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 June 30, 2013

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: 4,551,598shares of common stock, par value $.10, as of August 12, 2013.

INDEX

		Page No.
Part I.	Financial Information:
Item 1.       Financial Statements:
	Condensed Consolidated Balance Sheets - June 30, 2013(unaudited) and December 31, 2012	3-4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Six and Three Months Ended June 30, 2013 and 2012 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 (unaudited)	6-7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8-18
Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations.		19-31
Item 3.      Quantitative and Qualitative Disclosures About Market Risk.		31
Item 4.      Controls and Procedures.		31-32
Part II.	Other Information:
Item 1.      Legal Proceedings.		33
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds.		33
Item 3.      Defaults Under Senior Securities.		33
Item 4.       Mine Safety Disclosures.		33
Item 5.       Other Information.		33
Item 6. –    Exhibits.		33
Signatures		34
Exhibits		35-40

2

PART I - FINANCIAL INFORMATION

Item 1.FINANCIAL STATEMENTS

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS	June 30, 2013		December 31, 2012
	(unaudited)
Current assets:
Cash and cash equivalents	$	847,000	$	610,000
Investments in marketable securities		254,000		251,000
Accounts receivable (less allowance for doubtful accounts of $145,000)		4,186,000		5,372,000
Inventories		12,703,000		13,271,000
Costs and estimated earnings in excess of billings on uncompleted contracts		999,000		875,000
Deferred tax asset		320,000		447,000
Other current assets		174,000		252,000
Total current assets		19,483,000		21,078,000
Property and equipment, net		1,115,000		1,099,000
Goodwill		868,000		868,000
Deferred tax asset		1,929,000		1,806,000
Other assets		96,000		125,000
TOTAL ASSETS	$	23,491,000	$	24,976,000

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

3

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY	June 31, 2013			December 31, 2012
	(unaudited)
Current liabilities:
Current portion of long-term debt	$	25,000		$	33,000
Note payable-bank		-			3,324,000
Accounts payable		541,000			741,000
Liability associated with non-renewal of senior officer contract		459,000			661,000
Income taxes payable		23,000			2,000
Accrued expenses		1,241,000			1,294,000
Customer advances		27,000			88,000-
Total current liabilities		2,316,000			6,143,000
Note payable-bank		2,600,000			-
Liability associated with non-renewal of senior officer contract, net of current portion		25,000			41,000
Long-term debt, net of current portion		-			8,000
Total liabilities		4,941,000			6,192,000
STOCKHOLDERS’ EQUITY
Common stock - $.10 par value, 10,000,000 shares authorized, 5,232,000 and 5,102,000 shares issued at 2013 and 2012, respectively, and 4,552,000and 4,515,000 shares outstanding at 2013 and 2012,respectively		523,000			510,000
Additional paid-in capital		22,769,000			22,726,000
Treasury stock, at cost, 680,000 and 587,000shares at 2013 and 2012, respectively		(2,025,000	)		(1,700,000	)
Accumulated other comprehensive gain (loss),net of tax		3,000			(3,000	)
Accumulated deficit		(2,720,000	)		(2,749,000	)
Total stockholders’ equity		18,550,000			18,784,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	23,491,000		$	24,976,000

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

4

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Net sales	$	12,922,000		$	13,671,000		$	6,475,000		$	7,509,000
Cost of sales		7,934,000			8,450,000			3,978,000			4,675,000
Gross profit		4,988,000			5,221,000			2,497,000			2,834,000
Selling, general and administrative expenses		4,886,000			5,172,000			2,355,000			2,575,000
Costs related to non-renewal of senior officer contract		-			1,194,000			-			-
Interest expense		32,000			70,000			15,000			36,000
Investment and other income, net		(5,000	)		(97,000	)		(2,000	)		(4,000	)
Income (loss) before income tax provision		75,000			(1,118,000	)		129,000			227,000
Income tax provision		46,000			58,000			20,000			28,000
NET INCOME (LOSS)	$	29,000		$	(1,176,000	)	$	109,000		$	199,000
Change in unrealized gains and (losses) on marketable securities, net of income tax		6,000			17,000			2,000			2,000
Comprehensive income (loss)	$	35,000		$	(1,159,000	)	$	111,000		$	201,000
Net income (loss) per common share:
Basic	$	.01		$	(.26	)	$	.02		$	.04
Diluted	$	.01		$	(.26	)	$	.02		$	.04

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)

	Six Months Ended
	June 30,
	2013			2012
Cash flows from operating activities:
Net income (loss)	$	29,000		$	(1,176,000	)
Adjustments to reconcile net income (loss)to net cash provided by (used in) operating activities:
Share-based compensation expense		56,000			152,000
Bond premium amortization		6,000			1,000
Depreciation and amortization		140,000			141,000
Loss on sale of marketable securities		2,000			-
Changes in operating assets and liabilities:
Accounts receivable		1,186,000			960,000
Inventories		568,000			(2,055,000	)
Costs and estimated earnings in excess of billings on uncompleted contracts		(124,000	)		(43,000	)
Other current assets		78,000			66,000
Other assets		29,000			4,000
Accounts payable		(200,000	)		34,000
Accrued expenses		(53,000	)		(286,000	)
Income taxes payable		21,000			(30,000	)
Customer advances		(61,000	)		-
Liability associated with non-renewal of senior officers’ contracts		(218,000	)		701,000
Net cash provided by (used in) operating activities		1,459,000			(1,531,000	)
Cash flows from investing activities:
Purchase of property and equipment		(156,000	)		(281,000	)
Purchase of marketable securities		(151,000	)		-
Sale of marketable securities		150,000			-
.
Net cash used in investing activities		(157,000)			(281,000	)

(continued)

6

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(continued)

	Six Months Ended
	June 30,
	2013			2012
Cash flows from financing activities:
Purchase of treasury stock		(325,000	)		(402,000	)
Proceeds from issuance of long-term debt		-			65,000
Proceeds from issuance of note payable-bank		-			1,407,000
Restricted cash		-			671,000
Repayments of note payable-bank		(724,000	)		-
Repayments of long-term debt		(16,000	)		(473,000	)
Net cash (used in) provided by financing activities		(1,065,000	)		1,268,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		237,000			(544,000	)
Cash and cash equivalents - January 1		610,000			1,709,000
CASH AND CASH EQUIVALENTS – June 30	$	847,000		$	1,165,000
Supplemental cash flow information:
Cash paid for interest	$	34,000		$	72,000
Cash paid for income taxes	$	25,000		$	92,000

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 six and three months ended June 30, 2013 are not necessarily indicative of the results of operations that can be expected for the year ending December 31, 2013.

These condensed consolidated statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2012 contained in the Company’s Annual Report on Form 10-K filed on March 29, 2013.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash in bank deposit accounts, which, at times, exceed federally insured limits.  The Company has not experienced any losses on these accounts.

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 income.

Allowance for Doubtful Accounts

Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts.  The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic trends.  The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.

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):

Inventories

Inventories, which consist of raw materials, work-in-process, and finished goods, are recorded at the lower of cost (average cost method and specific identification) or market. Inventories are shown net of any reserves relating to any potential slow moving or obsolete inventory.

Property and Equipment

Property and equipment is recorded at cost.  Depreciation and amortization of the respective assets are computed using the straight-line method over their estimated useful lives ranging from 3 to 10 years.  Leasehold improvements are amortized using the straight-line method over the remaining term of the lease or the estimated useful life of the improvement, whichever is less.

Long-Lived Assets

When impairment indicators are present, the Company reviews the carrying value of its long-lived assets in determining the ultimate recoverability of their unamortized values using future undiscounted cash flow analyses. In the event the future undiscounted cash flows of the long-lived asset are less than the carrying value, the Company will record an impairment charge for the difference between the carrying value and the fair value of the long-lived asset.

Goodwill

The Company records goodwill as the excess of purchase price over the fair value of identifiable net assets acquired. In accordance with Accounting Standards Codification (“ASC”) 350, goodwill is not amortized but instead tested for impairment on at least an annual basis. The Company, where appropriate, will utilize Accounting Standards Update (“ASU”) 2011-08 which allows the Company to not perform the two-step goodwill impairment test if it determines that it is not more likely than not that the fair value of the reporting unit is less than the carrying amount based on a qualitative assessment of the reporting unit. The Company’s annual goodwill impairment test is performed in the fourth quarter each year or when impairment indicators are present. If the goodwill is deemed to be impaired, the difference between the carrying amount reflected in the financial statements and the estimated fair value is recognized as an expense in the period in which the impairment occurs. In determining the recoverability of goodwill, assumptions are made regarding estimated future cash flows and other factors to determine the fair value of the assets.

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):

Income Taxes

The Company recognizes deferred tax assets and liabilities in accordance with ASC 740 based on the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances have been established to reduce deferred tax assets to the amount expected to be realized. The Company evaluates uncertain tax positions and accounts for such items in accordance with ASC 740-10. As of June 30, 2013, the Company has no material uncertain tax positions. The Company is subject to federal income taxes and files a consolidated U.S. federal income tax return. In addition to the federal tax return, the Company files income tax returns in various state jurisdictions. The Company is subject to routine income tax audits in various jurisdictions and tax returns from December 31, 2009 remain open to examination by such taxing authorities.

Revenue and Cost Recognition

The Company recognizes a substantial portion of its revenue upon the delivery of product. The Company recognizes such revenue when title and risk of loss are transferred to the customer and when there is: i) persuasive evidence that an arrangement with the customer exists, which is generally a customer purchase order, ii) the selling price is fixed and determinable, iii) collection of the customer receivable is deemed probable, and iv) we do not have any continuing non-warranty obligations. 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, manufacturing overhead and estimated earnings less accounts receivable billings.

10

(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):

Deferred Rent

The Company’s leases have escalation clauses which are recognized on a straight line basis over the life of the lease. The amounts are recorded in accrued expenses in the accompanying condensed consolidated financial statements.

Comprehensive Income (loss)

Comprehensive income (loss) consists of net income (loss) and unrealized gains and losses on marketable securities, net of tax. The Company adopted ASU 2011-05 during the first quarter ended March 31, 2012, which eliminated the option to present the components of other comprehensive income in the statement of changes in stockholders’ equity. The Company has elected to present the components of net income (loss), the components of other comprehensive income (loss) and total comprehensive income (loss) as a single continuous statement.

