Item 1. BUSINESS
Orbit International Corp. (the "Company" or "Orbit") operates through three business segments: Electronics, United States Apparel and Canadian Apparel. Through its Orbit Instrument Division and through a wholly-owned subsidiary, Orbit Instrument of California, Inc. ("Orbit California"), the Company is engaged in the design, manufacture and sale of customized electronic components. The Company is engaged in the import and manufacture of men's and women's garments in the United States through an operating division known as the East/West Division ("East/West"). Through its three wholly-owned subsidiaries in Canada, Canada Classique Inc. ("Classique"), Winnipeg Leather (1991) Inc. ("Winnipeg Leather") and Symax Garment Co. (1993) Ltd. ("Symax"), the Company operates its Canadian Apparel Division.
The Company's Electronics segment is involved in the manufacture of customized electronics components and subsystems for military and non-military government application.
In February 1996, Cabot Court, Inc. ("Cabot Court"), a Delaware corporation and wholly-owned subsidiary of the Company, completed the acquisition of certain of the assets, subject to certain liabilities, of Astrosystems, Inc. a Delaware corporation ("Astrosystems"), and Behlman Electronics, Inc. ("Behlman Electronics"), a New York corporation. Each of Astrosystems and Behlman Electronics manufacture and sell power supplies, AC power sources, frequency converters, UPS and associated analytical equipment and other electronic equipment. The acquisition of each of Astrosystems and Behlman Electronics were partially financed pursuant to a bridge loan from BNY Financial Corporation ("BNY"), which loan was secured by a second mortgage on the Company's corporate facility at 80 Cabot Court, Hauppauge, New York. It is anticipated that such bridge loan will be replaced by a term loan and revolving credit facility with BNY, which has not been finalized. However, there is no assurance that such permanent financing will be successfully negotiated. Concurrently with the purchase of Astrosystems and Behlman Electronics, Cabot Court changed its name to Behlman Electronics, Inc.
East/West designs, imports and sells women's active-wear and outer-wear, principally under the East/West label. East/West is based in New York City and commenced operations in July 1993 following its acquisition of the operating assets of The Panda Group, Inc. ("Panda"). In December 1995, the operations of East End Apparel Group, Ltd. ("East End") were merged into East/West. East End manufacturers and sells women's outer-wear and sportswear principally under the Campton Place label. East End is based in New York City and commenced operations in June 1994.
Classique manufactures branded and private label men's, women's and children's outer-wear. Classique is based in Winnipeg, Manitoba, Canada, and commenced operations in December 1990 following its acquisition of the operating assets of Rice Sportswear Ltd.
Winnipeg Leather manufactures and sells women's garments under private labels including Daniel Marcus. Winnipeg Leather is based in Winnipeg, Manitoba, Canada and commenced operations in May 1991 following its acquisition of the operating assets of the Winnipeg Leather division of the Sterling-Stall Group.
Symax manufactures and sells private label men's outer-wear. Symax, based in Vancouver, British Columbia, Canada, commenced operations in February 1993 following its acquisition of the operating assets of Symax Garment Co. (1989) Ltd.
In January 1995, the Company discontinued the manufacture and sale of women's sportswear previously conducted through its wholly-owned subsidiary, Ax Elle Fashions, Inc.
In May 1994, USA Classic, Inc. ("USA Classic"), an approximately 43% owned subsidiary of the Company, filed a petition under Chapter 11 of the United States Bankruptcy Code.
The following sets forth certain selected historical financial information relating to the Company's business segments:
Additional financial information relating to the industry segments in which Orbit conducts business is set forth in Footnote M to the consolidated financial statements appearing elsewhere in this report.
This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors set forth in this Report.
ELECTRONICS SEGMENT
ORBIT INSTRUMENT DIVISION
General
The Orbit Instrument Division designs, manufactures and sells customized electronic components and subsystems for military, and to a lesser extent, non-military, governmental applications. Products include positional devices (ball trackers, force transducers and joysticks), data entry and display systems (computer controlled action entry panels, rear projection readout panels and manual entry displays), customized keyboards, plasma units and other specialized electronic systems. The Division also sells, on a repeat order basis, previously designed equipment, such as magnetic clutches, gearheads, indicators and differentials for console applications.
The Division's products, which in most instances are designed to customer specifications on a firm order basis, are utilized in surveillance aircraft, missiles, torpedoes, nuclear subsystems, naval vessels, guidance control and ground console radar equipment. A substantial portion of the Division's net sales during the Company's fiscal years ended December 31, 1995 and December 31, 1994 were attributable to one customer in the Company's capacity as a defense subcontractor for the United States Government. See "Substantial Customers" below.
