability insurance coverage for Executive in a total coverage amount determined by the Board to be reasonable, provided that, if Executive’s employment is terminated for “Cause” or Executive resigns his employment without “Good Reason,” each term as defined herein, the Company may, at its discretion, elect not to maintain Directors and Officers liability insurance coverage for Executive after Executive’s termination date.

5.             BUSINESS EXPENSES. During the Term, the Company shall reimburse Executive for, or pay on behalf of Executive, all reasonable and customary business expenses, including, but not limited to, travel expenses incurred by Executive in the performance of Executive’s duties hereunder.

6.            TAX PLANNING. During the Term, the Company shall reimburse Executive for, or pay on behalf of Executive, reasonable expenses for Executive’s taxation and tax planning services, not to exceed $1,500 per year in the aggregate.

7.            VEHICLE EXPENSES. During the Term, the Company shall provide Executive with (or reimburse Executive for, as applicable) a Company-leased, individually-owned or individually-leased vehicle as follows: for the remaining term of Executive’s existing leased vehicle, the Company will pay or reimburse Executive for the cost of such leased vehicle, and thereafter the Company will pay or reimburse Executive, provided that the total expense to the Company for such vehicle shall not exceed $1,100 per month (exclusive of, but not limited to, one time charges for taxes, bank fees and registration costs).  The Company shall pay for Executive's use and operation of such vehicle, including but not limited to costs for maintaining, insuring and fueling such vehicle.

8.             VACATIONS. During the Term, Executive shall be entitled to 25 paid days of vacation annually. Up to one week of paid vacation time unused at the end of a calendar year may be carried over until March 31 of the following year, at which time it shall be forfeited if unused. One week of unpaid vacation shall be available to Executive on an annual basis. Such unpaid vacation shall not carry over from year to year and shall be forfeited if unused at the end of a calendar year.

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9.             TERMINATION. The Term and Executive’s employment hereunder shall continue from the effective date of this Agreement through December 31, 2014, unless terminated earlier by the Company or by Executive pursuant to this Paragraph 9.  The Company and Executive agree to enter into good faith negotiations for a successor Agreement or extension of the Term no later than 5 months prior to the expiration of the Term, unless the Company responds to Executive’s Notice (as defined below) by stating its intention not to extend the Term or enter into a successor Agreement with Executive.  Accordingly, no later than 6 months prior to the expiration of the Term, Executive shall submit a written notice (“Executive’s Notice”) to the Company requesting that the Company state whether or not it intends to initiate negotiations for a successor Agreement or an extension of the Term.  The Company shall respond to Executive, in writing, no later than 10 days after receipt of Executive’s Notice.

A.          TERMINATION BY THE COMPANY FOR CAUSE; RESIGNATION BY EXECUTIVE WITHOUT GOOD REASON.

(I)            The Term and Executive’s employment hereunder may be terminated by the Company for Cause. Additionally, Executive’s employment shall terminate automatically upon Executive’s resignation without Good Reason (as hereinafter defined).

(II)           For purposes of this Agreement, “Cause” shall mean: (A) Executive’s willful misconduct in the performance of Executive’s duties hereunder that has an adverse effect on the Company; (B) Executive’s indictment for, or plea of nolo contendere to a felony under the laws of the United States or any state thereof or a misdemeanor involving moral turpitude; (C) Executive’s willful malfeasance or willful misconduct in connection with Executive’s duties hereunder which is materially injurious to the financial condition or business reputation of the Company; provided, that no such termination shall be effective as a termination for “Cause” unless Executive has been given written notice by the Board of its intention to terminate Executive’s employment for Cause, stating the grounds for such purported termination; (E) the refusal or failure of Executive to comply with any of his material obligations under this Agreement that is not cured by Executive within fifteen (15) business days after a written demand therefore is delivered to Executive by the Board which specifically identifies the manner in which the Board believes Executive has materially breached this Agreement.

(III)          If Executive’s employment is terminated by the Company for Cause or if Executive resigns without Good Reason (as hereinafter defined), Executive shall be entitled only to receive:

(A)           Executive’s Base Salary earned through the date of Executive’s termination, paid in one lump sum within the payroll period immediately following Executive’s date of termination;

(B)           reimbursement for any business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and

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(C)           such Executive Benefits, if any, pursuant to Paragraph 4 herein as to which Executive may be entitled as of the effective date of termination under the employee benefit plans of the Company.

The amounts described in clauses 9(A) (iii) (A) through (C) are referred to herein as the “Accrued Rights.”

B.           TERMINATION BY THE COMPANY WITHOUT CAUSE; RESIGNATION BY EXECUTIVE FOR GOOD REASON; OR NON-EXTENSION OF AGREEMENT BY THE COMPANY.

(I)            The Term and Executive’s employment hereunder may be terminated by the Company without Cause, by Executive’s resignation for Good Reason (as defined below) or if Executive’s employment terminates upon the expiration of the Term due to the Company’s decision not to extend this Agreement or enter into a successor employment agreement with Executive, at the Company’s election.

(II)           For purposes of this Agreement, “Good Reason” shall mean only: (A) the failure of the Company to pay or cause to be paid, or to provide or cause to be provided, any part of Executive’s compensation, benefits or perquisites when due hereunder, that is not applicable to all other senior executives; (B) any diminution in Executive’s title, position, authority responsibilities from those described herein, except in connection with the Company’s successorship plan or planning as duly authorized by the Board; or (C) failure of any successor company that acquires all or substantially all of the assets of the Company to assume the Agreement and the obligations hereunder, except in connection with the Company’s successorship plan or planning as duly authorized by the Board; provided that the events described in clauses (A) through (C) of this Paragraph 9(B) (II) shall constitute Good Reason only if the Company fails to cure such event to Executive’s reasonable satisfaction within 30 days after receipt from Executive of written notice of the event which constitutes Good Reason. Executive’s determination that Good Reason exists shall be subject to review, at the Company’s election, through arbitration in accordance with Paragraph 17 herein.