(Note 2) - Stock Based Compensation:

At June 30, 2013, the Company had a stock-based employee compensation plan. At June 30, 2013, there were no shares of common stock reserved for future issuance of stock options, restricted stock and stock appreciation rights. The plan provided for the granting of nonqualified and incentive stock options as well as restricted stock awards and stock appreciation rights to officers, employees and other key persons. The terms and vesting schedules of stock-based awards vary by type of grant and generally the awards vest based upon time-based conditions. Share-based compensation expense was $56,000 and $28,000 for the six and three months ended June 30, 2013, respectively, and was $152,000 and $100,000, respectively, for the comparable 2012 periods.

The Company's stock-based employee compensation plan allows 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 seven 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. During the six months ended June 30, 2013, 130,000 shares of restricted stock were awarded to senior management which will vest over seven years. As of June 30, 2013, the Company had unearned compensation of $453,000 associated with all of the Company's restricted stock awards, which will be expensed over approximately the next seven years. The unvested portion of restricted stock awards at June 30, 2013 was approximately 149,000 shares.

11

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(Note 2) - Stock Based Compensation (continued):

Stock option activity during the six months ended June 30, 2013, under all stock option plans is as follows:

						Average
				Weighted		Remaining
				Average		Contractual
	Number of			Exercise		Term
	Shares			Price		(in years)
Options outstanding,January 1, 2013		178,000		$	3.58		2
Granted		-			-		-
Forfeited		(3,000	)		3.70		-
Exercised		- -			- -		-
Options outstanding,June 30, 2013		175,000		$	3.58		1
Outstanding exercisable at June 30, 2013		161,000		$	3.72		1

At June 30, 2013, the aggregate intrinsic value of options outstanding and exercisable was $115,000 and $96,000, respectively. At the comparable 2012 period, the aggregate intrinsic value of options outstanding and exercisable was $135,000 and $89,000, respectively.

The following table summarizes the Company's nonvested stock option activity for the six months ended June 30, 2013:

	Number of			Weighted-Average
	Shares			Grant-Date Fair Value
Nonvested stock options at January 1, 2013		28,000		$	1.02
Granted		-			-
Vested		(14,000	)		1.02
Forfeited		-			- .
Nonvested stock options at June 30, 2013		14,000		$	1.02

12

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 3) – Debt:

On November 8, 2012, the Company entered into a credit agreement (“Credit Agreement”) with a commercial lender pursuant to which the Company established a committed line of credit of up to $6,000,000. This line of credit was used to pay off, in full, all of the Company’s obligations to its former primary lender and to provide for its general working capital needs. In June 2013, the Company’s Credit Agreement was amended whereby (i) the expiration date on its credit facility was extended to July 1, 2015 and (ii) the Company is permitted to purchase up to $400,000 of its common stock in each year beginning July 1 and ending June 30 during the term of the Credit Agreement. Payment of interest on the line of credit is due at a rate per annum as follows: either (i) variable at the lender’s prime lending rate (3.25% at June 30, 2013) and/or (ii) 2% over LIBOR for 30, 60, or 90 day LIBOR maturities, at the Company’s sole discretion. The line of credit is secured by a first priority security interest in all of the Company’s tangible and intangible assets. Outstanding borrowings under the line of credit were $2,600,000 at June 30, 2013.

The Credit Agreement contains customary affirmative and negative covenants and certain financial covenants. Additionally, available borrowings under the line of credit are subject to a borrowing base of eligible accounts receivable and inventory. All outstanding borrowings under the line of credit are accelerated and become immediately due and payable (and the line of credit terminates) in the event of a default, as defined under the Credit Agreement. The Company was in compliance with the financial covenants contained in the Credit Agreement at June 30, 2013.

During March 2012, the Company entered into a two-year $65,000 installment loan agreement to finance the purchase of a leasehold improvement. The loan’s imputed interest rate is 3.25%, is payable in twenty-four (24) monthly payments of approximately $2,800, is secured by the related leasehold improvement, and matures March 2014. The unpaid balance on the installment loan agreement was $25,000 at June 30, 2013.

(NOTE 4) – Net Income (loss) Per Common Share:

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

	Six Months Ended				Three Month Ended s
	June 30,				June 30,
	2013		2012		2013		2012
Denominator:
Denominator for basic net income (loss) per share -weighted-average common shares		4,456,000		4,609,000		4,425,000		4,577,000
Effect of dilutive securities:
Employee and directors stock options		21,000		-		21,000		25,000
Unearned portion of restricted stock awards		14,000		-		13,000		3,000
Denominator for diluted net income (loss) per share -weighted-average common shares and assumed conversion		4,491,000		4,609,000		4,459,000		4,605,000

13

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 4) – Net Income (loss) Per Common Share(continued):

The numerator for basic and diluted net income (loss) per share for the six and three month periods ended June 30, 2013 and 2012 is the net income (loss) for each period.

During the six months ended June 30, 2012, the Company had a net loss and therefore did not include 28,000 incremental common shares in its calculation of diluted net loss per common share since an inclusion of such securities would be anti-dilutive.

Options to purchase 92,000 shares of common stock were outstanding during the six and three month periods ending June 30, 2013 and 163,000 shares were outstanding during the comparable periods in 2012, but were not included in the computation of diluted income (loss) 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 149,000 shares of outstanding common stock during the six and three months ended June 30, 2013 and approximately 61,000 shares of outstanding common stock during the six and three months ended June 30, 2012 were not included in the computation of basic income (loss) per share. These shares were excluded because they represent the unvested portion of restricted stock awards.

(NOTE 5) - Cost of Sales:

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

(NOTE 6) - Inventories:

Inventories are comprised of the following:

	June 30, 2013		December 31, 2012
Raw Materials	$	7,299,000	$	8,199,000
Work-in-process		5,026,000		4,742,000
Finished goods		378,000		330,000
TOTAL	$	12,703,000	$	13,271,000

14

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 7) – Marketable Securities:

The following is a summary of the Company’s available for sale marketable securities at June 30, 2013 and December 31, 2012:

June 30, 2013	Adjusted Cost		Fair Value		Unrealized Holding Gain (Loss)
Corporate Bonds	$	250,000	$	254,000	$	4,000
December 31, 2012
Corporate Bonds	$	257,000	$	251,000	$	(6,000	)

(NOTE 8) - Fair Value of Financial Instruments:

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.

15

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 8) - Fair Value of Financial Instruments(continued):

The table below presents the balances, as of June 30, 2013 and December 31, 2012, of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy.

June 30, 2013	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	254,000	$	254,000	$	-	$	- -
December 31, 2012	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	251,000	$	251,000	$	-	$	- -

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. 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 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.

16

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 9) - Business Segments(continued):

The following is the Company’s business segment information for the six and three month periods ended June 30, 2013 and 2012:

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Net sales:
Electronics
Domestic	$	6,009,000		$	6,435,000		$	3,172,000		$	3,795,000
Foreign		495,000			962,000			144,000			496,000
Total Electronics		6,504,000			7,397,000			3,316,000			4,291,000
Power Units
Domestic		5,907,000			5,640,000			2,835,000			2,935,000
Foreign		531,000			634,000			331,000			283,000
Total Power Units		6,438,000			6,274,000			3,166,000			3,218,000
Intersegment sales		(20,000	)-		-			(7,000	)-		- -
Total	$	12,922,000		$	13,671,000		$	6,475,000		$	7,509,000
Income (loss) before income tax provision:
Electronics	$	(580,000	)	$	(1,790,000	)	$	(113,000	)	$	(57,000	)
Power Units		1,291,000			1,360,000			557,000			714,000
General corporate expenses not allocated		(609,000	)		(715,000	)		(302,000	)		(398,000	)
Interest expense		(32,000	)		(70,000	)		(15,000	)		(36,000	)
Investment and other income, net		5,000			97,000			2,000			4,000
Income (loss) before income tax provision	$	75,000		$	(1,118,000	)	$	129,000		$	227,000

(NOTE 10) - Goodwill:

As of June 30, 2013 and December 31, 2012, the Company's goodwill consists of the following:

Gross Carrying Value		Accumulated Amortization		Accumulated Impairment			Net Carrying Value
$	9,798,000		-	$	(8,930,000	)	$	868,000

(NOTE 11) – Income Taxes:

For the six and three months ended June 30, 2013, the Company recorded $46,000 and $20,000, respectively, of state income and federal minimum tax expense. For the comparable periods in 2012, the Company recorded income tax expense of $58,000 and $28,000, respectively, for state income and federal minimum taxes.

17

ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(continued)

(NOTE 12) – Liability Associated with Non-renewal of Senior Officer Contract:

In March 2012, the Company reached a decision that made it probable that the employment agreement of its former chief operating officer would not be renewed, which effectively terminated his employment as of July 31, 2012. Pursuant to the terms of his existing agreement, the Company recorded an expense of $1,194,000 during the three months ended March 31, 2012, representing its estimated contractual obligation relating to the contract non-renewal. In addition, relating to the non-renewal, all of his unvested restricted shares vested as of July 31, 2012, which resulted in share based compensation expense of approximately $138,000. As of June 30, 2013, the liability associated with the non-renewal of the former chief operating officer contract was approximately $484,000.

(NOTE 13) – Equity:

In November 2012, the Company’s Board of Directors authorized management, in its discretion, to purchase up to $400,000 of its common stock. On March 6, 2013, the Company’s Board of Directors approved a 10b5-1 Plan through which the Company conducted its authorized stock buy back program. The Company repurchased all of the remaining shares available under its 10b5-1 Trading Plan during the second quarter of 2013. From November 8, 2012 to June 30, 2013, the Company purchased a total of approximately 116,000 of its common shares for total cash consideration of approximately $400,000 for an average price of $3.45 per share. In June 2013, the Company’s Credit Agreement was amended whereby the Company is permitted to purchase up to $400,000 of its common stock in each year beginning July 1 and ending June 30 during the term of the Credit Agreement.

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Item 2. 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 our actual financial or operating results to be materially different from our 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 our most recent results. 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 our reports and registration statements filed with the Securities and Exchange Commission.

Executive Overview

Our net sales during the three and six months ended June 30, 2013 were $6,475,000 and $12,922,000, respectively, compared to $7,509,000 and $13,671,000 during the prior year three and six month periods, respectively. We recorded net income of $109,000 and $29,000 for the three and six months ended June 30, 2013, respectively, compared to net income of $199,000 and a net loss of $1,176,000 in the comparable 2012 periods, respectively. Despite the decrease in sales during the current three and six month periods, our net income did not materially change from the comparable periods in 2012, exclusive of the $1,194,000 charge taken in connection with the non-renewal of our former chief operating officer’s employment contract in the prior year six month period. This was primarily the result of a change in product mix and cost cutting measures taken over the last several quarters.