The Division purchases its raw materials and parts in the open market primarily from a variety of local manufacturers, dealers or suppliers.
Products
Positional Devices
The Division designs and manufactures ball trackers, joysticks and force transducers which are incorporated into radar and sonar display systems. These devices enable an operator to move a cursor across a screen for tracking missiles, ships, aircraft and other moving targets.
Data Entry, Keyboards and Display Systems
The Division manufactures a computer-controlled, action entry panel ("CCAEP") which provides a console operator with multiple displays of computer-generated data. The Segment's other data entry and display systems, digital data and manual entry units and panels are used in readout and switch panels located in fire control, sonar control and command communication consoles.
The Division also manufactures a family of keyboards designed to military specifications and has added to this product group, keyboards which include backlit and multi-function panels. These new keyboards have been sold for use in ships and aircraft.
The Division has designed, and is selling, a low-power, light-weight, minimum-depth display unit providing output similar to cathode ray tube displays by utilizing AC plasma technology, a flat panel display technology. This technology eliminates bulk and space requirement of cathode ray tube displays, and offers improved visual resolution and lower power requirements at environmental extremes. The Division is currently under contract to incorporate the plasma display panels in display consoles for Aegis class ships.
Positional Readout Devices
Nuclear rod position indicators manufactured by the Division control and measure the depth of rods going into the core of a nuclear reactor energy source. The Division's rear projection readout devices provide operators with multiple sources of film stored display information capable of storing up to 48 messages per unit.
Graphic Display Terminals
The Division's family of graphic display terminals enables the operator to monitor and control a ship's radar and sonar systems and subsystems through the ship's central computer. The terminals are used throughout a ship as adjuncts to larger display consoles. The modular design of these terminals facilitates applications on all size surface ships, submarines and aircraft.
Operator Control Trays
The variety of operator control trays engineered and manufactured by the Division help organize and present an influx of data created by interactive communications systems, making such data more manageable for operator consumption. The tray can be used for patrol and surveillance aircraft, standard shipboard display consoles, shore or mobile-based defense equipment and subsurface sonar displays. The Division's control trays are currently used in both naval service and operator simulators.
Plasma Flat Panel Technology
The Division has designed an intermediate sized display using AC gas discharge plasma technology. This touch sensitive unit allows interactive capability for communication between the operator and the host computer. Applications for this unit include weapons control, ships status, target recognition, air traffic control plus information exchange panels used in conjunction with image processing.
Proposed Products
Substantially all of the Division's efforts in the development of new products consist of design and engineering services associated with, and necessary for, the manufacture of new products. The Division generally begins development efforts after its customers have indicated that the proposed new products or improvements are desirable. The following is presently being developed by the Division; however, there can be no assurance that the Division's development efforts will result in any marketable products. The Division does not yet have any firm orders for products described below and there can be no assurance that any sales will be made.
The Division is expanding its design and development of AC plasma display panels to include bit mapping and graphics technologies. These next generation panels are intended to be used in aircraft and naval applications. The graphics version of the AC plasma display panel was completed in mid 1995 and the Division received contracts for these units on two separate programs. The Division has also been contracted to deliver a more advanced version of its panel with embedded intercommunication capability.
The Division has designed and developed a flat panel technology based communication panel. The Company has received prototype orders for these units for the LHA ship class.
A flat panel development has been commenced for interactive color liquid crystal and Electroluminescent displays.
Competition
The Division's competitive position in the electronics industry is, in Management's view, predicated upon the Company's manufacturing techniques, its ability to design and manufacture products which will meet the specific needs of its customers and its long-standing successful relationship with its major customer. There are numerous concerns (many of which are substantially larger than the Company) capable of producing substantially all of the Company's products. However, to the Company's knowledge, none of such competitors produce all of the products that the Division produces.
Sales to one customer, General Motors Hughes Electronics Corporation, accounted for approximately 54% and 66% of the sales of the Division for the fiscal years ended December 31, 1995 and December 31, 1994, respectively. The loss of such customer would have a materially adverse effect on the Division's sales and earnings.
BEHLMAN ELECTRONICS, INC.
In February 1996, the Company, through its wholly-owned subsidiary, Cabot Court, completed the acquisition of certain of the assets, subject to certain liabilities, of Astrosystems and Behlman Electronics. Concurrently with the purchase, Cabot Court changed its name to Behlman Electronics, Inc. ("Behlman").
General
The military division of Behlman designs and manufactures power conversion devices and electronic products for measurement and display. The commercial products division produces high quality, distortion free commercial power units and low noise uninterruptable power supplies (UPS).