(III)          For purposes of this Agreement, Executive’s employment terminates upon “Expiration of the Term due to the Company’s decision not to extend Executive’s Agreement or enter into a successor employment agreement with Executive” only if: (A) the Company does not, on or before December 31, 2014, offer to Executive to extend the Term of the Agreement for a period of at least one year; or (B) the Company does not, on or before December 31, 2014, offer Executive a successor employment agreement for a period of at least one year on at least as favorable terms as contained in this Agreement.

(IV)          If the Term and Executive’s employment is terminated by the Company without Cause, if Executive resigns for Good Reason, or if Executive’s employment terminates upon Expiration of the Term due to the Company’s decision not to extend Executive’s Agreement or enter into a successor employment agreement with Executive (each term as defined above), Executive shall be entitled only to receive:

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(A)           an amount equal to 2.65 multiplied by Executive’s Base Salary ($349,000) (and which, solely for purposes of the calculation to be made under this Paragraph 9(B)(IV)(A), shall be deemed to have been reduced by $50,000 on December 31, 2012 and by additional reductions of $50,000 on each December 31 thereafter), payable in consecutive monthly installments equal to Executive’s most recent actual monthly Base Salary until paid in full, the first such installment to be paid on the Company’s first payroll date following Executive’s date of termination;

(B)           all non-vested shares of Company stock or other non-vested option or equity grants to Executive shall vest on the date of termination;

(C)           reimbursement for any business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination on or before the Company’s payroll period immediately following Executive’s date of termination;

(D)           payment of any accrued but unused vacation days on or before the Company payroll period immediately following Executive’s date of termination;

(E)           for a period ending on the earlier to occur of the second anniversary of the date of termination or the date of Executive’s 65 birthday payment of the Company’s portion of health insurance premiums (on policies similar to those generally made available to other senior Company executives);

(F)           if termination of Executive occurs prior to December 31, 2012, payment of automobile lease payments, including end of term costs, for Executive’s Company-owned or Company-leased vehicle through the end of the lease term; and

(G)           Directors and Officers liability insurance coverage in a total coverage amount determined by the Board to be reasonable for a period of two years after Executive’s termination date; or, in the Company’s discretion, the Company may purchase a tail insurance policy for the benefit of Executive.

(V)           If the Term and Executive’s employment with the Company terminates at the expiration of the Term as a result of Executive’s refusal of the Company’s offer to extend the Term of the Agreement or offer of a successor employment agreement on at least as favorable terms as contained in this Agreement as provided in Paragraph 9(B)(III) herein (or refusal to execute an Agreement consistent therewith), Executive shall be entitled only to receive the Accrued Rights.

C.           Termination Due to Sale of Assets or Merger.

(I)            If (i) the Company sells all or substantially all of its assets and this Agreement is not expressly assumed by the purchaser or (ii) this Agreement does not remain an obligation of the Company or its successor in any merger, consolidation or other similar agreement, Executive shall be deemed to have been terminated without Cause and shall be entitled to receive those payments, benefits and rights set forth in Paragraph 9(B)(IV).

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D.          Termination Due to Death.

(I)            The Term and Executive’s employment hereunder shall terminate upon Executive’s death. Upon termination of the Term and Executive’s employment hereunder for Executive’s death, Executive’s spouse or estate (as the case may be) shall be entitled only to receive:

(A)           the Accrued Rights; and

(B)           the death benefit provided by the Policy or otherwise as set forth in Paragraph 4(b) herein, payable to the beneficiary or beneficiaries designated by Executive.

E.           Termination Due to Disability.

(I)            The Term and Executive’s employment may be terminated by the Company upon Executive’s “Disability”, which shall mean if Executive becomes physically or mentally incapacitated and is therefore unable to perform the essential functions of Executive’s position as Chief Executive Officer for a consecutive period or aggregate of three (3) months during the Term.

Prior to the termination of the Term and Executive’s employment for Disability as described above, a written report from Executive’s physician must be submitted to the Board, and include, at a minimum, a diagnosis of Executive’s condition, together with an assessment of the activities Executive can and cannot perform with or without reasonable accommodation. Any question as to the existence of Executive’s Disability where Executive and the Company cannot agree shall be reviewed by a qualified physician mutually acceptable to Executive and the Company. Upon reviewing the diagnosis and prognosis of Executive, such mutually accepted and qualified physician shall provide a report of his/her findings to the Board and Executive, and shall be final and conclusive.

(II)           Upon termination of the Term and Executive’s employment hereunder for Executive’s Disability, Executive shall be entitled only to receive:

(A)           the Accrued Rights;

(B)           for the first six months of Executive’s Disability, the Executive’s Base Salary;

(C)           for the second six months of Executive’s Disability (which six month period shall commence on the first day after the period set forth in 9(E)(II)(B) above), the Executive’s Base Salary less all amounts Executive received pursuant to applicable disability insurance policies covering Executive for such period (including but not limited to all disability insurance policies provided to Executive by the Company);

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(D)           all non-vested shares of Company stock or equity grants, together with all non-vested options granted to Executive shall immediately vest on the date of Executive’s termination due to Disability.

F.           NOTICE OF TERMINATION. Any purported termination of the Term and Executive’s employment by the Company or by Executive (other than due to Executive’s death) shall be communicated by written Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated, provided that the procedures set forth in Paragraph 9(A)(II) herein must be complied with in respect of any termination by the Company for Cause and provided further that the procedures set forth in Paragraph 9(B) (II) herein must be complied with in respect of any resignation by Executive for “Good Reason.”

G.           BOARD/COMMITTEE RESIGNATION. Upon termination of the Term and Executive’s employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Company’s Board of Directors (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s subsidiaries.