Our backlog at June 30, 2013 was approximately $13,600,000 compared to $15,900,000 at December 31, 2012 due to a lower backlog at both our Electronics and Power Groups.  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 while we are confident that we will receive many of the orders we are pursuing, there can be no assurance as to the ultimate receipt and timing of these orders.

Our financial condition remains strong as evidenced by our 8.4 to 1 current ratio at June 30, 2013. During November 2012, we entered into a $6,000,000 line of credit facility with a new lender. This line of credit was used to pay off, in full, all of our obligations to our former primary lender and to provide for our general working capital needs. In June 2013, our Credit Agreement was amended whereby (i) the expiration date on our credit facility was extended to July 1, 2015 and (ii) we are permitted to purchase up to $400,000 of our common stock in each year beginning July 1 and ending June 30 during the term of our Credit Agreement. Accordingly, as of June 30, 2013, our line of credit is now classified as a non-current liability. We were in compliance with the financial covenants contained in our Credit Agreement at June 30, 2013. In November 2012, our Board of Directors authorized management, in its discretion, to purchase up to $400,000 of our common stock. On March 6, 2013, our Board of Directors approved a 10b5-1 Plan through which we conducted our authorized stock buy back program. We repurchased all of the remaining shares available under our 10b5-1 Trading Plan during the second quarter of 2013 and we may put a new trading plan in place depending on industry conditions, share price and a determination of capital allocation factors.

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From November 8, 2012 to June 30, 2013, we purchased a total of approximately 116,000 shares of our common stock for total cash consideration of approximately $400,000 for an average price of $3.45 per share.

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 condensed consolidated financial statements.

Inventories

Inventory is valued at the lower of cost (average cost method and specific identification) 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 which have forced our country into various conflicts have resulted in increased usage of hardware and equipment which are now in need of repair and refurbishment. This could lead to increased product demand as well as the use of some older inventory items that we had previously determined obsolete. In addition, recently announced reductions in defense spending may result in deferral or cancellation of purchases of new equipment, which may require refurbishment of existing equipment.

20

Deferred Tax Asset

At June 30, 2013, 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 $5,000,000 and $6,000,000, respectively that expire from 2018 through 2032. 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 our deferred tax asset and operating results could be affected accordingly. We will evaluate the possibility of changing some or all of our valuation allowance relating to our deferred tax asset should we continue our profitability or incur losses in the future. The increase or reduction of some or all of our valuation allowance would create a deferred tax expense or benefit, resulting in a decrease or increase to net income in our condensed consolidated statements of operations.

Impairment of Goodwill

The balance of our goodwill, as of June 30, 2013, is $868,000 for Behlman. After applying ASU 2011-08, we performed a qualitative assessment on Behlman’s goodwill at December 31, 2012. We concluded as of December 31, 2012 that the fair value of Behlman was more likely than not greater than its carrying amount. This assessment was based on certain factors, such as: i) Behlman’s bookings and revenue in 2012 (approximately $12.5 million and  $12.4 million, respectively), ii) Behlman’s net income (approximately $2.8 million) in 2012, iii) Behlman’s backlog at December 31, 2012 of approximately $8.1 million and iv) the result of our 2010 quantitative goodwill impairment test under which Behlman’s fair value at December 31, 2010 exceeded its carrying amount by approximately 27%.

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 $56,000 and $152,000 for the six months ended June 30, 2013 and 2012, respectively. During the six months ended June 30, 2013, 130,000 shares of restricted stock were awarded to senior management. During the comparable period in 2012, no shares of restricted stock or stock options were granted.

21

Revenue and Cost Recognition

We recognize a substantial portion of our revenue upon the delivery of product. We recognize such revenue when title and risk of loss are transferred to our customer and when there is: i) persuasive evidence that an arrangement with the customer exists, which is generally a customer purchase order, ii) the selling price is fixed and determinable, iii) collection of the customer receivable is deemed probable, and iv) we do not have any continuing non-warranty obligations. 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 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 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 costs 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.

Marketable Securities

We currently have approximately $254,000 invested 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: i) 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.

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Results of Operations

Three month period ended June 30, 2013 v. June 30, 2012

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 (which collectively comprise our “Electronics Group”).  Our Behlman subsidiary is engaged in the design and manufacture of commercial power units and COTS power solutions (which comprises our “Power Group”).

Consolidated net sales for the three month period ended June 30, 2013 decreased by 13.8% to $6,475,000 from $7,509,000 for the three month period ended June 30, 2012, due primarily to lower sales from both our Electronics and Power Groups. Sales from our Electronics Group decreased by 22.7% due principally to lower sales from our ICS and TDL subsidiaries and despite an increase in sales from our Orbit Instrument Division. The decrease in sales at our ICS subsidiary was primarily due to the shipment of lower gross margin MK 437 sales in the prior year period. The decrease in sales at our TDL subsidiary was principally due to (i) lower bookings for the first six months of 2013 as compared to the comparable period in 2012 and (ii) the absence of shipments in the current year period for a certain display used in the ground mobile marketplace. The increase in sales at our Orbit Instrument Division was primarily due to increased shipments pursuant to customer delivery schedules. Our Power Group recorded a slight decrease (1.6%) in sales during the current three month period as compared to the prior year period.

Gross profit, as a percentage of sales, for the three months ended June 30, 2013 increased to 38.6% from 37.7% for the three month period ended June 30, 2012.  The increase was the result of higher gross profit at our Electronics Group that was partially offset by lower gross profit at our Power Group. The increase in gross profit from our Electronics Group was principally due to higher gross profit at our TDL subsidiary and to a lesser extent our Orbit Instrument Division which was partially offset by lower gross profit at our ICS subsidiary. The increase in gross profit at our TDL subsidiary was principally due to a change in product mix, primarily the result of the gross margin associated with the shipment of displays used in a major helicopter program and despite lower sales in the current year period. The slight increase in gross profit at our Orbit Instrument Division was primarily the result of an increase in sales during the current year period. The decrease in gross margin at our ICS subsidiary was principally due to lower sales during the current year period and despite the shipment of lower gross margin MK 437 sales in the prior year period. The decrease in gross profit at our Power Group was principally due to slightly lower sales and a change in product mix during the current year period.

Selling, general and administrative expenses decreased by 8.5% to $2,355,000 for the three month period ended June 30, 2013 from $2,575,000 for the three month period ended June 30, 2012. The decrease was due to lower selling, general and administrative expenses from both our Electronics and Power Groups, as well as lower corporate costs. The decrease in selling, general and administrative expenses at our Electronics Group was primarily due to the departure of a senior officer whose duties were assumed by other management and also to a reduction in personnel at our ICS subsidiary. Our Power Group recorded a very slight reduction(less than 1%) in selling, general and administrative expenses for the current three month period. Selling, general and administrative expenses, as a percentage of sales, for the three month period ended June 30, 2013 increased to 36.4% from 34.3% for the three month period ended June 30, 2012 principally due to a decrease in sales and despite a decrease in costs.

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Interest expense for the three months ended June 30, 2013 decreased to $15,000 from $36,000 for the three months ended June 30, 2012. In November 2012, we entered into a credit agreement with a commercial lender pursuant to which we established a committed line of credit of up to $6,000,000. This line of credit was used to pay off all of our obligations (term debt and line of credit) to our former primary lender. The decrease in interest expense was principally due to the pay off of our term debt, a lower interest rate on our new line of credit and despite an increase in amounts owed under our line of credit.

Investment and other income for the three month period ended June 30, 2013 decreased to $2,000 from $4,000 for the three month period ended June 30, 2012 principally due to higher bond premium amortization expense in the current period.

Net income before taxes was $129,000 for the three months ended June 30, 2013 compared to $227,000 for the three months ended June 30, 2012.  The decrease in income was principally due to a decrease in sales from both our Electronics and Power Groups which was partially offset by an increase in gross margin and a decrease in selling, general and administrative expenses and interest expense.

Income taxes for the three months ended June 30, 2013 and June 30, 2012 consist of $20,000 and $28,000, 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, net income for the three months ended June 30, 2013 was $109,000 compared to net income of $199,000 for the three months ended June 30, 2012.

Earnings before interest, taxes and depreciation and amortization (EBITDA) for the three months ended June 30, 2013 decreased to $216,000 from $338,000 for three months ended June 30, 2012.  Listed below is the EBITDA reconciliation to net income:

EBITDA is a Non-GAAP financial measure and should not be construed as an alternative to net income. An element of our 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 we believe 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.

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	Three months ended June 30,
	2013		2012
Net income	$	109,000	$	199,000
Interest expense		15,000		36,000
Income tax expense		20,000		28,000
Depreciation and amortization		72,000		75,000
EBITDA	$	216,000	$	338,000

Six month period ended June 30, 2013 v. June 30, 2012

Consolidated net sales for the six month period ended June 30, 2013 decreased by 5.5% to $12,922,000 from $13,671,000 for the six month period ended June 30, 2012 due to lower sales from our Electronics Group that was partially offset by higher sales from our Power Group. Sales from our Electronics Group decreased by 12.1%, due principally to a decrease in sales from our ICS and TDL subsidiaries that was partially offset by an increase in sales at our Orbit Instrument Division. The decrease in sales at our ICS subsidiary was primarily due to the shipment of lower gross margin MK 437 sales in the prior year period. The decrease in sales at our TDL subsidiary was principally due to the absence of shipments in the current year period for a certain display used in the ground mobile marketplace. The increase in sales at our Orbit Instrument Division was principally due to increased shipments pursuant to customer delivery schedules. The increase in sales at our Power Group was principally due to an increase in shipments at our commercial division that was partially offset by a decrease in sales at our COTS division.

Gross profit, as a percentage of sales, for the six months ended June 30, 2013 increased to 38.6% from 38.2% for the six month period ended June 30, 2012. This increase was primarily the result of higher gross profit from our Electronics Group that was partially offset by lower gross profit from our Power Group. The increase in gross profit at our Electronics Group was principally due to higher gross profit at our Orbit Instrument Division, primarily due to higher sales and a change in product mix, that was partially offset by lower gross profit at our ICS and TDL subsidiaries primarily the result of lower sales and despite the shipment of lower gross margin MK 437 sales at our ICS subsidiary in the prior year period. The decrease in gross profit at our Power Group was principally due to a change in product mix despite the increase in sales during the current year period.