Sales and Marketing
Products of the military division are marketed by Behlman's program managers and other management personnel. Commercial products are sold by Behlman's regional sales managers, manufacturer's representatives and non-exclusive distributors.
Competition
Competition in these fields depends on such factors as price, product reliability and performance, engineering and production. In particular, due primarily to budgetary restraints and program cutbacks, competition in the Company's government markets has been increasingly severe and price has become the major overriding factor in contract and subcontract awards. To the best of the Company's knowledge, some of its regular competitors are much larger companies with substantially greater capital resources and far larger engineering, administrative, sales and production staffs.
US APPAREL SEGMENT
EAST/WEST
General
In July 1993 Orbit acquired substantially all of the assets of Panda, a designer, importer and seller of women's active-wear and outer-wear. Orbit operates Panda as a separate division called the East/West Division. In December 1995, the Company merged the operations of East End into the East/West Division.
Products
East/West designs, imports and sells women's jogging suits and outer-wear under the private label East-West as well as women's sportswear and outer-wear under the Campton Place label. The product collections of East/West are designed and marketed to focus on quality and value to the consumer. A majority of the Division's products are sold at moderate price points. After the Fall 1995 season, East/West discontinued marketing men's outer- wear.
Sales and Marketing
East/West markets its various active-wear and outer-wear lines to major department stores and specialty stores throughout the United States and Canada through its direct sales force. Sales of East/West accounted for approximately 73% of the total net sales of the United States Apparel Segment during the fiscal year ended December 31, 1995.
Under the Campton Place label, East/West sells and distributes its products to retailers throughout the United States and Canada. These collections retail between $59 and $99. East/West also aggressively promotes private label product development with major chains using its branded line fashion concepts to enhance and enrich store interest for their gross margin advantages. Sales of East End accounted for approximately 26% of the total net sales of the United States Apparel Segment during the fiscal year ended December 31, 1995.
Importing
East/West imports all of its garments from a large number of independent contract manufacturers located in several countries in the Far East. The Division utilizes four agents in the Far East to place orders with independent contractors and to monitor production. The Division also has placed some production and imported from the Caribbean basin.
Competition
The apparel industry is highly competitive. The competitors of East/West include many apparel manufacturers which have greater financial and manufacturing resources than the Division. East/West believes it can compete successfully in the market place by delivering a product of good quality at an affordable price to the consumer.
CANADIAN APPAREL SEGMENT
CLASSIQUE
General
In December 1990, Classique acquired the operating assets, subject to certain liabilities, of Rice Sportswear Ltd. ("Rice"), a manufacturer of branded and private label men's and women's outer-wear located in Winnipeg, Manitoba, Canada. Classique is continuing the operations of Rice under the Rice Sportswear name.
Products
Rice's products and collections, sold under both proprietary and private labels, are generally designed and marketed for sale at moderate and higher price points through retailers throughout Canada.
Through its various domestic and import facilities, it markets and distributes outer-wear collections under the following proprietary labels: Mountaineer, men's and women's winter outer- wear; Hemingway, cloth and leather outer-wear; and Micro Tex, activewear fabric. These lines are an essential part of the Canadian retailing business, bringing value and fashion into an affordable collection with names that are associated with quality and style in over 750 customer accounts in Canada. Rice utilizes various fabrications, colors and insulations to produce specialized products that are identifiable to both retailers and consumers in specific markets.
Rice is seeking to broaden its customer base and enhance its market share by diversifying its product offerings. In particular, Rice is expanding its offerings of more casual products, and less constructed garments, based on its recognition of changing consumer preferences towards such products. Rice also sells boys' and girls' outer-wear.
During 1993, Rice formed a division called Apparel Image Marketing ("AIM") which manufactures and sells men's and women's outer-wear utilizing the corporate logo of its customers. During the fiscal year ended December 31, 1995, sales for the AIM division accounted for approximately 31% of the total net sales of the Canadian Apparel Segment.
Sales and Marketing
Rice markets its various mens' and ladies' cloth and leather outer-wear to major department store chains and specialty apparel retail stores throughout Canada through its direct sales force of 8 sales people and through 24 independent sales representatives. Sales of Rice accounted for approximately 68% of the total net sales of the Canadian Apparel Segment during the fiscal year ended December 31, 1995.
Manufacturing
Rice has one domestic manufacturing facility producing in excess of 170,000 units of product annually. These facilities are fully vertical in the manufacturing and assembly process. The facilities cut, sew and completely finish various products.