10.           NON-COMPETITION.

A.          Executive acknowledges and recognizes the highly competitive nature of the business of the Company and that he provides essential and unique services to the Company. Accordingly, despite that the terms contained herein may limit Executive’s ability to engage in certain business pursuits during the Restricted Period (as defined below), Executive hereby agrees as follows:

  During the Term and for the period ending two years following the termination of the Term and Executive’s employment with the Company for any reason other than an involuntary termination without Cause or a voluntary resignation by Executive, each within one (1) year of a Change of Control (as defined herein) of the Company (the “Restricted Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”):

(I)             become an officer, director, joint venturer, employee, agent, consultant or five percent (5%) or more shareholder (either directly or indirectly) of, or promote, provide services to or assist in any way, any person or entity which directly competes with any business of the Company or any of its affiliates in which the Company or such affiliates are engaged as of the date of Executive’s termination of employment with the Company, and which constitutes, on a consolidated basis, at least ten percent (10%) of the Company’s revenues (hereinafter, engage in a “Competing Business”). Executive acknowledges that such restriction may limit his ability to engage in certain business pursuits during the Restricted Period, but also acknowledges that the Company has provided significantly higher remuneration and benefits from the Company, as provided herein, than that which he otherwise would have received to adequately compensate him for such restriction. Executive has had an opportunity to consult with an attorney with respect to these restrictions;

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(II)            interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company and customers, clients, suppliers, partners, members or investors of the Company.

B.           It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Paragraph 10 to be reasonable, if a final determination is made by an arbitrator or arbitrators, or by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

11.           NON-SOLICITATION.

A.          Executive acknowledges and recognizes the highly competitive nature of the business of the Company and that he provides essential and unique services to the Company. Accordingly, despite that the terms contained herein may limit Executive’s ability to engage in certain business pursuits during the Restricted Period (as defined above), Executive hereby agrees as follows:

  During the Restricted Period (as defined above), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person (as defined above):

(I)            directly or indirectly solicit or encourage any employee of the Company to leave the employment of the Company; or enter into an Employment Agreement or Independent Contractor Agreement with any such employee;

(II)           directly or indirectly solicit or enter into any business relationship with any person or entity who, at the time of the termination of Executive’s employment with the Company was a customer of the Company or actively was being solicited by the Company to be a customer of the Company;

(III)          directly or indirectly, encourage any consultant then under contract with the Company to cease to work with the Company;

(IV)           directly or indirectly, encourage any of the Company’s customers or suppliers to cease doing business or reduce the amount of business it does with the Company.

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B.           It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Paragraph 11 to be reasonable, if a final determination is made by an arbitrator or arbitrators, or by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

12.           CONFIDENTIAL INFORMATION.

A.          Executive will not at any time (whether during or after Executive’s employment with the Company) retain or use for the benefit, purposes or account of Executive or any other Person or disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations or as otherwise required in connection with the proper performance of their duties on behalf of the Company), any non-public, proprietary or confidential information -- including without limitation trade secrets, know-how, research and development, strategies, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, profits, pricing, costs, products, services, vendors, customers, clients, partners, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions -- concerning the past, current or future business, activities and operations of the Company and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“Confidential Information”) without the prior written authorization of the Board.

B.           “Confidential Information” shall not include any information that is: (a) generally known to the industry on the public other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation; or (c) required by law or legal process to be disclosed; provided that Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and reasonably cooperate with any attempts by the Company to obtain a protective order or similar treatment at the Company’s sole expense.

C.           Upon termination of Executive’s employment with the Company for any reason, Executive shall cease and not thereafter commence use of any Confidential Information owned or used by the Company, and upon notification from the Company shall destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or is otherwise the property of the Company, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information.

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  The provisions of this Paragraph 12 shall survive the termination of Executive’s employment with the Company for any reason.

13.           INTELLECTUAL PROPERTY.

A.          If Executive creates, invents, designs, develops, contributes to or improves any United States or foreign works of authorship, design, program, software, source code, inventions, materials, documents, inventions, trade secrets, processes, patent applications, patents, know-how, copyrightable subject matter, and/or other intellectual property or work product of any kind (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials), either alone or with third parties, at any time during the Term and within the scope of Executive’s employment and/or with the use of any the Company resources (“Company Works”), Executive shall promptly and fully disclose same to the Company, hereby irrevocably relinquishes for the benefit of the Company and its assigns any rights Executive may have to the Company Works, and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company, without further consideration.

B.           During or after the Term, Executive shall take all requested actions and execute all requested documents (including any licenses or assignments required by a government contract) at the Company’s expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Company’s rights in the Company Works.

C.           The provisions of this Paragraph 13 shall survive the termination of Executive’s employment for any reason.

14.           SPECIFIC PERFORMANCE. Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Paragraphs 10, 11, 12 or 13 would be inadequate and the Company would suffer irreparable damages as a result of such breach. In recognition of this fact, Executive agrees that, in the event of such a breach, in addition to any remedies at law, the Company, without posting any bond, and without the necessity of proof of actual damages, shall be entitled to obtain injunctive relief restraining any threatened or further breach, or any other equitable remedy which may then be available.