Selling, general and administrative expenses decreased by 5.5% to $4,886,000 for the six month period ended June 30, 2013 from $5,172,000 for the six month period ended June 30, 2012. The decrease was primarily due to lower selling, general and administrative expenses from our Electronics Group, as well as lower corporate costs, that was partially offset by slightly higher(less than 1%) expenses at our Power Group. The decrease in selling, general and administrative expenses at our Electronics Group was primarily due to the departure of a senior officer whose duties were assumed by other management and also to a reduction in personnel at our ICS subsidiary. Selling, general and administrative expenses, as a percentage of sales, for both the six month period ended June 30, 2013 and 2012 was 37.8%, attributable to a decrease in sales which was offset by a decrease in costs.

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During the first quarter of 2012, we reached a decision that made it probable that the employment agreement of our former chief operating officer would not be renewed, which would effectively terminate his employment as of July 31, 2012. Pursuant to the terms of his existing agreement, we recorded an expense of $1,194,000 for estimated costs associated with the contract non-renewal.

Interest expense for the six months ended June 30, 2013 decreased to $32,000 from $70,000 for the six months ended June 30, 2012. In November 2012, we entered into a credit agreement with a commercial lender pursuant to which we established a committed line of credit of up to $6,000,000. This line of credit was used to pay off all of our obligations (term debt and line of credit) to our former primary lender. The decrease in interest expense was principally due to the pay off of our term debt, a lower interest rate on our new line of credit and despite an increase in amounts owed under our line of credit.

Investment and other income for the six month period ended June 30, 2013 decreased to $5,000 from $97,000 for the six month period ended June 30, 2012. The decrease was principally due to an $85,000 gain recognized during the prior period relating to the remaining unamortized deferred gain on the sale of our building in 2001 and also to a $2,000 loss on the sale of marketable securities and higher bond premium amortization expense during the current period.

Net income before taxes was $75,000 for the six months ended June 30, 2013 compared to a net loss before taxes of $1,118,000 for the six months ended June 30, 2012. The increase in profitability was principally due to a $1,194,000 charge taken in connection with the non-renewal of our former chief operating officer’s contract in the prior year period, a decrease in selling, general and administrative expenses and interest expense and an increase in gross margin that was partially offset by a decrease in sales at both our Electronics and Power Groups and a decrease in investment and other income.

Income taxes for the six months ended June 30, 2013 and June 30, 2012 consist of $46,000 and $58,000, 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, net income for the six months ended June 30, 2013 was $29,000 compared to a net loss of $1,176,000 for the six months ended June 30, 2012.

Earnings (loss) before interest, taxes and depreciation and amortization (EBITDA) for the six months ended June 30, 2013 increased to $247,000 from a loss of $907,000 for the six months ended June 30, 2012.  Listed below is the EBITDA reconciliation to net income:

	Six months ended June 30,
	2013		2012
Net Income (loss)	$	29,000	$	(1,176,000	)
Interest expense		32,000		70,000
Income tax expense		46,000		58,000
Depreciation and amortization		140,000		141,000
EBITDA	$	247,000	$	(907,000	)

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Material Change in Financial Condition

Working capital increased to $17,167,000 at June 30, 2013 compared to $14,935,000 at December 31, 2012. The ratio of current assets to current liabilities increased to 8.4 to 1 at June 30, 2013 compared to 3.4 to 1 at December 31, 2012. The increase in working capital was primarily attributable to the reclassification of our line of credit as a non-current liability which was partially offset by the purchase of treasury stock and property and equipment.

Net cash provided by operating activities for the six month period ended June 30, 2013 was $1,459,000, primarily attributable to a decrease in accounts receivable and inventory and the non-cash depreciation and stock based compensation which was partially offset by a decrease in accounts payable and the liability associated with the non-renewal of a senior officer contract and an increase in costs and earnings in excess of billings on uncompleted contracts. Net cash used in operating activities for the six month period ended June 30, 2012 was $1,531,000, primarily attributable to the net loss for the period, an increase in inventory and costs and estimated earnings in excess of billings on uncompleted contracts, the decrease in accrued expenses and taxes payable and despite the decrease in accounts receivable and other current assets, the increase in liabilities associated with the non-renewal of senior officers’ contracts and accounts payable and the non-cash depreciation and stock based compensation.

Cash flows used in investing activities for the six month period ended June 30, 2013 was $157,000, attributable to the purchase of fixed assets and marketable securities that was partially offset by the sale of marketable securities. Cash flows used in investing activities for the six month period ended June 30, 2012 was $281,000, attributable to the purchase of fixed assets.

Cash flows used in financing activities for the six month period ended June 30, 2013 was $1,065,000, attributable to the repayment of note payable-bank and long term debt and the purchase of treasury stock. Cash flows from financing activities for the six month period ended June 30, 2012 was $1,268,000, primarily attributable to the proceeds from issuance of note payable-bank and long-term debt and the decrease in restricted cash which was partially offset by the repayment of long term debt and purchase of treasury stock.

On November 8, 2012, we entered into a credit agreement (“Credit Agreement”) with a commercial lender pursuant to which we established a committed line of credit of up to $6,000,000. This line of credit was used to pay off, in full, all of our obligations to our former primary lender and to provide for our general working capital needs. In June 2013, our Credit Agreement was amended whereby (i) the expiration date on our credit facility was extended to July 1, 2015 and (ii) we are permitted to purchase up to $400,000 of our common stock in each year beginning July 1 and ending June 30 during the term of our Credit Agreement. Payment of interest on the line of credit is due at a rate per annum as follows: either (i) variable at the lender’s prime lending rate (3.25% at June 30, 2013) and/or (ii) 2% over LIBOR for 30, 60, or 90 day LIBOR maturities, at our sole discretion. The line of credit is secured by a first priority security interest in all of our tangible and intangible assets. Outstanding borrowings under the line of credit were $2,600,000 at June 30, 2013.

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The Credit Agreement contains customary affirmative and negative covenants and certain financial covenants. Additionally, available borrowings under the line of credit are subject to a borrowing base of eligible accounts receivable and inventory. All outstanding borrowings under the line of credit are accelerated and become immediately due and payable (and the Line of Credit terminates) in the event of a default, as defined, under the Credit Agreement. We were in compliance with the financial covenants contained in the Credit Agreement at June 30, 2013.

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

In November 2012, our Board of Directors authorized management, in its discretion, to purchase up to $400,000 of common stock. From November 8, 2012 to June 30, 2013, we purchased a total of approximately 116,000 of our common shares for total cash consideration of approximately $400,000 for an average price of $3.45 per share. Under the terms of our Credit Agreement, as amended, we are permitted to purchase up to an additional $400,000 of our common stock in each year beginning July 1 and ending June 30 during the term of the Credit Agreement.

We completed the repurchase of all of the shares under our 10b5-1 Trading Plan that we put in place in March 2013 and we may put a new trading plan in place depending on industry conditions, share price and a determination of capital allocation factors.

Inflation has not materially impacted the operations of our Company.

Certain Material Trends

Backlog at June 30, 2013 was $13.6 million compared to $19.5 million at June 30, 2012.  The decrease in backlog at June 30, 2013 from June 30, 2012 was attributable to lower backlogs at both our Electronics and Power Groups. The decrease in the backlog was attributable to several significant orders booked by the Electronics Group in the first quarter of the prior year under programs for which orders are again expected in the current year but have not yet been received to date. The delay in orders in the current year is attributable to a difficult business environment resulting from general budget uncertainty and funding reductions related to sequestration.

Our backlog at June 30, 2013 does not include approximately $4.2 million of orders that have not yet been funded against a base contract award for approximately $5.8 million received by ICS for its Signal Data Converter (“SDC”). Our backlog at June 30, 2013, inclusive of the full base contract award for the SDC would be $17.8 million. The $4.2 million remainder of the contract was expected to be received during the first quarter of 2013 so that all shipments would be completed by the end of 2013. However, ICS was notified by its customer that orders and deliveries under this contract will be spread over a four year period.  The initial production order is expected in the third quarter of 2013 for approximately $800,000 to $900,000.

28

Bookings at our Orbit Instrument Division exceeded $10,000,000 in 2012 due to significant orders for our Remote Control Units (RCU) and FAA keyboards that were expected in 2011 but were received in the first quarter of 2012 along with orders received for our Color Programmable Entry Panels (CPEP). We again received orders for our RCU in the first quarter of 2013 and received an order for our FAA keyboards in the second quarter but have not yet received new orders for our CPEP’s. These CPEP orders are expected in the third quarter. The FAA keyboard order was substantially less than the amount initially indicated by our customer and this shortfall was attributable to funding issues caused by sequestration.  However, the effort to upgrade air traffic control towers should continue for several years and we expect the shortfall from this current year to be layered into future awards. There has been a significant amount of bid and proposal activity for our Orbit Instrument Division on both legacy products and new opportunities.  Information from our customers related to all legacy opportunities is that the timing of the receipt of these awards is uncertain but the business remains intact. Our Orbit Instrument Division recorded improved gross margins in the first half of 2013 compared to 2012.  We expect that these margins can be maintained in 2013 but only if certain outstanding proposals can be converted to purchase orders on a timely basis so that revenue levels can be sustained.

ICS developed and shipped three prototype SDC units during the second quarter of 2011 and received an order for two additional prototype SDCs, one that was delivered in the second quarter of 2012 and the other delivered during the third quarter of 2012. In April 2012, ICS received a follow-on base contract award mentioned earlier for its SDC for approximately $5,758,000. ICS received initial orders of $1,597,000 against this contract.  The remainder of this contact is expected to be awarded over a four year period. ICS is currently working on other business opportunities and has took certain cost cutting initiatives in 2012 including a reduction in personnel in November 2012 and the consolidation of its two operating facilities into one.  ICS entered into a contract to rent the unoccupied facility for the period January 2012 through May 2013. We are planning to relocate ICS’s operations into a smaller, more suitable facility when its lease expires in early 2014, thereby creating additional savings.

TDL continues to work with several prime contractors on new prototype and pre-production orders but is experiencing significant delays to expected follow-on production awards.  An order for avionic displays was initially expected during the second quarter of 2012 but the order of approximately $1,143,000 was received at the end of 2012. Follow-on orders are expected for these displays over the next three years. However, timing remains an uncertainty for other expected follow-on awards that TDL has been waiting on since the end of 2012. Any further significant delay to the receipt of these awards could adversely affect TDL’s operating performance for 2013.

For the year ended December 31, 2012, operating results for the Power Group decreased from the prior year but business conditions remained strong. We experienced a 10.1% and 13.1% decrease in bookings at our COTS and Commercial Divisions, respectively for 2012 compared to the prior year period. Overall, bookings decreased by approximately 11.7% from the record levels in 2011. Despite the decrease in bookings, as evidenced by our first half 2013 results, we expect revenue and profitability for 2013 to be comparable to 2012 levels based on customer delivery schedules.