Rice also imports products from many independent contract manufacturers located in the Far East and Europe. It furnishes its foreign contractors with design and manufacturing specifications for the products it imports. Rice's use of foreign sources varies from season to season based upon cost, quality and other factors determined by Rice's product requirements. Rice believes that having a domestic as well as a foreign basis for its manufacturing allows it to effectively combine price, performance and quality.
Competition
The apparel industry, in general, and the active-wear segment, in particular, are intensively competitive. The market is composed of both large manufacturers and small independent Companies. Many of the large manufacturers have substantially greater resources than the Company. The Company believes that competition is based upon design, price and customer support.
WINNIPEG LEATHER
General
In May 1991, the Company, through a wholly-owned subsidiary, acquired the operating assets of the Winnipeg Leather division of the Sterling-Stall Group.
Products
Winnipeg Leather manufactures, sells and markets women's leather, suede and cloth garments under private labels, including Daniel Marcus. Winnipeg Leather's products are sold to major department store chains and specialty apparel retail stores throughout Canada and to several major department stores in the United States.
Sales and Marketing
Sales of Winnipeg Leather accounted for approximately 25% of the total net sales of the Canadian Apparel Segment during the fiscal year ended December 31, 1995. Winnipeg Leather will be broadening its importance as a major resource for outer-wear by taking on the design, manufacturing and marketing aspects of Rice's ladies cloth business.
Winnipeg Leather has over 200 Customer accounts. A large portion of the business is done by private label developmental programs with regular as well as specialty size chain stores.
Approximately one-third of Winnipeg Leather's sales are through sportswear items. It manufactures a complete line of sportswear that coordinates with the outer-wear portion of the business.
SYMAX
General
In February 1993, the Company, through a wholly-owned subsidiary, acquired the operating assets of Symax Garment Co. (1989) Ltd.
Products
Symax manufactures, sells and markets men's outer-wear under private labels. It is a leading manufacturer in British Columbia of uniform jackets, serving some 40 public bodies as well as private clubs, associations and numerous retailers.
Sales
Approximately 32% of Symax's sales are for uniform jackets delivered to government agencies while the remainder of its sales are made to retailers. Sales for Symax accounted for approximately 7% of the total net sales of the Canadian Apparel Segment during the fiscal year ended December 31, 1995.
USA CLASSIC
In July 1988 Orbit, through a wholly-owned subsidiary USA Classic, acquired all of the outstanding stock of U.S. Apparel, Inc. In November 1992, USA Classic completed an initial public offering (the "Offering") of 3,105,000 shares of its common stock, thereby reducing Orbit's ownership to approximately 43%. USA Classic designed, manufactured and marketed men's, women's and children's active-wear, sportswear and outer-wear until it, and its subsidiaries, filed petitions under Chapter 11 of the United States Bankruptcy Code in 1994. The Company recorded a non cash charge related to such bankruptcy of $13,987,000, which includes its 43% equity interest in USA Classic, subordinated debt owing by USA Classic to the Company of approximately $2,400,000 and approximately $2,500,000 of related costs.
CERTAIN INFORMATION RELATING TO THE COMPANY
Substantial Customers
General Motors Hughes Electronics Corporation ("GMHEC"), Fullerton, California accounted for approximately 11% of the Company's consolidated net sales during its fiscal year ended December 31, 1995. GMHEC, Northrup Grumman and various agencies of the United States government accounted for approximately 54%, 16% and 13% respectively, of net sales of the Electronics Segment for the fiscal year ended December 31, 1995. The loss of GMHEC as a customer would have a materially adverse effect on the Electronic Segment's sales and earnings. In the fiscal year ended December 31, 1995, Sears Canada and Polaris Industries (U.S. and Canada) accounted for approximately 18% and 16% of net sales of the Canadian Apparel Segment. The loss of Sears Canada and Polaris Industries would have a materially adverse effect on the Canadian Apparel Segment.
Since substantially all of the products which the Electronics Segment manufactures are used in military applications, any substantial reduction in overall military spending by the United States Government could have a materially adverse effect on the Company's sales and earnings.
Backlog
As of December 31, 1995 and December 31, 1994 the Company's consolidated backlog was as follows:
December 31, 1995 December 31, 1994 Electronic* $13,000,000 $18,000,000 Apparel-U.S. Operations 2,000,000 3,000,000 Apparel-Canadian Operations 1,000,000 1,000,000
Total $16,000,000 $22,000,000
* Does not include backlog of Behlman acquired in February 1996.