15.            INDEMNIFICATION.

A.          The Company shall defend, indemnify and hold harmless Executive to the fullest extent of the law from and against any and all loss, liability, damage or expense (including reasonable attorney’s fees and expenses incurred in connection with the investigation, defense or negotiation of a settlement thereof or otherwise) (collectively, “Losses”) arising from any claim or threatened claim by any third party with respect to, or in any way related to, the Company, this Agreement or Executive’s services hereunder (collectively “Claim”) . Executive shall give the Company prompt notice of any such Claim known to him, and the Company, in its sole discretion, then may take such action as it deems advisable to defend the Claim on behalf of the Executive. (The failure by Executive to give such a prompt notice shall not affect the right to indemnification except to the extent the Company is materially prejudiced thereby.) The Company shall have the sole and exclusive right to use counsel of its own choosing, shall control the defense of any such Claim in all respects, and shall have the sole and exclusive right to negotiate and settle any such Claim on behalf of Executive. Notwithstanding the foregoing, Executive shall have the right to employ his own legal counsel in defense of any Claim, with the reasonable fees and expenses of such counsel to be paid by the Company, provided that the Company determines that there exists a conflict of interest by reason of having common counsel in any such Claim. Executive shall cooperate fully with the Company and its counsel in all respects in connection with the defense of any Claim and in any attempt made to settle the matter. Such indemnification shall be deemed to apply solely to (a) the amount of the judgment, if any, against Executive, (b) any sums paid by Executive in settlement, and (c) the expenses (including reasonable attorneys’ fees and expenses) incurred by Executive in connection with its defense. Notwithstanding anything to the contrary contained herein, Executive shall not be entitled to indemnification for Losses under this Paragraph 15 for any claim or allegation made by the Company against Executive arising out of Executive’s breach of this Agreement; or if it is adjudicated by a court of competent jurisdiction that any Losses were the direct result of the gross negligence or willful misconduct by Executive and, if so proven, Executive shall reimburse the Company for the costs of defense incurred by the Company.

11

B.          Notwithstanding anything elsewhere to the contrary, this Paragraph 15 shall survive the termination of this Agreement and shall survive any termination of Executive’s employment.

16.           NO MITIGATION; NO SET OFF. In the event of any termination of employment hereunder, Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.

17.           ARBITRATION. Any dispute between the parties arising out of this Agreement, including but not limited to any dispute regarding any aspect of this Agreement, its formation, validity, interpretation, effect, performance or breach, or the Executive’s employment (“Arbitrable Dispute”) shall be submitted to arbitration in the City of New York, pursuant to the Rules of the American Arbitration Association, before a single experienced employment arbitrator who is either licensed to practice law in New York, or is a retired judge having practiced law in New York. The arbitrator in any Arbitrable Dispute shall not have authority to modify or change this Agreement in any respect. The Company shall be responsible for payment of the amount of the fees of the American Arbitration Association and the arbitrator. In the event the arbitrator specifically finds that any claim or defense of either party is unreasonable, he may in his discretion direct that reasonable legal fees of the prevailing party be paid by the non-prevailing party. In the event the arbitrator specifically finds that the claims by Executive against the Company are meritorious, the arbitrator shall direct that Executive’s reasonable legal fees incurred in connection with arbitrating such claims pursuant to this Agreement shall be paid by the Company. The arbitrator’s decision and/or award will be fully enforceable and subject to entry of judgment by any court of competent jurisdiction. Notwithstanding the provisions of this Paragraph 17, the Company may, at its sole discretion seek appropriate injunctive relief for Executive’s breach of Paragraphs 10, 11, 12 or 13 in the Supreme Court of the State of New York, New York and Suffolk Counties and the United States District Court for the Southern and Eastern Districts of New York. Executive hereby consents to the jurisdiction and venue of such courts for all such controversies.

12

18.           SECTION 409A. The intent of the parties is that payments and benefits under this Agreement comply with Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. The provisions of this Paragraph 18 shall survive the termination of this Agreement and shall survive any termination of Executive’s employment. Notwithstanding anything herein to the contrary, if at the time of an Executive’s termination of employment the Executive is a “specified employee” of a publicly traded company as defined in Code Section 409A (and any related regulations or other pronouncements thereunder) and the deferral of any payments otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Code Section 409A, then the Company shall defer such payments (without any reduction in such payments ultimately paid or provided to the Executive) until the date that is six months following the Executive’s termination of employment (or the earliest date as is permitted under Code Section 409A).

19.           MISCELLANEOUS.

A.         GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.

B.          ENTIRE AGREEMENT/AMENDMENTS. This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company and supersedes all prior agreements, oral or written, including, without limitation, the Original Agreement, with respect to the subject matter hereof. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

C.          NO WAIVER. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

D.          SEVERABILITY. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining pro-visions of this Agreement shall not be affected thereby.

13

E.           ASSIGNMENT. This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement may be assigned by the Company solely to a person or entity which is an affiliate or a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.

F.           SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit of and be binding upon the personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of the Parties. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company and any successor to its business and/or assets, which assumes and agrees to perform this Agreement by operation of law, or otherwise. If Executive should die while any accrued amount would still be payable to him hereunder had he continued to live, the accrued amounts, with the exception of any life, disability or health insurance premiums, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee, or if there is no such designee, to his estate.

G.           NOTICE. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

If to the Company:

Orbit International Corp.

80 Cabot Court

Hauppauge, New York 11788

Attn:  Board of Directors

With a copy to:

Ruskin Moscou Faltischek, P.C.

1425 RXR Plaza

East Tower, 15th Floor

Uniondale, New York 11556

Attn:  Irvin Brum, Esq.

Facsimile:  (516) 663-6610

14

If to Executive:

Mitchell Binder

Orbit International Corp.

80 Cabot Court

Hauppauge, New York  11788; and

200 East 57th Street, Apt. 17D

New York, NY  10028

(or Executive’s most recent address set forth in the Company’s personnel record)”

H.          EXECUTIVE REPRESENTATIONS. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound. Executive further represents that he has been advised by, or has consulted with his own independent counsel with respect to the negotiation of, and his decision to enter into, this Agreement and acknowledges that he understands the meaning and effect of each and every term and provision contained herein.