29

We were initially optimistic about our operating performance for 2013, but this was predicated upon no unknown adverse consequences of the budget discussions being conducted in Washington DC.  On March 1, 2013, our government officials failed to reach a consensus to avoid sequestration cuts.  These cuts will have a profound effect on the budget for the Department of Defense and their implementation has created great uncertainty for our Company and the defense industry as a whole.  Program contract delays, such as what we are experiencing now, particularly at our Orbit Instrument Division and TDL subsidiary, have always been a factor in our business. However, we are experiencing greater time delays between contract proposal and actual award. Continued delays in contract awards could adversely impact our delivery schedules and compromise our operating leverage, which currently could adversely impact our results for 2013. Nevertheless, it appears that aside from the timing of the receipt of certain pending orders, all of our legacy business with our customers remains intact.

Reductions in the level of military spending by the U.S. 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 current plans for cuts in defense spending will be in areas of the defense budget in which we generally do not participate.  In fact, we believe that as military assets return from the Middle East, the need for refurbishment and modernization could 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 the 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 several new opportunities that are in the prototype or pre-production stage.  These opportunities generally move to a production stage at a later date, although the timing 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 number 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.

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.  Again, due to sequestration, the merger and acquisition process has become more difficult.  Because of the uncertainty surrounding the DoD budget, there is elevated risk to revenue and profitability projections from potential targets.  Currently, we are not engaged in any discussions, beyond preliminary, related to any specific acquisition target, and there is no assurance that any future acquisition will be accomplished.  However, we believe our strong balance sheet will allow us to take advantage of opportunities in the marketplace as other weaker companies struggle with current industry conditions.

30

Although we have had several positive discussions with investment bankers looking to support our M&A initiatives, there can be no assurance that we will obtain the necessary financing to complete additional acquisitions. Moreover, even if we are able to obtain financing, there can be no assurance that we will have sufficient income from operations from any acquired companies to satisfy scheduled debt payments, in which case, we will be required to make the payments out of our existing operations.

We continue to use the cash generated by our operations to pay down our debt and when appropriate, repurchase our shares in the marketplace.  Since January 1, 2012, we have repurchased in excess of 311,000 shares at an average price of $3.57.  Our tangible book value at June 30, 2013 was $3.88 per share and depending on market conditions, we may continue to purchase shares under this trading level. We completed the repurchase of all of the remaining shares available under our 10b5-1 Trading Plan that we put in place in March 2013 and we may put a new trading plan in place depending on industry conditions, share price and a determination of capital allocation factors.

Off-balance sheet arrangements

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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.

31

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 June 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

32

PART II- OTHER INFORMATION

Item 1. Legal Proceedings

None.

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

None.

Issuer's Purchase of Equity Securities:

	(a)	(b)	(c)	(d)
Period	Total Number of Shares(or Units) Purchased	Average Price Paid per Share(or Unit)	Total Number of Shares(or Units) Purchased as part of Publicly Announced Plans or Programs	Maximum Number(or Approximate Dollar Value) of Shares(or Units) that May Yet Be Purchased Under the Plans or Programs
April 1- 30, 2013	25,677	$3.62	25,677	$177,000
May 1-31, 2013	38,600	$3.40	38,600	$46,000
June 1-30, 2013	13,189	$3.43	13,189	$0
Total	77,466	$3.48	77,466

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits

Exhibit Number	Description
31.1*	Certification of the Chief Executive Officer. Required by Rule 13a-14 (a) or Rule 15d-14(a).
31.2*	Certification of the Chief Financial Officer. Required by Rule 13a-14 (a) or Rule 15d-14(a).
32.1*	Certification of the Chief Executive Officer. Required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
32.2*	Certification of the Chief Financial Officer. Required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
101.1*	Financial statements from the Quarterly Report on Form 10-Q of Orbit International Corp. for the quarter ended June 30, 2013, filed on August 14, 2013, formatted in XBRL.

*Filed with this report.

33

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:	August 14, 2013	/s/ Mitchell Binder
		Mitchell Binder, President,
		Chief Executive Officer and Director
Dated:	August 14, 2013	/s/David Goldman
		David Goldman, Chief Financial Officer

34

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: August 14, 2013	/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: August 14, 2013	/s/ David Goldman
	David Goldman
	Chief Financial Officer

EX-33.1

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 June 30, 2013 (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: August 14, 2013
	/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 June 30, 2013 (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: August 14, 2013	/s/ David Goldman
	David Goldman
	Chief Financial Officer

XML

Liability Associated with Non-renewal of Senior Officers' Contracts

6 Months Ended

Jun. 30, 2013

Liability Associated with Non-renewal of Senior Officers' Contracts [Abstract]

Liability Associated with Non-renewal of Senior Officers' Contracts

(NOTE 12) – Liability Associated with Non-renewal of Senior Officers Contract:

In March 2012, the Company reached a decision that made it probable that the employment agreement of its former chief operating officer would not be renewed, which effectively terminated his employment as of July 31, 2012. Pursuant to the terms of his existing agreement, the Company recorded an expense of $1,194,000 during the three months ended March 31, 2012, representing its estimated contractual obligation relating to the contract non-renewal. In addition, relating to the non-renewal, all of his unvested restricted shares vested as of July 31, 2012, which resulted in share based compensation expense of approximately $138,000. As of June 30, 2013, the liability associated with the non-renewal of the former chief operating officer contract was approximately $484,000.

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited) [Abstract]
Net sales	$ 6,475,000	$ 7,509,000	$ 12,922,000	$ 13,671,000
Cost of sales	3,978,000	4,675,000	7,934,000	8,450,000
Gross profit	2,497,000	2,834,000	4,988,000	5,221,000
Selling, general and administrative expenses	2,355,000	2,575,000	4,886,000	5,172,000
Costs related to non-renewal of senior officer contract	0	0	0	1,194,000
Interest expense	15,000	36,000	32,000	70,000
Investment and other income, net	(2,000)	(4,000)	(5,000)	(97,000)
Income (loss) before income tax provision	129,000	227,000	75,000	(1,118,000)
Income tax provision	20,000	28,000	46,000	58,000
NET INCOME (LOSS)	109,000	199,000	29,000	(1,176,000)
Change in unrealized gains and (losses) on marketable securities, net of income tax	2,000	2,000	6,000	17,000
Comprehensive income (loss)	$ 111,000	$ 201,000	$ 35,000	$ (1,159,000)
Net income (loss) per common share:
Basic (in dollars per share)	$ 0.02	$ 0.04	$ 0.01	$ (0.26)
Diluted (in dollars per share)	$ 0.02	$ 0.04	$ 0.01	$ (0.26)

XML

Cost of Sales

6 Months Ended

Jun. 30, 2013

Cost of Sales [Abstract]

Cost of Sales

(NOTE 5) - Cost of Sales:

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

XML

Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value of Financial Instruments [Abstract]

Assets and liabilities measured at fair value on a recurring basis

The table below presents the balances, as of June 30, 2013 and December 31, 2012, of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy.

June 30, 2013	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	254,000	$	254,000	$	-	$	-
December 31, 2012	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	251,000	$	251,000	$	-	$	- -

XML

Equity

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Equity

(NOTE 13) – Equity:

In November 2012, the Company’s Board of Directors authorized management, in its discretion, to purchase up to $400,000 of its common stock. On March 6, 2013, the Company’s Board of Directors approved a 10b5-1 Plan through which the Company conducted its authorized stock buy back program. The Company repurchased all of the shares under its 10b5-1 Trading Plan during the second quarter of 2013. From November 8, 2012 to June 30, 2013, the Company purchased a total of approximately 116,000 of its common shares for total cash consideration of approximately $400,000 for an average price of $3.45 per share. In June 2013, the Company’s Credit Agreement was amended whereby the Company is permitted to purchase up to $400,000 of its common stock in each year beginning July 1 and ending June 30 during the term of the Credit Agreement.

XML

Equity (Details) (USD $)	6 Months Ended	8 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 Subsequent Event [Member] Repurchase of Equity [Member]
Equity [Abstract]
Common stock authorized to be repurchased, maximum	$ 400,000
Subsequent Event [Line Items]
Common stock repurchased (in shares)		116,000
Payments for repurchase of common stock		$ 400,000
Average purchase price of common stock repurchased (in dollars per share)		$ 3.45

XML

Basis of Presentation and Summary of Significant Accounting Policies (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Income Taxes [Abstract]
Uncertain tax positions	$ 0
Revenue and Cost Recognition [Abstract]
Period of warranty for all units shipped	1 year
Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	3 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life	10 years

XML

Goodwill (Tables)

6 Months Ended

Jun. 30, 2013

Goodwill [Abstract]

Schedule of goodwill

As of June 30, 2013 and December 31, 2012, the Company's goodwill consists of the following:

Gross Carrying Value		Accumulated Amortization		Accumulated Impairment			Net Carrying Value
$	9,798,000		-	$	(8,930,000	)	$	868,000

XML

Business Segments (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Segment	Jun. 30, 2012
Business Segments [Abstract]
Number of business segments			2
Business segment information [Abstract]
Net sales	$ 6,475,000	$ 7,509,000	$ 12,922,000	$ 13,671,000
Income (Loss) before income tax provision [Abstract]
Interest expense	(15,000)	(36,000)	(32,000)	(70,000)
Investment and other income, net	2,000	4,000	5,000	97,000
Income (loss) before income tax provision	129,000	227,000	75,000	(1,118,000)
Electronics Group [Member]
Business segment information [Abstract]
Net sales	3,316,000	4,291,000	6,504,000	7,397,000
Income (Loss) before income tax provision [Abstract]
Income (loss) before income tax provision	(113,000)	(57,000)	(580,000)	(1,790,000)
Power Group [Member]
Business segment information [Abstract]
Net sales	3,166,000	3,218,000	6,438,000	6,274,000
Income (Loss) before income tax provision [Abstract]
Income (loss) before income tax provision	557,000	714,000	1,291,000	1,360,000
Intersegment [Member]
Business segment information [Abstract]
Net sales	(7,000)	0	(20,000)	0
General Corporate Not Allocated [Member]
Income (Loss) before income tax provision [Abstract]
Income (loss) before income tax provision	(302,000)	(398,000)	(609,000)	(715,000)
Domestic [Member] | Electronics Group [Member]
Business segment information [Abstract]
Net sales	3,172,000	3,795,000	6,009,000	6,435,000
Domestic [Member] | Power Group [Member]
Business segment information [Abstract]
Net sales	2,835,000	2,935,000	5,907,000	5,640,000
Foreign [Member] | Electronics Group [Member]
Business segment information [Abstract]
Net sales	144,000	496,000	495,000	962,000
Foreign [Member] | Power Group [Member]
Business segment information [Abstract]
Net sales	$ 331,000	$ 283,000	$ 531,000	$ 634,000