A majority of the business of the United States and Canadian Apparel Segments is associated with the sale of outer-wear. The first and second quarters are historically weak periods since its customers do not generally request shipment of merchandise at that time. Consequently, the backlog of these Segments at December 31, 1995 reflect the impending weak selling periods for 1996.
The United States Apparel Segment reflects the backlog of East/West and East End at December 31, 1995 and at December 31, 1994.
Of the Electronics Segment backlog during the fiscal year ended December 31, 1995, approximately $5,000,000 represents backlog under contracts which will not be shipped during the 1996 fiscal year.
Additionally, substantially all of the Electronics Segment's contracts are subject to termination at the convenience of the United States Government.
Special Features of Government Contracts
Orders under government prime contracts or subcontracts are customarily subject to termination at the convenience of the government, in which event the contractor is normally entitled to reimbursement for allowable costs and for a reasonable allowance for profits, unless the termination of a contract was due to a default on the part of the contractor. No material terminations for the convenience of the government occurred during the fiscal year ended December 31, 1995.
In certain instances, the Electronics Segment ships products to its major customers prior to the issuance of final purchase orders. Therefore, certain of the prices may be subject to adjustment when the customer completes its review of all elements of the letter subcontract which is issued to the Company prior to the issuance of the purchase order. While these contracts are material to the Company's business, the Company does not believe that any material price adjustments will be made in these contracts. See Footnote J to the consolidated financial statements appearing elsewhere in this report.
Substantially all of the Electronics Segment's revenues are subject to audit under the Vinson-Trammel Act of 1934 and other federal statutes. The Company believes that adjustments to such revenues, if any, will not have a material effect on the Company's financial position.
Research and Development
The Electronics Segment incurred approximately $420,000 of research and development expenses during the fiscal year ended December 31, 1995, as compared with $381,000 of such expenses during the comparable period of the prior year. The Company did not incur any material research and development costs as defined in FASB Statement No. 2 (October 1974) during these two fiscal years.
Patents
The Company does not own any patents which it believes are of material significance to its operations.
Employees
As of March 15, 1996, the Company employed 395 persons. Of these, the Apparel Segments employed 276 people, 11 in design functions, 15 in sales, 34 in administration and the balance in production. The Electronics Segment employed 119 people consisting of 23 in engineering and drafting, 8 in sales and marketing, 20 in direct and corporate administration and the balance in production.
Item 2.

Item 2. PROPERTIES
The Company's plant and executive offices, located at 80 Cabot Court, Hauppauge, New York, consist of 60,000 square feet (of which approximately 50,000 square feet are utilized for manufacturing operations) in a two-story, sprinklered, brick building which was completed in October 1982 and expanded in 1985.
Behlman is renegotiating a new lease for its premises in Ventura, California consisting of 1700 square feet. The new lease is expected to be for a term of one year at an annual rental of approximately $13,000.
East/West leases approximately 15,000 square feet of showroom and office space at 500 7th Avenue in New York City at an annual rental of $233,605 under a lease which expires in January 2000. East/West also leases 80,000 square feet of warehouse space at 2400 83rd Street in North Bergen, New Jersey, at an annual rent of $258,000 under a lease which expires January 2000.
East End leases approximately 5,000 square feet of showroom and office space at 500 7th Avenue in New York City at an annual rental of $77,625 under a lease which expires in January 2000. The Company is currently seeking a third party to sublet this showroom and office space.
Classique leases 82,000 square feet of space at 1270 Notre Dame Avenue in Winnipeg, Manitoba, Canada at an annual rent of C$182,000. This lease, which commenced November 30, 1990, expires in November 2000. This space is used for distribution and warehousing, design, production and executive offices. Classique also leases 48,000 square feet at 181 Bannatyne Avenue in Winnipeg for warehousing and distribution.
Classique has assigned the leases for 20,000 square feet of production space in Steinbach, Manitoba and 20,000 square feet of production space in St. Malo, Manitoba. The Company remains as a secondary guarantor on such leases, which expire in November 2000.
Winnipeg Leather leases 22,000 square feet at 1270 Notre Dame Avenue in Winnipeg at an annual rental of C$66,000 under a lease which expires in November 2000. The space is used for distribution and warehousing, design, production and executive offices.
Symax leases 3,500 square feet of office and showroom space at 1654 Franklin Street in Vancouver, British Columbia, Canada at an annual rent of C$65,000 under a lease which expires in January 1997 with no renewal options.
Item 3.

Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company, other than routine litigation incidental to the Company's business, except as described below.