I.           WITHHOLDING TAXES. The Company shall withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

J.           COUNTERPARTS. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

MITCHELL BINDER
/s/ Mitchell Binder	Dated: August 22, 2011
ORBIT INTERNATIONAL CORP.
/s/ David Goldman	Dated: August 22, 2011
By:  David Goldman
Title: Chief Financial Officer

15

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mitchell Binder, certify that:

1.         I have reviewed this quarterly report on Form 10-Q 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  registrant as of, and for, the periods presented in this 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))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        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

(d)        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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 registrant’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 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: November 14, 2011	/s/ Mitchell Binder
	Mitchell Binder
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, David Goldman, certify that:

1.         I have reviewed this quarterly report on Form 10-Q 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 registrant as of, and for, the periods presented in this 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))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        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

(d)        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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 registrant’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 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: November 14, 2011	/s/ David Goldman
	David Goldman
	Chief Financial Officer

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

I, Mitchell Binder, 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-Q for the quarterly period ended September 30, 2011 (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, 2011
	/s/ Mitchell Binder
	Mitchell Binder
	Chief Executive Officer

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

I, David Goldman, 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-Q for the quarterly period ended September 30, 2011 (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, 2011	/s/ David Goldman
	David Goldman
	Chief Financial Officer

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Current assets:
Allowance for doubtful accounts	$ 145,000	$ 145,000
STOCKHOLDERS' EQUITY
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	5,102,000	5,101,000
Common stock, shares outstanding (in shares)	4,733,000	4,732,000
Treasury stock (in shares)	369,000	369,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) [Abstract]
Net sales	$ 7,850,000	$ 7,299,000	$ 22,946,000	$ 19,803,000
Cost of sales	4,464,000	4,484,000	13,317,000	12,594,000
Gross profit	3,386,000	2,815,000	9,629,000	7,209,000
Selling, general and administrative expenses	2,644,000	2,297,000	7,399,000	7,246,000
Interest expense	45,000	61,000	151,000	172,000
Investment and other income, net	(28,000)	(32,000)	(133,000)	(213,000)
Income before income tax provision(benefit)	725,000	489,000	2,212,000	4,000
Provision (benefit)for income taxes	28,000	(20,000)	74,000	1,000
NET INCOME	$ 697,000	$ 509,000	$ 2,138,000	$ 3,000
Net income per common share:
Basic (in dollars per share)	$ 0.15	$ 0.11	$ 0.46	$ 0.00
Diluted (in dollars per share)	$ 0.15	$ 0.11	$ 0.46	$ 0.00

XML

Document And Entity Information (USD $)	9 Months Ended
	Sep. 30, 2011	Nov. 14, 2011	Jun. 30, 2010
Entity Registrant Name	ORBIT INTERNATIONAL CORP
Entity Central Index Key	0000074818
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 11,055,899
Entity Common Stock, Shares Outstanding		4,732,695
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011

XML

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

(NOTE 7) - Fair Value of Financial Instruments:

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, requires disclosure that establishes a framework for measuring fair value in GAAP and expands disclosure about fair value measurements. This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to ASC 820.

The table below presents the balances, as of September 30, 2011 and December 31, 2010, of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy.

September 30, 2011	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	225,000	$	225,000	$	-	$	-
U.S. Government Agency Bonds		1,000		1,000		-		-
Total Assets	$	226,000	$	226,000	$	-	$	-

December 31, 2010	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	145,000	$	145,000	$	-	$	-
U.S. Government Agency Bonds		1,000		1,000		-		-
Total Assets	$	146,000	$	146,000	$	-	$	-

The Company's only asset or liability that is measured at fair value on a recurring basis is marketable securities, based on quoted market prices in active markets and therefore classified as level 1 within the fair value hierarchy. The carrying value of cash and cash equivalents, accounts receivable, accounts payable, and short-term debt reasonably approximate their fair value due to their relatively short maturities. Long-term debt carrying value and liability associated with former chief executive officer are approximate to their fair value at the balance sheet date. The fair value estimates presented herein were based on market or other information available to management. The use of different assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts.

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Commitments

9 Months Ended

Sep. 30, 2011

Commitments [Abstract]

Commitments

(NOTE 12) – Commitments:

The Company elected not to renew the employment agreement of its former chief executive officer, effectively terminating his employment as of December 31, 2010. The Company recorded an expense during the year ended December 31, 2010 of $2,000,000 representing its estimated contractual obligation, along with associated costs, relating to the contract non-renewal. Included in the recorded expense was $312,000 of stock compensation expense relating to the accelerated vesting of restricted stock. As of September 30, 2011, the liability associated with the former chief executive officer was approximately $820,000. A majority of the obligation will be paid by early January 2012. The former chief executive officer has filed for an arbitration hearing in the City of New York to settle a dispute regarding certain contractual provisions in connection with the contract non-renewal. The arbitration hearing is scheduled for the fourth quarter of 2011. The Company is committed to paying the amount that it believes is owed to its former chief executive officer. The Company believes any claims for amounts over what it believes are contractually owed to him is without merit and will be vigorously defended.

XML

Net Income Per Common Share

9 Months Ended

Sep. 30, 2011

Net Income Per Common Share [Abstract]

Net Income Per Common Share

(NOTE 3) – Net Income Per Common Share:

The following table sets forth the computation of basic and diluted net income per common share:

	Nine Months Ended September30,				Three Months Ended September 30,
Denominator:	2011		2010		2011		2010
Denominator for basic net income per share -weighted-average common shares		4,660,000		4,417,000		4,660,000		4,444,000
Effect of dilutive securities:
Employee and directors stock options		25,000		59,000		26,000		46,000
Unearned portion of restricted stock awards		8,000		23,000		7,000		24,000
Denominator for diluted net income per share - weighted-average common shares and assumed conversion		4,693,000		4,499,000		4,693,000		4,514,000

The numerator for basic and diluted net income per share for the nine and three month periods ended September 30, 2011 and 2010 is the net income for each period.

Options to purchase 163,000 shares of common stock were outstanding during nine and three months ended September 30, 2011 and options to purchase 229,000 shares of common stock were outstanding during the comparable 2010 periods but were not included in the computation of diluted income per share. The inclusion of these options would have been anti-dilutive as the options' exercise prices were greater than the average market price of the Company's common shares during the relevant period.