XML

Inventories (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Components of Inventories [Abstract]
Raw materials	$ 7,299,000	$ 8,199,000
Work-in-process	5,026,000	4,742,000
Finished goods	378,000	330,000
TOTAL	$ 12,703,000	$ 13,271,000

XML

Business Segments (Tables)

6 Months Ended

Jun. 30, 2013

Business Segments [Abstract]

Schedule of segment reporting information

The following is the Company's business segment information for the six and three month periods ended June 30, 2013 and 2012:

	Six Months Ended June 30,						Three Months Ended June 30,
	2013			2012			2013			2012
Net sales:
Electronics
Domestic	$	6,009,000		$	6,435,000		$	3,172,000		$	3,795,000
Foreign		495,000			962,000			144,000			496,000
Total Electronics		6,504,000			7,397,000			3,316,000			4,291,000
Power Units
Domestic		5,907,000			5,640,000			2,835,000			2,935,000
Foreign		531,000			634,000			331,000			283,000
Total Power Units		6,438,000			6,274,000			3,166,000			3,218,000
Intersegment sales		(20,000	)		-			(7,000	)		-
Total	$	12,922,000		$	13,671,000		$	6,475,000		$	7,509,000
Income (loss) before income tax provision:
Electronics	$	(580,000	)	$	(1,790,000	)	$	(113,000	)	$	(57,000	)
Power Units		1,291,000			1,360,000			557,000			714,000
General corporate expenses not allocated		(609,000	)		(715,000	)		(302,000	)		(398,000	)
Interest expense		(32,000	)		(70,000	)		(15,000	)		(36,000	)
Investment and other income, net		5,000			97,000			2,000			4,000
Income (loss) before income tax provision	$	75,000		$	(1,118,000	)	$	129,000		$	227,000

XML

Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

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 six and three months ended June 30, 2013 are not necessarily indicative of the results of operations that can be expected for the year ending December 31, 2013.

These condensed consolidated statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2012 contained in the Company’s Annual Report on Form 10-K.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash in bank deposit accounts, which, at times, exceed federally insured limits.  The Company has not experienced any losses on these accounts.

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 income.

Allowance for Doubtful Accounts

Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts.  The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic trends.  The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.

Inventories

Inventories, which consist of raw materials, work-in-process, and finished goods, are recorded at the lower of cost (average cost method and specific identification) or market. Inventories are shown net of any reserves relating to any potential slow moving or obsolete inventory.

Property and Equipment

Property and equipment is recorded at cost.  Depreciation and amortization of the respective assets are computed using the straight-line method over their estimated useful lives ranging from 3 to 10 years.  Leasehold improvements are amortized using the straight-line method over the remaining term of the lease or the estimated useful life of the improvement, whichever is less.

Long-Lived Assets

When impairment indicators are present, the Company reviews the carrying value of its long-lived assets in determining the ultimate recoverability of their unamortized values using future undiscounted cash flow analyses. In the event the future undiscounted cash flows of the long-lived asset are less than the carrying value, the Company will record an impairment charge for the difference between the carrying value and the fair value of the long-lived asset.

Goodwill

 The Company records goodwill as the excess of purchase price over the fair value of identifiable net assets acquired. In accordance with Accounting Standards Codification (“ASC”) 350, goodwill is not amortized but instead tested for impairment on at least an annual basis. The Company, where appropriate, will utilize Accounting Standards Update (“ASU”) 2011-08 which allows the Company to not perform the two-step goodwill impairment test if it determines that it is not more likely than not that the fair value of the reporting unit is less than the carrying amount based on a qualitative assessment of the reporting unit. The Company’s annual goodwill impairment test is performed in the fourth quarter each year or when impairment indicators are present. If the goodwill is deemed to be impaired, the difference between the carrying amount reflected in the financial statements and the estimated fair value is recognized as an expense in the period in which the impairment occurs. In determining the recoverability of goodwill, assumptions are made regarding estimated future cash flows and other factors to determine the fair value of the assets.

Income Taxes

The Company recognizes deferred tax assets and liabilities in accordance with ASC 740 based on the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances have been established to reduce deferred tax assets to the amount expected to be realized. The Company evaluates uncertain tax positions and accounts for such items in accordance with ASC 740-10. As of June 30, 2013, the Company has no material uncertain tax positions. The Company is subject to federal income taxes and files a consolidated U.S. federal income tax return. In addition to the federal tax return, the Company files income tax returns in various state jurisdictions. The Company is subject to routine income tax audits in various jurisdictions and tax returns from December 31, 2009 remain open to examination by such taxing authorities.

Revenue and Cost Recognition

The Company recognizes a substantial portion of its revenue upon the delivery of product. The Company recognizes such revenue when title and risk of loss are transferred to the customer and when there is: i) persuasive evidence that an arrangement with the customer exists, which is generally a customer purchase order, ii) the selling price is fixed and determinable, iii) collection of the customer receivable is deemed probable, and iv) we do not have any continuing non-warranty obligations. 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, manufacturing overhead and estimated earnings less accounts receivable billings.

Deferred Rent

The Company’s leases have escalation clauses which are recognized on a straight line basis over the life of the lease. The amounts are recorded in accrued expenses in the accompanying condensed consolidated financial statements.

Comprehensive Income (loss)

Comprehensive income (loss) consists of net income (loss) and unrealized gains and losses on marketable securities, net of tax. The Company adopted ASU 2011-05 during the first quarter ended March 31, 2012, which eliminated the option to present the components of other comprehensive income in the statement of changes in stockholders’ equity. The Company has elected to present the components of net income (loss), the components of other comprehensive income (loss) and total comprehensive income (loss) as a single continuous statement.

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Debt

6 Months Ended

Jun. 30, 2013

Debt [Abstract]

Debt

(NOTE 3) – Debt:

On November 8, 2012, the Company entered into a credit agreement (“Credit Agreement”) with a commercial lender pursuant to which the Company established a committed line of credit of up to $6,000,000. This line of credit was used to pay off, in full, all of the Company’s obligations to its former primary lender and to provide for its general working capital needs. In June 2013, the Company’s Credit Agreement was amended whereby (i) the expiration date on its credit facility was extended to July 1, 2015 and (ii) the Company is permitted to purchase up to $400,000 of its common stock in each year beginning July 1 and ending June 30 during the term of the Credit Agreement. Payment of interest on the line of credit is due at a rate per annum as follows: (i) variable at the lender’s prime lending rate (3.25% at June 30, 2013) and/or (ii) 2% over LIBOR for 30, 60, or 90 day LIBOR maturities, at the Company's sole discretion. The line of credit is secured by a first priority security interest in all of the Company’s tangible and intangible assets. Outstanding borrowings under the line of credit were $2,600,000 at June 30, 2013.

The Credit Agreement contains customary affirmative and negative covenants and certain financial covenants. Additionally, available borrowings under the line of credit are subject to a borrowing base of eligible accounts receivable and inventory. All outstanding borrowings under the line of credit are accelerated and become immediately due and payable (and the line of credit terminates) in the event of a default, as defined, under the Credit Agreement. The Company was in compliance with the financial covenants contained in the Credit Agreement at June 30, 2013.

During March 2012, the Company entered into a two-year $65,000 installment loan agreement to finance the purchase of a leasehold improvement. The loan’s imputed interest rate is 3.25%, is payable in twenty-four (24) monthly payments of approximately $2,800, is secured by the related leasehold improvement, and matures March 2014. The unpaid balance on the installment loan agreement was $25,000 at June 30, 2013.

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Inventories

6 Months Ended

Jun. 30, 2013

Inventories [Abstract]

Inventories

(NOTE 6) - Inventories:

Inventories are comprised of the following:

	June 30,		December 31,
	2012		2012
Raw Materials	$	7,298,000	$	8,199,000
Work-in-process		5,027,000		4,742,000
Finished goods		378,000		330,000
TOTAL	$	12,703,000		13,271,000

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Net Income (loss) Per Common Share

6 Months Ended

Jun. 30, 2013

Net Income (loss) Per Common Share [Abstract]

Net Income (loss) Per Common Share

(NOTE 4) – Net Income (loss) Per Common Share:

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

	Six Months Ended June 30,				Three Months Ended June 30,
	2013		2012		2013		2012
Denominator:
Denominator for basic net income (loss) per share - weighted-average common shares		4,456,000		4,609,000		4,577,000		4,425,000
Effect of dilutive securities:
Employee and directors stock options		21,000		-		21,000		25,000
Unearned portion of restricted stock awards		14,000		-		13,000		3,000
Denominator for diluted net income (loss) per share -weighted-average common shares and assumed conversion		4,491,000		4,609,000		4,459,000		4,605,000

The numerator for basic and diluted net income (loss) per share for the six and three month periods ended June 30, 2013 and 2012 is the net income (loss) for each period.

During the six months ended June 30, 2012, the Company had a net loss and therefore did not include 28,000 incremental common shares in its calculation of diluted net loss per common share since an inclusion of such securities would be anti-dilutive.

Options to purchase 92,000 shares of common stock were outstanding during the six and three month periods ending June 30, 2013 and 163,000 shares were outstanding during the comparable periods in 2012, but were not included in the computation of diluted income (loss) 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 149,000 shares of outstanding common stock during the six and three months ended June 30, 2013 and approximately 61,000 shares of outstanding common stock during the six and three months ended June 30, 2012 were not included in the computation of basic income (loss) per share. These shares were excluded because they represent the unvested portion of restricted stock awards.