In re USA Classic Securities Litigation: In September 1993, a class action (the "Class Action") was commenced by an alleged shareholder of USA Classic, against USA Classic and certain of its directors in the United States District Court for the Southern District of New York. The action was commenced on behalf of shareholders, other than the defendants, who acquired their shares from November 20, 1992, the date of the initial Offering, through September 22, 1993, and alleges violations of the Securities Act of 1933 in connection with the Offering as well as violations of Section 1Ob of the Securities Exchange Act of 1934. The plaintiffs are seeking compensatory damages as well as fees and expenses.
In February 1994, a First Amended and Consolidated Complaint was filed in the Class Action. The First Amended and Consolidated Complaint added the Company as a defendant and alleged that the Company is a "controlling person" of USA Classic and an "aider and abetter" of the alleged violations of the securities laws. The Company answered the First Amended and Consolidated Complaint in March 1994. The Class Action has been stayed as against USA Classic as a result of USA Classic's filing of a petition for reorganization under Chapter 11 of the United States Bankruptcy Code.
In October 1994, a Second Amended and Consolidated Complaint was filed in the Class Action. The Second Amended and Consolidated Complaint restated the allegations against the Company and added Paine Webber Incorporated and Ladenburg Thalmann & Co. Inc., the lead underwriters in the Offering, as additional defendants. On November 15, 1994, the Company and such underwriters moved to dismiss certain of the allegations in the Second Amended and Consolidated Complaint. While the dismissal motion, if granted, will not dispose of all the claims asserted in the Second Amended and Consolidated Complaint, the Company intends to vigorously defend against any remaining claims. In or about June 1995, the court denied the dismissal motion in its entirety.
In March 1995, the plaintiffs' representatives filed a motion for class certification. Since that date, the parties have been conducting depositions and reviewing documents relevant to the class certification issue. The defendants' response to the class certification motion has been adjourned without date pending completion of discovery into that issue. In February 1996, the underwriter defendants moved the court to stay all substantive discovery until the court rules upon the class certification motion. The Company joined in this motion. On March 7, 1996, the court denied the motion to stay substantive discovery. The next deposition is scheduled for April 17, 1996. It is estimated that discovery in this matter will continue throughout 1996. The Company plans to continue to vigorously defend this action.
Sandra Lakritz v. Orbit International Corp.: In July 1995, Sandra Lakritz, a former employee of East/West commenced an action in Supreme Court, New York County, claiming employment discrimination based upon age and disability. In December 1995, the Company answered the complaint and denied the allegations set forth therein. Simultaneously with its answer, the Company served upon plaintiff's counsel numerous discovery requests. To date, plaintiff has only partially responded to the discovery requests. In February 1996, plaintiffs' counsel filed a request for a preliminary conference. The court has yet to schedule such a conference. The Company intends to vigorously defend this action.
Venture Garments, Ltd. v. East End Apparel Group, Ltd. and Orbit International Corp.: In December 1995, Venture Garments, Ltd., a supplier of East End commenced an action in Supreme Court, New York County for goods had and received and related equitable relief against both East End and the Company. In February 1996, the Company answered the complaint, asserted counterclaims against Venture and impleaded East End's former president, Gary Jacobs. While the Company contests the allegations set forth in the complaint, in an effort to avoid litigation costs, the Company is engaging in negotiations to resolve the dispute with the plaintiff. Presently, the Company has agreed to adjourn Venture's time to reply to the counterclaim, to provide discovery and Jacobs' time to answer the third-party complaint sine die. Should the settlement negotiations prove to be unsuccessful, the Company intends to vigorously defend this action and prosecute its counterclaims and third-party claims.
Gary Jacobs v. East End Apparel Group, Ltd. and Orbit International Corp.: In December 1995, Gary Jacobs, former president of East End, commenced an action against the Company in connection with his termination. Jacobs' complaint alleges that he was wrongfully terminated in violation of his employment agreement with the Company. The complaint seeks damages in the amount of $2,000,000. In February 1996, the Company answered the complaint and asserted a counterclaim against Jacobs and his personal counsel, for breach of the contract, breach of fiduciary duty, tortious interference of the contract and other related relief seeking damages in the aggregate amount of $30,400,000. In February 1996, Jacob's counsel moved to dismiss the claims asserted against it and against one of its partners. That motion and Jacobs' time to reply to the counterclaims and provide discovery has been adjourned to April 4, 1996. It is possible that the settlement negotiations concerning the Venture v. East End litigation (see above) may resolve this action as well. Should such negotiations prove unsuccessful, the Company intends to vigorously defend Jacobs' claims and to vigorously prosecute the counterclaims set forth in this action.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
An Annual Meeting of Stockholders of the Company was held on December 18, 1995. The holders of 5,886,093 shares of Common Stock of the Company were entitled to vote at the meeting, the holders of 5,524,550 shares of Common Stock, or approximately 93.9% of shares entitled to vote at the meeting, were represented by proxy and the holders of 1,000 shares of Common Stock were present in person. The following actions took place:
1. The stockholders voted for the election of each of the following persons nominated to serve as a director of the Company until the next annual meeting and until his successor is elected and qualified: Dennis Sunshine by 4,640,270 votes for and 885,280 against, Bruce Reissman by 4,638,730 votes for and 886,820 against, Mitchell Binder by 4,632,730 votes for and 892,820 against, Nathan A. Greenberg by 4,632,330 votes for and 893,220 against, John Molloy by 4,638,530 votes for and 887,020 against and Stanley Morris by 4,638,517 votes for and 887,033 against.