Approximately 73,000 shares of outstanding common stock during the nine and three months ended September 30, 2011 were not included in the computation of basic earnings per share. These shares were excluded because they represent the unearned portion of restricted stock awards.

Approximately 225,000 shares of outstanding common stock during the nine and three months ended September 30, 2010 were not included in the computation of basic earnings per share. These shares were excluded because they represent the unearned portion of restricted stock awards.

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Business Segments

9 Months Ended

Sep. 30, 2011

Business Segments [Abstract]

Business Segments

(NOTE 9) - Business Segments:

The Company operates through two business segments, the Electronics Segment (or "Electronics Group") and the Power Units Segment (or "Power Group").  The Electronics Segment is comprised of the Orbit Instrument Division and the Company's TDL and ICS subsidiaries. The Orbit Instrument Division and TDL are engaged in the design, manufacture and sale of customized electronic components and subsystems. ICS performs system integration for Gun Weapons Systems and Fire Control Interface as well as logistics support and documentation. The Company's Power Units Segment, through the Company's 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, 2011 and 2010:

	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Net sales:
Electronics
Domestic	$	13,342,000		$	11,806,000		$	4,544,000		$	4,701,000
Foreign		739,000			1,136,000			332,000			185,000
Total Electronics		14,081,000			12,942,000			4,876,000			4,886,000
Power Units
Domestic		8,346,000			6,159,000			2,763,000			2,106,000
Foreign		910,000			868,000			211,000			344,000
Total Power Units		9,256,000			7,027,000			2,974,000			2,450,000
Intersegment sales		(391,000	)		(166,000	)		-			(37,000	)
Total	$	22,946,000		$	19,803,000		$	7,850,000		$	7,299,000
Income before income tax provision (benefit):
Electronics	$	1,076,000		$	160,000		$	419,000		$	448,000
Power Units		2,011,000			708,000			620,000			340,000
Intersegment profit		(3,000	)		42,000			11,000			(10,000	)
General corporate expenses not allocated		(854,000	)		(947,000	)		(308,000	)		(260,000	)
Interest expense		(151,000	)		(172,000	)		(45,000	)		(61,000	)
Investment and other income, net		133,000			213,000			28,000			32,000
Income before income tax provision (benefit)		2,212,000		$	4,000		$	725,000		$	489,000

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Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2011

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

(NOTE 10) - Goodwill and Other Intangible Assets:

The Company applies ASC 350, Intangibles-Goodwill and Other. ASC 350 requires that goodwill not be amortized but evaluated for impairment. The Company performs its annual impairment test of goodwill at the end of its fiscal year or when impairment indicators are present.

As of September 30, 2011 and December 31, 2010, the Company's goodwill and intangible assets consist of the following:

	Estimated Useful Life	Gross Carrying Value		Accumulated Amortization			Accumulated Impairment			Net Carrying Value
Goodwill		$	9,798,000		-		$	(8,110,000	)	$	1,688,000
Intangible Assets:
Contract relationships	15 Years		2,000,000	$	(278,000	)		(1,722,000	)		-
Contract backlog	1-5 Years		1,750,000		(1,750,000	)		-			-
Non-compete agreements	3 Years		415,000		(386,000	)		(29,000	)		-
		$	4,165,000	$	(2,414,000	)	$	(1,751,000	)	$	-

The Company recognized amortization expense of $94,000 and $4,000, respectively, for the nine and three months ended September 30, 2010.

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Comprehensive Income (loss)

9 Months Ended

Sep. 30, 2011

Comprehensive Income (loss) [Abstract]

Comprehensive Income (loss)

(NOTE 8) – Comprehensive Income (loss):

For the nine and three months ended September 30, 2011, total comprehensive income (loss), net of tax, was $2,092,000 and $675,000, respectively. For the comparable 2010 periods, total comprehensive income (loss), net of tax, was $(27,000) and $515,000, respectively. Comprehensive income (loss) consists of the net income (loss) and unrealized gains and losses on marketable securities, net of tax.

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Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Basis of Presentation and Summary of Significant Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

(NOTE 1) – Basis of Presentation and Summary of Significant Accounting Policies:

General

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 condensed consolidated financial statements do not purport to contain complete disclosures required for annual financial statements in accordance with accounting principles generally accepted in the United States of America.

The results of operations for the nine and three months ended September 30, 2011 are not necessarily indicative of the results of operations that can be expected for the year ending December 31, 2011.

These condensed consolidated statements should be read in conjunction with the Company's consolidated financial statements for the year ended December 31, 2010 contained in the Company's Annual Report on Form 10-K.

Reclassification

For comparability, certain 2010 amounts have been reclassified where appropriate, to conform to the financial presentation in 2011.

Marketable Securities

The Company's investments are classified as available-for-sale securities and are stated at fair value, based on quoted market prices, with the unrealized gains and losses, net of income tax, reported in other comprehensive income (loss). Realized gains and losses are included in investment income. Any decline in value judged to be other-than-temporary on available-for-sale securities are included in earnings to the extent they relate to a credit loss. A credit loss is the difference between the present value of cash flows expected to be collected from the security and the amortized cost basis. The amount of any impairment related to other factors will be recognized in comprehensive income. The cost of securities is based on the specific-identification method. Interest and dividends on such securities are included in investment and other income.