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Stock Based Compensation (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013 CompensationPlan	Jun. 30, 2012	Jun. 30, 2013 CompensationPlan	Jun. 30, 2012	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based employee compensation plans	1		1
Common stock reserved for future issuance of stock options (in shares)	0		0
Share-based compensation expense	$ 28,000	$ 100,000	$ 56,000	$ 152,000
Unvested portion of restricted stock	14,000		14,000		28,000
Number of Shares [Roll Forward]
Options outstanding at beginning of year (in shares)			178,000
Granted (in shares)			0
Forfeited (in shares)			(3,000)
Exercised (in shares)			0
Options outstanding at end of year (in shares)	175,000		175,000		178,000
Options outstanding exercisable at end of year (in shares)	161,000		161,000
Weighted Average Exercise Price [Roll Forward]
Options outstanding at beginning of year (in dollars per share)			$ 3.58
Granted (in dollars per share)			$ 0
Forfeited (in dollars per share)			$ 3.70
Exercised (in dollars per share)			$ 0
Options outstanding at end of year (in dollars per share)	$ 3.58		$ 3.58		$ 3.58
Options outstanding exercisable at end of year (in dollars per share)	$ 3.72		$ 3.72
Average Remaining Contractual Term [Abstract]
Options outstanding at beginning of year			1 year		2 years
Granted
Forfeited
Exercised
Options outstanding at end of year			1 year		2 years
Options outstanding and exercisable at end of year			1 year
Aggregate intrinsic value of options outstanding	115,000	135,000	115,000	135,000
Aggregate intrinsic value of options exercisable	96,000	89,000	96,000	89,000
Number of Shares [Roll Forward]
Nonvested stock options at beginning of period (in shares)			28,000
Granted (in shares)			0
Vested (in shares)			(14,000)
Forfeited (in shares)			0
Nonvested stock options at end of period (in shares)	14,000		14,000		28,000
Weighted-Average Grant-Date Fair Value [Roll Forward]
Nonvested stock options at beginning of period (in dollars per share)			$ 1.02
Granted (in dollars per share)			$ 0
Vested (in dollars per share)			$ 1.02
Forfeited (in dollars per share)			$ 0
Nonvested stock options at end of period (in dollars per share)	$ 1.02		$ 1.02		$ 1.02
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for amortization of unearned compensation related to nonvested awards			7 years
Restricted stock awarded to senior management (in shares)			130,000
Vesting period			7 years
Unvested portion of restricted stock	149,000		149,000
Unearned compensation cost associated with restricted stock awards	$ 453,000		$ 453,000
Number of Shares [Roll Forward]
Nonvested stock options at end of period (in shares)	149,000		149,000
Restricted Stock Awards [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for amortization of unearned compensation related to nonvested awards			7 years
Restricted Stock Awards [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for amortization of unearned compensation related to nonvested awards			10 years

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Marketable Securities (Details) (Corporate Bonds [Member], USD $)	Jun. 30, 2013	Dec. 31, 2012
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Adjusted Cost	$ 250,000	$ 257,000
Fair Value	254,000	251,000
Unrealized Holding Gain (loss)	$ 4,000	$ (6,000)

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Liability Associated with Non-renewal of Senior Officers Contract (Details) (USD $)	0 Months Ended	3 Months Ended
	Jul. 31, 2012	Mar. 31, 2012	Jun. 30, 2013
Liability Associated with Non-renewal of Senior Officers' Contracts [Abstract]
Estimated contractual obligation costs		$ 1,194,000
Stock compensation expense, restricted stock	138,000
Contractual obligation liability			$ 484,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Accounts receivables, allowance for doubtful accounts	$ 145,000	$ 145,000
STOCKHOLDERS' EQUITY
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized (in shares)	10,000,000	10,000,000
Common stock, issued (in shares)	5,232,000	5,102,000
Common stock, outstanding (in shares)	4,552,000	4,515,000
Treasury stock, at cost (in shares)	680,000	587,000

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Business Segments

6 Months Ended

Jun. 30, 2013

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 six and three month periods ended June 30, 2013 and 2012:

	Six Months Ended June 30,						Three Months Ended June 30,
	2013			2012			2013			2012
Net sales:
Electronics
Domestic	$	6,009,000		$	6,435,000		$	3,172,000		$	3,795,000
Foreign		495,000			962,000			144,000			496,000
Total Electronics		6,504,000			7,397,000			3,316,000			4,291,000
Power Units
Domestic		5,907,000			5,640,000			2,835,000			2,935,000
Foreign		531,000			634,000			331,000			283,000
Total Power Units		6,438,000			6,274,000			3,166,000			3,218,000
Intersegment sales		(20,000	)		-			(7,000	)		-
Total	$	12,922,000		$	13,671,000		$	6,475,000		$	7,509,000
Income (loss) before income tax provision:
Electronics	$	(580,000	)	$	(1,790,000	)	$	(113,000	)	$	(57,000	)
Power Units		1,291,000			1,360,000			557,000			714,000
General corporate expenses not allocated		(609,000	)		(715,000	)		(302,000	)		(398,000	)
Interest expense		(32,000	)		(70,000	)		(15,000	)		(36,000	)
Investment and other income, net		5,000			97,000			2,000			4,000
Income (loss) before income tax provision	$	75,000		$	(1,118,000	)	$	129,000		$	227,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income (loss)	$ 29,000	$ (1,176,000)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Share-based compensation expense	56,000	152,000
Bond premium amortization	6,000	1,000
Depreciation and amortization	140,000	141,000
Loss on sale of marketable securities	2,000	0
Changes in operating assets and liabilities:
Accounts receivable	1,186,000	960,000
Inventories	568,000	(2,055,000)
Costs and estimated earnings in excess of billings on uncompleted contracts	(124,000)	(43,000)
Other current assets	78,000	66,000
Other assets	29,000	4,000
Accounts payable	(200,000)	34,000
Accrued expenses	(53,000)	(286,000)
Income taxes payable	21,000	(30,000)
Customer advances	(61,000)	0
Liability associated with non-renewal of senior officers' contracts	(218,000)	701,000
Net cash provided by (used in) operating activities	1,459,000	(1,531,000)
Cash flows from investing activities:
Purchase of property and equipment	(156,000)	(281,000)
Purchase of marketable securities	(151,000)	0
Sale of marketable securities	150,000	0
Net cash used in investing activities	(157,000)	(281,000)
Cash flows from financing activities:
Purchase of treasury stock	(325,000)	(402,000)
Proceeds from issuance of long-term debt	0	65,000
Proceeds from issuance of note payable-bank	0	1,407,000
Restricted cash	0	671,000
Repayments of note payable - bank	(724,000)	0
Repayments of long-term debt	(16,000)	(473,000)
Net cash (used in) provided by financing activities	(1,065,000)	1,268,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	237,000	(544,000)
Cash and cash equivalents - Beginning of period	610,000	1,709,000
CASH AND CASH EQUIVALENTS - End of period	847,000	1,165,000
Supplemental cash flow information:
Cash paid for interest	34,000	72,000
Cash paid for income taxes	$ 25,000	$ 92,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 847,000	$ 610,000
Investments in marketable securities	254,000	251,000
Accounts receivable (less allowance for doubtful accounts of $145,000)	4,186,000	5,372,000
Inventories	12,703,000	13,271,000
Costs and estimated earnings in excess of billings on uncompleted contracts	999,000	875,000
Deferred tax asset	320,000	447,000
Other current assets	174,000	252,000
Total current assets	19,483,000	21,078,000
Property and equipment, net	1,115,000	1,099,000
Goodwill	868,000	868,000
Deferred tax asset	1,929,000	1,806,000
Other assets	96,000	125,000
TOTAL ASSETS	23,491,000	24,976,000
Current liabilities:
Current portion of long-term debt	25,000	33,000
Note payable - bank	0	3,324,000
Accounts payable	541,000	741,000
Liability associated with non-renewal of senior officer contract	459,000	661,000
Income taxes payable	23,000	2,000
Accrued expenses	1,241,000	1,294,000
Customer advances	27,000	88,000
Total current liabilities	2,316,000	6,143,000
Note payable-bank	2,600,000	0
Liability associated with non-renewal of senior officer contract, net of current portion	25,000	41,000
Long-term debt, net of current portion	0	8,000
Total liabilities	4,941,000	6,192,000
STOCKHOLDERS' EQUITY
Common stock - $.10 par value, 10,000,000 shares authorized, 5,232,000 and 5,102,000 shares issued at 2013 and 2012, respectively, and 4,552,000 and 4,515,000 shares outstanding at 2013 and 2012, respectively	523,000	510,000
Additional paid-in capital	22,769,000	22,726,000
Treasury stock, at cost, 680,000 and 587,000 shares at 2013 and 2012, respectively	(2,025,000)	(1,700,000)
Accumulated other comprehensive gain (loss), net of tax	3,000	(3,000)
Accumulated deficit	(2,720,000)	(2,749,000)
Total stockholders' equity	18,550,000	18,784,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 23,491,000	$ 24,976,000

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Debt (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Debt Instrument [Line Items]
Common stock repurchase permitted	$ 400,000
LIBOR [Member] | Maturity Period of Libor 1 [Member]
Debt Instrument [Line Items]
Maturity period of loan	30 days
LIBOR [Member] | Maturity Period of Libor 2 [Member]
Debt Instrument [Line Items]
Maturity period of loan	60 days
LIBOR [Member] | Maturity Period of Libor 3 [Member]
Debt Instrument [Line Items]
Maturity period of loan	90 days
Line of Credit [Member]
Debt Instrument [Line Items]
Borrowing capacity under line of credit facility	6,000,000
Common stock repurchase permitted	400,000
Date of maturity of loan	Jul. 01, 2015
Outstanding borrowings under line of credit facility	2,600,000
Line of Credit [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Description of variable rate basis	prime lending rate
Variable interest rate (in hundredths)	3.25%
Line of Credit [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Description of variable rate basis	LIBOR
Variable interest rate (in hundredths)	2.00%
Leasehold Improvement [Member]
Debt Instrument [Line Items]
Date of maturity of loan	Mar. 31, 2014
Maturity period of loan	2 years
Term loan facility, amount	65,000
Imputed interest rate (in hundredths)	3.25%
Number of monthly installments	24
Amount under monthly payment of term loan	2,800
Unpaid balance of loan	$ 25,000

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Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2013

Marketable Securities [Abstract]

Available-for-sale marketable securities

The following is a summary of the Company's available for sale marketable securities at June 30, 2013 and December 31, 2012:

June 30, 2013	Adjusted Cost		Value Fair		Unrealized Holding Gain(loss)
Corporate Bonds	$	250,000	$	254,000	$	4,000
December 31, 2012
Corporate Bonds	$	257,000		251,000	$	(6,000	)

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Goodwill (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Goodwill [Abstract]
Gross Carrying Value	$ 9,798,000	$ 9,798,000
Accumulated Amortization	0	0
Accumulated Impairment	(8,930,000)	(8,930,000)
Net Carrying Value	$ 868,000	$ 868,000

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Taxes [Abstract]
State income and federal minimum tax expense	$ 20,000	$ 28,000	$ 46,000	$ 58,000

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2013

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

(NOTE 8) - Fair Value of Financial Instruments:

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 June 30, 2013 and December 31, 2012, of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy.