2. The stockholders approved a proposal to adopt the Company's 1995 Employee Stock Option Plan. The holders of 2,395,267 shares voted for the proposal, the holders of 1,340,129 voted against the proposal and the holders of 19,954 shares abstained from voting.
3. The stockholders also approved a proposal to adopt the Company's 1995 Stock Option Plan for Non-Employee Directors. The holders of 2,701,153 shares voted for the proposal, the holders of 1,121,007 voted against the proposal and the holders of 41,758 shares abstained from voting.
4. The stockholders also ratified the appointment of Richard A. Eisner & Company, LLP as the independent accounts for the Company for the year ending December 31, 1995. The holders of 5,316,114 shares voted for the proposal, the holders of 141,407 voted against the proposal and the holders of 68,029 shares abstained from voting.
5. The stockholders rejected a proposal to amend the Company's Certificate of Incorporation to create a class of 1,000,000 shares of preferred stock which may be issued in one or more series and to authorize the Company's Board of Directors to determine the voting powers, designations, preferences and rights and the qualifications, limitations or restrictions thereof, of each such series. The holders of 2,175,078 shares voted for the proposal, the holders of 1,197,028 shares voted against the proposal and the holders of 35,471 shares abstained from voting.
6. Finally, the stockholders rejected a stockholder proposal to require that the majority of Company's Board of Directors be non-family members and individuals who do not currently work or consult with the Company, have been employed by the Company or have consulted with the Company in the past. The holders of 1,223,516 shares voted for the proposal, the holders of 2,134,658 shares voted against the proposal and the holders of 49,340 shares abstained from voting.
PART II
Item 5.

Item 5. MARKET FOR REGISTRANT'S CAPITAL STOCK AND RELATED SECURITY HOLDER MATTERS
As of March 25, 1996 the Company had 754 shareholders of record. The Company's stock is traded in the over-the-counter market (Nasdaq symbol ORBT) and is quoted in the Nasdaq Small Cap Market.
The quarterly closing prices for the period January 1, 1994 through December 31, 1995, as reported by Nasdaq, were as follows:
CLOSE High Low 1994: First Quarter 5 3 7/8 Second Quarter 4 1/8 3 1/2 Third Quarter 3 3/8 2 7/8 Fourth Quarter 3 3/8 1 1/2 1995:
First Quarter 2 1/2 1 5/8 Second Quarter 2 1/8 1 3/8 Third Quarter 1 5/8 1 3/16 Fourth Quarter 1 9/16 3/4
The Company has not declared any dividends during the aforesaid period.
Item 6.

Item 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not had any disagreements with its accountants on accounting or financial disclosure.
PART III
Item 10.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to regulation 14A promulgated under the Securities Exchange Act of 1934 in connection with the Company's 1996 Annual Meeting of Stockholders.
Item 11.

Item 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to regulation 14A promulgated under the Securities Exchange Act of 1934 in connection with the Company's 1996 Annual Meeting of Stockholders.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to regulation 14A promulgated under the Securities Exchange Act of 1934 in connection with the Company's 1996 Annual Meeting of Stockholders.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to regulation 14A promulgated under the Securities Exchange Act of 1934 in connection with the Company's 1996 Annual Meeting of Stockholders.
PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
1. Financial Statements and Schedules:
The index to the financial statements and schedules is incorporated by reference to the index to financial statements attached as an exhibit to this Annual Report on Form 10-K.
2. Exhibits: Exhibit No. Description of Exhibit
3 (a) Certification of Incorporation, as amended. Incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991.
3 (b) By-Laws, as amended. Incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1988.
4(a) Orbit International Corp. 1995 Employee Stock Option Plan. Incorporated by reference to Annex B to the Company's definitive proxy statement dated November 17, 1995.