Revenue and Cost Recognition

The Company recognizes a substantial portion of its revenue upon delivery of product, however for certain products, revenue and costs under larger, long-term contracts are reported on the percentage-of-completion method. For projects where materials have been purchased but have not been placed into production, the costs of such materials are excluded from costs incurred for the purpose of measuring the extent of progress toward completion. The amount of earnings recognized at the financial statement date is based on an efforts-expended method, which measures the degree of completion on a contract based on the amount of labor dollars incurred compared to the total labor dollars expected to complete the contract. When an ultimate loss is indicated on a contract, the entire estimated loss is recorded in the period the loss is identified. Costs and estimated earnings in excess of billings on uncompleted contracts represent an asset that will be liquidated in the normal course of contract completion, which at times may require more than one year. The components of cost and estimated earnings in excess of billings on uncompleted contracts are the sum of the related contract's direct material, direct labor, and manufacturing overhead and estimated earnings less accounts receivable billings. We had no contracts outstanding at September 30, 2011 accounted for under the percentage-of completion method.

Stock Based Compensation

At September 30, 2011, the Company has various stock-based employee compensation plans. These plans provide for the granting of nonqualified and incentive stock options as well as restricted stock awards to officers, key employees and nonemployee directors. The terms and vesting schedules of stock-based awards vary by type of grant and generally the awards vest based upon time-based conditions. The Company estimates the fair value of its stock option awards on the date of grant using the Black-Scholes valuation model. Share-based compensation expense was $118,000 and $38,000 for the nine and three months ended September 30, 2011, respectively, and was $257,000 and $88,000, respectively, for the comparable 2010 periods.

The Company's stock-based employee compensation plans allow for the issuance of restricted stock awards that may not be sold or otherwise transferred until certain restrictions have lapsed. The unearned stock-based compensation related to restricted stock granted is being amortized to compensation expense over the vesting period, which ranges from two to ten years. The share based expense for these awards was determined based on the market price of the Company's stock at the date of grant applied to the total number of shares that were anticipated to vest. As of September 30, 2011, the Company had unearned compensation of $325,000 associated with all of the Company's restricted stock awards, which will be expensed over approximately the next three years.

Stock option activity during the nine months ended September 30, 2011, under all stock option plans is as follows:

	Number of Shares			Weighted Average Exercise Price		Average Remaining Contractual Term (in years)
Options outstanding, January 1, 2011		314,000		$	4.24		3
Granted		-			-		-
Forfeited		(62,000	)		5.24		-
Exercised		(2,000	)		0.60		-
Options outstanding, September 30, 2011		250,000		$	4.03		3
Outstanding exercisable at September 30, 2011		207,000		$	4.44		3

At September 30, 2011 the aggregate intrinsic value of options outstanding and exercisable was $128,000 and $62,000, respectively. At the comparable 2010 period, the aggregate intrinsic value of options outstanding and exercisable was $231,000 and $151,000, respectively.

The following table summarizes the Company's nonvested stock option activity for the nine months ended September 30, 2011:

	Number of Shares			Weighted-Average Grant- Date Fair Value
Nonvested stock options at January 1, 2011		57,000		$	1.02
Granted		-			-
Vested		(14,000	)		1.02
Forfeited		-			-
Nonvested stock options at September 30, 2011		43,000		$	1.02

At September 30, 2011, there was approximately $7,000 of unearned compensation cost related to the above non-vested stock options. The cost is expected to be recognized over approximately the next two years.

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Cost of Sales

9 Months Ended

Sep. 30, 2011

Cost of Sales [Abstract]

Cost of Sales

(NOTE 4) - Cost of Sales:

For interim periods, the Company estimates certain components of its inventory and related gross profit.

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Inventories

9 Months Ended

Sep. 30, 2011

Inventories [Abstract]

Inventories

(NOTE 5) - Inventories:

Inventories are comprised of the following:

	September 30,		December 31,
	2011		2010
Raw Materials	$	7,070,000	$	7,584,000
Work-in-process		4,778,000		3,512,000
Finished goods		714,000		531,000
TOTAL	$	12,562,000	$	11,627,000

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2011

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

(NOTE 13) – Recent Accounting Pronouncements:

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, “Presentation of Comprehensive Income”, which eliminates the option to present the components of other comprehensive income in the statement of changes in stockholders' equity. Instead, entities will have the option to present the components of net income, the components of other comprehensive income and total comprehensive income in a single continuous statement or in two separate but consecutive statements. The guidance does not change the items reported in other comprehensive income or when an item of other comprehensive income is reclassified to net income. This ASU is effective, for fiscal years, and interim periods within those years, beginning after December 15, 2011, or as subsequently amended, and will be applied retrospectively. As this guidance only revises the presentation of comprehensive income, the adoption of this guidance is not expected to affect the company's financial position, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, ”Testing Goodwill for Impairment”. The objective of this ASU is to simplify how entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely that not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more likely than not threshold is defined as having a likelihood of more than 50 percent. This ASU is effective for fiscal years beginning after December 15, 2011 and early adoption is permitted. We do not expect the adoption of ASU No. 2011-08 to have a material impact on our financial condition,  results of operations or cash flows.

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Marketable Securities

9 Months Ended

Sep. 30, 2011

Marketable Securities [Abstract]

Marketable Securities

(NOTE 6) – Marketable Securities:

The following is a summary of the Company's available for sale marketable securities at September 30, 2011 and December 31, 2010:

September 30, 2011	Adjusted Cost		Fair Value		Unrealized Holding (Loss) Gain
Corporate Bonds	$	267,000	$	225,000	$	(42,000	)
U.S. Government Agency Bonds		1,000		1,000		-
Total	$	268,000	$	226,000	$	(42,000	)
December 31, 2010
Corporate Bonds	$	116,000	$	145,000		29,000
U.S. Government Agency Bonds		1,000		1,000		-
Total	$	117,000	$	146,000	$	29,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $)	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net income	$ 2,138,000	$ 3,000
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense	118,000	257,000
Amortization of intangible assets	0	94,000
Depreciation and amortization	202,000	206,000
Loss on disposal of property and equipment	4,000	0
Inventory reserves	139,000	50,000
Gain on sale of marketable securities	(45,000)	(100,000)
Deferred income	(64,000)	(64,000)
Changes in operating assets and liabilities:
Accounts receivable	(2,000)	(92,000)
Inventories	(1,074,000)	265,000
Costs and estimated earnings in excess of billings on uncompleted contracts	468,000	566,000
Other current assets	152,000	4,000
Other assets	6,000	(31,000)
Accounts payable	19,000	75,000
Accrued expenses	88,000	(97,000)
Income taxes payable	35,000	(57,000)
Customer advances	(55,000)	34,000
Liability associated with former executive officer	(868,000)	0
Net cash provided by operating activities	1,261,000	1,113,000
Cash flows from investing activities:
Purchase of property and equipment	(127,000)	(303,000)
Sale and disposal of property and equipment	10,000	0
Purchase of marketable securities	(262,000)	0
Sale of marketable securities	156,000	659,000
Net cash (used in) provided by investing activities	(223,000)	356,000
Cash flows from financing activities:
Purchase of treasury stock	0	(2,000)
Proceeds from issuance of long-term debt and note payable-bank	5,790,000	1,809,000
Stock option exercises	1,000	113,000
Repayments of long-term debt and note payable-bank	(6,876,000)	(3,085,000)
Net cash used in financing activities	(1,085,000)	(1,165,000)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(47,000)	304,000
Cash and cash equivalents - January 1	1,964,000	2,321,000
CASH AND CASH EQUIVALENTS - September 30	1,917,000	2,625,000
Supplemental cash flow information:
Cash paid for interest	155,000	177,000
Cash paid for income taxes	$ 30,000	$ 66,000

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Financing Arrangements

9 Months Ended

Sep. 30, 2011

Financing Arrangements [Abstract]

Financing Arrangements

(NOTE 2) – Financing Arrangements:

During March 2010, the Company entered into a $3,000,000 line of credit with a commercial lender secured by all the assets of the Company.  In addition, the Company refinanced its existing term loans with the same commercial lender with a five-year $4,655,000 term loan facility that matures March 2015. The aggregate amount of principal outstanding under the line of credit cannot exceed a borrowing base of eligible accounts receivable and inventory, as defined. The line of credit and term loan bear interest equal to the prime rate of interest (3.25% at September 30, 2011) plus 1% and the prime rate of interest plus 1.5%, respectively. The unpaid balance on the term loan was $3,258,000 at September 30, 2011. There were no outstanding borrowings under the line of credit as of September 30, 2011.

The Company was not in compliance with one of its financial covenants as of December 31, 2010. In March 2011, the Company and its lender agreed to(i) waive the covenant default; (ii) replace a financial covenant ratio for the first two quarters of 2011 with a new covenant related to the Company's operating profitability; (iii) modify the definition of a financial covenant; (iv) institute a new covenant related to the Company's liquidity; and (v) extend the expiration date of the Company's line of credit to August 15, 2011. The lender, in consideration of such waiver and amendment, assessed a waiver fee of $10,000 plus legal fees but did not change the interest rate on the Company's line of credit or term debt.

The Company was in compliance with all of its financial covenants for the first three quarterly reporting periods in 2011. During September 2011, the expiration date on the line of credit was extended from October 1, 2011 to June 1, 2012, unless sooner terminated for an event of default including non-compliance with financial covenants.

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Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

(NOTE 11) – Income Taxes:

The Company utilized net operating loss carryforwards to offset income taxes, except for $74,000 and $28,000 of state income and federal minimum tax expense, for the nine and three months ended September 30, 2011, respectively. For the comparable periods in 2010, the Company recorded income tax expense (benefit) of $1,000 and $(20,000), respectively, for state income and federal minimum taxes.

The Company applies ASC 740 relating to accounting for uncertainty in income taxes. A tax benefit from an uncertain position may be recognized only if it is "more likely than not" that the position is sustainable based on its technical merits. Additionally, this pronouncement provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company does not have any liabilities for uncertain tax positions at September 30, 2011 or December 31, 2010.

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 1,917,000	$ 1,964,000
Investments in marketable securities	226,000	146,000
Accounts receivable (less allowance for doubtful accounts of $145,000)	3,929,000	3,927,000
Inventories	12,562,000	11,627,000
Costs and estimated earnings in excess of billings on uncompleted contracts	0	468,000
Deferred tax asset	379,000	391,000
Other current assets	891,000	1,043,000
Total current assets	19,904,000	19,566,000
Property and equipment, net	1,083,000	1,172,000
Goodwill	1,688,000	1,688,000
Deferred tax asset.	1,886,000	1,847,000
Other assets	100,000	106,000
TOTAL ASSETS	24,661,000	24,379,000
Current liabilities:
Note payable - bank	0	387,000
Accounts payable	813,000	794,000
Current portion of long-term debt	931,000	931,000
Liability associated with former chief executive officer	813,000	1,194,000
Income taxes payable	35,000	0
Accrued expenses	1,139,000	1,051,000
Customer advances	63,000	118,000
Deferred income	85,000	85,000
Total current liabilities	3,879,000	4,560,000
Deferred income	22,000	86,000
Liability associated with former chief executive officer, net of current portion	7,000	494,000
Long-term debt, net of current portion	2,327,000	3,026,000
Total liabilities	6,235,000	8,166,000
STOCKHOLDERS' EQUITY
Common stock - $.10 par value, 10,000,000 shares authorized, 5,102,000 and 5,101,000 shares issued at 2011 and 2010, respectively, and 4,733,000 and 4,732,000 shares outstanding at 2011 and 2010, respectively.	510,000	510,000
Additional paid-in capital	22,481,000	22,360,000
Treasury stock, at cost, 369,000 shares at 2011 and 2010	(915,000)	(915,000)
Accumulated other comprehensive (loss) income, net of tax	(27,000)	19,000
Accumulated deficit	(3,623,000)	(5,761,000)
Total stockholders' equity	18,426,000	16,213,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 24,661,000	$ 24,379,000