June 30, 2013	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	254,000	$	254,000	$	-	$	-
December 31, 2012	Total		Level 1		Level 2		Level 3
Corporate Bonds	$	251,000	$	251,000	$	-	$	- -

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. 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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Net Income (loss) Per Common Share (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Denominator [Abstract]
Denominator for basic net income (loss) per share - weighted-average common shares (in shares)	4,577,000	4,425,000	4,456,000	4,609,000
Effect of dilutive securities [Abstract]
Employee and director stock options (in shares)	21,000	25,000	21,000	0
Unearned portion of restricted stock awards (in shares)	13,000	3,000	14,000	0
Denominator for diluted net income (loss) per share - weighted-average common shares and assumed conversion (in shares)	4,459,000	4,605,000	4,491,000	4,609,000
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of income (loss) per share (in shares)				28,000
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of income (loss) per share (in shares)	92,000	163,000	92,000	163,000
Restricted Stock Awards [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of income (loss) per share (in shares)	149,000	61,000	149,000	61,000

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Taxes [Abstract]

Income Taxes

(NOTE 11) – Income Taxes:

For the six and three months ended June 30, 2013, the Company recorded $46,000 and $20,000, respectively, of state income and federal minimum tax expense. For the comparable periods in 2012, the Company recorded income tax expense of $58,000 and $28,000, respectively, for state income and federal minimum taxes.

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Marketable Securities

6 Months Ended

Jun. 30, 2013

Marketable Securities [Abstract]

Marketable Securities

(NOTE 7) – Marketable Securities:

The following is a summary of the Company’s available for sale marketable securities at June 30, 2013 and December 31, 2012:

June 30, 2013	Adjusted Cost		Value Fair		Unrealized Holding Gain(Loss)
Corporate Bonds	$	250,000	$	254,000	$	4,000
December 31, 2012
Corporate Bonds	$	257,000		251,000	$	(6,000	)

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Stock Based Compensation

6 Months Ended

Jun. 30, 2013

Stock Based Compensation [Abstract]

Stock Based Compensation

 

(Note 2) - Stock Based Compensation:

At June 30, 2013, the Company had a stock-based employee compensation plan. At June 30, 2013, there were no shares of common stock reserved for future issuance of stock options, restricted stock and stock appreciation rights. The plan provided for the granting of nonqualified and incentive stock options as well as restricted stock awards and stock appreciation rights to officers, employees and other key persons. The terms and vesting schedules of stock-based awards vary by type of grant and generally the awards vest based upon time-based conditions. Share-based compensation expense was $56,000 and $28,000 for the six and three months ended June 30, 2013, respectively, and was $152,000 and $100,000, respectively, for the comparable 2012 periods.

The Company's stock-based employee compensation plan allows 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 seven 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. During the six months ended June 30, 2013, 130,000 shares of restricted stock were awarded to senior management which will vest over seven years. As of June 30, 2013, the Company had unearned compensation of $453,000 associated with all of the Company's restricted stock awards, which will be expensed over approximately the next seven years. The unvested portion of restricted stock awards at June 30, 2013 was approximately 149,000 shares.

Stock option activity during the six months ended June 30, 2013, 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, 2013		178,000		$	3.58		2
Granted		-			-		-
Forfeited		(3,000	)		3.70		-
Exercised		-			-		-
Options outstanding, June 30, 2013		175,000		$	3.58		1
Outstanding exercisable at June 30, 2013		161,000		$	3.72		1

At June 30, 2013, the aggregate intrinsic value of options outstanding and exercisable was $115,000 and $96,000, respectively. At the comparable 2012 period, the aggregate intrinsic value of options outstanding and exercisable was $135,000 and $89,000, respectively.

The following table summarizes the Company's nonvested stock option activity for the six months ended June 30, 2013:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Nonvested stock options at January 1, 2013		28,000		$	1.02
Granted		-			-
Vested		(14,000	)		1.02
Forfeited		-			- .
Nonvested stock options at June 30, 2013		14,000		$	1.02

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Fair Value of Financial Instruments (Details) (USD $)	Jun. 30, 2013	Jun. 30, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Corporate Bonds	$ 254,000	$ 251,000
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Corporate Bonds	254,000	251,000
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Corporate Bonds	0	0
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Corporate Bonds	$ 0	$ 0

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

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

Cash Equivalents

 

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash in bank deposit accounts, which, at times, exceed federally insured limits.  The Company has not experienced any losses on these accounts.

Marketable Securities

 

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 income.

Allowance for Doubtful Accounts

 

Allowance for Doubtful Accounts

Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts.  The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic trends.  The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.

Inventories

 

Inventories

Inventories, which consist of raw materials, work-in-process, and finished goods, are recorded at the lower of cost (average cost method and specific identification) or market. Inventories are shown net of any reserves relating to any potential slow moving or obsolete inventory.

Property and Equipment

 

Property and Equipment

Property and equipment is recorded at cost.  Depreciation and amortization of the respective assets are computed using the straight-line method over their estimated useful lives ranging from 3 to 10 years.  Leasehold improvements are amortized using the straight-line method over the remaining term of the lease or the estimated useful life of the improvement, whichever is less.

Long-Lived Assets

 

Long-Lived Assets

When impairment indicators are present, the Company reviews the carrying value of its long-lived assets in determining the ultimate recoverability of their unamortized values using future undiscounted cash flow analyses. In the event the future undiscounted cash flows of the long-lived asset are less than the carrying value, the Company will record an impairment charge for the difference between the carrying value and the fair value of the long-lived asset.

Goodwill

 

Goodwill

 The Company records goodwill as the excess of purchase price over the fair value of identifiable net assets acquired. In accordance with Accounting Standards Codification (“ASC”) 350, goodwill is not amortized but instead tested for impairment on at least an annual basis. The Company, where appropriate, will utilize Accounting Standards Update (“ASU”) 2011-08 which allows the Company to not perform the two-step goodwill impairment test if it determines that it is not more likely than not that the fair value of the reporting unit is less than the carrying amount based on a qualitative assessment of the reporting unit. The Company’s annual goodwill impairment test is performed in the fourth quarter each year or when impairment indicators are present. If the goodwill is deemed to be impaired, the difference between the carrying amount reflected in the financial statements and the estimated fair value is recognized as an expense in the period in which the impairment occurs. In determining the recoverability of goodwill, assumptions are made regarding estimated future cash flows and other factors to determine the fair value of the assets.

Income Taxes

 

Income Taxes

The Company recognizes deferred tax assets and liabilities in accordance with ASC 740 based on the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances have been established to reduce deferred tax assets to the amount expected to be realized. The Company evaluates uncertain tax positions and accounts for such items in accordance with ASC 740-10. As of June 30, 2013, the Company has no material uncertain tax positions. The Company is subject to federal income taxes and files a consolidated U.S. federal income tax return. In addition to the federal tax return, the Company files income tax returns in various state jurisdictions. The Company is subject to routine income tax audits in various jurisdictions and tax returns from December 31, 2009 remain open to examination by such taxing authorities.

Revenue and Cost Recognition

Revenue and Cost Recognition

The Company recognizes a substantial portion of its revenue upon the delivery of product. The Company recognizes such revenue when title and risk of loss are transferred to the customer and when there is: i) persuasive evidence that an arrangement with the customer exists, which is generally a customer purchase order, ii) the selling price is fixed and determinable, iii) collection of the customer receivable is deemed probable, and iv) we do not have any continuing non-warranty obligations. 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, manufacturing overhead and estimated earnings less accounts receivable billings.

Deferred Rent

Deferred Rent

The Company's leases have escalation clauses which are recognized on a straight line basis over the life of the lease. The amounts are recorded in accrued expenses in the accompanying condensed consolidated financial statements.

Comprehensive Income (loss)

Comprehensive Income (loss)

Comprehensive income (loss) consists of net income (loss) and unrealized gains and losses on marketable securities, net of tax. The Company adopted ASU 2011-05 during the first quarter ended March 31, 2012, which eliminated the option to present the components of other comprehensive income in the statement of changes in stockholders’ equity. The Company has elected to present the components of net income (loss), the components of other comprehensive income (loss) and total comprehensive income (loss) as a single continuous statement.

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Goodwill

6 Months Ended

Jun. 30, 2013

Goodwill [Abstract]

Goodwill

(NOTE 10) - Goodwill:

As of June 30, 2013 and December 31, 2012, the Company's goodwill consists of the following:

Gross Carrying Value		Accumulated Amortization		Accumulated Impairment			Net Carrying Value
$	9,798,000		-	$	(8,930,000	)	$	868,000

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Inventories (Tables)

6 Months Ended

Jun. 30, 2013

Inventories [Abstract]

Composition of Inventories

Inventories are comprised of the following:

	June 30,		December 31,
	2012		2012
Raw Materials	$	7,298,000	$	8,199,000
Work-in-process		5,027,000		4,742,000
Finished goods		378,000		330,000
TOTAL	$	12,703,000		13,271,000

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Stock Based Compensation [Abstract]

Stock option activity

Stock option activity during the six months ended June 30, 2013, 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, 2013		178,000		$	3.58		2
Granted		-			-		-
Forfeited		(3,000	)		3.70		-
Exercised		-			-		-
Options outstanding, June 30, 2013		175,000		$	3.58		1
Outstanding exercisable at June 30, 2013		161,000		$	3.72		1

Nonvested stock option activity

The following table summarizes the Company's nonvested stock option activity for the six months ended June 30, 2013:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Nonvested stock options at January 1, 2013		28,000		$	1.02
Granted		-			-
Vested		(14,000	)		1.02
Forfeited		-			- .
Nonvested stock options at June 30, 2013		14,000		$	1.02

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 12, 2013
Document and Entity Information [Abstract]
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 Common Stock, Shares Outstanding		4,551,598
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013

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Net Income (loss) Per Common Share (Tables)

6 Months Ended

Jun. 30, 2013

Net Income (loss) Per Common Share [Abstract]

Computation of basic and diluted net income loss per common share

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

	Six Months Ended June 30,				Three Months Ended June 30,
	2013		2012		2013		2012
Denominator:
Denominator for basic net income (loss) per share - weighted-average common shares		4,456,000		4,609,000		4,577,000		4,425,000
Effect of dilutive securities:
Employee and directors stock options		21,000		-		21,000		25,000
Unearned portion of restricted stock awards		14,000		-		13,000		3,000
Denominator for diluted net income (loss) per share -weighted-average common shares and assumed conversion		4,491,000		4,609,000		4,459,000		4,605,000