4(b) Orbit International Corp. 1995 Stock Option Plan for Non-Employee Directors. Incorporated by reference to Annex C to the Company's definitive proxy statement dated November 17, 1995.
10(a) Employment Agreement, dated July 1, 1992 between the Company and Mitchell Binder. Incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
10(b) Employment Agreement dated July 1, 1992 between the Company and Bruce Reissman. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
10(c) Employment Agreement dated July 1, 1992 between the Company and Dennis Sunshine. Incorporated by reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
10(d) Form of Indemnification Agreement between the Company and each of its Directors. Incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1988.
10(e) Asset Purchase Agreement, dated July 12, 1993, among the Panda Group, Inc., Kenneth Freedman, Frederick Meyers and Registrant. Incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated July 12, 1993.
10(f) Asset Purchase Agreement, dated as of January 11, 1996, by and among Astrosystems, Inc., and Behlman electronics, Inc., Orbit International Corp. and Cabot Court, Inc.. Incorporated by reference to the Company's Current Report on Form 8-K dated February 6, 1996.
10(g) Form of Agreement among Kenneth Freedman, Frederick Meyers, The Panda Group, Inc. and Orbit International Corp. dated March 28, 1996; Form of Amended Promissory Note dated March 28, 1996; and Form of Warrant to Purchase 125,000 shares of Orbit International Corp. Common Stock.
10(h) Form of Factoring Security and Loan Agreement, dated August 4, 1995 between BNY Financial Corporation - Canada, Canada Classique, Inc., Winnipeg Leather (1991), Inc. and Symax Garment Co. (1993) Ltd.
21 Subsidiaries of Registrant.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunder duly authorized.
ORBIT INTERNATIONAL CORP.
Dated: March 29, 1996 By: /s/ Dennis Sunshine Dennis Sunshine, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Dennis Sunshine Dennis Sunshine President, Chief Executive Officer and Director March 29, 1996
/s/ Mitchell Binder Mitchell Binder Vice President- Finance, Chief Financial Officer and Director March 29, 1996
/s/ Bruce Reissman Bruce Reissman Executive Vice President, Chief Operating Officer and Director March 29, 1996
/s/ Harlan Sylvan Harlan Sylvan Treasurer, Secretary and Controller March 29, 1996
/s/ Nathan A. Greenberg Nathan A. Greenberg Director March 29, 1996
/s/ John Molloy John Molloy Director March 29, 1996
/s/ Stanley Morris Stanley Morris Director March 29, 1996
EXHIBT INDEX
Exhibit No. Description of Exhibit
3 (a) Certification of Incorporation, as amended. Incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991.
3 (b) By-Laws, as amended. Incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1988.
4(a) Orbit International Corp. 1995 Employee Stock Option Plan. Incorporated by reference to Annex B to the Company's definitive proxy statement dated November 17, 1995.
4(b) Orbit International Corp. 1995 Stock Option Plan for Non-Employee Directors. Incorporated by reference to Annex C to the Company's definitive proxy statement dated November 17, 1995.
10(a) Employment Agreement, dated July 1, 1992 between the Company and Mitchell Binder. Incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
10(b) Employment Agreement dated July 1, 1992 between the Company and Bruce Reissman. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10- K for the fiscal year ended June 30, 1992.
10(c) Employment Agreement dated July 1, 1992 between the Company and Dennis Sunshine. Incorporated by reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
10(d) Form of Indemnification Agreement between the Company and each of its Directors. Incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10- K for the fiscal year ended June 30, 1988.
10(e) Asset Purchase Agreement, dated July 12, 1993, among the Panda Group, Inc., Kenneth Freedman, Frederick Meyers and Registrant. Incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated July 12, 1993.
10(f) Asset Purchase Agreement, dated as of January 11, 1996, by and among Astrosystems, Inc., and Behlman electronics, Inc., Orbit International Corp. and Cabot Court, Inc.. Incorporated by reference to the Company's Current Report on Form 8-K dated February 6, 1996.
10(g) Form of Agreement among Kenneth Freedman, Frederick Meyers, The Panda Group, Inc. and Orbit International Corp. dated March 28, 1996; Form of Amended Promissory Note dated March 28, 1996; and Form of Warrant to Purchase 125,000 shares of Orbit International Corp. Common Stock.
10(h) Form of Factoring Security and Loan Agreement, dated August 4, 1995 between BNY Financial Corporation - Canada, Canada Classique, Inc., Winnipeg Leather (1991), Inc. and Symax Garment Co. (1993) Ltd.
21 Subsidiaries of Registrant.